You are on page 1of 7

!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.

)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
!"#$#%& ()*"#+,- ./0,++/ 12 3,),+&/ 45262 7/2 89:;<:= (>?>%$ @A=
@AA<B

C/-*-$*: ?nA8LS-SA1lACC, !
C*$#$#/-*": 88l1lSP AML8lCAn 1C8ACCC - a forelgn clgareLLe
manufacLurlng company
6*%D/-E*-$%: !CSL lSlu8C n. CAMACPC (as SecreLary of Lhe
ueparLmenL Cf llnance) and CulLLL8MC L. A8A?nC, !8., (as
Commlssloner of Lhe 8ureau of lnLernal 8evenue)

3,%*: eLlLloner assalls Lhe valldlLy of: (1) SecLlon 143 of Lhe naLlonal
lnLernal 8evenue Code (nl8C), as recodlfled by 8epubllc AcL (8A) 8424,
(2) 8A 9334, whlch furLher amended SecLlon 143 of Lhe nl8C on !anuary
1, 2003, (3) 8evenue 8egulaLlons nos. 1-97, 9-2003, and 22-2003, and
(4) 8evenue Memorandum Crder no. 6-2003, for belng vlolaLlve of Lhe
equal proLecLlon and unlformlLy clauses of Lhe ConsLlLuLlon.

F>)),"G: Sec. 143 of Lhe nl8C and 8A9334 are consLlLuLlonal.
rovlslons of Lhe 8evenue 8egulaLlons and 8evenue Memorandum
Crder are lnvalld.

H,+$%I
!anuary 1997, 8A8240 Look effecL and amended Lhe nl8C. 1he nl8C was
furLher recodlfled by 8A8424 ln Lhe same year.
1hls provlded a 4-Ller Lax raLe based on Lhe neL reLall prlce per
pack of clgareLLes: premlum, hlgh, medlum, low.
o neL reLall prlce means prlce aL whlch Lhe clgareLLe ls
sold on reLall ln 20 ma[or supermarkeLs ln MeLro Manlla
(for brands of clgareLLes markeLed naLlonally) or Lhe
prlce aL whlch Lhe clgareLLe ls sold ln flve ma[or
supermarkeLs ln Lhe reglon (for brands markeLed only
ouLslde MeLro Manlla).
ClasslflcaLlon of each brand of clgareLLes was based on lLs
average neL reLall prlce as of CcLober 1, 1996, as seL forLh ln
Annex "u" of Lhe nl8C
1997, 8evenue 8egulaLlons no. 1-97 was enacLed by Lhe 8l8 Lo
lmplemenL 8A8240.
lL classlfled Lhe brands of clgareLLes as LxlsLlng (Lhose duly
reglsLered or acLlve brands prlor Lo !anuary 1, 1997) and new
brands (Lhose reglsLered afLer !anuary 1, 1997).
o new brands shall be lnlLlally assessed aL Lhelr suggesLed
reLall prlce unLll such Llme LhaL Lhe approprlaLe survey
Lo deLermlne Lhelr currenL neL reLall prlce ls conducLed
!une 2001, 8rlLlsh Amerlcan 1obacco lnLroduced Lucky SLrlke lllLer,
Lucky SLrlke LlghLs and Lucky SLrlke MenLhol LlghLs clgareLLes
1hey had a suggesLed reLall prlce of 9.90 per pack.
ursuanL Lo Sec. 143 (c) of Lhe nl8C, Lhey were lnlLlally assessed
Lhe exclse Lax aL 8.96 per pack aL Lhe hlgh-raLe Ller.
lebruary 2003, 8evenue 8egulaLlons no. 9-2003,

amended 8evenue
8egulaLlons no. 1-97
lL granLed Lhe 8l8 Commlssloner Lhe power Lo perform a
perlodlc revlew every Lwo years or earller of Lhe currenL neL
reLall prlce of new brands and varlanLs Lhereof for Lhe purpose
of esLabllshlng and updaLlng Lhelr Lax classlflcaLlon.
o updaLes shall only Lake effecL upon lssuance of an
approprlaLe 8evenue 8egulaLlon
March 2003, 8evenue Memorandum Crder no. 6-2003

was lssued
prescrlblng Lhe guldellnes and procedures ln esLabllshlng currenL neL
reLall prlces of new brands of clgareLLes and alcohol producLs.
AugusL 2003, 8evenue 8egulaLlons no. 22-2003

was lssued Lo
lmplemenL Lhe revlsed Lax classlflcaLlon of cerLaln new brands
lnLroduced ln Lhe markeL afLer !anuary 1, 1997, based on Lhe survey of
Lhelr currenL neL reLall prlce.
lL revealed LhaL Lhe Lucky SLrlke brand clgareLLe's currenL neL
reLall prlce was around 22 per pack.
8espondenL 8l8 Commlssloner Lhus recommended Lo place sald
brand aL Lhe premlum-raLe Ller of 13.44 per pack lnasmuch as
Lucky SLrlke's average neL reLall prlce ls above 10.00 per pack.
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
SepLember 1, 2003, peLlLloner company flled wlLh 81C a peLlLlon for
ln[uncLlon wlLh prayer for Lhe lssuance of a Lemporary resLralnlng order
(18C) and/or wrlL of prellmlnary ln[uncLlon.
SoughL Lo en[oln Lhe lmplemenLaLlon of Sec. 143 of Lhe nl8C,
and Lhe aforemenLloned 8evenue 8egulaLlons and
Memorandum Crders on Lhe ground of dlscrlmlnaLlon agalnsL
new brands of clgareLLes, ln vlolaLlon of equal proLecLlon
SepLember 4, 2003, 81C denled appllcaLlon for 18C slnce courLs had no
auLhorlLy Lo resLraln Lax collecLlon.
March 2004, 81C denled 8espondenL's moLlon Lo dlsmlss and lssued
wrlL of prellmlnary ln[uncLlon Lo en[oln Lhe lmplemenLaLlon of Lhe
8evenue 8egulaLlons and Lhe 8evenue Memorandum Crder.
upon moLlon for reconslderaLlon, boLh sldes agreed LhaL Lhe
maln conLenLlon was Lhe consLlLuLlonallLy of Sec. 143 of Lhe
nl8C, and Lhe 8evenue 8egulaLlons and Memorandum Crders
May 2004, 81C upheld Lhelr consLlLuLlonallLy and llfLed Lhe wrlL of
prellmlnary ln[uncLlon
2004, peLlLlon was broughL Lo Lhe Supreme CourL for revlew
!anuary 2003, 8A 9334 Look effecL and amended Sec. 143 of Lhe nl8C
new brands - lL provlded a leglslaLlve freeze on brands of
clgareLLes lnLroduced beLween Lhe perlod !anuary 2, 1997 Lo
uecember 31, 2003, such LhaL sald clgareLLes shall remaln ln Lhe
classlflcaLlon under whlch Lhe 8l8 has deLermlned Lhem Lo
belong as of uecember 31, 2003, unLll revlsed by Congress
LxlsLlng brands - 1he classlflcaLlon ln Annex u" %&,JJ "*),#- #-
K/"+* >-$#J "*1#%*E 0G 3/-?"*%%
new exclse Lax on peLlLloner's producL amounLed Lo 22 mllllon
whlch led lL Lo amend lLs peLlLlon Lo assall Lhe consLlLuLlonallLy
of 8A9334 and praylng for Lhe downward classlflcaLlon of Lhelr
producL Lo a lower Lax Ller.
o 1hey conLended LhaL Lhe conLlnued use of Annex "u" as
Lhe Lax base of exlsLlng brands of clgareLLes glves undue
proLecLlon Lo sald brands (Marlboro and hlllp Morrls,
for example) whlch are sLlll Laxed based on Lhelr prlce
as of CcLober 1996 noLwlLhsLandlng LhaL Lhey are now
sold aL Lhe same or even aL a hlgher prlce Lhan new
brands llke Lucky SLrlke
March 2006, hlllp Morrls hlllpplnes ManufacLurlng lncorporaLed,
lorLune 1obacco CorporaLlon, MlghLy CorporaLlon, and !1 lnLernaLlonal,
S.A., flled moLlons for leave Lo lnLervene slnce Lhe declslon on Lhe
consLlLuLlonallLy of Sec. 143 wlll affecL Lhem as manufacLurers of
clgareLLe brands found ln Annex u"
1hey conLend LhaL Lhe (1) freeze also covers Lhose already
classlfled as of uecember 2003 and so no lnequallLy exlsLs, (2)
CourL has no power Lo pass upon Lhe wlsdom of Lhe leglslaLure
ln reLalnlng Annex u" ln 8A9334 (3) peLlLloner ls sLopped from
quesLlonlng lLs consLlLuLlonallLy as lL enLered Lhe clgareLLe
lndusLry belng fully aware of Lhe sysLem (4) Lhe challenge Lo Lhe
valldlLy of Lhe 8l8 lssuance should have been broughL Lo Lhe
C1A, who exerclses excluslve appellaLe [urlsdlcLlon over
declslons of Lhe 8l8 ln Lax dlspuLes, and noL Lhe 81C
AugusL 2006, lnLervenLlon was admlLLed by Lhls CourL

L%%>*%I
rocedural
(1) W/n Lhe 81C had [urlsdlcLlon over Lhe case
(2) W/n Lhe peLlLloner ls esLopped from assalllng Lhe auLhorlLy
of Lhe Commlssloner of lnLernal 8evenue when lL underLook
Lo comply wlLh Lhe procedures under exlsLlng regulaLlons
for Lhe assessmenL of deflclency lnLernal revenue Laxes
SubsLanLlve
(1) W/n Lhe classlflcaLlon freeze provlslon ln 8A9334 vlolaLes
Lhe equal proLecLlon and unlformlLy of LaxaLlon clauses of
Lhe ConsLlLuLlon by (a) Lhe raLlonal basls LesL, (b) favorlng
older brands over newer brands
(2) W/n Lhe 8evenue 8egulaLlons and Memorandum Crders
are lnvalld
(3) W/n Lhe peLlLloner may be reclasslfled downward Lo a
lower Lax Ller
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
(4) W/n 8A8240, as amended by 8A9334, and lLs lmplemenLlng
rules and regulaLlons, vlolaLe aragraph 2, ArLlcle lll, arL ll
of Lhe Ceneral AgreemenL on 1arlffs and 1rade (CA111) of
1947

M*JEI
(1) - ?es, 81C had [urlsdlcLlon and noL C1A.
8aLlo
Whlle 8A1123, as amended by 8A9282, confers on Lhe C1A
[urlsdlcLlon Lo resolve Lax dlspuLes ln general, Lhls does noL
lnclude cases where Lhe consLlLuLlonallLy of a law or rule ls
challenged. Where whaL ls assalled ls Lhe valldlLy or
consLlLuLlonallLy of a law, or a rule or regulaLlon lssued by Lhe
admlnlsLraLlve agency ln Lhe performance of lLs quasl-leglslaLlve
funcLlon, Lhe regular courLs have [urlsdlcLlon Lo pass upon Lhe
same."
1he ConsLlLuLlon lLself vesLs [udlclal power, whlch lncludes
[udlclal revlew, ln Lhe regular courLs.
o eLlLlon for ln[uncLlon flled by peLlLloner before Lhe
81C ls a dlrecL aLLack on Lhe consLlLuLlonallLy of SecLlon
143(C) of Lhe nl8C, as amended, and Lhe valldlLy of lLs
lmplemenLlng rules and regulaLlons. eLlLloner,
Lherefore, properly flled Lhe sub[ecL case before Lhe
81C."
(2) - no, peLlLloner ls noL gullLy of esLoppel
8aLlo
lrom !"#"#$ &' ()*, Lhe elemenLs of esLoppel, as relaLed Lo Lhe
parLy Lo be esLopped, are: (1) conducL amounLlng Lo false
represenLaLlon or concealmenL of maLerlal facLs, or aL leasL
calculaLed Lo convey Lhe lmpresslon LhaL Lhe facLs are oLher
Lhan, and lnconslsLenL wlLh, Lhose whlch Lhe parLy subsequenLly
aLLempLs Lo asserL, (2) lnLenL, or aL leasL expecLaLlon LhaL Lhls
conducL shall be acLed upon by, or aL leasL lnfluence, Lhe oLher
parLy, and (3) knowledge, acLual or consLrucLlve, of Lhe real
facLs."
When peLlLloner made Lhe underLaklng Lo comply wlLh all
lssuances of Lhe 8l8, whlch aL LhaL Llme lL consldered as valld,
peLlLloner dld noL commlL any false mlsrepresenLaLlon or
mlsleadlng acL.
o eLlLloner cannoL be faulLed for lnlLlally underLaklng Lo
comply wlLh, and sub[ecLlng lLself Lo Lhe operaLlon of
SecLlon 143(C), and only laLer on flllng Lhe sub[ecL case
praylng for Lhe declaraLlon of lLs unconsLlLuLlonallLy
when Lhe clrcumsLances change and Lhe law resulLs ln
whaL lL percelves Lo be unlawful dlscrlmlnaLlon.
o 1he mere facL LhaL a law has been relled upon ln Lhe
pasL and all LhaL Llme has noL been aLLacked as
unconsLlLuLlonal ls noL a ground for conslderlng
peLlLloner esLopped from assalllng lLs valldlLy.
S(1) - noL lL does noL vlolaLe equal proLecLlon and unlformlLy of LaxaLlon
8aLlo
1he assalled feaLure of Lhe law perLalns Lo Lhe mechanlsm
where, afLer a brand ls classlfled based on lLs currenL neL reLall
prlce, Lhe classlflcaLlon ls frozen and only Congress can
LhereafLer reclasslfy Lhe same. lrom a pracLlcal polnL of vlew,
Annex "u" ls merely a +,-./$0)12 of Lhe whole mechanlsm and
phllosophy of Lhe assalled law. 1he maln cause of Lhe alleged
dlscrlmlnaLlon ls Lhe classlflcaLlon sysLem freeze beLween
brands under Annex u" and peLlLloner's new brands, Lhe
former was classlfled based on currenL" neL reLall prlces on
CcLober 1, 1996 and Lhe laLLer by prlces as of 2003.
ln 345$67 8/' &' 961:;2",

Lhls CourL explalned Lhe appllcable
sLandard ln decldlng equal proLecLlon and unlformlLy of LaxaLlon
challenges.
o lor equal proLecLlon, lL sufflces LhaL Lhe laws operaLe
equally and unlformly on all persons LhaL fall wlLhln a
class. 1hey should be LreaLed ln Lhe same fashlon such
LhaL whaLever resLrlcLlons casL on some ln Lhe group are
equally blndlng on Lhe resL.
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
o "LquallLy and unlformlLy ln LaxaLlon means LhaL all
Laxable arLlcles or klnds of properLy of Lhe same class
shall be Laxed aL Lhe same raLe. 1he Laxlng power has
Lhe auLhorlLy Lo make reasonable and naLural
classlflcaLlons for purposes of LaxaLlon"
o 1he sLandard ls Lhe raLlonal basls LesL" - a leglslaLlve
classlflcaLlon, Lo survlve an equal proLecLlon challenge,
musL be shown Lo raLlonally furLher a leglLlmaLe sLaLe
lnLeresL and Lhe classlflcaLlons musL be reasonable and
resL upon some ground of dlfference havlng a falr and
subsLanLlal relaLlon Lo Lhe ob[ecL of Lhe leglslaLlon.
! 1he burden of proof ls on Lhe one aLLacklng Lhe
consLlLuLlonallLy of Lhe law Lo prove beyond
reasonable doubL LhaL Lhe leglslaLlve
classlflcaLlon ls wlLhouL raLlonal basls.
A. 8aLlonal 8asls 1esL
A leglslaLlve classlflcaLlon ls valld lf (1) lL resLs on subsLanLlal
dlsLlncLlons, (2) lL ls germane Lo Lhe purpose of Lhe law, (3) lL
applles, all Lhlngs belng equal, Lo boLh presenL and fuLure
condlLlons, and (4) lL applles equally Lo all Lhose belonglng Lo
Lhe same class.
o 1he flrsL, Lhlrd and fourLh requlslLes are saLlsfled.
! 1he 1#"554<41"24$6 </;;*; ./$&454$6 was lnserLed
ln Lhe law for reasons of pracLlcallLy and
expedlency. Slnce a new brand was noL yeL ln
exlsLence aL Lhe Llme of Lhe passage of 8A 8240,
Lhen Congress needed a unlform mechanlsm Lo
flx Lhe Lax brackeL of a new brand. 1he currenL
neL reLall prlce, slmllar Lo whaL was used Lo
classlfy Lhe brands under Annex "u" as of
CcLober 1, 1996, was Lhus Lhe loglcal and
pracLlcal cholce.
! lurLher, wlLh Lhe amendmenLs lnLroduced by
8A 9334, Lhe freezlng of Lhe Lax classlflcaLlons
now expressly applles noL [usL Lo Annex "u"
brands buL Lo newer brands lnLroduced afLer
Lhe effecLlvlLy of 8A 8240 on !anuary 1, 1997
and any new brand LhaL wlll be lnLroduced ln
Lhe fuLure.
o Second requlslLe may be deLermlned by looklng aL Lhe
leglslaLlve hlsLory of 8A 8240:
! SLarLed from Lhe Comprehenslve 1ax 8eform
ackage durlng Lhe 8amos admlnlsLraLlon whlch
provlded Lhe purpose of Lhe law: (1) promoLe
falr compeLlLlon among lndusLry players and
generaLe buoyanL and sLable revenue for Lhe
governmenL, (2) Lo ensure Lax burden ls
equlLably dlsLrlbuLed, (3) Lo slmpllfy Lax
admlnlsLraLlon and mlnlmlze losses from
lnefflclencles and Lax avoldance
! uCl proposed Lo Congress a shlfL from "0
&"#$/;= LaxaLlon sysLem Lo a speclflc Lhree-
Llered LaxaLlon sysLem based on a per pack
basls Lo make lL less suscepLlble Lo prlce
manlpulaLlon. 1hls sysLem allowed a resurvey
and reclasslflcaLlon of brands based on
lncreases ln Lhe consumer prlce lndex as
deLermlned by Lhe Cl8 every Lwo years
! uCl proposal dld noL galn approval ln Lhe
Lower Pouse. Pouse blll used lnsLead a speclflc
Lax as a baslc Lax wlLh an "0 &"#$/;=
comparaLor and lL dlsallowed Lhe perlodlc
resurvey and reclasslflcaLlon. 1hls reason for
re[ecLlng Lhe proposal was because (1) Lhey saw
Lhls as an lnvalld delegaLlon Lo Lhe Cl8 of Lhe
power Lo flx Lhe Lax raLes whlch ls vesLed by Lhe
ConsLlLuLlon only ln Congress. (2)LLhlcal
lmpllcaLlon because Lhere ls Loo much
dlscreLlon placed ln Lhe 8l8, whlch ls a non-
LransparenL and unelecLed agency of
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
governmenL (3) lf LaxaLlon ls based on
consumer prlce lndex Lhen Lax ls based noL on
whaL Lhe brewer or manufacLurer acLually
reallzed buL on an lmaglnary wholesale or reLall
prlce. (4) lL serves as a barrler Lo Lhe enLry of
new players ln Lhe lndusLrles slnce Lhey wlll be
denled buslness flexlblllLy Lo flx lLs prlce levels
Lo promoLe lLs producL and peneLraLe Lhe
markeL as Lhe prlce levels are dlcLaLed by Lhe
consumer prlce lndex
! 1he SenaLe verslon adopLed a four-Llered
sysLem and conLalned a perlodlc exclse Lax raLe
and Lax brackeL ad[usLmenL as well as a perlodlc
resurvey and reclasslflcaLlon of brands provlslon
Lo be conducLed by Lhe uCl ln coordlnaLlon
wlLh Lhe 8l8 and Lhe naLlonal SLaLlsLlcs Cfflce
based on Lhe lncrease ln Lhe consumer prlce
lndex. ln Lhe dellberaLlons, SenaLor Lnrlle
defended Lhls sysLem by saylng LhaL lL serves
Lhe lnLeresLs of all. ln provldlng ad[usLable Lax
raLes Lo accounL for Lhe posslble prlce
escalaLlon of Lhese producLs, none of Lhem
would leave Lhelr own Ller and expose
Lhemselves Lo a Lax of hlgher magnlLude.
SenaLor 8oco remalned of Lhe oplnlon LhaL Lhls
was sLlll an lnvalld delegaLlon of power Lo flx Lax
raLes whlch musL orlglnaLe excluslvely ln Lhe
lower house. And LhaL allowlng Lhls dlscreLlon
Lo Lhe SecreLary of llnance, Lhe 8l8, and nSC,
lnvlLes corrupLlon and arblLrarlness.
! 1he 8lcameral Conference CommlLLee ls where
Lhe SenaLe verslon goL changed. 1he SenaLe Lax
sysLem remalned buL Lhe provlslons on Lhe
power of Lhe uCl and 8l8 Lo perlodlcally ad[usL
Lhe raLes and brackeLs, as well as Lo resurvey
and reclasslfy Lhe brands was deleLed.
! 1he frozen classlflcaLlon found wlLhln Lhe law
was lnLended, as explalned by Congressman
!avler, Lo glve sLablllLy Lo Lhe lndusLry as Lhe
8l8would be prevenLed from Llnkerlng wlLh Lhe
classlflcaLlon slnce lL would remaln unchanged
desplLe Lhe lncrease ln Lhe neL reLall prlces of
Lhe prevlously classlfled brands. 1hls would also
assure Lhe lndusLry players LhaL Lhere would be
no new lmposlLlons as long as Lhe law ls
unchanged.
! lL's evldenL LhaL Lhe 1#"554<41"24$6 </;;*;
./$&454$6 could hardly be consldered arblLrary,
or moLlvaLed by a hosLlle or oppresslve aLLlLude
Lo unduly favor older brands over newer brands.
! C#"554<41"24$6 </;;*; ./$&454$6 was ln Lhe maln
Lhe resulL of Congress's earnesL efforLs Lo
pursue Lhe ob[ecLlves of 8A8240:
1o slmpllfy and make more efflclenL Lhe
whole Lax sysLem for sln producLs Lo
remove Lhese poLenLlal areas of abuse
and corrupLlon from boLh Lhe slde of
Lhe Laxpayer and Lhe governmenL. 1he
perlodlc reclasslflcaLlon of brands
would LempL Lhe clgareLLe
manufacLurers Lo manlpulaLe Lhelr prlce
levels or brlbe Lhe Lax lmplemenLers ln
order Lo allow Lhelr brands Lo be
classlfled aL a lower Lax brackeL even lf
Lhelr neL reLall prlces have already
mlgraLed Lo a hlgher Lax brackeL afLer
Lhe ad[usLmenL of Lhe Lax brackeLs Lo
Lhe lncrease ln Lhe consumer prlce
lndex. resumably, Lhls could be done
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
when a resurvey and reclasslflcaLlon ls
forLhcomlng
1o generaLe buoyanL and sLable
revenues for governmenL. WlLh Lhe
frozen Lax classlflcaLlons, Lhe revenue
lnflow would remaln sLable and Lhe
governmenL would be able Lo predlcL
wlLh a greaLer degree of cerLalnLy Lhe
amounL of Laxes LhaL a clgareLLe
manufacLurer would pay glven Lhe
Lrend ln lLs sales volume over Llme.
o All ln all, Lhe 1#"554<41"24$6 </;;*; ./$&454$6 addressed
Congress's admlnlsLraLlve concerns ln Lhe slmpllflcaLlon
of Lax admlnlsLraLlon of sln producLs, ellmlnaLlon of
poLenLlal areas for abuse and corrupLlon ln Lax
collecLlon, buoyanL and sLable revenue generaLlon, and
ease of pro[ecLlon of revenues. >$65;?);62#,7 2:;/; 1"6
+; 6$ 0;64"# $< 2:; ;?)"# ./$2;124$6 $< 2:; #"@5 5461; 2:;
/"24$6"#-+"545 2;52 45 "=.#, 5"245<4;0
8. lL has noL been clearly demonsLraLed LhaL Lhe provlslon favors
old brands over new brands
lL has noL been shown by Lhe peLlLloner LhaL Lhe neL reLall prlces
of oLher older brands prevlously classlfled under Lhls
classlflcaLlon sysLem have already plerced Lhelr Lax brackeLs,
and, lf so, how Lhls has affecLed Lhe overall compeLlLlon ln Lhe
markeL.
lurLher, lL does noL necessarlly follow LhaL newer brands cannoL
compeLe agalnsL older brands because prlce ls noL Lhe only
facLor ln Lhe markeL as Lhere are oLher facLors llke consumer
preference, brand loyalLy, eLc.
Lven lf Lhe newer brands are prlced hlgher due Lo Lhe
dlfferenLlal Lax LreaLmenL, lL does noL mean LhaL Lhey cannoL
compeLe ln Lhe markeL especlally slnce clgareLLes conLaln
addlcLlve lngredlenLs so LhaL a consumer may be wllllng Lo pay a
hlgher prlce for a parLlcular brand solely due Lo lLs unlque
formulaLlon.
1hus, where Lhere ls a clalm of breach of Lhe due process and
equal proLecLlon clauses, conslderlng LhaL Lhey are noL flxed
rules buL raLher broad sLandards, Lhere ls a need for proof of
such persuaslve characLer as would lead Lo such a concluslon.
AbsenL such a showlng, Lhe presumpLlon of valldlLy musL prevall
AlLhough lL ls conceded LhaL Lhls has adversely affecLed, Lo a
cerLaln exLenL, Lhe ablllLy of peLlLloner Lo compeLlLlvely prlce lLs
newer brands vls-a-vls Lhe sub[ecL older brands. 1hus, Lo a
llmlLed exLenL, Lhe assalled law seems Lo derogaLe one of lLs
avowed ob[ecLlves, 4';'promoLlng falr compeLlLlon among Lhe
players ln Lhe lndusLry. 1hls however does noL render Lhe law
unconsLlLuLlonal.
o 1he quesLlon of wheLher or noL Lhls provlslon ls Lhe besL
means Lo acheleve Lhe sLaLe lnLeresLs aforemenLloned
goes lnLo Lhe wlsdom of Lhe law whlch Lhe CourLcannoL
lnqulre Lo.
o We musL accord Lhe respecL due Lo a co-equal branch of
governmenL by reasonably assumlng LhaL creaLlon of
Lhls provlslon was lmpelled by earnesL deslre Lo achleve
Lhe law's ob[ecLlves.
o 1he only Lhlng LhaL Lhls has shown ls LhaL Lhe
classlflcaLlon freeze provlslon as a pollcy ls noL perfecL,
buL Lhe recourse of Lhe peLlLloner Lo Lhls lles ln
Congress and noL Lhe courL.
S(2) - ?es, Lhe porLlons LhaL auLhorlze Lhe 8l8 Lo conducL perlodlc
resurvey and reclasslflcaLlon are lnvalld
8aLlo
1here was paLenL error on Lhe parL of Lhe 8l8 for belng conLrary
Lo Lhe plaln LexL and leglslaLlve lnLenL of 8A 8240 ln enacLlng
8evenue 8egulaLlon no. 9-2003 whlch auLhorlzed Lhe perlodlc
reclasslflcaLlon of brands of clgareLLes
o nowhere ln SecLlon 143 ls such auLhorlLy granLed Lo Lhe
8ureau of lnLernal 8evenue. unless expressly granLed Lo
!"#$%&%'%&"#() )(+ && ,&-.$%$ /0120 3 01245 (%%67 $.,89.6 !(#,.)(9&(


!:;<=-><?;@; .A;BC><D -EFGDBBD? )>HD? IGJK;F #;C;K 9;C>J $EHDBG> %;< %><@ L;KCD? L;BDK;
Lhe 8l8, Lhe power Lo reclasslfy clgareLLe brands
remalns a prerogaLlve of Lhe leglslaLure whlch cannoL
be usurped by Lhe former
Moreover, Lhe clear leglslaLlve lnLenL was for new brands Lo
beneflL from Lhe same freezlng mechanlsm accorded Lo Annex
"u" brands.
o lL would Lhus, be absurd for us Lo conclude LhaL
Congress lnLended Lo allow Lhe perlodlc reclasslflcaLlon
of new brands by Lhe 8l8 afLer Lhelr classlflcaLlon ls
deLermlned based on Lhelr currenL neL reLall prlce whlle
llmlLlng Lhe freezlng of Lhe classlflcaLlon Lo Annex "u"
brands
S(3) - no, lL wlll noL cause a downward reclasslflcaLlon of Lucky SLrlke,
desplLe Lhe lnvalldlLy of Lhe provlslons ln Lhe 8evenue 8egulaLlons and
Memorandum order
8aLlo
Lucky SLrlke came ouL ln !une 2001, buL pursuanL Lo 8A8240,
8l8 should have conducLed Lhe requlred markeL survey wlLhln
Lhree monLhs from Lhls daLe, buL Lhey dld noL do so. 1hus, Lucky
SLrlke was noL classlfled based on lLs acLual currenL neL reLall
prlce aL Lhe Llme.
eLlLloner falled Lo Llmely seek redress Lo compel Lhe 8l8 Lo
conducL Lhe requlslLe markeL survey ln order Lo flx Lhe Lax
classlflcaLlon of Lucky SLrlke. ln Lhe meanLlme, Lucky SLrlke was
Laxed based on lLs 5)AA;52;0 neL reLall prlce of 9.90 per pack,
whlch ls wlLhln Lhe hlgh-prlced Lax brackeL. lL was only 2 years
laLer ln 2003, LhaL Lhe 8l8 conducLed a markeL survey whlch was
Lhe <4/52 24=; LhaL Lucky SLrlke's "12)"# currenL neL reLall prlce
was surveyed and found Lo be from 10.34 Lo 11.33 per pack,
whlch ls wlLhln Lhe premlum-prlced Lax brackeL.
1hus, we cannoL granL peLlLloner's prayer for a downward
reclasslflcaLlon of Lucky SLrlke because lL was never /;classlfled
by Lhe 8l8 based on lLs "12)"# currenL neL reLall prlce.
S(4) - no. lL does noL vlolaLe Lhe CA11
8aLlo
1he 1#"554<41"24$6 </;;*; ./$&454$6 unlformly applles Lo all newly
lnLroduced brands ln Lhe markeL, wheLher lmporLed or locally
manufacLured. lL does noL purporL Lo slngle ouL lmporLed
clgareLLes ln order Lo unduly favor locally produced
Lven assumlng "/A);60$ LhaL peLlLloner was able Lo prove LhaL
Lhe 1#"554<41"24$6 </;;*; ./$&454$6 vlolaLes Lhe CA11, Lhe
ouLcome would sLlll be Lhe same. 1he CA11 ls a LreaLy duly
raLlfled by Lhe hlllpplne SenaLe and under ArLlcle vll, SecLlon
21 of Lhe ConsLlLuLlon, lL merely acqulred Lhe sLaLus of a sLaLuLe.

Applylng Lhe baslc prlnclples of sLaLuLory consLrucLlon ln case of
lrreconcllable confllcL beLween sLaLuLes, 8A 8240, as amended
by 8A 9334, would prevall over Lhe CA11 elLher as a laLer
enacLmenL by Congress or as a speclal law deallng wlLh Lhe
LaxaLlon of sln producLs.

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