11.

COMMISSIONER OF INTERNAL REVENUE vs COURT OF APPEALS FACTS: Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. On various dates the !hi"ippine !atent Office issued to the corporation separate certificates of trademar# registration over "Champion " "$ope " and "%ore" cigarettes. The Commissioner of &nterna" 'evenue c"assifies (Champion ( ($ope ( and (%ore( as foreign brands since the) *ere "isted in the +or"d Tobacco ,irector) as be"onging to foreign companies. $o*ever Fortune Tobacco changed the names of ($ope( to ($ope Luxury' and (%ore( to (Premium %ore ( thereb) removing the said brands from the foreign brand categor). !roof *as a"so submitted to the -ureau (of &nterna" 'evenue .(-&'(/) that (Champion( *as an origina" Fortune Tobacco Corporation register and therefore a "oca" brand. 'A 0123 *as enacted on 14 5une 1667 amending Section 138(c)(1) of the 9ationa" &nterna" 'evenue Code ("9&'C") particu"ar") on "oca"") manufactured cigarettes *hich *ere currently classified and taxed at fifty-five percent (55%) or the e:portation of *hich is not authori;ed b) contract or other*ise fift)<five (22=) provided that the minimum ta: sha"" not be "ess than Five !esos (!2.44) per pac#. The test for imposition of the 22= ad valorem ta: on cigarettes is that the "oca"") manufactured cigarettes bear a foreign brand regard"ess of *hether or not the right to use or tit"e to the foreign brand *as so"d or transferred b) its o*ner to the "oca" manufacturer. The brand must be origina"") o*ned b) a foreign manufacturer or producer. &f o*nership of the cigarette brand is ho*ever not definite") determinab"e the "isting of brands manufactured in foreign countries appearing in the current +or"d Tobacco ,irector) sha"" govern. The -&' sent the Compan) a month "ater a cop) 'evenue %emorandum Circu"ar 70<67 dec"aring >$ope? >%ore? and >Champion? as foreign brands and thus sub@ecting them to 22= as va"orem ta: a revie* of '%C 70<67 *as denied. &SSAB: +hether the promu"gation of '%C 70<67 is va"id and *ithin the scope of the amendator) "a* ('A 0123) C $BD,: 9o. The Supreme Court is convinced that the hasti") promu"gated '%C 70<67 has fa""en short of a va"id and effective administrative issuance. !rior to the issuance of '%C 70<67 the brands *ere in the categor) of "oca"") manufactured cigarettes not bearing foreign brands sub@ect to 32= ad va"orem ta:. +ithout '%C 70<67 the enactment of 'A0123 *ou"d not have ne* ta: rate conseEuences on the compan)Fs products. &n issuing '%C 70<67 the -&' "egis"ated under its Euasi<"egis"ative authorit) and not simp") interpreted the "a*. The C&' not simp") interpreted the "a*G veri") it "egis"ated under its Euasi<"egis"ative authorit). The due observance of the reEuirements of notice of hearing and of pub"ication shou"d not have been then ignored. +hen an administrative ru"e goes be)ond mere") providing for the means that can faci"itate or render "east cumbersome the imp"ementation of the "a* but substantia"") adds to or increases the burden of those governed it behoves the agenc) to accord at "east to those direct") affected a chance to be heard and thereb) be du") informed before that ne* issuance is given the force and effect of "a*.