Contents

Steel v. CA missing............................................................................................... 1
Buklod v. Zamora................................................................................................. 1
Bagaoisan v. National Tobacco Administration.....................................................8
GSIS v. Civil Service missing..............................................................................16
Commissioner v. CA........................................................................................... 16
LLDA v. CA.......................................................................................................... 16
Carpio v. Executive Secretary............................................................................. 24
DENR v. DENR Employees..................................................................................32
Carino v. CHR..................................................................................................... 39

Steel v. CA missing
Buklod v. Zamora
EN BANC

[G.R. No. 142801-802. July 10, 2001]

BUKLOD NG KAWANING EIIB, CESAR POSADA, REMEDIOS G. PRINCESA,

BENJAMIN KHO, BENIGNO MANGA, LULU MENDOZA, petitioners, vs.
HON. EXECUTIVE SECRETARY RONALDO B. ZAMORA, HON. SECRETARY
JOSE PARDO, DEPARTMENT OF FINANCE, HON. SECRETARY BENJAMIN
DIOKNO, DEPARTMENT OF BUDGET AND MANAGEMENT, HON.
SECRETARY
ARTEMIO
TUQUERO,
DEPARTMENT
OF
JUSTICE, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
In this petition for certiorari, prohibition and mandamus, petitioners Buklod Ng
Kawaning EIIB, Cesar Posada, Remedios Princesa, Benjamin Kho, Benigno Manga
and Lulu Mendoza, for themselves and in behalf of others with whom they share a
common or general interest, seek the nullification of Executive Order No.
191[1] and Executive Order No. 223[2] on the ground that they were issued by the

Office of the President with grave abuse of discretion and in violation of their
constitutional right to security of tenure.
The facts are undisputed:
On June 30, 1987, former President Corazon C. Aquino, issued Executive Order
No. 127[3] establishing the Economic Intelligence and Investigation Bureau (EIIB) as
part of the structural organization of the Ministry of Finance. [4] The EIIB was
designated to perform the following functions:
(a) Receive, gather and evaluate intelligence reports and information and
evidence on the nature, modes and extent of illegal activities affecting the
national economy, such as, but not limited to, economic sabotage, smuggling,
tax evasion, and dollar-salting, investigate the same and aid in the prosecution
of cases;
(b) Coordinate with external agencies in monitoring the financial and economic
activities of persons or entities, whether domestic or foreign, which may
adversely affect national financial interest with the goal of regulating,
controlling or preventing said activities;
(c) Provide all intelligence units of operating Bureaus or Offices under the
Ministry with the general framework and guidelines in the conduct of
intelligence and investigating works;
(d) Supervise, monitor and coordinate all the intelligence and investigation
operations of the operating Bureaus and Offices under the Ministry;
(e) Investigate, hear and file, upon clearance by the Minister, anti-graft and
corruption cases against personnel of the Ministry and its constituents units;
(f) Perform such other appropriate functions as may be assigned by the Minister
or his deputies.[5]
In a desire to achieve harmony of efforts and to prevent possible conflicts
among agencies in the course of their anti-smuggling operations, President Aquino
issued Memorandum Order No. 225 on March 17, 1989, providing, among others,
that the EIIB shall be the agency of primary responsibility for anti-smuggling
operations in all land areas and inland waters and waterways outside the areas of
sole jurisdiction of the Bureau of Customs.[6]
Eleven years after, or on January 7, 2000, President Joseph Estrada issued
Executive Order No. 191 entitled Deactivation of the Economic Intelligence and
Investigation Bureau.[7] Motivated by the fact that the designated functions of the
EIIB are also being performed by the other existing agencies of the government
and that there is a need to constantly monitor the overlapping of functions among
these agencies, former President Estrada ordered the deactivation of EIIB and the
transfer of its functions to the Bureau of Customs and the National Bureau of
Investigation.

Meanwhile, President Estrada issued Executive Order No. 196 [8] creating the
Presidential Anti-Smuggling Task Force Aduana.[9]
Then the day feared by the EIIB employees came. On March 29, 2000, President
Estrada issued Executive Order No. 223[10] providing that all EIIB personnel
occupying positions specified therein shall be deemed separated from the service
effective April 30, 2000, pursuant to a bona fide reorganization resulting to
abolition, redundancy, merger, division, or consolidation of positions. [11]
Agonizing over the loss of their employment, petitioners now come before this
Court invoking our power of judicial review of Executive Order Nos. 191 and 223.
They anchor their petition on the following arguments:
A
Executive Order Nos. 191 and 223 should be annulled as they are
unconstitutional for being violative of Section 2(3), Article IX-B of the
Philippine Constitution and/or for having been issued with grave abuse of
discretion amounting to lack or excess of jurisdiction.
B.
The abolition of the EIIB is a hoax. Similarly, if Executive Order Nos. 191
and 223 are considered to effect a reorganization of the EIIB, such
reorganization was made in bad faith.
C.
The President has no authority to abolish the EIIB.
Petitioners contend that the issuance of the afore-mentioned executive orders
is: (a) a violation of their right to security of tenure; (b) tainted with bad faith as
they were not actually intended to make the bureaucracy more efficient but to give
way to Task Force Aduana, the functions of which are essentially and substantially
the same as that of EIIB; and (c) a usurpation of the power of Congress to decide
whether or not to abolish the EIIB.
Arguing in behalf of respondents, the Solicitor General maintains that: (a) the
President enjoys the totality of the executive power provided under Sections 1 and
7, Article VII of the Constitution, thus, he has the authority to issue Executive Order
Nos. 191 and 223; (b) the said executive orders were issued in the interest of
national economy, to avoid duplicity of work and to streamline the functions of the
bureaucracy; and (c) the EIIB was not abolished, it was only deactivated.
The petition is bereft of merit.
Despite the presence of some procedural flaws in the instant petition, such as,
petitioners disregard of the hierarchy of courts and the non-exhaustion of
administrative remedies, we deem it necessary to address the issues. It is in the
interest of the State that questions relating to the status and existence of a public
office be settled without delay. We are not without precedent. In Dario v. Mison,
[12]
we liberally decreed:

The Court disregards the questions raised as to procedure, failure to exhaust

administrative remedies, the standing of certain parties to sue, for two
reasons,`[b]ecause of the demands of public interest, including the need
for stability in the public service,' and because of the serious implications of
these cases on the administration of the Philippine civil service and the rights of
public servants.
At first glance, it seems that the resolution of this case hinges on the question
- Does the deactivation of EIIB constitute abolition of an office? However, after
coming to terms with the prevailing law and jurisprudence, we are certain that the
ultimate queries should be a) Does the President have the authority to reorganize
the executive department? and, b) How should the reorganization be carried out?
Surely, there exists a distinction between the words deactivate and abolish.
To deactivate means to render inactive or ineffective or to break up by
discharging or reassigning personnel, [13] while to abolish means to do away with,
to annul, abrogate or destroy completely. [14] In essence, abolition denotes an
intention to do away with the office wholly and permanently.[15] Thus, while
in abolition, the office ceases to exist, the same is not true in deactivation where
the office continues to exist, albeit remaining dormant or inoperative. Be that as it
may, deactivation and abolition are both reorganization measures.
The Solicitor General only invokes the above distinctions on the mistaken
assumption that the President has no power to abolish an office.
The general rule has always been that the power to abolish a public office is
lodged with the legislature.[16] This proceeds from the legal precept that the power
to create includes the power to destroy. A public office is either created by the
Constitution, by statute, or by authority of law. [17] Thus, except where the office was
created by the Constitution itself, it may be abolished by the same legislature that
brought it into existence.[18]
The exception, however, is that as far as bureaus, agencies or offices in the
executive department are concerned, the Presidents power of control may justify
him to inactivate the functions of a particular office, [19] or certain laws may grant
him the broad authority to carry out reorganization measures. [20] The case in point
isLarin v. Executive Secretary.[21] In this case, it was argued that there is no law
which empowers the President to reorganize the BIR. In decreeing otherwise, this
Court sustained the following legal basis, thus:
Initially, it is argued that there is no law yet which empowers the President to issue
E.O. No. 132 or to reorganize the BIR.
We do not agree.
x

x x

Section 48 of R.A. 7645 provides that:

Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the
Executive Branch. The heads of departments, bureaus and offices and agencies

are hereby directed to identify their respective activities which are no longer
essential in the delivery of public services and which may be scaled down, phased
out or abolished, subject to civil service rules and regulations. X x x. Actual
scaling down, phasing out or abolition of the activities shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the President.
Said provision clearly mentions the acts of scaling down, phasing out and
abolition of offices only and does not cover the creation of offices or transfer of
functions. Nevertheless, the act of creating and decentralizing is included in the
subsequent provision of Section 62 which provides that:
Sec. 62. Unauthorized organizational charges.- Unless otherwise created by law or
directed by the President of the Philippines, no organizational unit or changes in key
positions in any department or agency shall be authorized in their respective
organization structures and be funded from appropriations by this Act. (italics ours)
The foregoing provision evidently shows that the President is authorized
to effect organizational changes including the creation of offices in the
department or agency concerned.
x

Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which
states:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the President
shall exercise such other powers and functions vested in the President which are
provided for under the laws and which are not specifically enumerated above or
which are not delegated by the President in accordance with law. (italic ours)
This provision speaks of such other powers vested in the President under
the law. What law then gives him the power to reorganize? It is
Presidential Decree No. 1772 which amended Presidential Decree No.
1416. These decrees expressly grant the President of the Philippines the
continuing authority to reorganize the national government, which
includes the power to group, consolidate bureaus and agencies, to abolish
offices, to transfer functions, to create and classify functions, services and
activities and to standardize salaries and materials. The validity of these two
decrees are unquestionable. The 1987 Constitution clearly provides that all laws,
decrees, executive orders, proclamations, letters of instructions and other executive
issuances not inconsistent with this Constitution shall remain operative until
amended, repealed or revoked. So far, there is yet no law amending or repealing
said decrees. (Emphasis supplied)
Now, let us take a look at the assailed executive order.
In the whereas clause of E.O. No. 191, former President Estrada anchored his
authority to deactivate EIIB on Section 77 of Republic Act 8745 (FY 1999 General
Appropriations Act), a provision similar to Section 62 of R.A. 7645 quoted
in Larin, thus;

Sec. 77. Organized Changes. Unless otherwise provided by law or directed by

the President of the Philippines, no changes in key positions or organizational
units in any department or agency shall be authorized in their respective
organizational structures and funded from appropriations provided by this Act.
We adhere to the precedent or ruling in Larin that this provision recognizes the
authority of the President to effect organizational changes in the department or
agency under the executive structure. Such a ruling further finds support in Section
78 of Republic Act No. 8760.[22] Under this law, the heads of departments, bureaus,
offices and agencies and other entities in the Executive Branch are directed (a) to
conduct a comprehensive review of their respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; (b) identify
activities which are no longer essential in the delivery of public services and which
may be scaled down, phased-out or abolished; and (c) adopt measures that will
result in the streamlined organization and improved overall performance of their
respective agencies.[23] Section 78 ends up with the mandate that the actual
streamlining and productivity improvement in agency organization and operation
shall be effected pursuant to Circulars or Orders issued for the purpose by
the Office of the President.[24] The law has spoken clearly. We are left only with
the duty to sustain.
But of course, the list of legal basis authorizing the President to reorganize any
department or agency in the executive branch does not have to end here. We must
not lose sight of the very source of the power that which constitutes an express
grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise
known as the Administrative Code of 1987), the President, subject to the
policy
in
the
Executive
Office
and
in
order
to
achieve simplicity,economy and efficiency, shall have the continuing
authority to reorganize the administrative structure of the Office of the
President. For this purpose, he may transfer the functions of other Departments
or Agencies to the Office of the President. In Canonizado v. Aguirre,[25] we ruled that
reorganization involves the reduction of personnel, consolidation of offices,
or abolition thereof by reason of economy or redundancy of functions. It
takes place when there is an alteration of the existing structure of government
offices or units therein, including the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to the Department of Finance. [26] It
falls under the Office of the President. Hence, it is subject to the Presidents
continuing authority to reorganize.
It having been duly established that the President has the authority to carry out
reorganization in any branch or agency of the executive department, what is then
left for us to resolve is whether or not the reorganization is valid. In this jurisdiction,
reorganizations have been regarded as valid provided they are pursued in good
faith. Reorganization is carried out in good faith if it is for the purpose of economy
or to make bureaucracy more efficient. [27] Pertinently, Republic Act No.
6656[28] provides for the circumstances which may be considered as evidence of bad
faith in the removal of civil service employees made as a result of reorganization, to
wit: (a) where there is a significant increase in the number of positions in the new
staffing pattern of the department or agency concerned; (b) wherean office is
abolished and another performing substantially the same functions is
created; (c) where incumbents are replaced by those less qualified in terms of

status of appointment, performance and merit; (d) where there is a classification of

offices in the department or agency concerned and the reclassified offices perform
substantially the same functions as the original offices, and (e) where the removal
violates the order of separation.[29]
Petitioners claim that the deactivation of EIIB was done in bad faith because
four days after its deactivation, President Estrada created the Task Force Aduana.
We are not convinced.
An examination of the pertinent Executive Orders[30] shows that the deactivation
of EIIB and the creation of Task Force Aduana were done in good faith. It was not for
the purpose of removing the EIIB employees, but to achieve the ultimate purpose of
E.O. No. 191, which is economy. While Task Force Aduana was created to take the
place of EIIB, its creation does not entail expense to the government.
Firstly, there is no employment of new personnel to man the Task Force.
E.O. No. 196 provides that the technical, administrative and special staffs
of EIIB are to be composed of people who are already in the public service,
they being employees of other existing agencies. Their tenure with the
Task Force would only be temporary, i.e., only when the agency where
they belong is called upon to assist the Task Force. Since their
employment with the Task force is only by way of detail or
assignment, they retain their employment with the existing agencies. And
should the need for them cease, they would be sent back to the agency
concerned.
Secondly, the thrust of E.O. No. 196 is to have a small group of military men
under the direct control and supervision of the President as base of the
governments anti-smuggling campaign. Such a smaller base has the necessary
powers 1) to enlist the assistance of any department, bureau, or office and to use
their respective personnel, facilities and resources; and 2) to select and recruit
personnel from within the PSG and ISAFP for assignment to the Task
Force. Obviously, the idea is to encourage the utilization of personnel,
facilities and resources of the already existing departments, agencies,
bureaus, etc., instead of maintaining an independent office with a whole
set of personnel and facilities. The EIIB had proven itself burdensome for the
government because it maintained separate offices in every region in the
Philippines.
And thirdly, it is evident from the yearly budget appropriation of the government
that the creation of the Task Force Aduana was especially intended to lessen EIIBs
expenses. Tracing from the yearly General Appropriations Act, it appears that the
allotted amount for the EIIBs general administration, support, and operations for
the
year
1995,
was P128,031,000;[31] for
1996, P182,156,000;[32] for
1998, P219,889,000;[33] and, for 1999, P238,743,000.[34] These amounts were far
above the P50,000,000[35] allocation to the Task Force Aduana for the year 2000.
While basically, the functions of the EIIB have devolved upon the Task Force
Aduana, we find the latter to have additional new powers. The Task Force Aduana,
being composed of elements from the Presidential Security Group (PSG) and
Intelligence Service Armed Forces of the Philippines (ISAFP), [36] has the
essential power to effect searches, seizures and arrests. The EIIB did not have this

power. The Task Force Aduana has the power to enlist the assistance of any
department, bureau, office, or instrumentality of the government, including
government-owned or controlled corporations; and to use their personnel, facilities
and resources. Again, the EIIB did not have this power. And, the Task Force Aduana
has the additional authority to conduct investigation of cases involving ill-gotten
wealth. This was not expressly granted to the EIIB.
Consequently,
it
cannot
be
said
that
there
is
a
feigned
reorganization. In Blaquera v. Civil Sevice Commission, [37] we ruled that a
reorganization in good faith is one designed to trim the fat off the bureaucracy and
institute economy and greater efficiency in its operation.
Lastly, we hold that petitioners right to security of tenure is not
violated. Nothing is better settled in our law than that the abolition of an office
within the competence of a legitimate body if done in good faith suffers from no
infirmity. Valid abolition of offices is neither removal nor separation of the
incumbents.[38] In the instructive words laid down by this Court in Dario v. Mison,
[39]
through Justice Abraham F. Sarmiento:
Reorganizations in this jurisdiction have been regarded as valid provided they are
pursued in good faith. As a general rule, a reorganization is carried out in good
faith if it is for the purpose of economy or to make bureaucracy more efficient. In
that event, no dismissal (in case of dismissal) or separation actually
occurs because the position itself ceases to exist. And in that case,
security of tenure would not be a Chinese wall. Be that as it may, if the
abolition, which is nothing else but a separation or removal, is done for political
reasons or purposely to defeat security of tenure, otherwise not in good faith, no
valid abolition takes and whatever abolition is done, is void ab initio. There is an
invalid abolition as where there is merely a change of nomenclature of positions, or
where claims of economy are belied by the existence of ample funds.
Indeed, there is no such thing as an absolute right to hold office. Except
constitutional offices which provide for special immunity as regards salary and
tenure, no one can be said to have any vested right in an office or its salary. [40]
While we cast a commiserating look upon the plight of all the EIIB employees
whose lives perhaps are now torn with uncertainties, we cannot ignore the
unfortunate reality that our government is also battling the impact of a plummeting
economy. Unless the government is given the chance to recuperate by instituting
economy and efficiency in its system, the EIIB will not be the last agency to suffer
the impact. We cannot frustrate valid measures which are designed to rebuild the
executive department.
WHEREFORE, the petition is hereby DENIED. No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Pardo,
Buena,Ynares-Santiago, and De Leon, Jr., JJ., concur.
Panganiban and Quisumbing, JJ., in the result.
Gonzaga-Reyes, J., on leave.

Bagaoisan v. National Tobacco Administration

FIRST DIVISION

[G.R. No. 152845. August 5, 2003]

DRIANITA BAGAOISAN, FELY MADRIAGA, SHIRLY TAGABAN, RICARDO

SARANDI, SUSAN IMPERIAL, BENJAMIN DEMDEM, RODOLFO DAGA,
EDGARDO BACLIG, GREGORIO LABAYAN, HILARIO JEREZ, and MARIA
CORAZON
CUANANG, petitioners, vs. NATIONAL
TOBACCO
ADMINISTRATION, represented by ANTONIO DE GUZMAN and PERLITA
BAULA, respondents.
DECISION
VITUG, J.:
President Joseph Estrada issued on 30 September 1998 Executive Order No. 29,
entitled Mandating the Streamlining of the National Tobacco Administration (NTA),
a government agency under the Department of Agriculture. The order was followed
by another issuance, on 27 October 1998, by President Estrada of Executive Order
No. 36, amending Executive Order No. 29, insofar as the new staffing pattern was
concerned, by increasing from four hundred (400) to not exceeding seven hundred
fifty (750) the positions affected thereby. In compliance therewith, the NTA
prepared and adopted a new Organization Structure and Staffing Pattern (OSSP)
which, on 29 October 1998, was submitted to the Office of the President.
On 11 November 1998, the rank and file employees of NTA Batac, among whom
included herein petitioners, filed a letter-appeal with the Civil Service Commission
and sought its assistance in recalling the OSSP. On 04 December 1998, the OSSP
was approved by the Department of Budget and Management (DBM) subject to
certain revisions. On even date, the NTA created a placement committee to assist
the appointing authority in the selection and placement of permanent personnel in
the revised OSSP. The results of the evaluation by the committee on the individual
qualifications of applicants to the positions in the new OSSP were then disseminated
and posted at the central and provincial offices of the NTA.
On 10 June 1996, petitioners, all occupying different positions at the NTA office
in Batac, Ilocos Norte, received individual notices of termination of their
employment with the NTA effective thirty (30) days from receipt thereof. Finding
themselves without any immediate relief from their dismissal from the service,
petitioners filed a petition for certiorari, prohibition and mandamus, with prayer for
preliminary mandatory injunction and/or temporary restraining order, with the
Regional Trial Court (RTC) of Batac, Ilocos Norte, and prayed -

1)
that a restraining order be immediately issued enjoining the respondents from
enforcing the notice of termination addressed individually to the petitioners and/or
from committing further acts of dispossession and/or ousting the petitioners from
their respective offices;
2)
that a writ of preliminary injunction be issued against the respondents,
commanding them to maintain the status quo to protect the rights of the petitioners
pending the determination of the validity of the implementation of their dismissal
from the service; and
3)
that, after trial on the merits, judgment be rendered declaring the notice of
termination of the petitioners illegal and the reorganization null and void and
ordering their reinstatement with backwages, if applicable, commanding the
respondents to desist from further terminating their services, and making the
injunction permanent.[1]
The RTC, on 09 September 2000, ordered the NTA to appoint petitioners in the
new OSSP to positions similar or comparable to their respective former
assignments. A motion for reconsideration filed by the NTA was denied by the trial
court in its order of 28 February 2001. Thereupon, the NTA filed an appeal with the
Court of Appeals, raising the following issues:
I.

Whether or not respondents submitted evidence as proof that

petitioners, individually, were not the best qualified and most
deserving among the incumbent applicant-employees.

II.

Whether or not incumbent permanent employees, including herein

petitioners, automatically enjoy a preferential right and the right of first
refusal to appointments/reappointments in the new Organization
Structure And Staffing Pattern (OSSP) of respondent NTA.

III.

Whether or not respondent NTA in implementing the mandated

reorganization pursuant to E.O. No. 29, as amended by E.O. No. 36,
strictly adhere to the implementing rules on reorganization, particularly
RA 6656 and of the Civil Service Commission Rules on Government
Reorganization.

IV.

Whether or not the validity of E.O. Nos. 29 and 36 can be put in issue
in the instant case/appeal.[2]

On 20 February 2002, the appellate court rendered a decision reversing and setting
aside the assailed orders of the trial court.
Petitioners went to this Court to assail the decision of the Court of Appeals,
contending that I.

The Court of Appeals erred in making a finding that went beyond the
issues of the case and which are contrary to those of the trial court and
that it overlooked certain relevant facts not disputed by the parties and
which, if properly considered, would justify a different conclusion;

II.

The Court of Appeals erred in upholding Executive Order Nos. 29 and

36 of the Office of the President which are mere administrative
issuances which do not have the force and effect of a law to warrant
abolition of positions and/or effecting total reorganization;

III.

The Court of Appeals erred in holding that petitioners removal from

the service is in accordance with law;

IV.

The Court of Appeals erred in holding that respondent NTA was not
guilty of bad faith in the termination of the services of petitioners;
(and)

V.

The Court of Appeals erred in ignoring case law/jurisprudence in the

abolition of an office.[3]

In its resolution of 10 July 2002, the Court required the NTA to file its comment on
the petition. On 18 November 2002, after the NTA had filed its comment of 23
September 2002, the Court issued its resolution denying the petition for failure of
petitioners to sufficiently show any reversible error on the part of the appellate
court in its challenged decision so as to warrant the exercise by this Court of its
discretionary appellate jurisdiction. A motion for reconsideration filed by petitioners
was denied in the Courts resolution of 20 January 2002.
On 21 February 2003, petitioners submitted a Motion to Admit Petition For En
Banc Resolution of the case allegedly to address a basic question, i.e., the legal
and constitutional issue on whether the NTA may be reorganized by an executive
fiat, not by legislative action.[4] In their Petition for an En Banc Resolution
petitioners would have it that 1.
The Court of Appeals decision upholding the reorganization of the National
Tobacco Administration sets a dangerous precedent in that:
a)
A mere Executive Order issued by the Office of the President and procured
by a government functionary would have the effect of a blanket authority to
reorganize a bureau, office or agency attached to the various executive
departments;
b)
The President of the Philippines would have the plenary power to
reorganize the entire government Bureaucracy through the issuance of an Executive
Order, an administrative issuance without the benefit of due deliberation, debate
and discussion of members of both chambers of the Congress of the Philippines;
c)
The right to security of tenure to a career position created by law or
statute would be defeated by the mere adoption of an Organizational Structure and
Staffing Pattern issued pursuant to an Executive Order which is not a law and could
thus not abolish an office created by law;
2.
The case law on abolition of an office would be disregarded, ignored and
abandoned if the Court of Appeals decision subject matter of this Petition would
remain undisturbed and untouched. In other words, previous doctrines and

precedents of this Highest Court would in effect be reversed and/or modified with
the Court of Appeals judgment, should it remain unchallenged.
3.
Section 4 of Executive Order No. 245 dated July 24, 1987 (Annex D, Petition),
issued by the Revolutionary government of former President Corazon Aquino, and
the law creating NTA, which provides that the governing body of NTA is the Board of
Directors, would be rendered meaningless, ineffective and a dead letter law
because the challenged NTA reorganization which was erroneously upheld by the
Court of Appeals was adopted and implemented by then NTA Administrator Antonio
de Guzman without the corresponding authority from the Board of Directors as
mandated therein. In brief, the reorganization is an ultra viresact of the NTA
Administrator.
4.
The challenged Executive Order No. 29 issued by former President Joseph
Estrada but unsigned by then Executive Secretary Ronaldo Zamora would in effect
be erroneously upheld and given legal effect as to supersede, amend and/or modify
Executive Order No. 245, a law issued during the Freedom Constitution of President
Corazon Aquino. In brief, a mere executive order would amend, supersede and/or
render ineffective a law or statute.[5]
In order to allow the parties a full opportunity to ventilate their views on the
matter, the Court ultimately resolved to hear the parties in oral
argument. Essentially, the core question raised by them is whether or not the
President, through the issuance of an executive order, can validly carry out the
reorganization of the NTA.
Notwithstanding the apparent procedural lapse on the part of petitioner to
implead the Office of the President as party respondent pursuant to Section 7, Rule
3, of the 1997 Revised Rules of Civil Procedure, [6] this Court resolved to rule on the
merits of the petition.
Buklod ng Kawaning EIIB vs. Zamora [7] ruled that the President, based on
existing laws, had the authority to carry out a reorganization in any branch or
agency of the executive department. In said case, Buklod ng Kawaning
EIIB challenged the issuance, and sought the nullification, of Executive Order No.
191 (Deactivation of the Economic Intelligence and Investigation Bureau) and
Executive Order No. 223 (Supplementary Executive Order No. 191 on the
Deactivation of the Economic Intelligence and Investigation Bureau and for Other
Matters) on the ground that they were issued by the President with grave abuse of
discretion and in violation of their constitutional right to security of tenure. The
Court explained:
The general rule has always been that the power to abolish a public office is lodged
with the legislature. This proceeds from the legal precept that the power to create
includes the power to destroy. A public office is either created by the Constitution,
by statute, or by authority of law. Thus, except where the office was created by the
Constitution itself, it may be abolished by the same legislature that brought it into
existence.
The exception, however, is that as far as bureaus, agencies or offices in the
executive department are concerned, the Presidents power of control may justify

him to inactivate the functions of a particular office, or certain laws may grant him
the broad authority to carry out reorganization measures. The case in point is Larin
v. Executive Secretary [280 SCRA 713]. In this case, it was argued that there is no
law which empowers the President to reorganize the BIR. In decreeing otherwise,
this Court sustained the following legal basis, thus:
`Initially, it is argued that there is no law yet which empowers the President to
issue E.O. No. 132 or to reorganize the BIR.
`We do not agree.
`x x x

xxx

`Section 48 of R.A. 7645 provides that:

``Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the
Executive Branch. The heads of departments, bureaus and offices and agencies
are hereby directed to identify their respective activities which are no longer
essential in the delivery of public services and which may be scaled down, phased
out or abolished, subject to civil service rules and regulations. x x x. Actual scaling
down, phasing out or abolition of the activities shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the President.
`Said provision clearly mentions the acts of `scaling down, phasing out and
abolition of offices only and does not cover the creation of offices or transfer of
functions. Nevertheless, the act of creating and decentralizing is included in the
subsequent provision of Section 62 which provides that:
``Sec. 62. Unauthorized organizational changes. Unless otherwise created by law
or directed by the President of the Philippines, no organizational unit or changes in
key positions in any department or agency shall be authorized in their respective
organization structures and be funded from appropriations by this Act.
`The foregoing provision evidently shows that the President is authorized to effect
organizational changes including the creation of offices in the department or
agency concerned.
`x x x

xxx

`Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which
states:
``Sec. 20. Residual Powers. Unless Congress provides otherwise, the President
shall exercise such other powers and functions vested in the President which are
provided for under the laws and which are not specifically enumerated above or
which are not delegated by the President in accordance with law.
`This provision speaks of such other powers vested in the President under the
law. What law then gives him the power to reorganize? It is Presidential Decree No.

1772 which amended Presidential Decree No. 1416. These decrees expressly grant
the President of the Philippines the continuing authority to reorganize the national
government, which includes the power to group, consolidate bureaus and agencies,
to abolish offices, to transfer functions, to create and classify functions, services
and activities and to standardize salaries and materials. The validity of these two
decrees are unquestionable. The 1987 Constitution clearly provides that `all laws,
decrees, executive orders, proclamations, letter of instructions and other executive
issuances not inconsistent with this Constitution shall remain operative until
amended, repealed or revoked. So far, there is yet no law amending or repealing
said decrees.
Now, let us take a look at the assailed executive order.
In the whereas clause of E.O. No. 191, former President Estrada anchored his
authority to deactivate EIIB on Section 77 of Republic Act 8745 (FY 1999 General
Appropriations Act), a provision similar to Section 62 of R.A. 7645 quoted in Larin,
thus:
`Sec. 77. Organized Changes. Unless otherwise provided by law or directed by
the President of the Philippines, no changes in key positions or organizational units
in any department or agency shall be authorized in their respective organizational
structures and funded from appropriations provided by this Act.
We adhere to the x x x ruling in Larin that this provision recognizes the authority of
the President to effect organizational changes in the department or agency under
the executive structure. Such a ruling further finds support in Section 78 of
Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices
and agencies and other entities in the Executive Branch are directed (a) to conduct
a comprehensive review of this respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; (b) identify
activities which are no longer essential in the delivery of public services and which
may be scaled down, phased-out or abolished; and (c) adopt measures that will
result in the streamlined organization and improved overall performance of their
respective agencies. Section 78 ends up with the mandate that the actual
streamlining and productivity improvement in agency organization and operation
shall be effected pursuant to Circulars or Orders issued for the purpose by the Office
of the President. The law has spoken clearly. We are left only with the duty to
sustain.
But of course, the list of legal basis authorizing the President to reorganize any
department or agency in the executive branch does not have to end here. We must
not lose sight of the very source of the power that which constitutes an express
grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise
known as the Administrative Code of 1987), the President, subject to the policy in
the Executive Office and in order to achieve simplicity, economy and efficiency,
shall have the continuing authority to reorganize the administrative structure of the
Office of the President. For this purpose, he may transfer the functions of other
Departments or Agencies to the Office of the President. In Canonizado vs.
Aguirre [323 SCRA 312], we ruled that reorganization involves the reduction of
personnel, consolidation of offices, or abolition thereof by reason of economy or

redundancy of functions. It takes place when there is an alteration of the existing

structure of government offices or units therein, including the lines of control,
authority and responsibility between them. The EIIB is a bureau attached to the
Department of Finance. It falls under the Office of the President. Hence, it is
subject to the Presidents continuing authority to reorganize.
It having been duly established that the President has the authority to carry out
reorganization in any branch or agency of the executive department, what is then
left for us to resolve is whether or not the reorganization is valid. In this jurisdiction,
reorganizations have been regarded as valid provided they are pursued in good
faith. Reorganization is carried out in `good faith if it is for the purpose of economy
or to make bureaucracy more efficient. Pertinently, Republic Act No. 6656 provides
for the circumstances which may be considered as evidence of bad faith in the
removal of civil service employees made as a result of reorganization, to
wit: (a) where there is a significant increase in the number of positions in the new
staffing pattern of the department or agency concerned; (b) where an office is
abolished and another performing substantially the same functions is
created; (c) where incumbents are replaced by those less qualified in terms of
status of appointment, performance and merit; (d) where there is a classification of
offices in the department or agency concerned and the reclassified offices perform
substantially the same functions as the original offices, and (e) where the removal
violates the order of separation.[8]
The Court of Appeals, in its now assailed decision, has found no evidence of bad
faith on the part of the NTA; thus In the case at bar, we find no evidence that the respondents committed bad faith
in issuing the notices of non-appointment to the petitioners.
Firstly, the number of positions in the new staffing pattern did not
increase. Rather, it decreased from 1,125 positions to 750. It is thus natural that
ones position may be lost through the removal or abolition of an office.
Secondly, the petitioners failed to specifically show which offices were abolished
and the new ones that were created performing substantially the same functions.
Thirdly, the petitioners likewise failed to prove that less qualified employees were
appointed to the positions to which they applied.
x
x

x x x.

Fourthly, the preference stated in Section 4 of R.A. 6656, only means that old
employees should be considered first, but it does not necessarily follow that they
should then automatically be appointed. This is because the law does not preclude
the infusion of new blood, younger dynamism, or necessary talents into the
government service, provided that the acts of the appointing power are bonafide for
the best interest of the public service and the person chosen has the needed
qualifications.[9]

These findings of the appellate court are basically factual which this Court must
respect and be held bound.
It is important to emphasize that the questioned Executive Orders No.
29 and No. 36 have not abolished the National Tobacco Administration but
merely mandated its reorganization through the streamlining or reduction
of its personnel. Article VII, Section 17,[10] of the Constitution, expressly grants
the President control of all executive departments, bureaus, agencies and offices
which may justify an executive action to inactivate the functions of a particular
office or to carry out reorganization measures under a broad authority of law.
[11]
Section 78 of the General Provisions of Republic Act No. 8522 (General
Appropriations Act of FY 1998) has decreed that the President may direct changes in
the organization and key positions in any department, bureau or agency pursuant to
Article VI, Section 25,[12] of the Constitution, which grants to the Executive
Department the authority to recommend the budget necessary for its
operation. Evidently, this grant of power includes the authority to evaluate each
and every government agency, including the determination of the most economical
and efficient staffing pattern, under the Executive Department.
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D.
Zamora, in his capacity as the Executive Secretary, et al.,[13]this Court has had
occasion to also delve on the Presidents power to reorganize the Office of the
President under Section 31(2) and (3) of Executive Order No. 292 and the power to
reorganize the Office of the President Proper. The Court has there observed:
x x x. Under Section 31(1) of EO 292, the President can reorganize the Office of
the President Proper by abolishing, consolidating or merging units, or by transferring
functions from one unit to another. In contrast, under Section 31(2) and (3) of EO
292, the Presidents power to reorganize offices outside the Office of the
President Proper but still within the Office of the President is limited to merely
transferring functions or agencies from the Office of the President to Departments
or Agencies, and vice versa.
The provisions of Section 31, Book III, Chapter 10, of Executive Order No. 292
(Administrative Code of 1987), above-referred to, reads thusly:
SEC. 31. Continuing Authority of the President to Reorganize his Office. The
President, subject to the policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have continuing authority to reorganize the
administrative structure of the Office of the President. For this purpose, he may
take any of the following actions:
(1) Restructure the internal organization of the Office of the President Proper,
including the immediate Offices, the Presidential Special Assistants/Advisers System
and the Common Staff Support System, by abolishing, consolidating or merging
units thereof or transferring functions from one unit to another;
(2) Transfer any function under the Office of the President to any other
Department or Agency as well as transfer functions to the Office of the President
from other Departments and Agencies; and

(3) Transfer any agency under the Office of the President to any other
department or agency as well as transfer agencies to the Office of the President
from other departments and agencies.
The first sentence of the law is an express grant to the President of a continuing
authority to reorganize the administrative structure of the Office of the
President. The succeeding numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope of the grant to the President of the
power to reorganize but are to be viewed in consonance therewith. Section 31(1) of
Executive Order No. 292 specifically refers to the Presidents power to restructure
the internal organization of the Office of the President Proper, by abolishing,
consolidating or merging units hereof or transferring functions from one unit to
another, while Section 31(2) and (3) concern executive offices outside the Office of
the President Proper allowing the President to transfer any function under the Office
of the President to any other Department or Agency andvice-versa, and the transfer
of any agency under the Office of the President to any other department or agency
and vice-versa.[14]
In the present instance, involving neither an abolition nor transfer of offices, the
assailed action is a mere reorganization under the general provisions of the law
consisting mainly of streamlining the NTA in the interest of simplicity, economy
and efficiency. It is an act well within the authority of President motivated and
carried out, according to the findings of the appellate court, in good faith, a factual
assessment that this Court could only but accept. [15]
In passing, relative to petitioners Motion for an En Banc Resolution of the
Case, it may be well to remind counsel, that the Court En Banc is not an appellate
tribunal to which appeals from a Division of the Court may be taken. A Division of
the Court is the Supreme Court as fully and veritably as the Court En Banc itself and
a decision of its Division is as authoritative and final as a decision of the Court En
Banc. Referrals of cases from a Division to the Court En Banc do not take place as
just a matter of routine but only on such specified grounds as the Court in its
discretion may allow.[16]
WHEREFORE, the Motion to Admit Petition for En Banc resolution and the
Petition for an En Banc Resolution are DENIED for lack of merit. Let entry of
judgment be made in due course. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

GSIS v. Civil Service missing

Commissioner v. CTA

G.R. No. 119761 August 29, 1996

COMMISSIONER
vs.

OF

INTERNAL

REVENUE, petitioner,

HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and

FORTUNE TOBACCO CORPORATION,respondents.

VITUG, J.:p
The Commissioner of Internal Revenue ("CIR") disputes the decision, dated
31 March 1995, of respondent Court of Appeals 1 affirming the 10th August
1994 decision and the 11th October 1994 resolution of the Court of Tax
Appeals 2("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco
Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of
Internal Revenue."
The facts, by and large, are not in dispute.
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the
manufacture of different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation
separate certificates of trademark registration over "Champion," "Hope," and
"More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner
of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of
the Presidential Commission on Good Government, "the initial position of the
Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands
since they were listed in the World Tobacco Directory as belonging to foreign
companies. However, Fortune Tobacco changed the names of 'Hope' to
'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said
brands from the foreign brand category. Proof was also submitted to the
Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune
Tobacco Corporation register and therefore a local brand." 3 Ad Valorem taxes
were imposed on these brands, 4 at the following rates:
BRAND AD VALOREM TAX RATE
E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90
Hope Luxury M. 100's
Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King

Sec. 142, (c), (2) 40% 45%

More Premium M. 100's
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20%

A bill, which later became Republic Act ("RA") No. 7654, 6 was enacted, on 10
June 1993, by the legislature and signed into law, on 14 June 1993, by the
President of the Philippines. The new law became effective on 03 July 1993. It
amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC") to
read; as follows:
Sec. 142. Cigars and Cigarettes.
xxx xxx xxx
(c) Cigarettes packed by machine. There shall be levied, assessed and
collected on cigarettes packed by machine a tax at the rates prescribed
below based on the constructive manufacturer's wholesale price or the
actual manufacturer's wholesale price, whichever is higher:
(1) On locally manufactured cigarettes which are currently classified and
taxed at fifty-five percent (55%) or the exportation of which is not authorized
by contract or otherwise, fifty-five (55%) provided that the minimum tax shall
not be less than Five Pesos (P5.00) per pack.
(2)
On other
locally
manufactured
cigarettes,
forty-five
percent
(45%) provided that the minimum tax shall not be less than Three Pesos
(P3.00) per pack.
xxx xxx xxx

When the registered manufacturer's wholesale price or the actual

manufacturer's wholesale price whichever is higher of existing brands of
cigarettes, including the amounts intended to cover the taxes, of cigarettes
packed in twenties does not exceed Four Pesos and eighty centavos (P4.80)
per pack, the rate shall be twenty percent (20%). 7 (Emphasis supplied)
About a month after the enactment and two (2) days before the effectivity of
RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR the full text of which expressed:
REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
July 1, 1993
REVENUE MEMORANDUM CIRCULAR NO. 37-93
SUBJECT: Reclassification of Cigarettes Subject to Excise Tax
TO: All Internal Revenue Officers and Others Concerned.
In view of the issues raised on whether "HOPE," "MORE" and "CHAMPION"
cigarettes which are locally manufactured are appropriately considered as
locally manufactured cigarettes bearing a foreign brand, this Office is
compelled to review the previous rulings on the matter.
Section 142 (c)(1) National Internal Revenue Code, as amended by R.A. No.
6956, provides:
On locally manufactured cigarettes bearing a foreign brand, fifty-five percent
(55%) Provided, That this rate shall apply regardless of whether or not the
right to use or title to the foreign brand was sold or transferred by its owner
to the local manufacturer. Whenever it has to be determined whether or not
a cigarette bears a foreign brand, the listing of brands manufactured in
foreign countries appearing in the current World Tobacco Directory shall
govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand
regardless of whether or not the right to use or title to the foreign brand was

sold or transferred by its owner to the local manufacturer. The brand must be
originally owned by a foreign manufacturer or producer. If ownership of the
cigarette brand is, however, not definitely determinable, ". . . the listing of
brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern. . . ."
"HOPE" is listed in the World Tobacco Directory as being manufactured by (a)
Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. "MORE" is listed in
the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra;
(b) Rothmans, Australia; (c) RJR-Macdonald Canada; (d) Rettig-Strenberg,
Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New
Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and
(m) R.J. Reynolds, USA. "Champion" is registered in the said directory as
being manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c)
Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan;
and (f) Tabac Reunies, Switzerland.
Since there is no showing who among the above-listed manufacturers of the
cigarettes bearing the said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of the National
Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24,
1988, "in cases where it cannot be established or there is dearth of evidence
as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
In view of the foregoing, the aforesaid brands of cigarettes, viz: "HOPE,"
"MORE" and "CHAMPION" being manufactured by Fortune Tobacco
Corporation are hereby considered locally manufactured cigarettes bearing a
foreign brand subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
(SGD) LIWAYWAY VINZONS-CHATO
Commissioner
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A.
Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it
was addressed to no one in particular. On 15 July 1993, Fortune Tobacco
received, by ordinary mail, a certified xerox copy of RMC 37-93.

In a letter, dated 19 July 1993, addressed to the appellate division of the BIR,
Fortune Tobacco requested for a review, reconsideration and recall of RMC
37-93. The request was denied on 29 July 1993. The following day, or on 30
July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency
amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the
CTA. 8
On 10 August 1994, the CTA upheld the position of Fortune Tobacco and
adjudged:
WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the
brands of cigarettes, viz: "HOPE," "MORE" and "CHAMPION" being
manufactured by Fortune Tobacco Corporation as locally manufactured
cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes is found to be defective, invalid and unenforceable, such that
when R.A. No. 7654 took effect on July 3, 1993, the brands in question were
not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section 1142(c)
(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still
classified as other locally manufactured cigarettes and taxed at 45% or 20%
as the case may be.
Accordingly, the deficiency ad valorem tax assessment issued on petitioner
Fortune Tobacco Corporation in the amount of P9,598,334.00, exclusive of
surcharge and interest, is hereby canceled for lack of legal basis.
Respondent Commissioner of Internal Revenue is hereby enjoined from
collecting the deficiency tax assessment made and issued on petitioner in
relation to the implementation of RMC No. 37-93.
SO ORDERED.

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit
the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals,
questioning the CTA's 10th August 1994 decision and 11th October 1994
resolution. On 31 March 1993, the appellate court's Special Thirteenth
Division affirmed in all respects the assailed decision and resolution.

In the instant petition, the Solicitor General argues: That

I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL
REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE.
II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF
RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND
PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND
ENFORCEABILITY.
III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93
ON JULY 2, 1993.
IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY
MANUFACTURED CIGARETTES SIMILARLY SITUATED AS "HOPE," "MORE" AND
"CHAMPION" CIGARETTES.
V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING
"HOPE," "MORE" AND "CHAMPION" CIGARETTES BEFORE THE EFFECTIVITY OF
R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO
ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS
OR PROPRIETY; RMC 37-93 IS CORRECT. 10
In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of
the BIR which can thus become effective without any prior need for notice
and hearing, nor publication, and that its issuance is not discriminatory since
it would apply under similar circumstances to all locally manufactured
cigarettes.
The Court must sustain both the appellate court and the tax court.
Petitioner stresses on the wide and ample authority of the BIR in the
issuance of rulings for the effective implementation of the provisions of the
National Internal Revenue Code. Let it be made clear that such authority of
the Commissioner is not here doubted. Like any other government agency,
however, the CIR may not disregard legal requirements or applicable
principles in the exercise of its quasi-legislative powers.

Let us first distinguish between two kinds of administrative issuances

a legislative rule and aninterpretative rule.
In Misamis Oriental Association of Coco Traders, Inc., vs. Department of
Finance Secretary, 11 the Court expressed:
. . . a legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof . In the
same way that laws must have the benefit of public hearing, it is generally
required that before a legislative rule is adopted there must be hearing. In
this connection, the Administrative Code of 1987 provides:
Public Participation. If not otherwise required by law, an agency shall, as
far as practicable, publish or circulate notices of proposed rules and afford
interested parties the opportunity to submit their views prior to the adoption
of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the
proposed rates shall have been published in a newspaper of general
circulation at least two (2) weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
In addition such rule must be published. On the other hand, interpretative
rules are designed to provide guidelines to the law which the administrative
agency is in charge of enforcing. 12
It should be understandable that when an administrative rule is merely
interpretative in nature, its applicability needs nothing further than its bare
issuance for it gives no real consequence more than what the law itself has
already prescribed. When, upon the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at
least to those directly affected a chance to be heard, and thereafter to be
duly informed, before that new issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under
which it has been issued, convinces us that the circular cannot be viewed
simply as a corrective measure (revoking in the process the previous
holdings of past Commissioners) or merely as construing Section 142(c)(1) of

the NIRC, as amended, but has, in fact and most importantly, been made in
order to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and
to thereby have them covered by RA 7654. Specifically, the new law would
have its amendatory provisions applied to locally manufactured cigarettes
which at the time of its effectivity were not so classified as bearing foreign
brands. Prior to the issuance of the questioned circular, "Hope Luxury,"
"Premium More," and "Champion" cigarettes were in the category of locally
manufactured cigarettes not bearing foreign brand subject to 45% ad
valorem tax. Hence, without RMC 37-93, the enactment of RA 7654, would
have had no new tax rate consequence on private respondent's products.
Evidently, in order to place "Hope Luxury," "Premium More," and "Champion"
cigarettes within the scope of the amendatory law and subject them to an
increased tax rate, the now disputed RMC 37-93 had to be issued. In so
doing, the BIR not simply intrepreted the law; verily, it legislated under its
quasi-legislative authority. The due observance of the requirements of notice,
of hearing, and of publication should not have been then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
RMC NO. 10-86
Effectivity of Internal Revenue Rules and Regulations
It has been observed that one of the problem areas bearing on compliance
with Internal Revenue Tax rules and regulations is lack or insufficiency of due
notice to the tax paying public. Unless there is due notice, due compliance
therewith may not be reasonably expected. And most importantly, their strict
enforcement could possibly suffer from legal infirmity in the light of the
constitutional provision on "due process of law" and the essence of the Civil
Code provision concerning effectivity of laws, whereby due notice is a basic
requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).
In order that there shall be a just enforcement of rules and regulations, in
conformity with the basic element of due process, the following procedures
are hereby prescribed for the drafting, issuance and implementation of the
said Revenue Tax Issuances:
(1) This Circular shall apply only to (a) Revenue Regulations; (b) Revenue
Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and
Revenue Memorandum Orders bearing on internal revenue tax rules and
regulations.

(2) Except when the law otherwise expressly provides, the aforesaid internal
revenue tax issuances shall not begin to be operative until after due notice
thereof may be fairly presumed.
Due notice of the said issuances may be fairly presumed only after the
following procedures have been taken;
xxx xxx xxx
(5)
Strict
enjoined. 13

compliance

with

the

foregoing

procedures

is

Nothing on record could tell us that it was either impossible or impracticable

for the BIR to observe and comply with the above requirements before giving
effect to its questioned circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of
taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates
taxation to be uniform and equitable. Uniformity requires that all subjects or
objects of taxation, similarly situated, are to be treated alike or put on equal
footing both in privileges and liabilities. 14 Thus, all taxable articles or kinds
of property of the same class must be taxed at the same rate 15 and the tax
must operate with the same force and effect in every place where the
subject may be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury," "Premium More"
and "Champion" cigarettes and, unless petitioner would be willing to concede
to the submission of private respondent that the circular should, as in fact
my esteemed colleague Mr. Justice Bellosillo so expresses in his separate
opinion, be considered adjudicatory in nature and thus violative of due
process following the Ang Tibay 16 doctrine, the measure suffers from lack of
uniformity of taxation. In its decision, the CTA has keenly noted that other
cigarettes bearing foreign brands have not been similarly included within the
scope of the circular, such as
1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.
(a) "PALM TREE" is listed as manufactured by office of Monopoly, Korea
(Exhibit "R")

2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY

(a) "GOLDEN KEY" is listed being manufactured by United Tobacco, Pakistan
(Exhibit "S")
(b) "CANNON" is listed as being manufactured by Alpha Tobacco, Bangladesh
(Exhibit "T")
3. Locally manufactured by LA PERLA INDUSTRIES, INC.
(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia
(Exhibit "U")
(b) "RIGHT" is listed as being manufactured by SVENSKA, Tobaks, Sweden
(Exhibit "V-1")
4. Locally manufactured by MIGHTY CORPORATION
(a) "WHITE HORSE" is listed as being manufactured by Rothman's, Malaysia
(Exhibit "U-1")
5. Locally manufactured by STERLING TOBACCO CORPORATION
(a) "UNION" is listed as being manufactured by Sumatra Tobacco, Indonesia
and Brown and Williamson, USA (Exhibit "U-3")
(b) "WINNER" is listed as being manufactured by Alpha Tobacco, Bangladesh;
Nangyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan;
Premier Tobacco, Pakistan and Haggar, Sudan (Exhibit "U-4"). 17
The court quoted at length from the transcript of the hearing conducted on
10 August 1993 by the Committee on Ways and Means of the House of
Representatives; viz:
THE CHAIRMAN. So you have specific information on Fortune Tobacco alone.
You don't have specific information on other tobacco manufacturers. Now,
there are other brands which are similarly situated. They are locally
manufactured bearing foreign brands. And may I enumerate to you all these
brands, which are also listed in the World Tobacco Directory . . . Why were
these brand not reclassified at 55 if your want to give a level playing filed to
foreign manufacturers?

MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue

Memorandum Circular that was supposed to come after RMC No. 37-93
which have really named specifically the list of locally manufactured
cigarettes bearing a foreign brand for excise tax purposes and includes all
these brands that you mentioned at 55 percent except that at that time,
when we had to come up with this, we were forced to study the brands of
Hope, More and Champion because we were given documents that would
indicate the that these brands were actually being claimed or patented in
other countries because we went by Revenue Memorandum Circular 1488
and we wanted to give some rationality to how it came about but we couldn't
find the rationale there. And we really found based on our own interpretation
that the only test that is given by that existing law would be registration in
the World Tobacco Directory. So we came out with this proposed revenue
memorandum circular which we forwarded to the Secretary of Finance except
that at that point in time, we went by the Republic Act 7654 in Section 1
which amended Section 142, C-1, it said, that on locally manufactured
cigarettes which are currently classified and taxed at 55 percent. So we were
saying that when this law took effect in July 3 and if we are going to come up
with this revenue circular thereafter, then I think our action would really be
subject to question but we feel that . . . Memorandum Circular Number 37-93
would really cover even similarly situated brands. And in fact, it was really
because of the study, the short time that we were given to study the matter
that we could not include all the rest of the other brands that would have
been really classified as foreign brand if we went by the law itself. I am sure
that by the reading of the law, you would without that ruling by
Commissioner Tan they would really have been included in the definition or
in the classification of foregoing brands. These brands that you referred to or
just read to us and in fact just for your information, we really came out with
a proposed revenue memorandum circular for those brands. (Emphasis
supplied)
(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).
xxx xxx xxx
MS. CHATO. . . . But I do agree with you now that it cannot and in fact that is
why I felt that we . . . I wanted to come up with a more extensive coverage
and precisely why I asked that revenue memorandum circular that would
cover all those similarly situated would be prepared but because of the lack
of time and I came out with a study of RA 7654, it would not have been

possible to really come up with the reclassification or the proper

classification of all brands that are listed there. . .(emphasis supplied)
(Exhibit "FF-2d," page IX-1)
xxx xxx xxx
HON. DIAZ. But did you not consider that there are similarly situated?
MS. CHATO. That is precisely why, Sir, after we have come up with this
Revenue Memorandum Circular No. 37-93, the other brands came about the
would have also clarified RMC 37-93 by I was saying really because of the
fact that I was just recently appointed and the lack of time, the period that
was allotted to us to come up with the right actions on the matter, we were
really caught by the July 3 deadline. But in fact, We have already prepared a
revenue memorandum circular clarifying with the other . . . does not yet,
would have been a list of locally manufactured cigarettes bearing a foreign
brand for excise tax purposes which would include all the other brands that
were mentioned by the Honorable Chairman. (Emphasis supplied) (Exhibit
"FF-2-d," par. IX-4). 18
All taken, the Court is convinced that the hastily promulgated RMC 37-93 has
fallen short of a valid and effective administrative issuance.
WHEREFORE, the decision of the Court of Appeals, sustaining that of the
Court of Tax Appeals, is AFFIRMED. No costs.
SO ORDERED.
Kapunan, J., concurs.

Separate Opinions

BELLOSILLO, J.: separate opinion:

RA 7654 was enacted by Congress on 10 June 1993, signed into law by the
President on 14 June 1993, and took effect 3 July 1993. It amended partly
Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read
Sec. 142. Cigars and cigarettes. . . . . (c) Cigarettes packed by machine.
There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below based on the constructive
manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher.
(1) On locally manufactured cigarettes which are currently classified and
taxed at fifty-five percent (55%) or the exportation of which is not authorized
by contract or otherwise, fifty-five percent (55%) provided that the minimum
tax shall not be less than Five Pesos (P5.00) per pack (emphasis supplied).
(2) On other locally manufactured cigarettes, forty-five percent (45%)
provided that the minimum tax shall not be less than Three Pesos (P3.00) per
pack.
Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium
More and Champion were considered local brands subjected to an ad
valorem tax at the rate of 20-45%. However, on 1 July 1993 or two (2) days
before RA 7654 took effect, petitioner Commissioner of Internal Revenue
issued
RMC
37-93
reclassifying
"Hope, Moreand Champion being
manufactured by Fortune Tobacco Corporation . . . . (as) locally manufactured
cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes." 1 RMC 37-93 in effect subjected Hope Luxury, Premium
More and Champion cigarettes to the provisions of Sec. 142, par. (c), subpar.
(1), NIRC, as amended by RA 7654, imposing upon these cigarette brands
an ad valorem tax of "fifty-five percent (55%) provided that the minimum tax
shall not be less than Five Pesos (P5.00) per pack."
On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours
before the effectivity of RA 7654, a copy of RMC 37-93 with a cover letter
signed by Deputy Commissioner Victor A. Deoferio of the Bureau of Internal
Revenue was sent by facsimile to the factory of respondent corporation in
Parang, Marikina, Metro Manila. It appears that the letter together with a
copy of RMC 37-93 did not immediately come to the knowledge of private
respondent as it was addressed to no one in particular. It was only when the
reclassification of respondent corporation's cigarette brands was reported in
the column of Fil C. Sionil in Business Bulletin on 4 July 1993 that the

president of respondent corporation learned of the matter, prompting him to

inquire into its veracity and to request from petitioner a copy of RMC 37-93.
On 15 July 1993 respondent corporation received by ordinary mail a certified
machine copy of RMC 37-93.
Respondent corporation sought a review, reconsideration and recall of RMC
37-93 but was forthwith denied by the Appellate Division of the Bureau of
Internal Revenue. As a consequence, on 30 July 1993 private respondent was
assessed an ad valorem tax deficiency amounting to P9,598,334.00.
Respondent corporation went to the Court of Tax Appeals (CTA) on a petition
for review.
On 10 August 1994, after due hearing, the CTA found the petition meritorious
and ruled
Revenue Memorandum Circular No. 37-93 reclassifying the brands of
cigarettes, viz: Hope, More andChampion being manufactured by Fortune
Tobacco Corporation as locally manufactured cigarettes bearing a foreign
brand subject to the 55% ad valorem tax on cigarettes is found to be
defective, invalid and unenforceable . . . . Accordingly, the deficiency ad
valorem tax assessment issued on petitioner Fortune Tobacco Corporation in
the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby
cancelled for lack of legal basis. 2
The CTA held that petitioner Commissioner of Internal Revenue failed to
observe due process of law in issuing RMC 37-93 as there was no prior notice
and hearing, and that RMC 37-93 was in itself discriminatory. The motion to
reconsider its decision was denied by the CTA for lack of merit. On 31 March
1995 respondent Court of Appeals affirmed in toto the decision of the
CTA. 3 Hence, the instant petition for review.
Petitioner now submits through the Solicitor General that RMC 37-93
reclassifying Hope
Luxury, Premium
Moreand Champion as
locally
manufactured cigarettes bearing brands is merely an interpretative ruling
which needs no prior notice and hearing as held in Misamis Oriental
Association of Coco Traders, Inc. v. Department of Finance Secretary. 4 It
maintains that neither is the assailed revenue memorandum circular
discriminatory as it merely "lays down the test in determining whether or not
a locally manufactured cigarette bears a foreign brand using (only) the
cigarette brandsHope, More and Champion as specific examples." 5

Respondent corporation on the other hand contends that RMC 37-93 is not a
mere interpretative ruling but is adjudicatory in nature where prior notice
and hearing are mandatory, and that Misamis Oriental Association of Coco
Traders, Inc. v. Department of Finance Secretary on which the Solicitor
General relies heavily is not applicable. Respondent Fortune Tobacco
Corporation also argues that RMC 37-93 discriminates against its cigarette
brands since those of its competitors which are similarly situated have not
been reclassified.
The main issues before us are (a) whether RMC 37-93 is merely an
interpretative rule the issuance of which needs no prior notice and hearing,
or an adjudicatory ruling which calls for the twin requirements of prior notice
and hearing, and, (b) whether RMC 37-93 is discriminatory in nature.
A brief discourse on the powers and functions of administrative bodies may
be instructive.
Administrative agencies posses quasi-legislative or rule making powers and
quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule
making power is the power to make rules and regulations which results
in delegated legislation that is within the confines of the granting statute and
the doctrine of nondelegability and separability of powers.
Interpretative rule, one of the three (3) types of quasi-legislative or rule
making powers of an administrative agency (the other two being
supplementary or detailed legislation, and contingent legislation), is
promulgated by the administrative agency to interpret, clarify or explain
statutory regulations under which the administrative body operates. The
purpose or objective of an interpretative rule is merely to construe the
statute being administered. It purports to do no more than interpret the
statute. Simply, the rule tries to say what the statute means. Generally, it
refers to no single person or party in particular but concerns all those
belonging to the same class which may be covered by the said interpretative
rule. It need not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to enforce the
law and is intended merely to clarify statutory provisions for proper
observance by the people. In Taada v. Tuvera, 6 this Court expressly said
that "[i]interpretative regulations . . . . need not be published."
Quasi-judicial or administrative adjudicatory power on the other hand is the
power of the administrative agency to adjudicate the rights of persons before

it. It is the power to hear and determine questions of fact to which the
legislative policy is to apply and to decide in accordance with the standards
laid down by the law itself in enforcing and administering the same law. 7 The
administrative body exercises its quasi-judicial power when it performs in a
judicial manner an act which is essentially of an executive or administrative
nature, where the power to act in such manner is incidental to or reasonably
necessary for the performance of the executive or administrative duty
entrusted to it. 8 In carrying out their quasi-judicial functions the
administrative officers or bodies are required to investigate facts or ascertain
the existence of facts, hold hearings, weigh evidence, and draw conclusions
from them as basis for their official action and exercise of discretion in a
judicial nature. Since rights of specific persons are affected it is elementary
that in the proper exercise of quasi-judicial power due process must be
observed in the conduct of the proceedings.
The importance of due process cannot be underestimated. Too basic is the
rule that no person shall be deprived of life, liberty or property without due
process of law. Thus when an administrative proceeding is quasi-judicial in
character, notice and fair open hearing are essential to the validity of the
proceeding. The right to reasonable prior notice and hearing embraces not
only the right to present evidence but also the opportunity to know the
claims of the opposing party and to meet them. The right to submit
arguments implies that opportunity otherwise the right may as well be
considered impotent. And those who are brought into contest with
government in a quasi-judicial proceeding aimed at the control of their
activities are entitled to be fairy advised of what the government proposes
and to be heard upon its proposal before it issues its final command.
There are cardinal primary rights which must be respected in administrative
proceedings. The landmark case ofAng Tibay v. The Court of Industrial
Relations 9 enumerated these rights: (1) the right to a hearing, which
includes the right of the party interested or affected to present his own case
and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself;
(4) the evidence must be substantial; (5) the decision must be rendered on
the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected; (6) the tribunal or any of its judges
must act on its or his own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate in arriving
at a decision; and, (7) the tribunal should in all controversial questions

render its decision in such manner that the parties to the proceeding may
know the various issues involved and the reasons for the decision rendered.
In determining whether RMC No. 37-93 is merely an interpretative rule which
requires no prior notice and hearing, or an adjudicatory rule which demands
the observance of due process, a close examination of RMC 37-93 is in order.
Noticeably, petitioner Commissioner of Internal Revenue at first interprets
Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and
clarifying or explaining what it means
Section 142 (c) (1), National Internal Revenue Code, as amended by R.A. No.
6956, provides: On locally manufactured cigarettes bearing a foreign brand,
fifty-five percent (55%) Provided, That this rate shall apply regardless of
whether or not the right to use or title to the foreign brand was sold or
transferred by its owner to the local manufacturer. Whenever it has to be
determined whether or not a cigarette bears a foreign brand, the listing of
brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand
regardless of whether or not the right to use or title to the foreign brand was
sold or transferred by its owner to the local manufacturer. The brand must be
originally owned by a foreign manufacturer or producer. If ownership of the
cigarette
brand
is,
however,
not
definitely
determinable,
". . . the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern . . ."
Then petitioner makes a factual finding by declaring that Hope (Luxury),
(Premium) More and Champion are
manufactured
by
other
foreign
manufacturers
Hope is listed in the World Tobacco Directory as being manufactured by (a)
Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. More is listed in
the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra;
(b) Rothmans, Australia; (c) RJR-MacDonald, Canada; (d) Rettig-Strenberg,
Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New
Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and
(m) R.J. Reynolds, USA. "Champion" is registered in the said directory as
being manufactured by: (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c)

Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan;
and (f) Tabac Reunies, Switzerland.
From this finding, petitioner thereafter formulates an inference that since it
cannot be determined who among the manufacturers are the real owners of
the brands in question, then these cigarette brands should be considered
foreign brands
Since there is no showing who among the above-listed manufacturers of the
cigarettes bearing the said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of the National
Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24,
1988, "in cases where it cannot be established or there is dearth of evidence
as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
Finally, petitioner caps RMC 37-93 with a disposition specifically directed at
respondent corporation reclassifying its cigarette brands as locally
manufactured bearing foreign brands
In
view
of
the
foregoing,
the
aforesaid
brands
of
cigarettes, viz: Hope, More and Champion being manufactured by Fortune
Tobacco Corporation are hereby considered locally manufactured cigarettes
bearing a foreign brand subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
It is evident from the foregoing that in issuing RMC 37-93 petitioner
Commissioner of Internal Revenue was exercising her quasi-judicial or
administrative adjudicatory power. She cited and interpreted the law, made a
factual finding, applied the law to her given set of facts, arrived at a
conclusion, and issued a ruling aimed at a specific individual. Consequently
prior notice and hearing are required. It must be emphasized that even the
text alone of RMC 37-93 implies that reception of evidence during a hearing
is appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated
August 24, 1988, which provides that "in cases where it cannot be
established or there is dearth of evidence as to whether a brand is foreign or
not . . . ." Indeed, it is difficult to determine whether a brand is foreign or not
if it is not established by, or there is dearth of, evidence because no hearing
has been called and conducted for the reception of such evidence. In fine, by

no stretch of the imagination can RMC 37-93 be considered purely as an

interpretative rule requiring no previous notice and hearing and simply
interpreting, construing, clarifying or explaining statutory regulations being
administered by or under which the Bureau of Internal Revenue operates.
It is true that both RMC 47-91 in Misamis Oriental Association of Coco
Traders v. Department of Finance Secretary, and RMC 37-93 in the instant
case reclassify certain products for purposes of taxation. But the similarity
between the two revenue memorandum circulars ends there. For in properly
determining whether a revenue memorandum circular is merely an
interpretative rule or an adjudicatory rule, its very tenor and text, and the
circumstances surrounding its issuance will have no to be considered.
We quote RMC 47-91 promulgated 11 June 1991
Revenue Memorandum Circular No. 47-91
SUBJECT
:
Taxability
of
TO : All Revenue Officials and Employees and Others Concerned.

Copra

For the information and guidance of all officials and employees and others
concerned, quoted hereunder in its entirety is VAT Ruling No. 190-90 dated
August 17, 1990:
COCOFED
6th
144
Legaspi
Metro Manila

MARKETING
Floor

Attention:
Vice President Finance

RESEARCH
Cocofed
Amorsolo
Village,

Ms. Esmyrna

CORPORATION
Building
Street
Makati

E. Reyes

Sirs:
This has reference to your letter dated January 16, 1990 wherein you
represented that inspite of your VAT registration of your copra trading
company, you are supposed to be exempt from VAT on the basis of BIR
Ruling dated January 8, 1988 which considered copra as an agricultural food
product in its original state. In this connection, you request for a confirmation
of your opinion as aforestated.

In reply, please be informed that copra, being an agricultural non-food

product, is exempt from VAT only if sale is made by the primary producer
pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading
company and a subsequent seller, your sale of copra is already subject to
VAT pursuant to Section 9(b) (1) of Revenue Regulations 5-27.
This revokes VAT Ruling Nos. 009-88 and 279-88.
Very truly yours,
(Sgd.)
JOSE
Commissioner of Internal Revenue

U.

ONG

As a clarification, this is the present and official stand of this Office unless
sooner revoked or amended. All revenue officials and employees are
enjoined to give this Circular as wide a publicity as possible.
(Sgd.)
JOSE
Commissioner of Internal Revenue

U.

ONG

Quite obviously, the very text of RMC 47-91 itself shows that it is merely an
interpretative rule as it simply quotes a VAT Ruling and reminds those
concerned that the ruling is the present and official stand of the Bureau of
Internal Revenue. Unlike in RMC 37-93 where petitioner Commissioner
manifestly exercised her quasi-judicial or administrative adjudicatory power,
in RMC 47-91 there were no factual findings, no application of laws to a given
set of facts, no conclusions of law, and no dispositive portion directed at any
particular party.
Another difference is that in the instant case, the issuance of the assailed
revenue memorandum circular operated to subject the taxpayer to the new
law which was yet to take effect, while in Misamis, the disputed revenue
memorandum circular was issued simply to restate and then clarify the
prevailing position and ruling of the administrative agency, and no new law
yet to take effect was involved. It merely interpreted an existing law which
had already been in effect for some time and which was not set to be
amended. RMC 37-93 is thus prejudicial to private respondent alone.
A third difference, and this likewise resolves the issue of discrimination, is
that RMC 37-93 was ostensibly issued to subject the cigarette brands of
respondent corporation to a new law as it was promulgated two days before

the expiration of the old law and a few hours before the effectivity of the new
law. That RMC 37-93 is particularly aimed only at respondent corporation and
its three (3) cigarette brands can be seen from the dispositive portion of the
assailed revenue memorandum circular
In view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More,
and Champion being manufactured by Fortune Tobacco Corporation are
hereby considered locally manufactured cigarettes bearing a foreign brand
subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
Thus the argument of the Solicitor General that RMC 37-93 is not
discriminatory as "[i]t merely lays down the test in determining whether or
not a locally manufactured cigarette bears a foreign brand using the
cigarette brandsHope, More and Champion as specific examples," cannot be
accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous
effect on respondent corporation and solely on respondent corporation
as
its
deficiency ad
valorem tax
assessment
on
its
removals
of Hope, Luxury, Premium More, and Champion cigarettes for six (6) hours
alone, i.e., from six o'clock in the evening of 2 July 1993 which is presumably
the time respondent corporation was supposed to have received the
facsimile message sent by Deputy Commissioner Victor A. Deoferio, until
twelve o'clock midnight upon the effectivity of the new law, was already
P9,598,334.00. On the other hand, RMC 47-91 was issued with no purpose
except to state and declare what has been the official stand of the
administrative agency on the specific subject matter, and was
indiscriminately directed to all copra traders with no particular individual in
mind.
That petitioner Commissioner of Internal Revenue is an expert in her filed is
not attempted to be disputed; hence, we do not question the wisdom of her
act in reclassifying the cigarettes. Neither do we deny her the exercise of her
quasi-legislative or quasi-judicial powers. But most certainly, by
constitutional mandate, the Court must check the exercise of these powers
and ascertain whether petitioner has gone beyond the legitimate bounds of
her authority.
In the final analysis, the issue before us in not the expertise, the authority to
promulgate rules, or the wisdom of petitioner as Commissioner of Internal
Revenue is reclassifying the cigarettes of private respondents. It is simply the

faithful observance by government by government of the basic constitutional

right of a taxpayer to due process of law and equal protection of the laws.
This is what distresses me no end the manner and the circumstances
under which the cigarettes of private respondent were reclassified and
correspondingly taxed under RMC 37-93, and adjudicatory rule which
therefore requires reasonable notice and hearing before its issuance. It
should not be confused with RMC 47-91, which is a mere interpretative rule.
In the earlier case of G.R. No. 119322, which practically involved the same
opposing interests, I also voted to uphold the constitutional right of the
taxpayer concerned to due process and equal protection of the laws. By a
vote of 3-2, that view prevailed. In sequela, we in the First Division who
constituted the majority found ourselves unjustly drawn into the vortex of a
nightmarish episode. The strong ripples whipped up by my opinion expressed
therein and of the majority have yet to varnish when we are again in
the imbroglio of a similar dilemma. The unpleasant experience should be
reason enough to simply steer clear of this controversy and surf on a
pretendedloss of judicial objectivity. Such would have been an easy way out,
a gracious exit, so to speak, albeit lame. But to camouflage my leave with a
sham excuse would be to turn away from a professional vow I keep at all
times; I would not be true to myself, and to the people I am committed to
serve. Thus, as I have earlier expressed, if placed under similar
circumstances in some future time, I shall have to brave again the prospect
of another vilification and a tarnished image if only to show proudly to the
whole world that under the present dispensation judicial independence in our
country is a true component of our democracy.
In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as
well as the effect of such issuance. For it cannot be denied that the
circumstances clearly demonstrate that it was hastily issued without prior
notice and hearing, and singling out private respondent alone when two
days before a new tax law was to take effect petitioner reclassified and taxed
the cigarette brands of private respondent at a higher rate. Obviously, this
was to make it appear that even before the anticipated date of effectivity of
the statute which was undeniably priorly known to petitioner these
brands were already currently classified and taxed at fifty-five percent
(55%), thus shoving them into the purview of the law that was to take effect
two days after!

For sure, private respondent was not properly informed before the issuance
of the questioned memorandum circular that its cigarette brands Hope
Luxury, Premium More and Champion were being reclassified and subjected
to a higher tax rate. Naturally, the result would be to lose financially because
private respondent was still selling its cigarettes at a price based on the old,
lower tax rate. Had there been previous notice and hearing, as claimed by
private respondent, it could have very well presented its side, either by
opposing the reclassification, or by acquiescing thereto but increasing the
price of its cigarettes to adjust to the higher tax rate. The reclassification and
the ensuing imposition of a tax rate increase therefore could not be anything
but confiscatory if we are also to consider the claim of private respondent
that the new tax is even higher than the cost of its cigarettes.
Accordingly, I vote to deny the petition.

HERMOSISIMA, JR., J.: dissenting

Private respondent Fortune Tobacco Corporation in the instant case disputes
its liability for deficiency ad valoremexcise taxes on its removals of "Hope,"
"More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July
2, 1993, in the total amount of P9,598,334.00. It claims that the circular,
upon which the assessment was based and made, is defective, invalid and
unenforceable for having been issued without notice and hearing and in
violation of the equal protection clause guaranteed by the Constitution.
The majority upholds these claims of private respondent, convinced that the
Circular in question, in the first place, did not give prior notice and hearing,
and so, it could not have been valid and effective. It proceeds to affirm the
factual findings of the Court of Tax Appeals, which findings were considered
correct by respondent Court of Appeals, to the effect that the petitioner
Commissioner of Internal Revenue had indeed blatantly failed to comply with
the said twin requirements of notice and hearing, thereby rendering the
issuance of the questioned Circular to be in violation of the due process
clause of the Constitution. It is also its dominant opinion that the questioned
Circular discriminates against private respondent Fortune Tobacco
Corporation insofar as it seems to affect only its "Hope," "More," and
"Champion" cigarettes, to the exclusion of other cigarettes apparently of the
same kind or classification as these cigarettes manufactured by private
respondent.

With all due respect, I disagree with the majority in its disquisition of the
issues and its resulting conclusions.
Section
245
of
the
National
as
amended,
empowers
the
Revenue to issue the questioned Circular

Internal
Revenue
Commissioner
of

Code,
Internal

Section 245 of the National Internal Revenue Code, as amended, provides:

Sec. 245. Authority of Secretary of Finance to promulgate rules and
regulations. The Secretary of Finance, upon recommendation of the
Commissioner, shall promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code . . . without prejudice to
the power of the Commissioner of Internal Revenue to make rulings or
opinions in connection with the implementation of the provisions of internal
revenue laws, including rulings on the classification of articles for sales tax
and similar purposes.
The subject of the questioned Circular is the reclassification of cigarettes
subject to excise taxes. It was issued in connection with Section 142 (c) (1) of
the National Internal Revenue Code, as amended, which imposes ad
valorem excise taxes on locally manufactured cigarettes bearing a foreign
brand. The same provision prescribes the ultimate criterion that determines
which cigarettes are to be considered "locally manufactured cigarettes
bearing a foreign brand." It provides:
. . . Whenever it has to be determined whether or not a cigarette bears a
foreign brand, the listing of brands manufactured in foreign countries
appearing in the current World Tobacco Directory shall govern.
There is only one World Tobacco Directory for a given current year, and the
same is mandated by law to be the BIR Commissioner's controlling basis for
determining whether or not a particular locally manufactured cigarette is one
bearing a foreign brand. In so making a determination, petitioner should
inquire into the entries in the World Tobacco Directory for the given current
year and shall be held bound by such entries therein. She is not required to
subject the results of her inquiries to feedback from the concerned cigarette
manufacturers, and it is doubtlessly not desirable nor managerially sound to
court dispute thereon when the law does not, in the first place, require
debate or hearing thereon. Petitioner may make such a determination
because she is the Chief Executive Officer of the administrative agency that

is the Bureau of Internal Revenue in which are vested quasi-legislative

powers entrusted to it by the legislature in recognition of its more
encompassing and unequalled expertise in the field of taxation.
The vesture of quasi-legislative and quasi-judicial powers in administrative
bodies is not unconstitutional, unreasonable and oppressive. It has been
necessitated by "the growing complexity of the modern society" (Solid
Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative
bodies are necessary to help in the regulation of society's ramified activities.
"Specialized in the particular field assigned to them, they can deal with the
problems thereof with more expertise and dispatch than can be expected
from the legislature or the courts of justice" . . . 1
Statutorily empowered to issue rulings or opinions embodying the proper
determination in respect to classifying articles, including cigarettes, for
purposes of tax assessment and collection, petitioner was acting well within
her prerogatives when she issued the questioned Circular. And in the
exercise of such prerogatives under the law, she has in her favor the
presumption of regular performance of official duty which must be overcome
by clearly persuasive evidence of stark error and grave abuse of discretion in
order to be overturned and disregarded.
It is irrelevant that the Court of Tax Appeals makes much of the effect of the
passing of Republic Act No. 7654 2 on petitioner's power to classify
cigarettes. Although the decisions assailed and sought to be reviewed, as
well as the pleadings of private respondent, are replete with alleged
admissions of our legislators to the effect that the said Act was intended to
freeze the current classification of cigarettes and make the same an integral
part of the said Act, certainly the repeal, if any, of petitioner's power to
classify cigarettes must be reckoned from the effectivity of the said Act and
not before. Suffice it to say that indisputable is the plain fact that the
questioned Circular was issued on July 1, 1993, while the said Act took effect
on July 3, 1993.
The
contents
of
the
questioned
circular
been
proven
to
be
erroneous
or
illegal
as
issuance
thereof
an
act
of
grave
discretion on the part of petitioner Commissioner

have
not
to
render
abuse
of

Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National
Internal Revenue Code, as amended, levies the following ad valorem taxes

on cigarettes in accordance with their predetermined classifications as

established by the Commissioner of Internal Revenue:
. . . based on the manufacturer's registered wholesale price:
(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five
percent (55%) Provided, That this rate shall apply regardless of whether or
not the right to use or title to the foreign brand was sold or transferred by its
owner to the local manufacturer. Whenever it has to be determined whether
or not a cigarette bears a foreign brand, the listing of brands manufactured
in foreign countries appearing in the current World Tobacco Directory shall
govern.
(2) Other locally manufactured cigarettes, forty five percent (45%).
xxx xxx xxx
Prior to the issuance of the questioned Circular, assessed against and paid by
private respondent as ad valoremexcise taxes on their removals of "Hope,"
"More," and "Champion" cigarettes were amounts based on paragraph (2)
above, i.e., the tax rate made applicable on the said cigarettes was 45% at
the most. The reason for this is that apparently, petitioner's predecessors
have all made determinations to the effect that the said cigarettes were to
be considered "other locally manufactured cigarettes" and not "locally
manufactured cigarettes bearing a foreign brand." Even petitioner, until her
issuance of the questioned Circular, adhered to her predecessors'
determination as to the proper classification of the above-mentioned
cigarettes for purposes of ad valorem excise taxes. Apparently, the past
determination that the said cigarettes were to be classified as "other locally
manufactured cigarettes" was based on private respodnent's convenient
move of changing the names of "Hope" to "Hope Luxury" and "More" to
"Premium More." It also submitted proof that "Champion" was an original
Fortune Tobacco Corporation register and, therefore, a local brand. Having
registered these brands with the Philippine Patent Office and with
corresponding evidence to the effect, private respondent paid ad
valorem excise taxes computed at the rate of not more than 45% which is
the rate applicable to cigarettes considered as locally manufactured brands.
How these past determinations pervaded notwithstanding their erroneous
basis is only tempered by their innate quality of being merely errors in
interpretative ruling, the formulation of which does not bind the government.

Advantage over such errors may precipitously be withdrawn from those who
have been benefiting from them once the same have been discovered and
rectified.
Petitioner correctly emphasizes that:
. . . the registration of said brands in the name of private respondent is proof
only that it is the exclusive owner thereof in the Philippines; it does not
necessarily follow, however, that it is the exclusive owner thereof in the
whole world. Assuming arguendo that private respondent is the exclusive
owner of said brands in the Philippines, it does not mean that they are local.
Otherwise, they would not have been listed in the WTD as international
brands manufactured by different entities in different countries. Moreover, it
cannot be said that the brands registered in the names of private respondent
are not the same brands listed in the WTD because private respondent is one
of the manufacturers of said brands listed in the WTD. 3
Private respondent attempts to cast doubt on the determination made by
petitioner in the questioned Circular that Japan is a manufacturer of "Hope"
cigarettes. Private respondent's own inquiry into the World Tobacco Directory
reveals that Japan is not a manufacturer of "Hope" cigarettes. In pointing this
out, private respondent concludes that the entire Circular is erroneous and
makes such error the principal proof of its claim that the nature of the
determination embodied in the questioned Circular requires a hearing on the
facts and a debate on the applicable law. Such a determination is
adjudicatory in nature and, therefore, requires notice and hearing. Private
respondent is, however, apparently only eager to show error on the part of
petitioner for acting with grave abuse of discretion. Private respondent
conveniently forgets that petitioner, equipped with the expertise in taxation,
recognized in that expertise by the legislature that vested in her the power
to make rules respecting classification of articles for taxation purposes, and
presumed to have regularly exercised her prerogatives within the scope of
her statutory power to issue determinations specifically under Section 142
(c) (1) in relation to Section 245 of the National Internal Revenue Code, as
amended, simply followed the law as she understood it. Her task was to
determine which cigarette brands were foreign, and she was directed by the
law to look into the World Tobacco Directory. Foreign cigarette brands were
legislated to be taxed at higher rates because of their more extensive public
exposure and international reputation; their competitive edge against local
brands may easily be checked by imposition of higher tax rates. Private

respondent makes a mountain of the mole hill circumstance that "Hope" is

listed, not as being "manufactured" by Japan but as being "used" by Japan.
Whether manufactured or used by Japan, however, "Hope" remains a
cigarette brand that can not be said to be limited to local manufacture in the
Philippines. The undeniable fact is that it is a foreign brand the sales in the
Philippines of which are greatly boosted by its international exposure and
reputation. The petitioner was well within her prerogatives, in the exercise of
her rule-making power, to classify articles for taxation purposes, to interpret
the laws which she is mandated to administer. In interpreting the same,
petitioner must, in general, be guided by the principles underlying
taxation, i.e., taxes are the lifeblood of Government, and revenue laws ought
to be interpreted in favor of the Government, for Government can not
survive without the funds to underwrite its varied operational expenses in
pursuit of the welfare of the society which it serves and protects.
Private respondent claims that its business will be destroyed by the
imposition of additional ad valorem taxes as a result of the effectivity of the
questioned Circular. It claims that under the vested rights theory, it cannot
now be made to pay higher taxes after having been assessed for less in the
past. Of course private respondent will trumpet its losses, its interests, after
all, being its sole concern. What private respondent fails to see is the loss of
revenue by the Government which, because of erroneous determinations
made by its past revenue commissioners, collected lesser taxes than what it
was entitled to in the first place. It is every citizen's duty to pay the correct
amount of taxes. Private respondent will not be shielded by any vested
rights, for there are not vested rights to speak of respecting a wrong
construction of the law by administrative officials, and such wrong
interpretation does not place the Government in estoppel to correct or
overrule the same. 4
The
Questioned
Circular
embodies
ruling
of
petitioner
Commissioner
which
not require notice and hearing

an
as

interpretative
such
does

As one of the public offices of the Government, the Bureau of Internal

Revenue, through its Commissioner, has grown to be a typical administrative
agency vested with a fusion of different governmental powers: the power to
investigate, initiate action and control the range of investigation, the power
to promulgate rules and regulations to better carry out statutory policies,
and the power to adjudicate controversies within the scope of their

activities. 5 In the realm of administrative law, we understand that such an

empowerment of administrative agencies was evolved in response to the
needs of a changing society. This development arose as the need for broad
social control over complex conditions and activities became more and more
pressing, and such complexity could no longer be dealt with effectivity and
directly by the legislature or the judiciary. The theory which underlies the
empowerment of administrative agencies like the Bureau of Internal
Revenue, is that the issues with which such agencies deal ought to be
decided by experts, and not be a judge, at least not in the first instance or
until the facts have been sifted and arranged. 6
One of the powers of administrative agencies like the Bureau of Internal
Revenue, is the power to make rules. The necessity for vesting
administrative agencies with this power stems from the impracticability of
the lawmakers providing general regulations for various and varying details
pertinent to a particular legislation. 7
The rules that administrative agencies may promulgate may either be
legislative or interpretative. The former is a form of subordinate legislation
whereby the administrative agency is acting in a legislative capacity,
supplementing the statute, filling in the details, pursuant to a specific
delegation of legislative power. 8
Interpretative rules, on the other hand, are "those which purport to do no
more than interpret the statute being administered, to say what it means." 9
There can be no doubt that there is a distinction between an administrative
rule or regulation and an administrative interpretation of a law whose
enforcement is entrusted to an administrative body. When an administrative
agency promulgates rules and regulations, it "makes" a new law with the
force and effect of a valid law, while when it renders an opinion or gives a
statement of policy, it merely interprets a pre-existing law (Parker,
Administrative Law, p. 197; Davis Administrative Law, p. 194). Rules and
regulations when promulgated in pursuance of the procedure or authority
conferred upon the administrative agency by law, partake of the nature of a
statute, and compliance therewith may be enforced by a penal sanction
provided in the law. This is so because statutes are usually couched in
general terms, after expressing the policy, purposes, objectives, remedies
and sanctions intended by the legislature. The details and the manner of
carrying out the law are often times left to the administrative agency

entrusted with its enforcement. In this sense, it has been said that rules and
regulations are the product of a delegated power to create new or additional
legal provisions that have the effect of law. (Davis, op. cit. p. 194.)
A rule is binding on the courts as long as the procedure fixed for its
promulgation is followed and its scope is within the statutory authority
granted by the legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom (Davis, op. cit. pp. 195-197). On
the other hand, administrative interpretation of the law is at best merely
advisory, for it is the courts that finally determine what the law means. 10
"Whether a given statutory delegation authorizes legislative or interpretative
regulations depends upon whether the statute places specific 'sanctions'
behind the regulations authorized, as for example, by making it a criminal
offense to disobey them, or by making conformity with their provisions a
condition of the exercise of legal privileges." 11 This is because interpretative
regulations are by nature simply statutory interpretations, which have behind
them no statutory sanction. Such regulations, whether so expressly
authorized by statute or issued only as an incident of statutory
administration, merely embody administrative findings of law which are
always subject to judicial determination as to whether they are erroneous or
not, even when their issuance is authorized by statute.
The questioned Circular has undisputedly been issued by petitioner in
pursuance of her rule-making powers under Section 245 of the National
Internal Revenue Code, as amended. Exercising such powers, petitioner reclassified "Hope," "More" and "Champion" cigarettes as locally manufactured
cigarettes bearing foreign brands. The re-classification, as previously
explained, is the correct interpretation of Section 142 (c) (1) of the said
Code. The said legal provision is not accompanied by any penal sanction, and
no detail had to be filled in by petitioner. The basis for the classification of
cigarettes has been provided for by the legislature, and all petitioner has to
do, on behalf of the government agency she heads, is to proceed to make
the proper determination using the criterion stipulated by the lawmaking
body. In making the proper determination, petitioner gave it a liberal
construction consistent with the rule that revenue laws are to be construed
in favor of the Government whose survival depends on the contributions that
taxpayers give to the public coffers that finance public services and other
governmental operations.

The Bureau of Internal Revenue which petitioner heads, is the government

agency charged with the enforcement of the laws pertinent to this case and
so, the opinion of the Commissioner of Internal Revenue, in the absence of a
clear showing that it is plainly wrong, is entitled to great weight. Private
respondent claims that its rights under previous interpretations of Section
142 (c) (1) may not abruptly be cut by a new interpretation of the said
section, but precisely the said section is subject to various and changing
construction, and hence, any ruling issued by petitioner thereon is
necessarily interpretative and not legislative. Private respondent insists that
the questioned circular is adjudicatory in nature because it determined the
rights of private respondent in a controversy involving his tax liability. It also
asseverates that the questioned circular involved administrative action that
is particular and immediate, thereby rendering it subject to the requirements
of notice and hearing in compliance with the due process clause of the
Constitution.
We find private respondent's arguments to be rather strained.
Petitioner made a determination as to the classification of cigarettes as
mandated by the aforecited provisions in the National Internal Revenue
Code, as amended. Such determination was an interpretation by petitioner of
the said legal provisions. If in the course of making the interpretation and
embodying the same in the questioned circular which the petitioner
subsequently issued after making such a determination, private respondent's
cigarettes products, by their very nature of being foreign brands as
evidenced by their enlistment in the World Tobacco Directory, which is the
controlling basis for the proper classification of cigarettes as stipulated by
the law itself, have come to be classified as locally manufactured cigarettes
bearing foreign brands and as such subject to a tax rate higher than what
was previously imposed thereupon based on past rulings of other revenue
commissioners, such a situation is simply a consequence of the performance
by petitioner of here duties under the law. No adjudication took place, much
less was there any controversy ripe for adjudication. The natural
consequences of making a classification in accordance with law may not be
used by private respondent in arguing that the questioned circular is in fact
adjudicatory in nature. Such an exercise in driving home a point is illogical as
it is fallacious and misplaced.
Private respondent concedes that under general rules of administrative law,
"a ruling which is merely 'interpretative' in character may not require prior

notice to affected parties before its issuance as well as a hearing" and "for
this reason, in most instances, interpretative regulations are not given the
force of law." 12Indeed, "interpretative regulations and those merely internal
in
nature
13
. . . need not be published." And it is now settled that only legislative
regulations and not interpretative rulings must have the benefit of public
hearing. 14
Because (1) the questioned circular merely embodied an interpretation or a
way of reading and giving meaning to Section 142 (c) (1) of the National
Internal Revenue Code, as amended; (2) petitioner did not fill in any details
in the aforecited section but only classified cigarettes on the basis of the
World Tobacco Directory in the light of the paramount principle of construing
revenue laws in favor of the Government to the end that Government
collects as much tax money as it is entitled to in order to fulfill its public
purposes for the general good of its citizens; (3) no penal sanction is
provided in the aforecited section that was construed by petitioner in the
questioned circular; and (4) a similar circular declassifying copra from being
an agricultural food to non-food product for purposes of the value added tax
laws, resulting in the revocation of an exemption previously enjoyed by copra
traders, has been ruled by us to be merely an interpretative ruling and not a
legislative, much less, an adjudicatory, action on the part of the revenue
commissioner, 15 this Court must not be blind to the fact that the questioned
Circular is indeed an interpretative ruling not subject to notice and hearing.
Neither
is
violation
of
Constitution

the
the

questioned
Circular
tainted
by
equal
protection
clause
under

a
the

Private respondent anchors its claim of violation of its equal protection rights
upon the too obvious fact that only its cigarette brands, i.e., "Hope," "More"
and "Champion," are mentioned in the questioned circular. Because only the
cigarettes that they manufacture are enumerated in the questioned circular,
private respondent proceeded to attack the same as being discriminatory
against it. On the surface, private respondent seems to have a point there. A
scrutiny of the questioned Circular, however, will show that it is undisputedly
one of general application for all cigarettes that are similarly situated as
private respondent's brands. The new interpretation of Section 142 (1) (c)
has been well illustrated in its application upon private respondent's brands,
which illustration is properly a subject of the questioned Circular.

Significantly, indicated as the subject of the questioned circular is the

"reclassification of cigarettes subject to excise taxes." The reclassification
resulted in the foregrounding of private respondent's cigarette brands, which
incidentally is largely due to the controversy spawned no less by private
respondent's own action of conveniently changing its brand names to avoid
falling under a classification that would subject it to higher ad valorem tax
rates. This caused then Commissioner Bienvenido Tan to depart from his
initial determination that private respondent's cigarette brands are foreign
brands. The consequent specific mention of such brands in the questioned
Circular, does not change the fact that the questioned Circular has always
been intended for and did cover, all cigarettes similarly situated as "Hope,"
"More" and "Champion." Petitioner is thus correct in stating that:
. . . RMC 37-93 is not discriminatory. It lays down the test in determining
whether or not a locally manufactured cigarette bears a foreign brand using
the cigarette brands "Hope," More and "Champion" as specific examples.
Such test applies to all locally manufactured cigarette brands similarly
situated as the cigarette brands aforementioned. While it is true that only
"Hope," "More" and "Champion" cigarettes are actually determined as locally
manufactured cigarettes bearing a foreign brand, RMC 37-93 does not state
that ONLY cigarettes fall under such classification to the exclusion of other
cigarettes similarly situated. Otherwise stated, RMC 37-93 does not exclude
the coverage of other cigarettes similarly situated. Otherwise stated, RMC
37-93 does not exclude the coverage of other cigarettes similarly situated as
locally manufactured cigarettes bearing a foreign brand. Hence, in itself,
RMC 37-93 is not discriminatory. 16
Both the respondent Court of Appeals and the Court of Tax Appeals held that
the questioned Circular reclassifying "Hope," "More" and "Champion"
cigarettes, is defective, invalid and unenforceable and has rendered the
assessment against private respondent of deficiency ad valorem excise taxes
to be without legal basis. The majority agrees with private respondent and
respondent Courts. As the foregoing opinion chronicles the fatal flaws in
private respondent's arguments, it becomes more apparent that the
questioned Circular is in fact a valid and subsisting interpretative ruling that
the petitioner had power to promulgate and enforce.
WHEREFORE, I vote to grant the petition and set aside the decisions of the
Court of Tax Appeals and the Court of Appeals, respectively, and to reinstate
the decision of petitioner Commissioner of Internal Revenue denying private

respondent's request for a review, reconsideration and recall of Revenue

Memorandum Circular No. 37-93 dated July 1, 1993.
Padilla, J., concurs.

Separate Opinions

BELLOSILLO, J.: separate opinion:

RA 7654 was enacted by Congress on 10 June 1993, signed into law by the
President on 14 June 1993, and took effect 3 July 1993. It amended partly
Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read
Sec. 142. Cigars and cigarettes. . . . . (c) Cigarettes packed by machine.
There shall be levied, assessed and collected on cigarettes packed by
machine a tax at the rates prescribed below based on the constructive
manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher.
(1) On locally manufactured cigarettes which are currently classified and
taxed at fifty-five percent (55%) or the exportation of which is not authorized
by contract or otherwise, fifty-five percent (55%) provided that the minimum
tax shall not be less than Five Pesos (P5.00) per pack (emphasis supplied).
(2) On other locally manufactured cigarettes, forty-five percent (45%)
provided that the minimum tax shall not be less than Three Pesos (P3.00) per
pack.
Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium
More and Champion were considered local brands subjected to an ad
valorem tax at the rate of 20-45%. However, on 1 July 1993 or two (2) days
before RA 7654 took effect, petitioner Commissioner of Internal Revenue
issued
RMC
37-93
reclassifying
"Hope, Moreand Champion being
manufactured by Fortune Tobacco Corporation . . . . (as) locally manufactured
cigarettes bearing a foreign brand subject to the 55% ad valorem tax on
cigarettes." 1 RMC 37-93 in effect subjected Hope Luxury, Premium
More and Champion cigarettes to the provisions of Sec. 142, par. (c), subpar.

(1), NIRC, as amended by RA 7654, imposing upon these cigarette brands

an ad valorem tax of "fifty-five percent (55%) provided that the minimum tax
shall not be less than Five Pesos (P5.00) per pack."
On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours
before the effectivity of RA 7654, a copy of RMC 37-93 with a cover letter
signed by Deputy Commissioner Victor A. Deoferio of the Bureau of Internal
Revenue was sent by facsimile to the factory of respondent corporation in
Parang, Marikina, Metro Manila. It appears that the letter together with a
copy of RMC 37-93 did not immediately come to the knowledge of private
respondent as it was addressed to no one in particular. It was only when the
reclassification of respondent corporation's cigarette brands was reported in
the column of Fil C. Sionil in Business Bulletin on 4 July 1993 that the
president of respondent corporation learned of the matter, prompting him to
inquire into its veracity and to request from petitioner a copy of RMC 37-93.
On 15 July 1993 respondent corporation received by ordinary mail a certified
machine copy of RMC 37-93.
Respondent corporation sought a review, reconsideration and recall of RMC
37-93 but was forthwith denied by the Appellate Division of the Bureau of
Internal Revenue. As a consequence, on 30 July 1993 private respondent was
assessed an ad valorem tax deficiency amounting to P9,598,334.00.
Respondent corporation went to the Court of Tax Appeals (CTA) on a petition
for review.
On 10 August 1994, after due hearing, the CTA found the petition meritorious
and ruled
Revenue Memorandum Circular No. 37-93 reclassifying the brands of
cigarettes, viz: Hope, More andChampion being manufactured by Fortune
Tobacco Corporation as locally manufactured cigarettes bearing a foreign
brand subject to the 55% ad valorem tax on cigarettes is found to be
defective, invalid and unenforceable . . . . Accordingly, the deficiency ad
valorem tax assessment issued on petitioner Fortune Tobacco Corporation in
the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby
cancelled for lack of legal basis. 2
The CTA held that petitioner Commissioner of Internal Revenue failed to
observe due process of law in issuing RMC 37-93 as there was no prior notice
and hearing, and that RMC 37-93 was in itself discriminatory. The motion to
reconsider its decision was denied by the CTA for lack of merit. On 31 March

1995 respondent Court of Appeals affirmed in toto the decision of the

CTA. 3 Hence, the instant petition for review.
Petitioner now submits through the Solicitor General that RMC 37-93
reclassifying Hope
Luxury, Premium
Moreand Champion as
locally
manufactured cigarettes bearing brands is merely an interpretative ruling
which needs no prior notice and hearing as held in Misamis Oriental
Association of Coco Traders, Inc. v. Department of Finance Secretary. 4 It
maintains that neither is the assailed revenue memorandum circular
discriminatory as it merely "lays down the test in determining whether or not
a locally manufactured cigarette bears a foreign brand using (only) the
cigarette brandsHope, More and Champion as specific examples." 5
Respondent corporation on the other hand contends that RMC 37-93 is not a
mere interpretative ruling but is adjudicatory in nature where prior notice
and hearing are mandatory, and that Misamis Oriental Association of Coco
Traders, Inc. v. Department of Finance Secretary on which the Solicitor
General relies heavily is not applicable. Respondent Fortune Tobacco
Corporation also argues that RMC 37-93 discriminates against its cigarette
brands since those of its competitors which are similarly situated have not
been reclassified.
The main issues before us are (a) whether RMC 37-93 is merely an
interpretative rule the issuance of which needs no prior notice and hearing,
or an adjudicatory ruling which calls for the twin requirements of prior notice
and hearing, and, (b) whether RMC 37-93 is discriminatory in nature.
A brief discourse on the powers and functions of administrative bodies may
be instructive.
Administrative agencies posses quasi-legislative or rule making powers and
quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule
making power is the power to make rules and regulations which results
in delegated legislation that is within the confines of the granting statute and
the doctrine of nondelegability and separability of powers.
Interpretative rule, one of the three (3) types of quasi-legislative or rule
making powers of an administrative agency (the other two being
supplementary or detailed legislation, and contingent legislation), is
promulgated by the administrative agency to interpret, clarify or explain
statutory regulations under which the administrative body operates. The

purpose or objective of an interpretative rule is merely to construe the

statute being administered. It purports to do no more than interpret the
statute. Simply, the rule tries to say what the statute means. Generally, it
refers to no single person or party in particular but concerns all those
belonging to the same class which may be covered by the said interpretative
rule. It need not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to enforce the
law and is intended merely to clarify statutory provisions for proper
observance by the people. In Taada v. Tuvera, 6 this Court expressly said
that "[i]interpretative regulations . . . . need not be published."
Quasi-judicial or administrative adjudicatory power on the other hand is the
power of the administrative agency to adjudicate the rights of persons before
it. It is the power to hear and determine questions of fact to which the
legislative policy is to apply and to decide in accordance with the standards
laid down by the law itself in enforcing and administering the same law. 7 The
administrative body exercises its quasi-judicial power when it performs in a
judicial manner an act which is essentially of an executive or administrative
nature, where the power to act in such manner is incidental to or reasonably
necessary for the performance of the executive or administrative duty
entrusted to it. 8 In carrying out their quasi-judicial functions the
administrative officers or bodies are required to investigate facts or ascertain
the existence of facts, hold hearings, weigh evidence, and draw conclusions
from them as basis for their official action and exercise of discretion in a
judicial nature. Since rights of specific persons are affected it is elementary
that in the proper exercise of quasi-judicial power due process must be
observed in the conduct of the proceedings.
The importance of due process cannot be underestimated. Too basic is the
rule that no person shall be deprived of life, liberty or property without due
process of law. Thus when an administrative proceeding is quasi-judicial in
character, notice and fair open hearing are essential to the validity of the
proceeding. The right to reasonable prior notice and hearing embraces not
only the right to present evidence but also the opportunity to know the
claims of the opposing party and to meet them. The right to submit
arguments implies that opportunity otherwise the right may as well be
considered impotent. And those who are brought into contest with
government in a quasi-judicial proceeding aimed at the control of their
activities are entitled to be fairy advised of what the government proposes
and to be heard upon its proposal before it issues its final command.

There are cardinal primary rights which must be respected in administrative

proceedings. The landmark case ofAng Tibay v. The Court of Industrial
Relations 9 enumerated these rights: (1) the right to a hearing, which
includes the right of the party interested or affected to present his own case
and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself;
(4) the evidence must be substantial; (5) the decision must be rendered on
the evidence presented at the hearing, or at least contained in the record
and disclosed to the parties affected; (6) the tribunal or any of its judges
must act on its or his own independent consideration of the law and facts of
the controversy, and not simply accept the views of a subordinate in arriving
at a decision; and, (7) the tribunal should in all controversial questions
render its decision in such manner that the parties to the proceeding may
know the various issues involved and the reasons for the decision rendered.
In determining whether RMC No. 37-93 is merely an interpretative rule which
requires no prior notice and hearing, or an adjudicatory rule which demands
the observance of due process, a close examination of RMC 37-93 is in order.
Noticeably, petitioner Commissioner of Internal Revenue at first interprets
Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and
clarifying or explaining what it means
Section 142 (c) (1), National Internal Revenue Code, as amended by R.A. No.
6956, provides: On locally manufactured cigarettes bearing a foreign brand,
fifty-five percent (55%) Provided, That this rate shall apply regardless of
whether or not the right to use or title to the foreign brand was sold or
transferred by its owner to the local manufacturer. Whenever it has to be
determined whether or not a cigarette bears a foreign brand, the listing of
brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern.
Under the foregoing, the test for imposition of the 55% ad valorem tax on
cigarettes is that the locally manufactured cigarettes bear a foreign brand
regardless of whether or not the right to use or title to the foreign brand was
sold or transferred by its owner to the local manufacturer. The brand must be
originally owned by a foreign manufacturer or producer. If ownership of the
cigarette
brand
is,
however,
not
definitely
determinable,
". . . the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern . . ."

Then petitioner makes a factual finding by declaring that Hope (Luxury),

(Premium) More and Champion are
manufactured
by
other
foreign
manufacturers
Hope is listed in the World Tobacco Directory as being manufactured by (a)
Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. More is listed in
the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra;
(b) Rothmans, Australia; (c) RJR-MacDonald, Canada; (d) Rettig-Strenberg,
Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New
Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j)
R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and
(m) R.J. Reynolds, USA. "Champion" is registered in the said directory as
being manufactured by: (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c)
Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan;
and (f) Tabac Reunies, Switzerland.
From this finding, petitioner thereafter formulates an inference that since it
cannot be determined who among the manufacturers are the real owners of
the brands in question, then these cigarette brands should be considered
foreign brands
Since there is no showing who among the above-listed manufacturers of the
cigarettes bearing the said brands are the real owner/s thereof, then it
follows that the same shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of the National
Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24,
1988, "in cases where it cannot be established or there is dearth of evidence
as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made."
Finally, petitioner caps RMC 37-93 with a disposition specifically directed at
respondent corporation reclassifying its cigarette brands as locally
manufactured bearing foreign brands
In
view
of
the
foregoing,
the
aforesaid
brands
of
cigarettes, viz: Hope, More and Champion being manufactured by Fortune
Tobacco Corporation are hereby considered locally manufactured cigarettes
bearing a foreign brand subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.

It is evident from the foregoing that in issuing RMC 37-93 petitioner

Commissioner of Internal Revenue was exercising her quasi-judicial or
administrative adjudicatory power. She cited and interpreted the law, made a
factual finding, applied the law to her given set of facts, arrived at a
conclusion, and issued a ruling aimed at a specific individual. Consequently
prior notice and hearing are required. It must be emphasized that even the
text alone of RMC 37-93 implies that reception of evidence during a hearing
is appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated
August 24, 1988, which provides that "in cases where it cannot be
established or there is dearth of evidence as to whether a brand is foreign or
not . . . ." Indeed, it is difficult to determine whether a brand is foreign or not
if it is not established by, or there is dearth of, evidence because no hearing
has been called and conducted for the reception of such evidence. In fine, by
no stretch of the imagination can RMC 37-93 be considered purely as an
interpretative rule requiring no previous notice and hearing and simply
interpreting, construing, clarifying or explaining statutory regulations being
administered by or under which the Bureau of Internal Revenue operates.
It is true that both RMC 47-91 in Misamis Oriental Association of Coco
Traders v. Department of Finance Secretary, and RMC 37-93 in the instant
case reclassify certain products for purposes of taxation. But the similarity
between the two revenue memorandum circulars ends there. For in properly
determining whether a revenue memorandum circular is merely an
interpretative rule or an adjudicatory rule, its very tenor and text, and the
circumstances surrounding its issuance will have no to be considered.
We quote RMC 47-91 promulgated 11 June 1991
Revenue Memorandum Circular No. 47-91
SUBJECT
:
Taxability
of
TO : All Revenue Officials and Employees and Others Concerned.

Copra

For the information and guidance of all officials and employees and others
concerned, quoted hereunder in its entirety is VAT Ruling No. 190-90 dated
August 17, 1990:
COCOFED
6th
144

MARKETING
Floor

RESEARCH
Cocofed
Amorsolo

CORPORATION
Building
Street

Legaspi
Metro Manila
Attention:
Vice President Finance

Village,

Makati

Ms. Esmyrna

E. Reyes

Sirs:
This has reference to your letter dated January 16, 1990 wherein you
represented that inspite of your VAT registration of your copra trading
company, you are supposed to be exempt from VAT on the basis of BIR
Ruling dated January 8, 1988 which considered copra as an agricultural food
product in its original state. In this connection, you request for a confirmation
of your opinion as aforestated.
In reply, please be informed that copra, being an agricultural non-food
product, is exempt from VAT only if sale is made by the primary producer
pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading
company and a subsequent seller, your sale of copra is already subject to
VAT pursuant to Section 9(b) (1) of Revenue Regulations 5-27.
This revokes VAT Ruling Nos. 009-88 and 279-88.
Very truly yours,
(Sgd.)
JOSE
Commissioner of Internal Revenue

U.

ONG

As a clarification, this is the present and official stand of this Office unless
sooner revoked or amended. All revenue officials and employees are
enjoined to give this Circular as wide a publicity as possible.
(Sgd.)
JOSE
Commissioner of Internal Revenue

U.

ONG

Quite obviously, the very text of RMC 47-91 itself shows that it is merely an
interpretative rule as it simply quotes a VAT Ruling and reminds those
concerned that the ruling is the present and official stand of the Bureau of
Internal Revenue. Unlike in RMC 37-93 where petitioner Commissioner
manifestly exercised her quasi-judicial or administrative adjudicatory power,
in RMC 47-91 there were no factual findings, no application of laws to a given

set of facts, no conclusions of law, and no dispositive portion directed at any

particular party.
Another difference is that in the instant case, the issuance of the assailed
revenue memorandum circular operated to subject the taxpayer to the new
law which was yet to take effect, while in Misamis, the disputed revenue
memorandum circular was issued simply to restate and then clarify the
prevailing position and ruling of the administrative agency, and no new law
yet to take effect was involved. It merely interpreted an existing law which
had already been in effect for some time and which was not set to be
amended. RMC 37-93 is thus prejudicial to private respondent alone.
A third difference, and this likewise resolves the issue of discrimination, is
that RMC 37-93 was ostensibly issued to subject the cigarette brands of
respondent corporation to a new law as it was promulgated two days before
the expiration of the old law and a few hours before the effectivity of the new
law. That RMC 37-93 is particularly aimed only at respondent corporation and
its three (3) cigarette brands can be seen from the dispositive portion of the
assailed revenue memorandum circular
In view of the foregoing, the aforesaid brands of cigarettes, viz: Hope, More,
and Champion being manufactured by Fortune Tobacco Corporation are
hereby considered locally manufactured cigarettes bearing a foreign brand
subject to the 55% ad valorem tax on cigarettes.
Any ruling inconsistent herewith is revoked or modified accordingly.
Thus the argument of the Solicitor General that RMC 37-93 is not
discriminatory as "[i]t merely lays down the test in determining whether or
not a locally manufactured cigarette bears a foreign brand using the
cigarette brandsHope, More and Champion as specific examples," cannot be
accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous
effect on respondent corporation and solely on respondent corporation
as
its
deficiency ad
valorem tax
assessment
on
its
removals
of Hope, Luxury, Premium More, and Champion cigarettes for six (6) hours
alone, i.e., from six o'clock in the evening of 2 July 1993 which is presumably
the time respondent corporation was supposed to have received the
facsimile message sent by Deputy Commissioner Victor A. Deoferio, until
twelve o'clock midnight upon the effectivity of the new law, was already
P9,598,334.00. On the other hand, RMC 47-91 was issued with no purpose
except to state and declare what has been the official stand of the

administrative agency on the specific subject matter, and was

indiscriminately directed to all copra traders with no particular individual in
mind.
That petitioner Commissioner of Internal Revenue is an expert in her filed is
not attempted to be disputed; hence, we do not question the wisdom of her
act in reclassifying the cigarettes. Neither do we deny her the exercise of her
quasi-legislative or quasi-judicial powers. But most certainly, by
constitutional mandate, the Court must check the exercise of these powers
and ascertain whether petitioner has gone beyond the legitimate bounds of
her authority.
In the final analysis, the issue before us in not the expertise, the authority to
promulgate rules, or the wisdom of petitioner as Commissioner of Internal
Revenue is reclassifying the cigarettes of private respondents. It is simply the
faithful observance by government by government of the basic constitutional
right of a taxpayer to due process of law and equal protection of the laws.
This is what distresses me no end the manner and the circumstances
under which the cigarettes of private respondent were reclassified and
correspondingly taxed under RMC 37-93, and adjudicatory rule which
therefore requires reasonable notice and hearing before its issuance. It
should not be confused with RMC 47-91, which is a mere interpretative rule.
In the earlier case of G.R. No. 119322, which practically involved the same
opposing interests, I also voted to uphold the constitutional right of the
taxpayer concerned to due process and equal protection of the laws. By a
vote of 3-2, that view prevailed. In sequela, we in the First Division who
constituted the majority found ourselves unjustly drawn into the vortex of a
nightmarish episode. The strong ripples whipped up by my opinion expressed
therein and of the majority have yet to varnish when we are again in
the imbroglio of a similar dilemma. The unpleasant experience should be
reason enough to simply steer clear of this controversy and surf on a
pretendedloss of judicial objectivity. Such would have been an easy way out,
a gracious exit, so to speak, albeit lame. But to camouflage my leave with a
sham excuse would be to turn away from a professional vow I keep at all
times; I would not be true to myself, and to the people I am committed to
serve. Thus, as I have earlier expressed, if placed under similar
circumstances in some future time, I shall have to brave again the prospect
of another vilification and a tarnished image if only to show proudly to the

whole world that under the present dispensation judicial independence in our
country is a true component of our democracy.
In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as
well as the effect of such issuance. For it cannot be denied that the
circumstances clearly demonstrate that it was hastily issued without prior
notice and hearing, and singling out private respondent alone when two
days before a new tax law was to take effect petitioner reclassified and taxed
the cigarette brands of private respondent at a higher rate. Obviously, this
was to make it appear that even before the anticipated date of effectivity of
the statute which was undeniably priorly known to petitioner these
brands were already currently classified and taxed at fifty-five percent
(55%), thus shoving them into the purview of the law that was to take effect
two days after!
For sure, private respondent was not properly informed before the issuance
of the questioned memorandum circular that its cigarette brands Hope
Luxury, Premium More and Champion were being reclassified and subjected
to a higher tax rate. Naturally, the result would be to lose financially because
private respondent was still selling its cigarettes at a price based on the old,
lower tax rate. Had there been previous notice and hearing, as claimed by
private respondent, it could have very well presented its side, either by
opposing the reclassification, or by acquiescing thereto but increasing the
price of its cigarettes to adjust to the higher tax rate. The reclassification and
the ensuing imposition of a tax rate increase therefore could not be anything
but confiscatory if we are also to consider the claim of private respondent
that the new tax is even higher than the cost of its cigarettes.
Accordingly, I vote to deny the petition.

HERMOSISIMA, JR., J.: dissenting

Private respondent Fortune Tobacco Corporation in the instant case disputes
its liability for deficiency ad valoremexcise taxes on its removals of "Hope,"
"More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July
2, 1993, in the total amount of P9,598,334.00. It claims that the circular,
upon which the assessment was based and made, is defective, invalid and
unenforceable for having been issued without notice and hearing and in
violation of the equal protection clause guaranteed by the Constitution.

The majority upholds these claims of private respondent, convinced that the
Circular in question, in the first place, did not give prior notice and hearing,
and so, it could not have been valid and effective. It proceeds to affirm the
factual findings of the Court of Tax Appeals, which findings were considered
correct by respondent Court of Appeals, to the effect that the petitioner
Commissioner of Internal Revenue had indeed blatantly failed to comply with
the said twin requirements of notice and hearing, thereby rendering the
issuance of the questioned Circular to be in violation of the due process
clause of the Constitution. It is also its dominant opinion that the questioned
Circular discriminates against private respondent Fortune Tobacco
Corporation insofar as it seems to affect only its "Hope," "More," and
"Champion" cigarettes, to the exclusion of other cigarettes apparently of the
same kind or classification as these cigarettes manufactured by private
respondent.
With all due respect, I disagree with the majority in its disquisition of the
issues and its resulting conclusions.
Section
245
of
the
National
as
amended,
empowers
the
Revenue to issue the questioned Circular

Internal
Revenue
Commissioner
of

Code,
Internal

Section 245 of the National Internal Revenue Code, as amended, provides:

Sec. 245. Authority of Secretary of Finance to promulgate rules and
regulations. The Secretary of Finance, upon recommendation of the
Commissioner, shall promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code . . . without prejudice to
the power of the Commissioner of Internal Revenue to make rulings or
opinions in connection with the implementation of the provisions of internal
revenue laws, including rulings on the classification of articles for sales tax
and similar purposes.
The subject of the questioned Circular is the reclassification of cigarettes
subject to excise taxes. It was issued in connection with Section 142 (c) (1) of
the National Internal Revenue Code, as amended, which imposes ad
valorem excise taxes on locally manufactured cigarettes bearing a foreign
brand. The same provision prescribes the ultimate criterion that determines
which cigarettes are to be considered "locally manufactured cigarettes
bearing a foreign brand." It provides:

. . . Whenever it has to be determined whether or not a cigarette bears a

foreign brand, the listing of brands manufactured in foreign countries
appearing in the current World Tobacco Directory shall govern.
There is only one World Tobacco Directory for a given current year, and the
same is mandated by law to be the BIR Commissioner's controlling basis for
determining whether or not a particular locally manufactured cigarette is one
bearing a foreign brand. In so making a determination, petitioner should
inquire into the entries in the World Tobacco Directory for the given current
year and shall be held bound by such entries therein. She is not required to
subject the results of her inquiries to feedback from the concerned cigarette
manufacturers, and it is doubtlessly not desirable nor managerially sound to
court dispute thereon when the law does not, in the first place, require
debate or hearing thereon. Petitioner may make such a determination
because she is the Chief Executive Officer of the administrative agency that
is the Bureau of Internal Revenue in which are vested quasi-legislative
powers entrusted to it by the legislature in recognition of its more
encompassing and unequalled expertise in the field of taxation.
The vesture of quasi-legislative and quasi-judicial powers in administrative
bodies is not unconstitutional, unreasonable and oppressive. It has been
necessitated by "the growing complexity of the modern society" (Solid
Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative
bodies are necessary to help in the regulation of society's ramified activities.
"Specialized in the particular field assigned to them, they can deal with the
problems thereof with more expertise and dispatch than can be expected
from the legislature or the courts of justice" . . . 1
Statutorily empowered to issue rulings or opinions embodying the proper
determination in respect to classifying articles, including cigarettes, for
purposes of tax assessment and collection, petitioner was acting well within
her prerogatives when she issued the questioned Circular. And in the
exercise of such prerogatives under the law, she has in her favor the
presumption of regular performance of official duty which must be overcome
by clearly persuasive evidence of stark error and grave abuse of discretion in
order to be overturned and disregarded.
It is irrelevant that the Court of Tax Appeals makes much of the effect of the
passing of Republic Act No. 7654 2 on petitioner's power to classify
cigarettes. Although the decisions assailed and sought to be reviewed, as

well as the pleadings of private respondent, are replete with alleged

admissions of our legislators to the effect that the said Act was intended to
freeze the current classification of cigarettes and make the same an integral
part of the said Act, certainly the repeal, if any, of petitioner's power to
classify cigarettes must be reckoned from the effectivity of the said Act and
not before. Suffice it to say that indisputable is the plain fact that the
questioned Circular was issued on July 1, 1993, while the said Act took effect
on July 3, 1993.
The
contents
of
the
questioned
circular
been
proven
to
be
erroneous
or
illegal
as
issuance
thereof
an
act
of
grave
discretion on the part of petitioner Commissioner

have
not
to
render
abuse
of

Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National
Internal Revenue Code, as amended, levies the following ad valorem taxes
on cigarettes in accordance with their predetermined classifications as
established by the Commissioner of Internal Revenue:
. . . based on the manufacturer's registered wholesale price:
(1) On locally manufactured cigarettes bearing a foreign brand, fifty-five
percent (55%) Provided, That this rate shall apply regardless of whether or
not the right to use or title to the foreign brand was sold or transferred by its
owner to the local manufacturer. Whenever it has to be determined whether
or not a cigarette bears a foreign brand, the listing of brands manufactured
in foreign countries appearing in the current World Tobacco Directory shall
govern.
(2) Other locally manufactured cigarettes, forty five percent (45%).
xxx xxx xxx
Prior to the issuance of the questioned Circular, assessed against and paid by
private respondent as ad valoremexcise taxes on their removals of "Hope,"
"More," and "Champion" cigarettes were amounts based on paragraph (2)
above, i.e., the tax rate made applicable on the said cigarettes was 45% at
the most. The reason for this is that apparently, petitioner's predecessors
have all made determinations to the effect that the said cigarettes were to
be considered "other locally manufactured cigarettes" and not "locally
manufactured cigarettes bearing a foreign brand." Even petitioner, until her

issuance of the questioned Circular, adhered to her predecessors'

determination as to the proper classification of the above-mentioned
cigarettes for purposes of ad valorem excise taxes. Apparently, the past
determination that the said cigarettes were to be classified as "other locally
manufactured cigarettes" was based on private respodnent's convenient
move of changing the names of "Hope" to "Hope Luxury" and "More" to
"Premium More." It also submitted proof that "Champion" was an original
Fortune Tobacco Corporation register and, therefore, a local brand. Having
registered these brands with the Philippine Patent Office and with
corresponding evidence to the effect, private respondent paid ad
valorem excise taxes computed at the rate of not more than 45% which is
the rate applicable to cigarettes considered as locally manufactured brands.
How these past determinations pervaded notwithstanding their erroneous
basis is only tempered by their innate quality of being merely errors in
interpretative ruling, the formulation of which does not bind the government.
Advantage over such errors may precipitously be withdrawn from those who
have been benefiting from them once the same have been discovered and
rectified.
Petitioner correctly emphasizes that:
. . . the registration of said brands in the name of private respondent is proof
only that it is the exclusive owner thereof in the Philippines; it does not
necessarily follow, however, that it is the exclusive owner thereof in the
whole world. Assuming arguendo that private respondent is the exclusive
owner of said brands in the Philippines, it does not mean that they are local.
Otherwise, they would not have been listed in the WTD as international
brands manufactured by different entities in different countries. Moreover, it
cannot be said that the brands registered in the names of private respondent
are not the same brands listed in the WTD because private respondent is one
of the manufacturers of said brands listed in the WTD. 3
Private respondent attempts to cast doubt on the determination made by
petitioner in the questioned Circular that Japan is a manufacturer of "Hope"
cigarettes. Private respondent's own inquiry into the World Tobacco Directory
reveals that Japan is not a manufacturer of "Hope" cigarettes. In pointing this
out, private respondent concludes that the entire Circular is erroneous and
makes such error the principal proof of its claim that the nature of the
determination embodied in the questioned Circular requires a hearing on the

facts and a debate on the applicable law. Such a determination is

adjudicatory in nature and, therefore, requires notice and hearing. Private
respondent is, however, apparently only eager to show error on the part of
petitioner for acting with grave abuse of discretion. Private respondent
conveniently forgets that petitioner, equipped with the expertise in taxation,
recognized in that expertise by the legislature that vested in her the power
to make rules respecting classification of articles for taxation purposes, and
presumed to have regularly exercised her prerogatives within the scope of
her statutory power to issue determinations specifically under Section 142
(c) (1) in relation to Section 245 of the National Internal Revenue Code, as
amended, simply followed the law as she understood it. Her task was to
determine which cigarette brands were foreign, and she was directed by the
law to look into the World Tobacco Directory. Foreign cigarette brands were
legislated to be taxed at higher rates because of their more extensive public
exposure and international reputation; their competitive edge against local
brands may easily be checked by imposition of higher tax rates. Private
respondent makes a mountain of the mole hill circumstance that "Hope" is
listed, not as being "manufactured" by Japan but as being "used" by Japan.
Whether manufactured or used by Japan, however, "Hope" remains a
cigarette brand that can not be said to be limited to local manufacture in the
Philippines. The undeniable fact is that it is a foreign brand the sales in the
Philippines of which are greatly boosted by its international exposure and
reputation. The petitioner was well within her prerogatives, in the exercise of
her rule-making power, to classify articles for taxation purposes, to interpret
the laws which she is mandated to administer. In interpreting the same,
petitioner must, in general, be guided by the principles underlying
taxation, i.e., taxes are the lifeblood of Government, and revenue laws ought
to be interpreted in favor of the Government, for Government can not
survive without the funds to underwrite its varied operational expenses in
pursuit of the welfare of the society which it serves and protects.
Private respondent claims that its business will be destroyed by the
imposition of additional ad valorem taxes as a result of the effectivity of the
questioned Circular. It claims that under the vested rights theory, it cannot
now be made to pay higher taxes after having been assessed for less in the
past. Of course private respondent will trumpet its losses, its interests, after
all, being its sole concern. What private respondent fails to see is the loss of
revenue by the Government which, because of erroneous determinations
made by its past revenue commissioners, collected lesser taxes than what it
was entitled to in the first place. It is every citizen's duty to pay the correct

amount of taxes. Private respondent will not be shielded by any vested

rights, for there are not vested rights to speak of respecting a wrong
construction of the law by administrative officials, and such wrong
interpretation does not place the Government in estoppel to correct or
overrule the same. 4
The
Questioned
Circular
embodies
ruling
of
petitioner
Commissioner
which
not require notice and hearing

an
as

interpretative
such
does

As one of the public offices of the Government, the Bureau of Internal

Revenue, through its Commissioner, has grown to be a typical administrative
agency vested with a fusion of different governmental powers: the power to
investigate, initiate action and control the range of investigation, the power
to promulgate rules and regulations to better carry out statutory policies,
and the power to adjudicate controversies within the scope of their
activities. 5 In the realm of administrative law, we understand that such an
empowerment of administrative agencies was evolved in response to the
needs of a changing society. This development arose as the need for broad
social control over complex conditions and activities became more and more
pressing, and such complexity could no longer be dealt with effectivity and
directly by the legislature or the judiciary. The theory which underlies the
empowerment of administrative agencies like the Bureau of Internal
Revenue, is that the issues with which such agencies deal ought to be
decided by experts, and not be a judge, at least not in the first instance or
until the facts have been sifted and arranged. 6
One of the powers of administrative agencies like the Bureau of Internal
Revenue, is the power to make rules. The necessity for vesting
administrative agencies with this power stems from the impracticability of
the lawmakers providing general regulations for various and varying details
pertinent to a particular legislation. 7
The rules that administrative agencies may promulgate may either be
legislative or interpretative. The former is a form of subordinate legislation
whereby the administrative agency is acting in a legislative capacity,
supplementing the statute, filling in the details, pursuant to a specific
delegation of legislative power. 8
Interpretative rules, on the other hand, are "those which purport to do no
more than interpret the statute being administered, to say what it means." 9

There can be no doubt that there is a distinction between an administrative

rule or regulation and an administrative interpretation of a law whose
enforcement is entrusted to an administrative body. When an administrative
agency promulgates rules and regulations, it "makes" a new law with the
force and effect of a valid law, while when it renders an opinion or gives a
statement of policy, it merely interprets a pre-existing law (Parker,
Administrative Law, p. 197; Davis Administrative Law, p. 194). Rules and
regulations when promulgated in pursuance of the procedure or authority
conferred upon the administrative agency by law, partake of the nature of a
statute, and compliance therewith may be enforced by a penal sanction
provided in the law. This is so because statutes are usually couched in
general terms, after expressing the policy, purposes, objectives, remedies
and sanctions intended by the legislature. The details and the manner of
carrying out the law are often times left to the administrative agency
entrusted with its enforcement. In this sense, it has been said that rules and
regulations are the product of a delegated power to create new or additional
legal provisions that have the effect of law. (Davis, op. cit. p. 194.)
A rule is binding on the courts as long as the procedure fixed for its
promulgation is followed and its scope is within the statutory authority
granted by the legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom (Davis, op. cit. pp. 195-197). On
the other hand, administrative interpretation of the law is at best merely
advisory, for it is the courts that finally determine what the law means. 10
"Whether a given statutory delegation authorizes legislative or interpretative
regulations depends upon whether the statute places specific 'sanctions'
behind the regulations authorized, as for example, by making it a criminal
offense to disobey them, or by making conformity with their provisions a
condition of the exercise of legal privileges." 11 This is because interpretative
regulations are by nature simply statutory interpretations, which have behind
them no statutory sanction. Such regulations, whether so expressly
authorized by statute or issued only as an incident of statutory
administration, merely embody administrative findings of law which are
always subject to judicial determination as to whether they are erroneous or
not, even when their issuance is authorized by statute.
The questioned Circular has undisputedly been issued by petitioner in
pursuance of her rule-making powers under Section 245 of the National
Internal Revenue Code, as amended. Exercising such powers, petitioner re-

classified "Hope," "More" and "Champion" cigarettes as locally manufactured

cigarettes bearing foreign brands. The re-classification, as previously
explained, is the correct interpretation of Section 142 (c) (1) of the said
Code. The said legal provision is not accompanied by any penal sanction, and
no detail had to be filled in by petitioner. The basis for the classification of
cigarettes has been provided for by the legislature, and all petitioner has to
do, on behalf of the government agency she heads, is to proceed to make
the proper determination using the criterion stipulated by the lawmaking
body. In making the proper determination, petitioner gave it a liberal
construction consistent with the rule that revenue laws are to be construed
in favor of the Government whose survival depends on the contributions that
taxpayers give to the public coffers that finance public services and other
governmental operations.
The Bureau of Internal Revenue which petitioner heads, is the government
agency charged with the enforcement of the laws pertinent to this case and
so, the opinion of the Commissioner of Internal Revenue, in the absence of a
clear showing that it is plainly wrong, is entitled to great weight. Private
respondent claims that its rights under previous interpretations of Section
142 (c) (1) may not abruptly be cut by a new interpretation of the said
section, but precisely the said section is subject to various and changing
construction, and hence, any ruling issued by petitioner thereon is
necessarily interpretative and not legislative. Private respondent insists that
the questioned circular is adjudicatory in nature because it determined the
rights of private respondent in a controversy involving his tax liability. It also
asseverates that the questioned circular involved administrative action that
is particular and immediate, thereby rendering it subject to the requirements
of notice and hearing in compliance with the due process clause of the
Constitution.
We find private respondent's arguments to be rather strained.
Petitioner made a determination as to the classification of cigarettes as
mandated by the aforecited provisions in the National Internal Revenue
Code, as amended. Such determination was an interpretation by petitioner of
the said legal provisions. If in the course of making the interpretation and
embodying the same in the questioned circular which the petitioner
subsequently issued after making such a determination, private respondent's
cigarettes products, by their very nature of being foreign brands as
evidenced by their enlistment in the World Tobacco Directory, which is the

controlling basis for the proper classification of cigarettes as stipulated by

the law itself, have come to be classified as locally manufactured cigarettes
bearing foreign brands and as such subject to a tax rate higher than what
was previously imposed thereupon based on past rulings of other revenue
commissioners, such a situation is simply a consequence of the performance
by petitioner of here duties under the law. No adjudication took place, much
less was there any controversy ripe for adjudication. The natural
consequences of making a classification in accordance with law may not be
used by private respondent in arguing that the questioned circular is in fact
adjudicatory in nature. Such an exercise in driving home a point is illogical as
it is fallacious and misplaced.
Private respondent concedes that under general rules of administrative law,
"a ruling which is merely 'interpretative' in character may not require prior
notice to affected parties before its issuance as well as a hearing" and "for
this reason, in most instances, interpretative regulations are not given the
force of law." 12Indeed, "interpretative regulations and those merely internal
in
nature
13
. . . need not be published." And it is now settled that only legislative
regulations and not interpretative rulings must have the benefit of public
hearing. 14
Because (1) the questioned circular merely embodied an interpretation or a
way of reading and giving meaning to Section 142 (c) (1) of the National
Internal Revenue Code, as amended; (2) petitioner did not fill in any details
in the aforecited section but only classified cigarettes on the basis of the
World Tobacco Directory in the light of the paramount principle of construing
revenue laws in favor of the Government to the end that Government
collects as much tax money as it is entitled to in order to fulfill its public
purposes for the general good of its citizens; (3) no penal sanction is
provided in the aforecited section that was construed by petitioner in the
questioned circular; and (4) a similar circular declassifying copra from being
an agricultural food to non-food product for purposes of the value added tax
laws, resulting in the revocation of an exemption previously enjoyed by copra
traders, has been ruled by us to be merely an interpretative ruling and not a
legislative, much less, an adjudicatory, action on the part of the revenue
commissioner, 15 this Court must not be blind to the fact that the questioned
Circular is indeed an interpretative ruling not subject to notice and hearing.

Neither
is
violation
of
Constitution

the
the

questioned
Circular
tainted
by
equal
protection
clause
under

a
the

Private respondent anchors its claim of violation of its equal protection rights
upon the too obvious fact that only its cigarette brands, i.e., "Hope," "More"
and "Champion," are mentioned in the questioned circular. Because only the
cigarettes that they manufacture are enumerated in the questioned circular,
private respondent proceeded to attack the same as being discriminatory
against it. On the surface, private respondent seems to have a point there. A
scrutiny of the questioned Circular, however, will show that it is undisputedly
one of general application for all cigarettes that are similarly situated as
private respondent's brands. The new interpretation of Section 142 (1) (c)
has been well illustrated in its application upon private respondent's brands,
which illustration is properly a subject of the questioned Circular.
Significantly, indicated as the subject of the questioned circular is the
"reclassification of cigarettes subject to excise taxes." The reclassification
resulted in the foregrounding of private respondent's cigarette brands, which
incidentally is largely due to the controversy spawned no less by private
respondent's own action of conveniently changing its brand names to avoid
falling under a classification that would subject it to higher ad valorem tax
rates. This caused then Commissioner Bienvenido Tan to depart from his
initial determination that private respondent's cigarette brands are foreign
brands. The consequent specific mention of such brands in the questioned
Circular, does not change the fact that the questioned Circular has always
been intended for and did cover, all cigarettes similarly situated as "Hope,"
"More" and "Champion." Petitioner is thus correct in stating that:

. . . RMC 37-93 is not discriminatory. It lays down the test in determining

whether or not a locally manufactured cigarette bears a foreign brand using
the cigarette brands "Hope," More and "Champion" as specific examples.
Such test applies to all locally manufactured cigarette brands similarly
situated as the cigarette brands aforementioned. While it is true that only
"Hope," "More" and "Champion" cigarettes are actually determined as locally
manufactured cigarettes bearing a foreign brand, RMC 37-93 does not state
that ONLY cigarettes fall under such classification to the exclusion of other
cigarettes similarly situated. Otherwise stated, RMC 37-93 does not exclude
the coverage of other cigarettes similarly situated. Otherwise stated, RMC

37-93 does not exclude the coverage of other cigarettes similarly situated as
locally manufactured cigarettes bearing a foreign brand. Hence, in itself,
RMC 37-93 is not discriminatory. 16
Both the respondent Court of Appeals and the Court of Tax Appeals held that
the questioned Circular reclassifying "Hope," "More" and "Champion"
cigarettes, is defective, invalid and unenforceable and has rendered the
assessment against private respondent of deficiency ad valorem excise taxes
to be without legal basis. The majority agrees with private respondent and
respondent Courts. As the foregoing opinion chronicles the fatal flaws in
private respondent's arguments, it becomes more apparent that the
questioned Circular is in fact a valid and subsisting interpretative ruling that
the petitioner had power to promulgate and enforce.
WHEREFORE, I vote to grant the petition and set aside the decisions of the
Court of Tax Appeals and the Court of Appeals, respectively, and to reinstate
the decision of petitioner Commissioner of Internal Revenue denying private
respondent's request for a review, reconsideration and recall of Revenue
Memorandum Circular No. 37-93 dated July 1, 1993.
Padilla, J., concurs.

LLDA v. CA
G.R. No. 110120 March 16, 1994
LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,
vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC,
Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of
Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN, respondents.
Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner.
The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and
the City Government of Caloocan.

ROMERO, J.:

The clash between the responsibility of the City Government of Caloocan to dispose
off the 350 tons of garbage it collects daily and the growing concern and sensitivity
to a pollution-free environment of the residents of Barangay Camarin, Tala Estate,
Caloocan City where these tons of garbage are dumped everyday is the hub of this
controversy elevated by the protagonists to the Laguna Lake Development
Authority (LLDA) for adjudication.
The instant case stemmed from an earlier petition filed with this Court by Laguna
Lake
Development
Authority
(LLDA
for
short)
docketed
as
G.R.
No. 107542 against the City Government of Caloocan, et al. In the Resolution of
November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for
appropriate
disposition.
Docketed
therein
as
CA-G.R.
SP
1
No. 29449, the Court of Appeals, in a decision promulgated on January 29, 1993
ruled that the LLDA has no power and authority to issue a cease and desist order
enjoining the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City.
The LLDA now seeks, in this petition, a review of the decision of the Court of
Appeals.
The facts, as disclosed in the records, are undisputed.
On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish,
Barangay Camarin, Caloocan City, filed a letter-complaint 2 with the Laguna Lake
Development Authority seeking to stop the operation of the 8.6-hectare open
garbage dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its
harmful effects on the health of the residents and the possibility of pollution of the
water content of the surrounding area.
On November 15, 1991, the LLDA conducted an on-site investigation, monitoring
and test sampling of the leachate 3 that seeps from said dumpsite to the nearby
creek which is a tributary of the Marilao River. The LLDA Legal and Technical
personnel found that the City Government of Caloocan was maintaining an open
dumpsite at the Camarin area without first securing an Environmental Compliance
Certificate (ECC) from the Environmental Management Bureau (EMB) of the
Department of Environment and Natural Resources, as required under Presidential
Decree No. 1586, 4 and clearance from LLDA as required under Republic Act No.
4850, 5 as amended by Presidential Decree No. 813 and Executive Order No. 927,
series of 1983. 6
After a public hearing conducted on December 4, 1991, the LLDA, acting on the
complaint of Task Force Camarin Dumpsite, found that the water collected from the
leachate and the receiving streams could considerably affect the quality, in turn, of
the receiving waters since it indicates the presence of bacteria, other than coliform,
which may have contaminated the sample during collection or handling. 7 On
December 5, 1991, the LLDA issued a Cease and Desist Order 8 ordering the City

Government of Caloocan, Metropolitan Manila Authority, their contractors, and other

entities, to completely halt, stop and desist from dumping any form or kind of
garbage and other waste matter at the Camarin dumpsite.
The dumping operation was forthwith stopped by the City Government of Caloocan.
However, sometime in August 1992 the dumping operation was resumed after a
meeting held in July 1992 among the City Government of Caloocan, the
representatives of Task Force Camarin Dumpsite and LLDA at the Office of
Environmental Management Bureau Director Rodrigo U. Fuentes failed to settle the
problem.
After an investigation by its team of legal and technical personnel on August 14,
1992, the LLDA issued another order reiterating the December 5, 1991, order and
issued an Alias Cease and Desist Order enjoining the City Government of Caloocan
from continuing its dumping operations at the Camarin area.
On September 25, 1992, the LLDA, with the assistance of the Philippine National
Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all
garbage dump trucks into the Tala Estate, Camarin area being utilized as a
dumpsite.
Pending resolution of its motion for reconsideration earlier filed on September 17,
1992 with the LLDA, the City Government of Caloocan filed with the Regional Trial
Court of Caloocan City an action for the declaration of nullity of the cease and desist
order with prayer for the issuance of writ of injunction, docketed as Civil Case No. C15598. In its complaint, the City Government of Caloocan sought to be declared as
the sole authority empowered to promote the health and safety and enhance the
right of the people in Caloocan City to a balanced ecology within its territorial
jurisdiction. 9
On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan
City issued a temporary restraining order enjoining the LLDA from enforcing its
cease and desist order. Subsequently, the case was raffled to the Regional Trial
Court, Branch 126 of Caloocan which, at the time, was presided over by Judge
Manuel Jn. Serapio of the Regional Trial Court, Branch 127, the pairing judge of the
recently-retired presiding judge.
The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground,
among others, that under Republic Act No. 3931, as amended by Presidential
Decree No. 984, otherwise known as the Pollution Control Law, the cease and desist
order issued by it which is the subject matter of the complaint is reviewable both
upon the law and the facts of the case by the Court of Appeals and not by the
Regional Trial Court. 10

On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil
Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the Task
Force Camarin Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario Asistio."
The LLDA, however, maintained during the trial that the foregoing cases, being
independent of each other, should have been treated separately.
On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss,
issued in the consolidated cases an order 11 denying LLDA's motion to dismiss and
granting the issuance of a writ of preliminary injunction enjoining the LLDA, its
agent and all persons acting for and on its behalf, from enforcing or implementing
its cease and desist order which prevents plaintiff City of Caloocan from dumping
garbage at the Camarin dumpsite during the pendency of this case and/or until
further orders of the court.
On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and
injunction with prayer for restraining order with the Supreme Court, docketed as
G.R. No. 107542, seeking to nullify the aforesaid order dated October 16, 1992
issued by the Regional Trial Court, Branch 127 of Caloocan City denying its motion
to dismiss.
The Court, acting on the petition, issued a Resolution 12 on November 10, 1992
referring the case to the Court of Appeals for proper disposition and at the same
time, without giving due course to the petition, required the respondents to
comment on the petition and file the same with the Court of Appeals within ten (10)
days from notice. In the meantime, the Court issued a temporary restraining order,
effective immediately and continuing until further orders from it, ordering the
respondents: (1) Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court,
Branch 127, Caloocan City to cease and desist from exercising jurisdiction over the
case for declaration of nullity of the cease and desist order issued by the Laguna
Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or the City
Government of Caloocan to cease and desist from dumping its garbage at the Tala
Estate, Barangay Camarin, Caloocan City.
Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on
November 12, 1992 a motion for reconsideration and/or to quash/recall the
temporary restraining order and an urgent motion for reconsideration alleging that
". . . in view of the calamitous situation that would arise if the respondent city
government fails to collect 350 tons of garbage daily for lack of dumpsite (i)t is
therefore, imperative that the issue be resolved with dispatch or with sufficient
leeway to allow the respondents to find alternative solutions to this garbage
problem."
On November 17, 1992, the Court issued a Resolution 13 directing the Court of
Appeals to immediately set the case for hearing for the purpose of determining

whether or not the temporary restraining order issued by the Court should be lifted
and what conditions, if any, may be required if it is to be so lifted or whether the
restraining order should be maintained or converted into a preliminary injunction.
The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in
the morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals. 14 After
the oral argument, a conference was set on December 8, 1992 at 10:00 o'clock in
the morning where the Mayor of Caloocan City, the General Manager of LLDA, the
Secretary of DENR or his duly authorized representative and the Secretary of DILG
or his duly authorized representative were required to appear.
It was agreed at the conference that the LLDA had until December 15, 1992 to finish
its study and review of respondent's technical plan with respect to the dumping of
its garbage and in the event of a rejection of respondent's technical plan or a failure
of settlement, the parties will submit within 10 days from notice their respective
memoranda on the merits of the case, after which the petition shall be deemed
submitted for resolution. 15 Notwithstanding such efforts, the parties failed to settle
the dispute.
On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1)
the Regional Trial Court has no jurisdiction on appeal to try, hear and decide the
action for annulment of LLDA's cease and desist order, including the issuance of a
temporary restraining order and preliminary injunction in relation thereto, since
appeal therefrom is within the exclusive and appellate jurisdiction of the Court of
Appeals under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna
Lake Development Authority has no power and authority to issue a cease and desist
order under its enabling law, Republic Act No. 4850, as amended by P.D. No. 813
and
Executive
Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary
injunction issued in the said case was set aside; the cease and desist order of LLDA
was likewise set aside and the temporary restraining order enjoining the City Mayor
of Caloocan and/or the City Government of Caloocan to cease and desist from
dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City was lifted,
subject, however, to the condition that any future dumping of garbage in said area,
shall be in conformity with the procedure and protective works contained in the
proposal attached to the records of this case and found on pages 152-160 of
the Rollo, which was thereby adopted by reference and made an integral part of the
decision, until the corresponding restraining and/or injunctive relief is granted by
the proper Court upon LLDA's institution of the necessary legal proceedings.
Hence, the Laguna Lake Development Authority filed the instant petition for review
on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary

restraining order lifted by the Court of Appeals be re-issued until after final
determination by this Court of the issue on the proper interpretation of the powers
and authority of the LLDA under its enabling law.
On July, 19, 1993, the Court issued a temporary restraining order 16 enjoining the
City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist
from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City,
effective as of this date and containing until otherwise ordered by the Court.
It is significant to note that while both parties in this case agree on the need to
protect the environment and to maintain the ecological balance of the surrounding
areas of the Camarin open dumpsite, the question as to which agency can lawfully
exercise jurisdiction over the matter remains highly open to question.
The City Government of Caloocan claims that it is within its power, as a local
government unit, pursuant to the general welfare provision of the Local Government
Code, 17 to determine the effects of the operation of the dumpsite on the ecological
balance and to see that such balance is maintained. On the basis of said contention,
it questioned, from the inception of the dispute before the Regional Trial Court of
Caloocan City, the power and authority of the LLDA to issue a cease and desist
order enjoining the dumping of garbage in the Barangay Camarin over which the
City Government of Caloocan has territorial jurisdiction.
The Court of Appeals sustained the position of the City of Caloocan on the theory
that Section 7 of Presidential Decree No. 984, otherwise known as the Pollution
Control law, authorizing the defunct National Pollution Control Commission to issue
an ex-parte cease and desist order was not incorporated in Presidential Decree No.
813
nor
in
Executive
Order
No.
927,
series
of
1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No.
4850, as amended, the LLDA is instead required "to institute the necessary legal
proceeding against any person who shall commence to implement or continue
implementation of any project, plan or program within the Laguna de Bay region
without previous clearance from the Authority."
The LLDA now assails, in this partition for review, the abovementioned ruling of the
Court of Appeals, contending that, as an administrative agency which was granted
regulatory and adjudicatory powers and functions by Republic Act No. 4850 and its
amendatory laws, Presidential Decree No. 813 and Executive Order No. 927, series
of 1983, it is invested with the power and authority to issue a cease and desist
order pursuant to Section 4 par. (c), (d), (e), (f) and (g) of Executive Order No. 927
series of 1983 which provides, thus:
Sec. 4. Additional Powers and Functions. The authority shall have the
following powers and functions:

xxx xxx xxx

(c) Issue orders or decisions to compel compliance with the provisions
of this Executive Order and its implementing rules and regulations only
after proper notice and hearing.
(d) Make, alter or modify orders requiring the discontinuance of
pollution specifying the conditions and the time within which such
discontinuance must be accomplished.
(e) Issue, renew, or deny permits, under such conditions as it may
determine to be reasonable, for the prevention and abatement of
pollution, for the discharge of sewage, industrial waste, or for the
installation or operation of sewage works and industrial disposal
system or parts thereof.
(f) After due notice and hearing, the Authority may also revoke,
suspend or modify any permit issued under this Order whenever the
same is necessary to prevent or abate pollution.
(g) Deputize in writing or request assistance of appropriate
government agencies or instrumentalities for the purpose of enforcing
this Executive Order and its implementing rules and regulations and
the orders and decisions of the Authority.
The LLDA claims that the appellate court deliberately suppressed and totally
disregarded the above provisions of Executive Order No. 927, series of 1983, which
granted administrative quasi-judicial functions to LLDA on pollution abatement
cases.
In light of the relevant environmental protection laws cited which are applicable in
this case, and the corresponding overlapping jurisdiction of government agencies
implementing these laws, the resolution of the issue of whether or not the LLDA has
the authority and power to issue an order which, in its nature and effect was
injunctive, necessarily requires a determination of the threshold question: Does the
Laguna Lake Development Authority, under its Charter and its amendatory laws,
have the authority to entertain the complaint against the dumping of garbage in the
open dumpsite in Barangay Camarin authorized by the City Government of
Caloocan which is allegedly endangering the health, safety, and welfare of the
residents therein and the sanitation and quality of the water in the area brought
about by exposure to pollution caused by such open garbage dumpsite?
The matter of determining whether there is such pollution of the environment that
requires control, if not prohibition, of the operation of a business establishment is

essentially addressed to the Environmental Management Bureau (EMB) of the DENR

which, by virtue of Section 16 of Executive Order No. 192, series of 1987, 18 has
assumed the powers and functions of the defunct National Pollution Control
Commission created under Republic Act No. 3931. Under said Executive Order, a
Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now
assumes the powers and functions of the National Pollution Control Commission
with respect to adjudication of pollution cases. 19
As a general rule, the adjudication of pollution cases generally pertains to the
Pollution Adjudication Board (PAB), except in cases where the special law provides
for another forum. It must be recognized in this regard that the LLDA, as a
specialized administrative agency, is specifically mandated under Republic Act No.
4850 and its amendatory laws to carry out and make effective the declared national
policy 20 of promoting and accelerating the development and balanced growth of the
Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities
of San Pablo, Manila, Pasay, Quezon and Caloocan 21 with due regard and adequate
provisions for environmental management and control, preservation of the quality
of human life and ecological systems, and the prevention of undue ecological
disturbances, deterioration and pollution. Under such a broad grant and power and
authority, the LLDA, by virtue of its special charter, obviously has the responsibility
to protect the inhabitants of the Laguna Lake region from the deleterious effects of
pollutants emanating from the discharge of wastes from the surrounding areas. In
carrying out the aforementioned declared policy, the LLDA is mandated, among
others, to pass upon and approve or disapprove all plans, programs, and projects
proposed by local government offices/agencies within the region, public
corporations, and private persons or enterprises where such plans, programs and/or
projects are related to those of the LLDA for the development of the region. 22
In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady
of Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before
the LLDA, the latter's jurisdiction under its charter was validly invoked by
complainant on the basis of its allegation that the open dumpsite project of the City
Government of Caloocan in Barangay Camarin was undertaken without a clearance
from the LLDA, as required under Section 4, par. (d), of Republic Act. No. 4850, as
amended by P.D. No. 813 and Executive Order No. 927. While there is also an
allegation that the said project was without an Environmental Compliance
Certificate from the Environmental Management Bureau (EMB) of the DENR, the
primary jurisdiction of the LLDA over this case was recognized by the Environmental
Management Bureau of the DENR when the latter acted as intermediary at the
meeting among the representatives of the City Government of Caloocan, Task Force
Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of
re-opening the open dumpsite.

Having thus resolved the threshold question, the inquiry then narrows down to the
following issue: Does the LLDA have the power and authority to issue a "cease and
desist" order under Republic Act No. 4850 and its amendatory laws, on the basis of
the facts presented in this case, enjoining the dumping of garbage in Tala Estate,
Barangay Camarin, Caloocan City.
The irresistible answer is in the affirmative.
The cease and desist order issued by the LLDA requiring the City Government of
Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the
LLDA to have been done in violation of Republic Act No. 4850, as amended, and
other relevant environment laws, 23 cannot be stamped as an unauthorized exercise
by the LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as
amended by P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes
the LLDA to "make, alter or modify order requiring the discontinuance or
pollution." 24 (Emphasis supplied) Section 4, par. (d) explicitly authorizes the LLDA
to make whatever order may be necessary in the exercise of its jurisdiction.
To be sure, the LLDA was not expressly conferred the power "to issue and exparte cease and desist order" in a language, as suggested by the City Government
of Caloocan, similar to the express grant to the defunct National Pollution Control
Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced
in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to
draw therefrom the conclusion that there is a denial of the power to issue the order
in question when the power "to make, alter or modify orders requiring the
discontinuance of pollution" is expressly and clearly bestowed upon the LLDA by
Executive Order No. 927, series of 1983.
Assuming arguendo that the authority to issue a "cease and desist order" were not
expressly conferred by law, there is jurisprudence enough to the effect that the rule
granting such authority need not necessarily be express. 25 While it is a fundamental
rule that an administrative agency has only such powers as are expressly granted to
it by law, it is likewise a settled rule that an administrative agency has also such
powers as are necessarily implied in the exercise of its express powers. 26 In the
exercise, therefore, of its express powers under its charter as a regulatory and
quasi-judicial body with respect to pollution cases in the Laguna Lake region, the
authority of the LLDA to issue a "cease and desist order" is, perforce, implied.
Otherwise, it may well be reduced to a "toothless" paper agency.
In this connection, it must be noted that in Pollution Adjudication Board v. Court of
Appeals, et al., 27 the Court ruled that the Pollution Adjudication Board (PAB) has the
power to issue an ex-parte cease and desist order when there is prima
facieevidence of an establishment exceeding the allowable standards set by the

anti-pollution laws of the country. The ponente, Associate Justice Florentino P.

Feliciano, declared:
Ex parte cease and desist orders are permitted by law and regulations
in situations like that here presented precisely because stopping the
continuous discharge of pollutive and untreated effluents into the
rivers and other inland waters of the Philippines cannot be made to
wait until protracted litigation over the ultimate correctness or
propriety of such orders has run its full course, including multiple and
sequential appeals such as those which Solar has taken, which of
course may take several years. The relevant pollution control statute
and implementing regulations were enacted and promulgated in the
exercise of that pervasive, sovereign power to protect the safety,
health, and general welfare and comfort of the public, as well as the
protection of plant and animal life, commonly designated as the police
power. It is a constitutional commonplace that the ordinary
requirements of procedural due process yield to the necessities of
protecting vital public interests like those here involved, through the
exercise of police power. . . .
The immediate response to the demands of "the necessities of protecting vital
public interests" gives vitality to the statement on ecology embodied in the
Declaration of Principles and State Policies or the 1987 Constitution. Article II,
Section 16 which provides:
The State shall protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm and harmony
of nature.
As a constitutionally guaranteed right of every person, it carries the correlative duty
of non-impairment. This is but in consonance with the declared policy of the state
"to protect and promote the right to health of the people and instill health
consciousness among them." 28 It is to be borne in mind that the Philippines is party
to the Universal Declaration of Human Rights and the Alma Conference Declaration
of 1978 which recognize health as a fundamental human right. 29
The issuance, therefore, of the cease and desist order by the LLDA, as a practical
matter of procedure under the circumstances of the case, is a proper exercise of its
power and authority under its charter and its amendatory laws. Had the cease and
desist order issued by the LLDA been complied with by the City Government of
Caloocan as it did in the first instance, no further legal steps would have been
necessary.

The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon
the LLDA the means of directly enforcing such orders, has provided under its
Section 4 (d) the power to institute "necessary legal proceeding against any person
who shall commence to implement or continue implementation of any project, plan
or program within the Laguna de Bay region without previous clearance from the
LLDA."
Clearly, said provision was designed to invest the LLDA with sufficiently broad
powers in the regulation of all projects initiated in the Laguna Lake region, whether
by the government or the private sector, insofar as the implementation of these
projects is concerned. It was meant to deal with cases which might possibly arise
where decisions or orders issued pursuant to the exercise of such broad powers may
not be obeyed, resulting in the thwarting of its laudabe objective. To meet such
contingencies, then the writs of mandamus and injunction which are beyond the
power of the LLDA to issue, may be sought from the proper courts.
Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake
region and its surrounding provinces, cities and towns are concerned, the Court will
not dwell further on the related issues raised which are more appropriately
addressed to an administrative agency with the special knowledge and expertise of
the LLDA.
WHEREFORE, the petition is GRANTED. The temporary restraining order issued by
the Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the City
Government of Caloocan from dumping their garbage at the Tala Estate, Barangay
Camarin, Caloocan City is hereby made permanent.
SO ORDERED.
Feliciano, Bidin, Melo and Vitug, JJ., concur.
Carpio v. Executive Secretary
G.R. No. 96409 February 14, 1992
CITIZEN J. ANTONIO M. CARPIO, petitioner,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF LOCAL GOVERNMENTS,
THE SECRETARY OF NATIONAL DEFENSE and THE NATIONAL
TREASURER, respondents.

PARAS, J.:

At the very outset, it should be well to set forth the constitutional provision that is at
the core of the controversy now confronting us, thus:
Article XVI, Section 6:
The State shall establish and maintain one police force, which stall be
national in scope and civilian in character, to be administered and
controlled by a national police commission. The authority of local
executives over the police units in their jurisdiction shall be provided
by law. 1
With the aforequoted provision in mind, Congress passed Republic Act No. 6975
entitled "AN ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A
REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR
OTHER PURPOSES" as the consolidated version of House Bill No. 23614 and Senate
Bill No. 463.
Following the said Act's approval by President Corazon C. Aquino on December 13,
1990, it was published on December 17, 1990. 2
Presently, however, petitioner as citizen, taxpayer and member of the Philippine Bar
sworn to defend the Constitution, filed the petition now at bar on December 20,
1990, seeking this Court's declaration of unconstitutionality of RA 6975 with prayer
for temporary restraining order.
But in an en banc resolution dated December 27, 1990, We simply required the
public respondents to file their Comment, without however giving due course to the
petition and the prayer therein. Hence, the Act took effect after fifteen days
following its publication, or on January 1, 1991. 3
Before we settle down on the merits of the petition, it would likewise be well to
discuss albeit briefly the history of our police force and the reasons for the
ordination of Section 6, Article XVI in our present Constitution.
During the Commonwealth period, we had the Philippine Constabulary as the
nucleus of the Philippine Ground Force (PGF), now the Armed Forces of the
Philippines (AFP). The PC was made part of the PGF but its administrative,
supervisory and directional control was handled by the then Department of the
Interior. After the war, it remained as the "National Police" under the Department of
National Defense, as a major service component of the AFP. 4
Later, the Integration Act of 1975 5 created the Integrated National Police (INP)
under the Office of the President, with the PC as the nucleus, and the local police

forces as the civilian components. The PC-INP was headed by the PC Chief who, as
concurrent Director-General of the INP, exercised command functions over the INP. 6
The National Police Commission (NAPOLCOM) 7 exercised administrative control and
supervision while the local executives exercised operational supervision and
direction over the INP units assigned within their respective localities. 8
The set-up whereby the INP was placed under the command of the military
component, which is the PC, severely eroded the INP's civilian character and the
multiplicity in the governance of the PC-INP resulted in inefficient police
service. 9Moreover, the integration of the national police forces with the PC also
resulted in inequities since the military component had superior benefits and
privileges. 10
The Constitutional Commission of 1986 was fully aware of the structural errors that
beset the system. Thus, Com. Teodulo C. Natividad explained that:
xxx xxx xxx
MR. NATIVIDAD. . . . The basic tenet of a modern police
organization is to remove it from the military. 11
xxx xxx xxx
Here in our draft Constitution, we have already made a constitutional
postulate that the military cannot occupy any civil service position [in
Section 6 of the Article on the Civil Service 12] Therefore, in keeping
with this and because of the universal acceptance that a police force is
a civilian function, a public service, and should not be performed by
military force, one of the basic reforms we are presenting here is that it
should be separated from the military force which is the PC. 13
xxx xxx xxx
Furthermore:
xxx xxx xxx
. . . the civilian police cannot blossom into full profession because most
of the key positions are being occupied by the military So, it is up to
this Commission to remove the police from such a situation so that it
can develop into a truly professional civilian police. . . . 14

Hence, the "one police force, national in scope, and civilian in character" provision
that is now Article XVI, Section 6 of the 1987 Constitution.
And so we now come to the merits of the petition at hand.
In the main, petitioner herein respectfully advances the view that RA 6975
emasculated
the
National
Police
Commission
by limiting
its
power
"to administrative control" over the Philippine National Police (PNP), thus, "control"
remained with the Department Secretary under whom both the National Police
Commission and the PNP were placed. 15
We do not share this view.
To begin with, one need only refer to the fundamentally accepted principle in
Constitutional Law that the President has control of all executive departments,
bureaus, and offices to lay at rest petitioner's contention on the matter.
This presidential power of control over the executive branch of government extends
over all executive officers from Cabinet Secretary to the lowliest clerk 17 and has
been held by us, in the landmark case of Mondano vs. Silvosa, 18 to mean "the
power of [the President] to alter or modify or nullify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the judgment of
the former with that of the latter." It is said to be at the very "heart of the meaning
of Chief Executive." 19
Equally well accepted, as a corollary rule to the control powers of the President, is
the "Doctrine of Qualified Political Agency". As the President cannot be expected to
exercise his control powers all at the same time and in person, 20 he will have to
delegate some of them to his Cabinet members.
Under this doctrine, which recognizes the establishment of a single executive, 21 "all
executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants and
agents of the Chief Executive, and, except in cases where the Chief Executive is
required by the Constitution or law to act in person on the exigencies of the
situation demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and through the
executive departments, and the acts of the Secretaries of such departments,
performed and promulgated in the regular course of business, unless disapproved
or reprobated by the Chief Executive presumptively the acts of the Chief
Executive." 22 (emphasis ours)
Thus, and in short, "the President's power of control is directly exercised by him
over the members of the Cabinet who, in turn, and by his authority, control the

bureaus and other offices under their respective jurisdictions in the executive
department." 23
Additionally, the circumstance that the NAPOLCOM and the PNP are placed under
the reorganized Department of Interior and Local Government is merely an
administrative realignment that would bolster a system of coordination and
cooperation among the citizenry, local executives and the integrated law
enforcement agencies and public safety agencies created under the assailed
Act, 24 the funding of the PNP being in large part subsidized by the national
government.
Such organizational set-up does not detract from the mandate of the Constitution
that the national police force shall be administered and controlled by a national
police commission as at any rate, and in fact, the Act in question adequately
provides for administration and control at the commission level, as shown in the
following provisions, to wit:
Sec. 14. Powers and Functions of the Commission. The Commission
shall exercise the following powers and functions:
xxx xxx xxx
(i) Approve or modify plans and programs on education and training,
logistical requirements, communications, records, information systems,
crime laboratory, crime prevention and crime reporting;
(j) Affirm, reverse or modify, through the National Appellate Board,
personnel disciplinary actions involving demotion or dismissal from the
service imposed upon members of the Philippine National Police by the
Chief of the PNP;
(k) Exercise appellate jurisdiction through .the regional. appellate
boards over administrative cases against policemen and over decisions
on claims for police benefits;
xxx xxx xxx
Sec. 26. The Command and direction of the PNP shall be vested in the
Chief of the PNP . . . Such command and direction of the Chief of the
PNP may be delegated to subordinate officials with respect to the units
under their respective commands, in accordance with the rules and
regulations prescribed by the Commission. . . .
xxx xxx xxx

Sec. 35. . . . To enhance police operational efficiency and effectiveness,

the Chief of the PNP may constitute such other support units as may be
necessary subject to the approval of the Commission. . . .
xxx xxx xxx
Sec. 37. . . . There shall be established a performance evaluation
system which shall be administered in accordance with the rules,
regulations and standards; and a code of conduct promulgated by the
Commission for members of the PNP. . . .
xxx xxx xxx
Petitioner further asserts that in manifest derogation of the power of control of the
NAPOLCOM over the PNP, RA 6975 vested the power to choose the PNP Provincial
Director and the Chiefs of Police in the Governors and Mayors, respectively; the
power of "operational supervision and control" over police units in city and
municipal mayors; in the Civil Service Commission, participation in appointments to
the positions of Senior Superintendent to Deputy Director-General as well as the
administration of qualifying entrance examinations; disciplinary powers over PNP
members in the "People's Law Enforcement Boards" and in city and municipal
mayors. 25
Once more, we find no real controversy upon the foregoing assertions.
It is true that when the Constitutional Commissioners of 1986 provided that the
authority of local executives over the police units in their jurisdiction shall be
provided by law, they intended that the day-to-day functions of police work like
crime, investigation, crime prevention activities, traffic control, etc., would be under
the operational control of the local executives as it would not be advisable to give
full control of the police to the local executives. 26
They reasoned that in the past, this gave rise to warlordism, bossism, and
sanctuaries for vices and abuses. 27
It would appear then that by vesting in the local executives the power to choose the
officers in question, the Act went beyond the bounds of the Constitution's intent.
Not so. We find light in the principle of constitutional construction that every
presumption should be indulged in favor of constitutionality and the court in
considering the validity of the statute in question should give it such reasonable
construction as can be reached to bring it within the fundamental
law. 28

Under the questioned provisions, which read as follows:

D. PARTICIPATION OF LOCAL EXECUTIVES IN THE ADMINISTRATION OF
THE PNP.
Sec. 51. Powers of Local Government Officials over the PNP Units or
Forces.
Governors and mayors shall be deputized as representatives of the
Commission in their respective territorial jurisdictions. As such, the
local executives shall discharge the following functions:
a.) Provincial Governor (1) . . .
The provincial governor shall choose the provincial director from a list
of three (3) eligibles recommended by the PNP Regional Director.
4) . . . City and municipal mayors shall have the following authority
over the PNP units in their respective jurisdictions:
i.) Authority to choose the chief of police from a list of five (5) eligibles
recommended by the Provincial Police Director. . . . (Emphasis ours)
full control remains with the National Police Commission.
We agree, and so hold, with the view of the Solicitor General that "there is no
usurpation of the power of control of the NAPOLCOM under Section 51 because
under this very same provision, it is clear that the local executives are only acting
as representatives of the NAPOLCOM. . . . As such deputies, they are answerable to
the NAPOLCOM for their actions in the exercise of their functions under that section.
Thus, unless countermanded by the NAPOLCOM, their acts are valid and binding as
acts of the NAPOLCOM." 29 It is significant to note that the local officials, as
NAPOLCOM representatives, will choose the officers concerned from a list of
eligibles (those who meet the general qualifications for appointment to the PNP) 30 to
be recommended by PNP officials.
The same holding is true with respect to the contention on the operational
supervision and control exercised by the local officials. Those officials would simply
be acting as representatives of the Commission.
As regards the assertion involving the Civil Service Commission, suffice it to say that
the questioned provisions, which read:

Sec. 31. Appointment of PNP Officers and Members. The

Appointment of the officers and members of the PNP shall be effected
in the following manner:
a.) Police Officer I to Senior Police Officer IV. Appointed by the PNP
regional director for regional personnel or by the Chief of the PNP for
national headquarters personnel and attested by the Civil Service
Commission;
b.) Inspector to Superintendent. Appointed by the Chief of the PNP,
as recommended by their immediate superiors, and attested by the
Civil Service Commission;
c.) Senior Superintendent to Deputy Director-General. Appointed by
the President upon recommendation of the Chief of the PNP, with
proper endorsement by the Chairman of the Civil Service
Commission . . .
Sec. 32. Examinations for Policemen. The Civil Service Commission
shall administer the qualifying entrance examinations for policemen on
the basis of the standards set by the NAPOLCOM.
precisely underscore the civilian character of the national police force, and will
undoubtedly professionalize the same.
The grant of disciplinary powers over PNP members to the "People's Law
Enforcement Boards" (or the PLEB) and city and municipal mayors is also not in
derogation of the commission's power of control over the PNP.
Pursuant to the Act, the Commission exercises appellate jurisdiction, thru the
regional appellate boards, over decisions of both the PLEB and the said mayors. This
is so under Section 20(c). Furthermore, it is the Commission which shall issue the
implementing guidelines and procedures to be adopted by the PLEB for in the
conduct of its hearings, and it may assign NAPOLCOM hearing officers to act as
legal consultants of the PLEBs (Section 43-d4, d5).
As a disciplinary board primarily created to hear and decide citizen's complaints
against erring officers and members of the PNP, the establishment of PLEBs in every
city, and municipality would all the more help professionalize the police force.
Petitioner would likewise have this Court imagine that Section 12 of the questioned
Act, the pertinent portion of which reads:

Sec. 12. Relationship of the Department with the Department of

National Defense. During a period of twenty- four (24) months from
the effectivity of this Act, the Armed Forces of the Philippines (AFP)
shall continue its present role of preserving the internal and external
security of the State: Provided, that said period may be extended by
the President, if he finds it justifiable, for another period not exceeding
twenty-four (24) months, after which, the Department shall
automatically take over from the AFP the primary role of preserving
internal security, leaving to the AFP its primary role of preserving
external security.
xxx xxx xxx
constitutes an "encroachment upon, interference with, and an abdication by the
President of, executive control and commander-in-chief powers."
That We are not disposed to do for such is not the case at all here. A rejection thus
of petitioner's submission anent Section 12 of the Act should be in order in the light
of the following exchanges during the CONCOM deliberations of Wednesday,
October 1, 1986:
xxx xxx xxx
MR. RODRIGO. Just a few questions. The President of the Philippines is
the Commander-in-Chief of all the armed forces.
MR. NATIVIDAD. Yes, Madam President.
MR. RODRIGO. Since the national police is not integrated with the
armed forces, I do not suppose they come under the Commander-inChief powers of the President of the Philippines.
MR. NATIVIDAD. They do, Madam President. By law they are under the
supervision and control of the President of the Philippines.
MR. RODRIGO. Yes, but the President is not the Commander-in-Chief of
the national police.
MR. NATIVIDAD. He is the President.
MR. RODRIGO. Yes, the Executive. But they do not come under that
specific provision that the President is Commander-in-Chief of all the
armed forces.

MR. NATIVIDAD. No, not under the Commander-in-Chief provision.

MR. RODRIGO. There are two other powers of the President. The
President has control over departments, bureaus and offices, and
supervision over local governments. Under which does the police fall,
under control or under supervision?
MR. NATIVIDAD. Both, Madam President.
MR. RODRIGO. Control and Supervision.
MR. NATIVIDAD. Yes, in fact, the National Police Commission is under
the Office of the President. (CONCOM RECORDS, Vol. 5, p. 296)
It thus becomes all too apparent then that the provision herein assailed precisely
gives muscle to and enforces the proposition that the national police force does not
fall under the Commander-in-Chief powers of the President. This is necessarily so
since the police force, not being integrated with the military, is not a part of the
Armed Forces of the Philippines. As a civilian agency of the government, it properly
comes within, and is subject to, the exercise by the President of the power of
executive control.
Consequently, Section 12 does not constitute abdication of commander-in-chief
powers. It simply provides for the transition period or process during which the
national police would gradually assume the civilian function of safeguarding the
internal security of the State. Under this instance, the President, to repeat,
abdicates nothing of his war powers. It would bear to here state, in reiteration of the
preponderant view, that the President, as Commander-in-Chief, is not a member of
the Armed Forces. He remains a civilian whose duties under the Commander-inChief provision "represent only a part of the organic duties imposed upon him. All
his other functions are clearly civil in nature." 31 His position as a civilian
Commander-in-Chief is consistent with, and a testament to, the constitutional
principle that "civilian authority is, at all times, supreme over the military." (Article
II, Section 3, 1987 Constitution)
Finally, petitioner submits that the creation of a "Special Oversight Committee"
under Section 84 of the Act, especially the inclusion therein of some legislators as
members (namely: the respective Chairmen of the Committee on Local Government
and the Committee on National Defense and Security in the Senate, and the
respective Chairmen of the Committee on Public Order and Security and the
Committee on National Defense in the House of Representatives) is an
"unconstitutional encroachment upon and a diminution of, the President's power of
control over all executive departments, bureaus and offices."

But there is not the least interference with the President's power of control under
Section 84. The Special Oversight Committee is simply an ad hoc or transitory body,
established and tasked solely with planning and overseeing the immediate
"transfer, merger and/or absorption" into the Department of the Interior and Local
Governments of the "involved agencies." This it will undertake in accordance with
the phases of implementation already laid down in Section 85 of the Act and once
this is carried out, its functions as well as the committee itself would cease
altogether. 32 As an ad hoc body, its creation and the functions it exercises,
decidedly do not constitute an encroachment and in diminution of the power of
control which properly belongs to the President. What is more, no executive
department, bureau or office is placed under the control or authority, of the
committee. 33
As a last word, it would not be amiss to point out here that under the Constitution,
there are the so-called independentConstitutional Commissions, namely: The Civil
Service Commission, Commission on Audit, and the Commission on Elections.
(Article IX-A, Section 1)
As these Commissions perform vital governmental functions, they have to be
protected from external influences and political pressures. Hence, they were made
constitutional bodies, independent of and not under any department of the
government. 34 Certainly, they are not under the control of the President.
The Constitution also created an independent office called the "Commission on
Human Rights." (Article XIII, Section 17[1]).However, this Commission is not on the
same level as the Constitutional Commissions under Article IX, although it is
independent like the latter Commissions. 35 It still had to be constituted thru
Executive Order No. 163 (dated May 5, 1987).
In contrast, Article XVI, Section 6 thereof, merely mandates the statutory creation of
a national police commission that will administer and control the national police
force to be established thereunder.
This commission is, for obvious reasons, not in the same category as
the independent Constitutional Commissions of Article IX and the other
constitutionally created independent Office, namely, the Commission on Human
Rights.
By way of resume, the three Constitutional Commissions (Civil Service, Audit,
Elections) and the additional commission created by the Constitution (Human
Rights) are all independent of the Executive; but the National Police Commission is
not. 36 In fact, it was stressed during the CONCOM deliberations that this
commission would be under the President, and hence may be controlled by the

President, thru his or her alter ego, the Secretary of the Interior and Local
Government.
WHEREFORE, having in view all of the foregoing holdings, the instant petition is
hereby DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Padilla, Bidin, GrioAquino, Medialdea, Regalado, Davide, Jr., Romero and Nocon, JJ., concur.

DENR v. DENR Employees

FIRST DIVISION

[G.R. No. 149724. August 19, 2003]

DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, represented

herein by its Secretary,HEHERSON T. ALVAREZ, petitioner, vs. DENR
REGION 12 EMPLOYEES, represented by BAGUIDALI KARIM, Acting
President of COURAGE (DENR Region 12 Chapter), respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review assailing the Resolutions dated May 31, 2000 [1] of
the Court of Appeals which dismissed the petition forcertiorari in CA-G.R. SP No.
58896, and its Resolution dated August 20, 2001 [2], which denied the motion for
reconsideration.
The facts are as follows:
On November 15, 1999, Regional Executive Director of the Department of
Environment and Natural Resources for Region XII, Israel C. Gaddi, issued a
Memorandum[3] directing the immediate transfer of the DENR XII Regional Offices
from Cotabato City to Koronadal (formerly Marbel), South Cotabato. The
Memorandum was issued pursuant to DENR Administrative Order No. 99-14, issued
by then DENR Secretary Antonio H. Cerilles, which reads in part:
Subject: Providing for the Redefinition of Functions and Realignment
of Administrative Units in the Regional and Field Offices:

Pursuant to Executive Order No. 192, dated June 10, 1987 and as an interim
administrative arrangement to improve the efficiency and effectiveness of the
Department of Environment and Natural Resources (DENR) in delivering its services
pending approval of the government-wide reorganization by Congress, the following
redefinition of functions and realignment of administrative units in the regional and
field offices are hereby promulgated:
Section 1. Realignment of Administrative Units:
The DENR hereby adopts a policy to establish at least one Community Environment
and Natural Resources Office (CENRO) or Administrative Unit per Congressional
District except in the Autonomous Region of Muslim Mindanao (ARMM) and the
National Capital Region (NCR). The Regional Executive Directors (REDs) are hereby
authorized to realign/relocate existing CENROs and implement this policy in
accordance with the attached distribution list per region which forms part of this
Order. Likewise, the following realignment and administrative arrangements are
hereby adopted:
xxx

xxx

xxx

1.6. The supervision of the Provinces of South Cotabato and Sarangani shall be
transferred from Region XI to XII.[4]
Respondents, employees of the DENR Region XII who are members of the
employees association, COURAGE, represented by their Acting President,
Baguindanai A. Karim, filed with the Regional Trial Court of Cotabato, a petition for
nullity of orders with prayer for preliminary injunction.
On December 8, 1999, the trial court issued a temporary restraining order
enjoining petitioner from implementing the assailed Memorandum. The dispositive
portion of the Order reads:
WHEREFORE, defendants DENR Secretary Antonio H. Cerilles and Regional Executive
Director Israel C. Gaddi are hereby ordered to cease and desist from doing the act
complained of, namely, to stop the transfer of DENR [Region] 12 offices from
Cotabato City to Korandal (Marbel), South Cotabato.
xxx

xxx

xxx.

SO ORDERED.[5]
Petitioner filed a Motion for Reconsideration with Motion to Dismiss, raising the
following grounds:
I.
The power to transfer the Regional Office of the Department of Environment and
Natural Resources (DENR) is executive in nature.
II.

The decision to transfer the Regional Office is based on Executive Order No. 429,
which reorganized Region XII.
III.
The validity of EO 429 has been affirmed by the Honorable Supreme Court in the
Case of Chiongbian vs. Orbos (1995) 245 SCRA 255.
IV.
Since the power to reorganize the Administrative Regions is Executive in Nature
citing Chiongbian, the Honorable Court has no jurisdiction to entertain this petition.
[6]

On January 14, 2000, the trial court rendered judgment, the dispositive portion
of which reads:
CONSEQUENTLY, order is hereby issued ordering the respondents herein to cease
and desist from enforcing their Memorandum Order dated November 15, 1999
relative to the transfer of the DENR Regional Offices from Region 12 to Region 11 at
Koronadal, South Cotabato for being bereft of legal basis and issued with grave
abuse of discretion amounting to lack or excess of jurisdiction on their part, and
they are further ordered to return back the seat of the DENR Regional Offices 12 to
Cotabato City.
SO ORDERED.[7]
Petitioners motion for reconsideration was denied in an Order dated April 10,
2000. A petition for certiorari under Rule 65 was filed before the Court of Appeals,
docketed as CA-G.R. SP No. 58896. The petition was dismissed outright for: (1)
failure to submit a written explanation why personal service was not done on the
adverse party; (2) failure to attach affidavit of service; (3) failure to indicate the
material dates when copies of the orders of the lower court were received; (4)
failure to attach certified true copy of the order denying petitioners motion for
reconsideration; (5) for improper verification, the same being based on petitioners
knowledge and belief, and (6) wrong remedy of certiorari under Rule 65 to
substitute a lost appeal.[8]
The motion for reconsideration was denied in a resolution dated August 20,
2001.[9] Hence, this petition based on the following assignment of errors:
I
RULES OF PROCEDURE CAN NOT BE USED TO DEFEAT THE ENDS OF SUBSTANTIAL
JUSTICE
II
THE DECISION OF THE LOWER COURT DATED 14 JANUARY 2000 WHICH WAS
AFFIRMED IN THE QUESTIONED RESOLUTIONS OF THE COURT OF APPEALS DATED 31

MAY 2000 AND 20 AUGUST 2001 IS PATENTLY ILLEGAL AND SHOULD BE NULLIFIED,
CONSIDERING THAT:
A.

B.

RESPONDENTS HAVE NO CAUSE OF ACTION AGAINST

PETITIONER AS THEY HAVE NO RIGHT TO CAUSE THE DENR
REGION 12 OFFICE TO REMAIN IN COTABATO CITY.
THE STATE DID NOT GIVE ITS CONSENT TO BE SUED.

C.

THE DECISION OF THE LOWER COURT DATED 14 JANUARY 2000

IS CONTRARY TO THE RULE OF PRESUMPTION OF REGULARITY IN
THE PERFORMANCE OF OFFICIAL FUNCTIONS.

D.

IN ANY EVENT, THE DECISION OF THE LOWER COURT DATED 14

JANUARY 2000 IS CONTRARY TO THE LETTER AND INTENT OF
EXECUTIVE ORDER NO. 429 AND REPUBLIC ACT NO. 6734.

E.

THE DETERMINATION OF THE PROPRIETY AND PRACTICALITY OF

THE TRANSFER OF REGIONAL OFFICES IS INHERENTLY
EXECUTIVE, AND THEREFORE, NON-JUSTICIABLE.[10]

In essence, petitioner argues that the trial court erred in enjoining it from
causing the transfer of the DENR XII Regional Offices, considering that it was done
pursuant to DENR Administrative Order 99-14.
The issues to be resolved in this petition are: (1) Whether DAO-99-14 and the
Memorandum implementing the same were valid; and (2) Whether the DENR
Secretary has the authority to reorganize the DENR.
Prefatorily, petitioner prays for a liberal application of procedural rules
considering the greater interest of justice.
This Court is fully aware that procedural rules are not to be simply disregarded
for these prescribed procedures ensure an orderly and speedy administration of
justice. However, it is equally true that litigation is not merely a game of
technicalities. Time and again, courts have been guided by the principle that the
rules of procedure are not to be applied in a very rigid and technical manner, as
rules of procedure are used only to help secure and not to override substantial
justice.[11] Thus, if the application of the Rules would tend to frustrate rather than
promote justice, it is always within the power of this Court to suspend the rules, or
except a particular case from its operation.[12]
Despite the presence of procedural flaws, we find it necessary to address the
issues because of the demands of public interest, including the need for stability in
the public service and the serious implications this case may cause on the effective
administration of the executive department. Although no appeal was made within
the reglementary period to appeal, nevertheless, the departure from the general
rule that the extraordinary writ of certiorari cannot be a substitute for the lost
remedy of appeal is justified because the execution of the assailed decision would
amount to an oppressive exercise of judicial authority. [13]

Petitioner maintains that the assailed DAO-99-14 and the implementing

memorandum were valid and that the trial court should have taken judicial notice of
Republic Act No. 6734, otherwise known as An Organic Act for the Autonomous
Region in Muslim Mindanao, and its implementing Executive Order 429, [14] as the
legal bases for the issuance of the assailed DAO-99-14. Moreover, the validity of
R.A. No. 6734 and E.O. 429 were upheld in the case of Chiongbian v. Orbos.[15] Thus,
the respondents cannot, by means of an injunction, force the DENR XII Regional
Offices to remain in Cotabato City, as the exercise of the authority to transfer the
same is executive in nature.
It is apropos to reiterate the elementary doctrine of qualified political agency,
thus:
Under this doctrine, which recognizes the establishment of a single executive, all
executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants and
agents of the Chief Executive, and, except in cases where the Chief Executive is
required by the Constitution or law to act in person or the exigencies of the situation
demand that he act personally, the multifarious executive and administrative
functions of the Chief Executive are performed by and through the executive
departments, and the acts of the Secretaries of such departments, performed and
promulgated in the regular course of business, are, unless disapproved or
reprobated by the Chief Executive, presumptively the acts of the Chief Executive. [16]
This doctrine is corollary to the control power of the President as provided for
under Article VII, Section 17 of the 1987 Constitution, which reads:
Sec. 17. The President shall have control of all the executive departments, bureaus,
and offices. He shall ensure that the laws be faithfully executed.
However, as head of the Executive Department, the President cannot be
expected to exercise his control (and supervisory) powers personally all the
time. He may delegate some of his powers to the Cabinet members except when
he is required by the Constitution to act in person or the exigencies of the situation
demand that he acts personally.[17]
In Buklod ng Kawaning EIIB v. Zamora, [18] this Court upheld the continuing
authority of the President to carry out the reorganization in any branch or agency of
the executive department. Such authority includes the creation, alteration or
abolition of public offices.[19] The Chief Executives authority to reorganize the
National Government finds basis in Book III, Section 20 of E.O. No. 292, otherwise
known as the Administrative Code of 1987, viz:
Section 20. Residual Powers. Unless Congress provides otherwise, the President
shall exercise such other powers and functions vested in the President which are
provided for under the laws and which are not specifically enumerated above or
which are not delegated by the President in accordance with law.
Further, in Larin v. Executive Secretary,[20] this Court had occasion to rule:

This provision speaks of such other powers vested in the President under the law.
What law then gives him the power to reorganize? It is Presidential Decree No. 1772
which amended Presidential Decree No. 1416. These decrees expressly grant the
President of the Philippines the continuing authority to reorganize the national
government, which includes the power to group, consolidate bureaus and agencies,
to abolish offices, to transfer functions, to create and classify functions, services and
activities and to standardize salaries and materials. The validity of these two
decrees is unquestionable. The 1987 Constitution clearly provides that all laws,
decrees, executive orders, proclamations, letters of instructions and other executive
issuances not inconsistent with this Constitution shall remain operative until
amended, repealed or revoked. So far, there is yet no law amending or repealing
said decrees.
Applying the doctrine of qualified political agency, the power of the President to
reorganize the National Government may validly be delegated to his cabinet
members exercising control over a particular executive department. Thus, in DOTC
Secretary v. Mabalot,[21] we held that the President through his duly constituted
political agent and alter ego, the DOTC Secretary may legally and validly decree
the reorganization of the Department, particularly the establishment of DOTC-CAR
as the LTFRB Regional Office at the Cordillera Administrative Region, with the
concomitant transfer and performance of public functions and responsibilities
appurtenant to a regional office of the LTFRB.
Similarly, in the case at bar, the DENR Secretary can validly reorganize the
DENR by ordering the transfer of the DENR XII Regional Offices from Cotabato City
to Koronadal, South Cotabato. The exercise of this authority by the DENR Secretary,
as an alter ego, is presumed to be the acts of the President for the latter had not
expressly repudiated the same.
The trial court should have taken judicial notice of R.A. No. 6734, as
implemented by E.O. No. 429, as legal basis of the Presidents power to reorganize
the executive department, specifically those administrative regions which did not
vote for their inclusion in the ARMM. It is axiomatic that a court has the mandate to
apply relevant statutes and jurisprudence in determining whether the allegations in
a complaint establish a cause of action. While it focuses on the complaint, a court
clearly cannot disregard decisions material to the proper appreciation of the
questions before it.[22] In resolving the motion to dismiss, the trial court should have
taken cognizance of the official acts of the legislative, executive, and judicial
departments because they are proper subjects of mandatory judicial notice as
provided by Section 1 of Rule 129 of the Rules of Court, to wit:
A court shall take judicial notice, without the introduction of evidence, of the
existence and territorial extent of states, their political history, forms of government
and symbols of nationality, the law of nations, the admiralty and maritime courts of
the world and their seals, the political constitution and history of the
Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the
geographical divisions. (Emphasis supplied)
Article XIX, Section 13 of R.A. No. 6734 provides:

SECTION 13. The creation of the Autonomous Region in Muslim Mindanao shall take
effect when approved by a majority of the votes cast by the constituent units
provided in paragraph (2) of Sec. 1 of Article II of this Act in a plebiscite which shall
be held not earlier than ninety (90) days or later than one hundred twenty (120)
days after the approval of this Act: Provided, That only the provinces and cities
voting favorably in such plebiscite shall be included in the Autonomous Region in
Muslim Mindanao. The provinces and cities which in the plebiscite do not vote for
inclusion in the Autonomous Region shall remain in the existing administrative
regions: Provided, however, That the President may, by administrative
determination, merge the existing regions.
Pursuant to the authority granted by the aforequoted provision, then President
Corazon C. Aquino issued on October 12, 1990 E.O. 429, Providing for the
Reorganization of the Administrative Regions in Mindanao. Section 4 thereof
provides:
SECTION 4. REGION XII, to be known as CENTRAL MINDANAO, shall include the
following provinces and cities:
Provinces
Sultan Kudarat
Cotabato
South Cotabato
Cities
Cotabato
General Santos
The Municipality of Koronadal (Marinduque) in South Cotabato shall serve as the
regional center.
In Chiongbian v. Orbos, this Court stressed the rule that the power of the
President to reorganize the administrative regions carries with it the power to
determine the regional centers. In identifying the regional centers, the President
purposely intended the effective delivery of the field services of government
agencies.[23] The same intention can be gleaned from the preamble of the assailed
DAO-99-14 which the DENR sought to achieve, that is, to improve the efficiency and
effectiveness of the DENR in delivering its services.
It may be true that the transfer of the offices may not be timely considering
that: (1) there are no buildings yet to house the regional offices in Koronadal, (2) the
transfer falls on the month of Ramadan, (3) the children of the affected employees
are already enrolled in schools in Cotabato City, (4) the Regional Development
Council was not consulted, and (5) the Sangguniang Panglungsond, through a
resolution, requested the DENR Secretary to reconsider the orders. However, these
concern issues addressed to the wisdom of the transfer rather than to its legality. It
is basic in our form of government that the judiciary cannot inquire into the wisdom
or expediency of the acts of the executive or the legislative department, [24] for each
department is supreme and independent of the others, and each is devoid of
authority not only to encroach upon the powers or field of action assigned to any of

the other department, but also to inquire into or pass upon the advisability or
wisdom of the acts performed, measures taken or decisions made by the other
departments.[25]
The Supreme Court should not be thought of as having been tasked with the
awesome responsibility of overseeing the entire bureaucracy. Unless there is a clear
showing of constitutional infirmity or grave abuse of discretion amounting to lack or
excess of jurisdiction, the Courts exercise of the judicial power, pervasive and
limitless it may seem to be, still must succumb to the paramount doctrine of
separation of powers.[26] After a careful review of the records of the case, we find
that this jurisprudential element of abuse of discretion has not been shown to exist.
WHEREFORE, in view of the foregoing, the petition for review is GRANTED. The
resolutions of the Court of Appeals in CA-G.R. SP No. 58896 dated May 31, 2000 and
August 20, 2001, as well as the decision dated January 14, 2000 of the Regional Trial
Court of Cotabato City, Branch 15, in Civil Case No 389, are REVERSED and SET
ASIDE. The permanent injunction, which enjoined the petitioner from enforcing the
Memorandum Order of the DENR XII Regional Executive Director, is LIFTED.
SO ORDERED.
Vitug, (Acting Chairman), Carpio, and Azcuna, JJ., concur.
Davide, Jr., C.J., (Chairman), abroad, on official business.

Carino v. CHR
G.R. No. 96681 December 2, 1991
HON. ISIDRO CARIO, in his capacity as Secretary of the Department of
Education, Culture & Sports, DR. ERLINDA LOLARGA, in her capacity as
Superintendent of City Schools of Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA
BABARAN, ELSA IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL
CASTILLO, ELSA REYES and APOLINARIO ESBER, respondents.

NARVASA, J.:p
The issue raised in the special civil action of certiorari and prohibition at bar,
instituted by the Solicitor General, may be formulated as follows: where the relief
sought from the Commission on Human Rights by a party in a case consists of the
review and reversal or modification of a decision or order issued by a court of justice
or government agency or official exercising quasi-judicial functions, may the
Commission take cognizance of the case and grant that relief? Stated otherwise,
where a particular subject-matter is placed by law within the jurisdiction of a court

or other government agency or official for purposes of trial and adjudgment, may
the Commission on Human Rights take cognizance of the same subject-matter for
the same purposes of hearing and adjudication?
The facts narrated in the petition are not denied by the respondents and are hence
taken as substantially correct for purposes of ruling on the legal questions posed in
the present action. These facts, 1 together with others involved in related cases
recently resolved by this Court 2 or otherwise undisputed on the record, are
hereunder set forth.
1. On September 17, 1990, a Monday and a class day, some 800 public school
teachers, among them members of the Manila Public School Teachers Association
(MPSTA) and Alliance of Concerned Teachers (ACT) undertook what they described
as "mass concerted actions" to "dramatize and highlight" their plight resulting from
the alleged failure of the public authorities to act upon grievances that had time and
again been brought to the latter's attention. According to them they had decided to
undertake said "mass concerted actions" after the protest rally staged at the DECS
premises on September 14, 1990 without disrupting classes as a last call for the
government to negotiate the granting of demands had elicited no response from the
Secretary of Education. The "mass actions" consisted in staying away from their
classes, converging at the Liwasang Bonifacio, gathering in peaceable assemblies,
etc. Through their representatives, the teachers participating in the mass actions
were served with an order of the Secretary of Education to return to work in 24
hours or face dismissal, and a memorandum directing the DECS officials concerned
to initiate dismissal proceedings against those who did not comply and to hire their
replacements. Those directives notwithstanding, the mass actions continued into
the week, with more teachers joining in the days that followed. 3
Among those who took part in the "concerted mass actions" were the eight (8)
private respondents herein, teachers at the Ramon Magsaysay High School, Manila,
who had agreed to support the non-political demands of the MPSTA. 4
2. For failure to heed the return-to-work order, the CHR complainants (private
respondents) were administratively charged on the basis of the principal's report
and given five (5) days to answer the charges. They were also preventively
suspended for ninety (90) days "pursuant to Section 41 of P.D. 807" and temporarily
replaced (unmarked CHR Exhibits, Annexes F, G, H). An investigation committee
was consequently formed to hear the charges in accordance with P.D. 807. 5
3. In the administrative case docketed as Case No. DECS 90-082 in which CHR
complainants Graciano Budoy, Jr., Julieta Babaran, Luz del Castillo, Apolinario Esber
were, among others, named respondents, 6 the latter filed separate answers, opted
for a formal investigation, and also moved "for suspension of the administrative
proceedings pending resolution by . . (the Supreme) Court of their application for

issuance of an injunctive writ/temporary restraining order." But when their motion

for suspension was denied by Order dated November 8, 1990 of the Investigating
Committee, which later also denied their motion for reconsideration orally made at
the hearing of November 14, 1990, "the respondents led by their counsel staged a
walkout signifying their intent to boycott the entire proceedings." 7 The case
eventually resulted in a Decision of Secretary Cario dated December 17, 1990,
rendered after evaluation of the evidence as well as the answers, affidavits and
documents submitted by the respondents, decreeing dismissal from the service of
Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy and del
Castillo. 8
4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional
Trial Court of Manila against petitioner (Cario), which was dismissed (unmarked
CHR Exhibit, Annex I). Later, the MPSTA went to the Supreme Court (on certiorari, in
an attempt to nullify said dismissal, grounded on the) alleged violation of the
striking teachers" right to due process and peaceable assembly docketed as G.R.
No. 95445, supra. The ACT also filed a similar petition before the Supreme Court . . .
docketed as G.R. No. 95590." 9 Both petitions in this Court were filed in behalf of
the teacher associations, a few named individuals, and "other teacher-members so
numerous similarly situated" or "other similarly situated public school teachers too
numerous to be impleaded."
5. In the meantime, too, the respondent teachers submitted sworn statements
dated September 27, 1990 to the Commission on Human Rights to complain that
while they were participating in peaceful mass actions, they suddenly learned of
their replacements as teachers, allegedly without notice and consequently for
reasons completely unknown to them. 10
6. Their complaints and those of other teachers also "ordered suspended by
the . . . (DECS)," all numbering forty-two (42) were docketed as "Striking
Teachers CHR Case No. 90775." In connection therewith the Commission scheduled
a "dialogue" on October 11, 1990, and sent a subpoena to Secretary Cario
requiring his attendance therein. 11
On the day of the "dialogue," although it said that it was "not certain whether he
(Sec. Cario) received the subpoena which was served at his office, . . . (the)
Commission, with the Chairman presiding, and Commissioners Hesiquio R. Mallilin
and Narciso C. Monteiro, proceeded to hear the case;" it heard the complainants'
counsel (a) explain that his clients had been "denied due process and suspended
without formal notice, and unjustly, since they did not join the mass leave," and (b)
expatiate on the grievances which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR complainants) sympathize." 12 The
Commission thereafter issued an Order 13 reciting these facts and making the
following disposition:

To be properly apprised of the real facts of the case and be accordingly

guided in its investigation and resolution of the matter, considering
that these forty two teachers are now suspended and deprived of their
wages, which they need very badly, Secretary Isidro Cario, of the
Department of Education, Culture and Sports, Dr. Erlinda Lolarga,
school superintendent of Manila and the Principal of Ramon Magsaysay
High School, Manila, are hereby enjoined to appear and enlighten the
Commission en banc on October 19, 1990 at 11:00 A.M. and to bring
with them any and all documents relevant to the allegations
aforestated herein to assist the Commission in this matter. Otherwise,
the Commission will resolve the complaint on the basis of
complainants' evidence.
xxx xxx xxx
7. Through the Office of the Solicitor General, Secretary Cario sought and was
granted leave to file a motion to dismiss the case. His motion to dismiss was
submitted on November 14, 1990 alleging as grounds therefor, "that the complaint
states no cause of action and that the CHR has no jurisdiction over the case." 14
8. Pending determination by the Commission of the motion to dismiss, judgments
affecting the "striking teachers" were promulgated in two (2) cases, as
aforestated, viz.:
a) The Decision dated December l7, 1990 of Education Secretary
Cario in Case No. DECS 90-082, decreeing dismissal from the service
of Apolinario Esber and the suspension for nine (9) months of Babaran,
Budoy and del Castillo; 15 and
b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos.
95445 and 95590 dismissing the petitions "without prejudice to any
appeals, if still timely, that the individual petitioners may take to the
Civil Service Commission on the matters complained of," 16 and inter
alia "ruling that it was prima facie lawful for petitioner Cario to issue
return-to-work orders, file administrative charges against recalcitrants,
preventively suspend them, and issue decision on those charges." 17
9. In an Order dated December 28, 1990, respondent Commission denied Sec.
Cario's motion to dismiss and required him and Superintendent Lolarga "to submit
their counter-affidavits within ten (10) days . . . (after which) the Commission shall
proceed to hear and resolve the case on the merits with or without respondents
counter affidavit." 18 It held that the "striking teachers" "were denied due process
of law; . . . they should not have been replaced without a chance to reply to the
administrative charges;" there had been a violation of their civil and political rights

which the Commission was empowered to investigate; and while expressing its
"utmost respect to the Supreme Court . . . the facts before . . . (it) are different from
those in the case decided by the Supreme Court" (the reference being unmistakably
to this Court's joint Resolution of August 6, 1991 in G.R. Nos. 95445 and
95590, supra).
It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor
General, in behalf of petitioner Cario, has commenced the present action
of certiorari and prohibition.
The Commission on Human Rights has made clear its position that it does not feel
bound by this Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has
also made plain its intention "to hear and resolve the case (i.e., Striking Teachers
HRC Case No. 90-775) on the merits." It intends, in other words, to try and decide or
hear and determine, i.e., exercise jurisdiction over the following general issues:
1) whether or not the striking teachers were denied due process, and just cause
exists for the imposition of administrative disciplinary sanctions on them by their
superiors; and
2) whether or not the grievances which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR complainants) sympathize," justify
their mass action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with
character of finality and definiteness, the same issues which have been passed
upon and decided by the Secretary of Education, Culture & Sports, subject to appeal
to the Civil Service Commission, this Court having in fact, as aforementioned,
declared that the teachers affected may take appeals to the Civil Service
Commission on said matters, if still timely.
The threshold question is whether or not the Commission on Human Rights has the
power under the Constitution to do so; whether or not, like a court of justice, 19 or
even a quasi-judicial agency, 20 it has jurisdiction or adjudicatory powers over, or
the power to try and decide, or hear and determine, certain specific type of cases,
like alleged human rights violations involving civil or political rights.
The Court declares the Commission on Human Rights to have no such power; and
that it was not meant by the fundamental law to be another court or quasi-judicial
agency in this country, or duplicate much less take over the functions of the latter.
The most that may be conceded to the Commission in the way of adjudicative
power is that it may investigate, i.e., receive evidence and make findings of fact as
regards claimed human rights violations involving civil and political rights. But fact

finding is not adjudication, and cannot be likened to the judicial function of a court
of justice, or even a quasi-judicial agency or official. The function of receiving
evidence and ascertaining therefrom the facts of a controversy is not a judicial
function, properly speaking. To be considered such, the faculty of receiving evidence
and making factual conclusions in a controversy must be accompanied by the
authority of applying the law to those factual conclusions to the end that the
controversy may be decided or determined authoritatively, finally and definitively,
subject to such appeals or modes of review as may be provided by law. 21 This
function, to repeat, the Commission does not have. 22
The proposition is made clear by the constitutional provisions specifying the powers
of the Commission on Human Rights.
The Commission was created by the 1987 Constitution as an independent
office. 23 Upon its constitution, it succeeded and superseded the Presidential
Committee on Human Rights existing at the time of the effectivity of the
Constitution. 24 Its powers and functions are the following 25
(1) Investigate, on its own or on complaint by any party, all forms of
human rights violations involving civil and political rights;
(2) Adopt its operational guidelines and rules of procedure, and cite for
contempt for violations thereof in accordance with the Rules of Court;
(3) Provide appropriate legal measures for the protection of human
rights of all persons within the Philippines, as well as Filipinos residing
abroad, and provide for preventive measures and legal aid services to
the underprivileged whose human rights have been violated or need
protection;
(4) Exercise visitorial powers over jails, prisons, or detention facilities;
(5) Establish a continuing program of research, education, and
information to enhance respect for the primacy of human rights;
(6) Recommend to the Congress effective measures to promote human
rights and to provide for compensation to victims of violations of
human rights, or their families;
(7) Monitor the Philippine Government's compliance with international
treaty obligations on human rights;
(8) Grant immunity from prosecution to any person whose testimony or
whose possession of documents or other evidence is necessary or

convenient to determine the truth in any investigation conducted by it

or under its authority;
(9) Request the assistance of any department, bureau, office, or
agency in the performance of its functions;
(10) Appoint its officers and employees in accordance with law; and
(11) Perform such other duties and functions as may be provided by
law.
As should at once be observed, only the first of the enumerated powers and
functions bears any resemblance to adjudication or adjudgment. The Constitution
clearly and categorically grants to the Commission the power to investigate all
forms of human rights violations involving civil and political rights. It can exercise
that power on its own initiative or on complaint of any person. It may exercise that
power pursuant to such rules of procedure as it may adopt and, in cases of
violations of said rules, cite for contempt in accordance with the Rules of Court. In
the course of any investigation conducted by it or under its authority, it may grant
immunity from prosecution to any person whose testimony or whose possession of
documents or other evidence is necessary or convenient to determine the truth. It
may also request the assistance of any department, bureau, office, or agency in the
performance of its functions, in the conduct of its investigation or in extending such
remedy as may be required by its findings. 26
But it cannot try and decide cases (or hear and determine causes) as courts of
justice, or even quasi-judicial bodies do. To investigate is not to adjudicate or
adjudge. Whether in the popular or the technical sense, these terms have well
understood and quite distinct meanings.
"Investigate," commonly understood, means to examine, explore, inquire or delve or
probe into, research on, study. The dictionary definition of "investigate" is "to
observe or study closely: inquire into systematically. "to search or inquire into: . . . to
subject to an official probe . . .: to conduct an official inquiry." 27 The purpose of
investigation, of course, is to discover, to find out, to learn, obtain information.
Nowhere included or intimated is the notion of settling, deciding or resolving a
controversy involved in the facts inquired into by application of the law to the facts
established by the inquiry.
The legal meaning of "investigate" is essentially the same: "(t)o follow up step by
step by patient inquiry or observation. To trace or track; to search into; to examine
and inquire into with care and accuracy; to find out by careful inquisition;
examination; the taking of evidence; a legal inquiry;" 28 "to inquire; to make an
investigation," "investigation" being in turn describe as "(a)n administrative

function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm
L Sec. 257; . . . an inquiry, judicial or otherwise, for the discovery and collection of
facts concerning a certain matter or matters." 29
"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate,
judge, decide, determine, resolve, rule on, settle. The dictionary defines the term as
"to settle finally (the rights and duties of the parties to a court case) on the merits
of issues raised: . . . to pass judgment on: settle judicially: . . . act as judge." 30 And
"adjudge" means "to decide or rule upon as a judge or with judicial or quasi-judicial
powers: . . . to award or grant judicially in a case of controversy . . . ." 31
In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority.
To determine finally. Synonymous with adjudge in its strictest sense;" and "adjudge"
means: "To pass on judicially, to decide, settle or decree, or to sentence or
condemn. . . . Implies a judicial determination of a fact, and the entry of a
judgment." 32
Hence it is that the Commission on Human Rights, having merely the power "to
investigate," cannot and should not "try and resolve on the merits" (adjudicate) the
matters involved in Striking Teachers HRC Case No. 90-775, as it has announced it
means to do; and it cannot do so even if there be a claim that in the administrative
disciplinary proceedings against the teachers in question, initiated and conducted
by the DECS, their human rights, or civil or political rights had been transgressed.
More particularly, the Commission has no power to "resolve on the merits" the
question of (a) whether or not the mass concerted actions engaged in by the
teachers constitute and are prohibited or otherwise restricted by law; (b) whether or
not the act of carrying on and taking part in those actions, and the failure of the
teachers to discontinue those actions, and return to their classes despite the order
to this effect by the Secretary of Education, constitute infractions of relevant rules
and regulations warranting administrative disciplinary sanctions, or are justified by
the grievances complained of by them; and (c) what where the particular acts done
by each individual teacher and what sanctions, if any, may properly be imposed for
said acts or omissions.
These are matters undoubtedly and clearly within the original jurisdiction of the
Secretary of Education, being within the scope of the disciplinary powers granted to
him under the Civil Service Law, and also, within the appellate jurisdiction of the
Civil Service Commission.
Indeed, the Secretary of Education has, as above narrated, already taken
cognizance of the issues and resolved them, 33and it appears that appeals have
been seasonably taken by the aggrieved parties to the Civil Service Commission;
and even this Court itself has had occasion to pass upon said issues. 34

Now, it is quite obvious that whether or not the conclusions reached by the
Secretary of Education in disciplinary cases are correct and are adequately based on
substantial evidence; whether or not the proceedings themselves are void or
defective in not having accorded the respondents due process; and whether or not
the Secretary of Education had in truth committed "human rights violations
involving civil and political rights," are matters which may be passed upon and
determined through a motion for reconsideration addressed to the Secretary
Education himself, and in the event of an adverse verdict, may be reviewed by the
Civil Service Commission and eventually the Supreme Court.
The Commission on Human Rights simply has no place in this scheme of things. It
has no business intruding into the jurisdiction and functions of the Education
Secretary or the Civil Service Commission. It has no business going over the same
ground traversed by the latter and making its own judgment on the questions
involved. This would accord success to what may well have been the complaining
teachers' strategy to abort, frustrate or negate the judgment of the Education
Secretary in the administrative cases against them which they anticipated would be
adverse to them.
This cannot be done. It will not be permitted to be done.
In any event, the investigation by the Commission on Human Rights would serve no
useful purpose. If its investigation should result in conclusions contrary to those
reached by Secretary Cario, it would have no power anyway to reverse the
Secretary's conclusions. Reversal thereof can only by done by the Civil Service
Commission and lastly by this Court. The only thing the Commission can do, if it
concludes that Secretary Cario was in error, is to refer the matter to the
appropriate Government agency or tribunal for assistance; that would be the Civil
Service Commission. 35 It cannot arrogate unto itself the appellate jurisdiction of
the Civil Service Commission.
WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED
and SET ASIDE, and the respondent Commission on Human Rights and the
Chairman and Members thereof are prohibited "to hear and resolve the case (i.e.,
Striking Teachers HRC Case No. 90-775) on the merits."
SO ORDERED.
Melencio-Herrera, Cruz, Feliciano,
Davide, Jr. and Romero, JJ, concur.

Bidin,

Grio-Aquino,

Medialdea,

Regalado,