CIR vs Algue Inc.

No. L-28896 Feb. 17, 1988

CRUZ, J.:

FACTS: Algue Inc. engaged in engineering, construction etc. was appointed as agent
by Ph. Sugar Estate Developmend Company to sell latters land, factories and oil
manufacturing process.Pursuant to that, 5 individuals were hired for the formation of the
Vegetable Oil Investment Corporation, inducing others to invest in it. By promoting, this
corporation purchased the PSEDC properties. Algue then received as agent commission of
P125k and it was from this commission that the P75k promotional fees were paid to the five
individuals. There is no dispute that they reported their respective income tax returns and
paid tax.
Algue was assessed of P83k as delinquency income taxes. Upon inaction to the protest,
Algue filed a petition with CTA.
CTA: taxes were legitimately payed for actual services rendered.

ISSUE: W/N CIR correctly disallowed the P75k deduction claimed by algue as legitimate
business expenses.

HELD: No. The amount of promotional fees was not excessive. Findings of CTA is accord with
Sec. 30 and 70 of Tax Code. Algue has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing investors to
venture in an experimental enterprise.

It is true that taxes are the lifeblood of the Government hence every oersin who is able to
must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values.
This symbiotic relationship is the rationale of taxation and should dispel the erroneous
notion that it is an arbitrary method of exaction by those in the seat of power.
It is a requirement that it be exercised reasonably and in accordance with the prescribed
procedure.
 Philippiine Guaranty Inc. vs. CIR
PHIL. GUARANTY CO., INC. v. CIR
GR No. L-22074, April 30, 1965
13 SCRA 775

FACTS: The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into
reinsurance
contracts with foreign insurance companies not doing business in the country, thereby ceding to
foreign
reinsurers a portion of the premiums on insurance it has originally underwritten in the
Philippines. The premiums paid by such companies were excluded by the petitioner from its
gross income when it file its income tax returns for 1953 and 1954. Furthermore, it did not
withhold or pay tax on them. Consequently, the CIR assessed against the petitioner withholding
taxes on the ceded reinsurance premiums to which the latter protested the assessment on the
ground that the premiums are not subject to tax for the premiums did not constitute income
from sources within the Philippines because the foreign reinsurers did not engage in business in
the Philippines, and CIR's previous rulings did not require insurance companies to withhold
income tax due from foreign companies.

ISSUE: Are insurance companies not required to withhold tax on reinsurance premiums ceded to
foreign
insurance companies, which deprives the government from collecting the tax due from them?

HELD: No. The power to tax is an attribute of sovereignty. It is a power emanating from
necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army
to resist an
aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public
improvement
designed for the enjoyment of the citizenry and those which come within the State's territory,
and facilities and
protection which a government is supposed to provide. Considering that the reinsurance
premiums in question
were afforded protection by the government and the recipient foreign reinsurers exercised rights
and privileges
guaranteed by our laws, such reinsurance premiums and reinsurers should share the burden of
maintaining the
state.
The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding
of tax due on
reinsurance premiums may free the taxpayer from the payment of surcharges or penalties
imposed for failure to pay the corresponding withholding tax, but it certainly would not
exculpate it from liability to pay such
withholding tax. The Government is not estopped from collecting taxes by the mistakes or errors
of its agents.
CHAMBER OF REAL ESTATE AND BUILDERS
ASSOCIATION, INC. vs. EXECUTIVE
SECRETARY- Minimum Corporate Income Tax

FACTS:
CREBA assails the imposition of the minimum corporate income tax (MCIT) as being violative of the due
process clause as it levies income tax even if there is no realized gain. They also question the creditable
withholding tax (CWT) on sales of real properties classified as ordinary assets stating that (1) they ignore the
different treatment of ordinary assets and capital assets; (2) the use of gross selling price or fair market value
as basis for the CWT and the collection of tax on a per transaction basis (and not on the net income at the
end of the year) are inconsistent with the tax on ordinary real properties; (3) the government collects income
tax even when the net income has not yet been determined; and (4) the CWT is being levied upon real estate
enterprises but not on other enterprises, more particularly those in the manufacturing sector.

ISSUE:
Are the impositions of the MCIT on domestic corporations and CWT on income from sales of real properties
classified as ordinary assets unconstitutional?

HELD:
NO. MCIT does not tax capital but only taxes income as shown by the fact that the MCIT is arrived at by
deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. Besides, there are sufficient safeguards that exist for the MCIT: (1) it is only
imposed on the 4th year of operations; (2) the law allows the carry forward of any excess MCIT paid over the
normal income tax; and (3) the Secretary of Finance can suspend the imposition of MCIT in justifiable
instances.
The regulations on CWT did not shift the tax base of a real estate business income tax from net income to
GSP or FMV of the property sold since the taxes withheld are in the nature of advance tax payments and they
are thus just installments on the annual tax which may be due at the end of the taxable year. As such the tax
base for the sale of real property classified as ordinary assets remains to be the net taxable income and the
use of the GSP or FMV is because these are the only factors reasonably known to the buyer in connection
with the performance of the duties as a withholding agent.
Neither is there violation of equal protection even if the CWT is levied only on the real industry as the real
estate industry is, by itself, a class on its own and can be validly treated different from other businesses.
CIR vs. Fortune Tobacco Corporation, [G.R. Nos. 167274-75, July 21, 2008]

Facts: Respondent FTC is a domestic corporation that manufactures cigarettes packed by machine
under several brands. Prior to January 1, 1997, Section 142 of the 1977 Tax Code subjected said
cigarette brands to ad valorem tax. Annex D of R.A. No. 4280 prescribed the cigarette brands tax
classification ratesbased on their net retail price. On January 1, 1997, R.A. No. 8240 took effect. Sec.
145 thereof now subjects the cigarette brands to specific tax and also provides that: (1) the excise tax
from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not
be lower than the tax, which is due from each brand on October 1, 1996; (2) the rates of excise tax on
cigarettes enumerated therein shall be increased by 12% on January 1, 2000; and (3) the classification
of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex
D shall remain in force until revised by Congress.

The Secretary of Finance issued RR No. 17-99 to implement the provision for the 12% excise tax
increase. RR No. 17-99 added the qualification that the new specific tax rate xxx shall not be lower than
the excise tax that is actually being paid prior to January 1, 2000. In effect, it provided that the 12% tax
increase must be based on the excise tax actually being paid prior to January 1, 2000 and not on their
actual net retail price.

FTC filed 2 separate claims for refund or tax credit of its purportedly overpaid excise taxes for the month
of January 2000 and for the period January 1-December 31, 2002. It assailed the validity of RR No. 17-
99 in that it enlarges Section 145 by providing the aforesaid qualification. In this petition, petitioner CIR
alleges that the literal interpretation given by the CTA and the CA of Section 145 would lead to a lower
tax imposable on 1 January 2000 than that imposable during the transition period, which is contrary to
the legislative intent to raise revenue.

Issue: Should the 12% tax increase be based on the net retail price of the cigarettes in the market as
outlined in Section 145 of the 1997 Tax Code?

Held: YES. Section 145 is clear and unequivocal. It states that during the transition period, i.e., within the
next 3 years from the effectivity of the 1997 Tax Code, the excise tax from any brand of cigarettes shall
not be lower than the tax due from each brand on 1 October 1996. This qualification, however, is
conspicuously absent as regards the 12% increase which is to be applied on cigars and cigarettes
packed by machine, among others, effective on 1 January 2000.

Clearly, Section 145 mandates a new rate of excise tax for cigarettes packed by machine due to the 12%
increase effective on 1 January 2000 without regard to whether the revenue collection starting from this
period may turn out to be lower than that collected prior to this date.

The qualification added by RR No. 17-99 imposes a tax which is the higher amount between the ad
valorem tax being paid at the end of the 3-year transition period and the specific tax under Section 145,
as increased by 12%a situation not supported by the plain wording of Section 145 of the 1997 Tax
Code. Administrativeissuances must not override, supplant or modify the law, but must remain consistent
with the law they intend to carry out.

Revenue generation is not the sole purpose of the passage of the 1997 Tax Code. The shift from the ad
valorem system to the specific tax system in the Code is likewise meant to promote fair competition
among the players in the industries concerned and to ensure an equitable distribution of the tax burden.
 Tan v. Del Rosario Digest

Tan v Del Rosario

Facts:

1. Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income Taxation Scheme
("SNIT"), which amended certain provisions of the NIRC, as well as the Rules and Regulations
promulgated by public respondents pursuant to said law.

2. Petitioners posit that RA 7496 is unconstitutional as it allegedly violates the following provisions of
the Constitution:

-Article VI, Section 26(1) Every bill passed by the Congress shall embrace only one subject which
shall be expressed in the title thereof.
- Article VI, Section 28(1) The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation.
- Article III, Section 1 No person shall be deprived of . . . property without due process of law, nor
shall any person be denied the equal protection of the laws.

3. Petitioners contended that public respondents exceeded their rule-making authority in applying SNIT
to general professional partnerships. Petitioner contends that the title of HB 34314, progenitor of RA
7496, is deficient for being merely entitled, "Simplified Net Income Taxation Scheme for the Self-
Employed and Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289)
when the full text of the title actually reads,
'An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed and Professionals
Engaged In The Practice of Their Profession, Amending Sections 21 and 29 of the National Internal
Revenue Code,' as amended. Petitioners also contend it violated due process.

5. The Solicitor General espouses the position taken by public respondents.

6. The Court has given due course to both petitions.

ISSUE: Whether or not the tax law is unconstitutional for violating due process

NO. The due process clause may correctly be invoked only when there is a clear contravention of
inherent or constitutional limitations in the exercise of the tax power. No such transgression is so
evident in herein case.

1. Uniformity of taxation, like the concept of equal protection, merely requires that all subjects or
objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.
Uniformity does not violate classification as long as: (1) the standards that are used therefor are
substantial and not arbitrary, (2) the categorization is germane to achieve the legislative purpose, (3)
the law applies, all things being equal, to both present and future conditions, and (4) the
classification applies equally well to all those belonging to the same class.

2. What is apparent from the amendatory law is the legislative intent to increasingly shift the income
tax system towards the schedular approach in the income taxation of individual taxpayers and to
maintain, by and large, the present global treatment on taxable corporations. The Court does not
view this classification to be arbitrary and inappropriate.
ISSUE 2: Whether or not public respondents exceeded their authority in promulgating the
RR

No. There is no evident intention of the law, either before or after the amendatory legislation, to
place in an unequal footing or in significant variance the income tax treatment of professionals who
practice their respective professions individually and of those who do it through a general
professional partnership.
Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
GR No. 159647, April 15, 2005

Facts:

Respondent is a domestic corporation engaged in the retailing of medicines and other pharmaceutical products. In
1996 it operated six (6) drugstores under the business name and style Mercury Drug. From January to December
1996 respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines pursuant
to RA 7432. For said period respondent granted a total of 904,769.

On April 15, 1997, respondent filed its annual ITR for taxable year 1996 declaring therein net losses. On Jan. 16,
1998 respondent filed with petitioner a claim for tax refund/credit of 904,769.00 alledgedly arising from the 20%
sales discount. Unable to obtain affirmative response from petitioner, respondent elevated its claim to the CTA via
Petition for Review. CTA dismissed the same but on MR, CTA reversed its earlier ruling and ordered petitioner to
issue a Tax Credit Certificate in favor of respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug
Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or erroneously paid taxes but
that there are other situations which may warrant a tax credit/refund.

CA affirmed CTA decision reasoning that RA 7432 required neither a tax liability nor a payment of taxes by private
establishments prior to the availment of a tax credit. Moreover, such credit is not tantamount to an unintended
benefit from the law, but rather a just compensation for the taking of private property for public use.

ISSUE: W/N respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.

RULING:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their
purchase of medicine from any private establishment in the country. The latter may then claim the cost of the
discount as a tax credit. Such credit can be claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is subtracted directly from ones total tax liability. It is an allowance
against the tax itself or a deduction from what is owed by a taxpayer to the government.
A tax credit should be understood in relation to other tax concepts. One of these is tax deduction which is
subtraction from income for tax purposes, or an amount that is allowed by law to reduce income prior to the
application of the tax rate to compute the amount of tax which is due. In other words, whereas a tax credit reduces
the tax due, tax deduction reduces the income subject to tax in order to arrive at the taxable income.

Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before the tax
credit can be applied. Without that liability, any tax credit application will be useless. There will be no reason for
deducting the latter when there is, to begin with, no existing obligation to the government. However, as will be
presented shortly, the existence of a tax credit or its grant by law is not the same as the availment or use of such
credit. While the grant is mandatory, the availment or use is not.

If a net loss is reported by, and no other taxes are currently due from, a business establishment, there will obviously
be no tax liability against which any tax credit can be applied. For the establishment to choose the immediate
availment of a tax credit will be premature and impracticable. Nevertheless, the irrefutable fact remains that, under
RA 7432, Congress has granted without conditions a tax credit benefit to all covered establishments. However, for
the losing establishment to immediately apply such credit, where no tax is due, will be an improvident usance.

In addition, while a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On
the contrary, for the existence or grant solely of such credit, neither a tax liability nor a prior tax payment is needed.
The Tax Code is in fact replete with provisions granting or allowing tax credits, even though no taxes have been
previously paid.

G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,
vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE
COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE
COMMISSIONER ALBERTO P. CRUZ, respondents.

Topic: (1) tax vs. ordinary debt, (2) purpose/objective of taxation: non-
revenue / special / regulatory
Ponente: Davide, Jr. J.

DOCTRINE:
A taxpayer may not offset taxes due from the claims that he may have
against the government.

QUICK FACTS: Caltex Philippines questions the decisions of COA for

disallowing the offsetting of its claims for reimbursement with its due
OPSF remittance

FACTS:

The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD
1956, as amended by EO 137 for the purpose of minimizing frequent
price changes brought about by exchange rate adjustments. It will be
used to reimburse the oil companies for cost increase and possible cost
underrecovery incurred due to reduction of domestic prices.

COA sent a letter to Caltex directing the latter to remit to the OPSF its
collection. Caltex requested COA for an early release of its
reimbursement certificates which the latter denied.

COA disallowed recover of financing charges, inventory losses and sales

to marcopper and atlas but allowed the recovery of product sale or
those arising from export sales.
Petitioners Contention:
Department of Finance issued Circular No. 4-88 allowing
reimbursement. Denial of claim for reimbursement would be
inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the
Revised Administrative Code (Retention of Money for Satisfaction of
Indebtedness to Government) allows offsetting.

Amounts due do not arise as a result of taxation since PD 1956 did not
create a source of taxation, it instead established a special fund. This
lack of public purpose behind OPSF exactions distinguishes it from tax.

Respondents Contention:
Based on Francia v. IAC, theres no offsetting of taxes against the the
claims that a taxpayer may have against the government, as taxes do
not arise from contracts or depend upon the will of the taxpayer, but are
imposed by law.

ISSUE: WON Caltex is entitled to offsetting

DECISION: NO. COA AFFIRMED

HELD:
It is settled that a taxpayer may not offset taxes due from the
claims that he may have against the government. Taxes cannot be
subject of compensation because the government and taxpayer
are not mutually creditors and debtors of each other and a claim
for taxes is not such a debt, demand, contract or judgment as is
allowed to be set-off.
Technically, the oil companies merely act as agents for the
Government in the latters collection since the taxes are, in reality,
passed unto the end-users the consuming public. Their primary
obligation is to account for and remit the taxes collection to the
administrator of the OPSF.
There is not merit in Caltexs contention that the OPSF
contributions are not for a public purpose because they go to a
special fund of the government. Taxation is no longer envisioned as
a measure merely to raise revenue to support the existence of the
government; taxes may be levied with a regulatory purpose to
provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as to be
within the police power of the State.
 The oil industry is greatly imbued with public interest as it vitally
affects the general welfare.
PD 1956, as amended by EO No. 137 explicitly provides that the
source of OPSF is taxation.

Chapter 17 Southern Cross Cement Corporation v. Philippine Cement

Manufacturers Corporation: Executive Power to Protect Local Industries The state
power to impose safeguard measures to protect domestic industries and producers
from increased imports that result in or threaten serious injury to the local industry
was discussed in Southern Cross Cement Corporation v. Philippine Cement
Manufacturers Corporation. [1] More particularly, the case clarified certain
provisions of Republic Act No. 8800 (RA 8800), also known as the Safeguard
Measures Act (SMA).[2] The Facts In 2001, the Philippine Cement Manufacturers
Corporation[3] (Philcemcor), an association of domestic cement manufacturers, filed
with the Department of Trade and Industry (DTI) an application for the imposition of
a definitive safeguard measure on the importation of gray Portland cement.
Philcemcor alleged that gray Portland cement was being imported in increased
quantities, thus causing declines in domestic production, capacity utilization, market
share, sales and employment, as well as depressed local prices. The application was
opposed by Southern Cross Cement Corporation, a domestic corporation engaged in
the business of cement manufacturing, production, exportation, and importation. In
accordance with the procedure laid down in RA 8800, the Bureau of Import Services
of the DTI conducted a preliminary investigation, after which it determined the
existence of critical circumstances justifying the imposition of provisional measures.
Thus, on November 7, 2001, the DTI issued an Order imposing a provisional
measure in the form of a safeguard duty equivalent to twenty pesos and sixty
centavos (P20.60) per forty- kilogram (40-kg) bag on all importations of gray
Portland cement for a period not exceeding two hundred (200) days from the date of
issuance by the Bureau of Customs (BOC) of the implementing Customs
Memorandum Order, issued on December 10, 2001. Also pursuant to RA 8800, the
DTI referred the application for a formal investigation to the Tariff Commission (TC).
On March 13, 2002, the Commission issued its Formal Investigation Report, in which
it made the following negative recommendation: The elements of serious injury
and imminent threat of serious injury not having been established, it is hereby
recommended that no definitive general safeguard measure be imposed on the
importation of gray Portland cement. After reviewing the report, then DTI Secretary
Manuel Roxas II disagreed with the TCs conclusion that no serious injury to the local
cement industry had been caused by the surge of imports. In view of this
disagreement, the DTI requested an opinion from the Department of Justice (DOJ) on
the DTI heads options on the Commissions recommendations. In response, then
DOJ Secretary Hernando Perez rendered an Opinion stating that Section 13 of the
SMA had precluded a review by the DTI secretary of the TCs finding that a definitive
safeguard measure should not be imposed. On April 5, 2002, the DTI secretary
promulgated a Decision, in which he quoted the TCs conclusions, but noted his
disagreement. Citing, however, the DOJ Opinion advising the DTI that the latter was
bound by the TCs negative finding, he disposed thus: The DTI has no alternative
but to abide by the [Tariff] Commissions recommendations. IN VIEW OF THE
FOREGOING, and in accordance with Section 13 of RA 8800 which states: In the
event of a negative final determination; or if the cash bond is in excess of the
definitive safeguard duty assessed, the Secretary shall immediately issue, through
the Secretary of Finance, a written instruction to the Commissioner of Customs,
authorizing the return of the cash bond or the remainder thereof, as the case may
be, previously collected as provisional general safeguard measure within ten (10)
days from the date a final decision has been made; Provided, that the government
shall not be liable for any interest on the amount to be returned. The Secretary shall
not accept for consideration another petition from the same industry, with respect
to the same imports of the product under consideration within one (1) year after the
date of rendering such a decision. The DTI hereby issues the following: The
application for safeguard measures against the importation of gray Portland cement
filed by PHILCEMCOR (Case No. 02-2001) is hereby denied. (Emphasis in the
original.) Consequently, Philcemcor filed with the Court of Appeals (CA) a Petition for
Certiorari, Prohibition and Mandamus, seeking to set aside the DTI Decision, as well
as the TCs Report. In its Decision promulgated on June 5, 2003, the CA granted
Philcemcors Petition in part. The appellate court ruled that it had jurisdiction over
the Petition, which had alleged grave abuse of discretion. But the CA refused to
annul the TCs findings, on the ground that factual findings of administrative
agencies were binding upon the courts; and that courts should not interfere in
matters addressed to the sound discretion of such agencies and embraced within
the latters special technical knowledge and training.[4] Nevertheless, it held that
the DTI secretary was not bound by the TCs factual findings, which were merely
recommendatory and were within the ambit of his discretionary review. The
dispositive portion of the CA Decision reads: WHEREFORE, based on the foregoing
premises, petitioners prayer to set aside the findings of the Tariff Commission in its
assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed
April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is
hereby SET ASIDE. Consequently, the case is REMANDED to the public respondent
Secretary of Department of Trade and Industry for a final decision in accordance
with RA 8800 and its Implementing Rules and Regulations. On June 23, 2003,
Southern Cross filed a Petition before the Supreme Court, alleging that the CA had
no jurisdiction over Philcemcors Petition, as the proper remedy conformable to RA
8800 was a petition for review at the Court of Tax Appeals (CTA). Southern Cross
further alleged that the TCs factual findings on the existence or the nonexistence of
conditions warranting the imposition of general safeguard measures were binding
upon the DTI secretary. Despite the pendency of the Petition before the Supreme
Court, the DTI secretary issued on June 25, 2003, a new Decision stating that -- in
the light of the appellate courts Decision -- there was no longer any legal
impediment to his decision on Philcemcors application for definitive safeguard
measures.[5] He ruled that, contrary to the TCs findings, the local cement industry
had suffered serious injury as a result of the import surges.[6] Accordingly, a
definitive safeguard measure on the importation of gray Portland cement was
imposed, in the form of a definitive safeguard duty in the amount of P20.60 for
every 40-kg bag of the cement for three years. On July 7, 2003, Southern Cross
sought to enjoin the DTI secretary from enforcing his June 25, 2003 Decision by
filing with the Supreme Court a Very Urgent Application for a Temporary Restraining
Order and/or a Writ of Preliminary Injunction. On August 1, 2003, it likewise filed
with the CTA a Petition for Review. Because of the double remedy resorted to by
Southern Cross, Philcemcor filed with the Supreme Court (SC) a Manifestation and
Motion to Dismiss the Petition, on the ground of deliberate and willful forum
shopping. The Issues The issues raised were the following: (1) whether a Decision of
the DTI secretary denying the imposition of a safeguard measure was appealable to
the CTA; and (2) whether the DTI secretary could impose a general safeguard
measure only upon a positive final determination by the Tariff Commission. The
Courts Ruling On July 8, 2004, the Supreme Court (Second Division) promulgated its
Decision.[7] The Court held that forum shopping had not been duly proven, as no
malicious intent to subvert procedural rules was evident. As regards the
jurisdictional issue, the Court said that while the CA had certiorari powers, the
special civil action of certiorari was available only when there was no plain, speedy
and adequate remedy in the ordinary course of law.[8] A plain, speedy and
adequate remedy in the ordinary course of law was, however, provided by Section
29 of the SMA, which reads: Section 29. Judicial Review. Any interested party who
is adversely affected by the ruling of the Secretary in connection with the imposition
of a safeguard measure may file with the CTA, a petition for review of such ruling
within thirty (30) days from receipt thereof. Provided, however, that the filing of
such petition for review shall not in any way stop, suspend or otherwise toll the
imposition or collection of the appropriate tariff duties or the adoption of other
appropriate safeguard measures, as the case may be. The petition for review shall
comply with the same requirements and shall follow the same rules of procedure
and shall be subject to the same disposition as in appeals in connection with
adverse rulings on tax matters to the Court of Appeals. The SC Second Division
emphasized that jurisprudence had long recognized the legislative determination to
vest in a specialized court the sole and exclusive jurisdiction over matters involving
internal revenue and customs duties.[9] The CTA was one such court. By the very
nature of its function, it was dedicated exclusively to the study and consideration of
tax and tariff matters. Necessarily, it had developed an expertise on the subject.
More significantly, the Supreme Court held that the CTA had the jurisdiction to
review the DTI secretarys Decision, even if that Decision did not impose any
safeguard measure. The SC gave the following reasons. First, split jurisdiction is
abhorred. The power of the DTI secretary to adopt or withhold a safeguard measure
emanates from the same statutory source. In deciding whether or not to impose
such measure, the DTI secretary evaluates only one body of facts and applies only
one set of laws. Whether the determination is positive or negative, the reviewing
tribunal will also be called upon to examine the same facts and the same laws.
Besides, the law expressly confers the task of judicial review on the CTA, the
tribunal with the specialized competence over tax and tariff matters. The law
mentions no other court that may exercise corollary or ancillary jurisdiction over the
SMA. Second, a plain reading of Section 29 of the SMA reveals that Congress did not
expressly bar the CTA from reviewing a negative determination by the DTI secretary
or confer on the Court of Appeals such review authority. According to the clear text
of the law, the CTA is vested with jurisdiction to review the DTI secretarys rulings
in connection with the imposition of a safeguard measure. Undoubtedly, the
phrase in connection with not only qualifies, but clarifies, the succeeding one --
the imposition of a safeguard measure. The phrase also encompasses the
opposite or converse ruling, which is the non-imposition of a safeguard measure.
The scope and reach of the same phrase pertain to all rulings of the DTI or the
Department of Agriculture secretary, arising from the time of the application of a
safeguard measure or of the motu proprio initiation of its imposition. Third, [w]here
there is ambiguity, such interpretation as will avoid inconvenience and absurdity is
to be adopted.[10] Even assuming arguendo that Section 29 does not expressly
grant the CTA jurisdiction to review a negative ruling of the DTI secretary, the Court
is precluded from favoring an interpretation that would cause inconvenience and
absurdity. Section 29 of the SMA is worded in such a way that it places under the
CTAs judicial review all of the DTI secretarys rulings connected with the imposition
of a safeguard measure. In the same way that a question of whether to tax or not to
tax is properly a tax matter, so is the question of whether to impose or not to
impose a definitive safeguard measure. As regards the issue of the binding effect on
the DTI secretary of the TCs factual determination, the Decision held that the DTI
head could not impose a safeguard measure without a positive final determination
by the Commission. It said that Section 13 prescribed certain limitations and
restrictions before general safeguard measures could be imposed. But the most
fundamental restriction, contained in Section 5, provides as follows: Sec. 5.
Conditions for the Application of General Safeguard Measures. The Secretary shall
apply a general safeguard measure upon a positive final determination of the [Tariff]
Commission that a product is being imported into the country in increased
quantities, whether absolute or relative to the domestic production, as to be a
substantial cause of serious injury or threat thereof to the domestic industry;
however, in the case of non-agricultural products, the Secretary shall first establish
that the application of such safeguard measures will be in the public interest. The
conditions precedent that must be satisfied before the DTI secretary may impose a
general safeguard measure are as follows: one, there must be a positive final
determination by the Tariff Commission that a product is being imported into the
country in such increased quantities (whether absolute or relative to domestic
production) as to be a substantial cause of serious injury or threat to the domestic
industry; and, two, in the case of non-agricultural products, the secretary must
establish that the application of a safeguard measure is in the public interest.
According to the SC Second Division, the plain meaning of Section 5 was that only if
the Tariff Commission rendered a positive determination could the DTI secretary
impose a safeguard measure. The TCs power to make a positive final
determination must be distinguished from the power to impose general safeguard
measures, a power that is vested in the DTI secretary. A positive final
determination antecedes, as a condition precedent, the imposition of a general
safeguard measure. At the same time, a positive final determination does not
necessarily result in the imposition of a general safeguard measure. Under Section
5, notwithstanding the TCs positive final determination, the DTI secretary may
decide not to apply the safeguard measure in the interest of the public. The
legislative intent should be given full force and effect, as the executive power to
impose definitive safeguard measures is but a delegated power -- the power of
taxation which is, by nature and by command of the fundamental law, a preserve of
the legislature.[11] Section 28(2), Article VI of the 1987 Constitution, authorizes the
delegation of the legislative power to tax, yet ensures the prerogative of Congress
to impose limitations and restrictions on the executive exercise of this power. This
provision states thus: The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and restrictions as it may
impose, tariff rates, import and export quotas, tonnage and wharfage dues, and
other duties or imposts within the framework of the national development program
of the Government.[12] The SMA empowered the DTI secretary, as alter ego of the
President,[13] to impose definitive safeguard measures,[14] which were basically
tariff imposts of the type spoken of in the Constitution. The law, however, did not
grant the executive official full and uninhibited discretion to impose such measures.
The word determination, as used in the SMA, pertained to the factual findings on
whether imports into the country of the product under consideration had increased,
and on whether the increase substantially caused or threatened to substantially
cause serious injury to the domestic industry.[15] According to the Decision, the law
explicitly authorizes the DTI secretary to make a preliminary determination,[16] and
the Tariff Commission to make the final one.[17] These functions are not
interchangeable. The Commission makes its determination only after a formal
investigation process, which in turn is undertaken only if there is a positive
preliminary determination by the DTI secretary.[18] On the other hand, the latter
may impose a definitive safeguard measure only if there is a positive final
determination by the Commission. In this respect, the DTI head is bound by the TCs
determination. In contrast, a recommendation is a suggested remedial measure
submitted by the Commission under Section 13, after making a positive final
determination in accordance with Section 5. Under Section 13, the Commission is
required to recommend to the DTI secretary an appropriate definitive
measure.[19] It may also recommend other actions, including the initiation of
international negotiations to address the underlying cause of the increased imports
of a product, to alleviate the resulting injury or threat on the domestic industry, and
to facilitate a positive adjustment to import competition.[20] Nothing in the SMA
obliges the DTI secretary to adopt the recommendations made by the Tariff
Commission. The SMA in fact requires the DTI head to determine if the application of
safeguard measures is in the public interest, notwithstanding the TCs positive final
determination.[21] The non-binding force of the Commissions recommendations is
congruent with Section 28(2) of Article VI of the 1987 Constitution. According to the
mandate of this provision, only the President may be empowered by Congress to
impose appropriate tariff rates, import/export quotas and similar measures. It is the
DTI secretary, as the Presidents alter ego who, under the SMA and subject to its
limitations, may impose the safeguard measures. A contrary conclusion would in
essence unduly arrogate to the Tariff Commission the executive power to impose the
appropriate tariff measures. Thus, the SMA empowers the DTI secretary to adopt
safeguard measures other than those recommended by the Commission. Yet, the
Court held that the DTI head did not have the power to review the findings of the
Tariff Commission, which was not a subordinate agency of the DTI. The TC fell under
the supervision of the National Economic Development Authority (NEDA), an
independent government planning agency that was coequal with the DTI. In
general, the DTI secretary could not exercise review authority over actions of the
Tariff Commission, as the formers supervision and control were limited to
subordinate bureaus, offices, and agencies. Neither did the SMA specifically
authorize the DTI head to alter, amend or modify the TCs determination. The most
that the secretary could do to express displeasure over the actions of the
Commission was to ignore its recommendation, but not its determination. Finally,
the Decision ruled that the mechanism established by Congress had put in place a
measure of check and balance between two different governmental agencies with
disparate specializations. The matter of safeguard measures was of such national
importance that a decision either to impose or not to impose them could have had
ruinous effects on companies doing business in the Philippines. Thus, it was ideal to
put in place a system that would afford all due deliberation and call to the fore
various governmental agencies exercising their particular specializations. In sum,
the SC (Second Division) held that the Court of Appeals had erred in remanding the
case to the DTI secretary, with the instruction that the secretary could impose a
general safeguard measure, even if there was no positive final determination from
the Tariff Commission. More crucially, the CA did not acquire jurisdiction over
Philcemcors Petition for Certiorari, as Section 29 of RA 8800 had vested jurisdiction
in the CTA. Consequently, the assailed CA Decision was an absolute nullity. Because
it was from the void CA Decision that the June 25, 2003 DTI Decision derived its
legal basis, the latter former was consequently void. The spring cannot rise higher
than its source. Thus, the Supreme Court (Second Division) disposed as follows:
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the DTI
Secretary date

Batangas Power Corporation vs. Batangas City

Posted on October 23, 2012
Batangas Power Corporation vs. Batangas City
GR 152675
April 28, 2004
FACTS
In the early 1990s, the country suffered from a crippling power crisis. The government,
through the National Power Corporation (NPC), sought to attract investors in power
plant operations by providing them with incentives, one of which was the NPCs
assumption of their tax payments in the Build Operate and Transfer (BOT) Agreement.
On June 29, 1993, Enron Power Development Corporation (Enron) and NPC entered into
a Fast Track BOT Project. Enron agreed to supply a power station to NPC & transfer its
plant to the latter after 10 years of operation. The BOT Agreement provided that NPC
shall be responsible for the payment of all taxes imposed on the power station except
income & permit fees. Subsequently, Enron assigned its obligation under the BOT
Agreement to Batangas Power Corporation (BPC).
On September 23, 1992, the BOI issued a certificate of registration to BPC as a pioneer
enterprise entitled to a tax holiday of 6 years. On October 12, 1998, Batangas City sent
a letter to BPC demanding payment of business taxes & penalties. BPC refused to pay
citing its tax exemption as a pioneer enterprise for 6 years under Sec.133(g) of the LGC.
The citys tax claim was modified and it demanded payment of business taxes for the
years 1998-1999. BPC still refused to pay the tax, insisting that the 6-year tax holiday
commenced from the date of its commercial operation on July 16, 1993, not from the
date of its BOI registration in September 1992.
In the alternative, BPC asserted that the city should collect the taxes from NPC since the
latter assumed responsibility for their payment under the BOT Agreement. The NPC
intervened that while it admitted assumption of the BPCs tax obligations under the BOT
Agreement, it refused to pay BPCs business tax as it allegedly constituted an indirect
tax on NPC which is a tax-exempt corporation under its Charter.
BPC filed a petition for declaratory relief with the Makati RTC against Batangas City &
NPC alleging that under the BOT Agreement, NPC is responsible for the payment of such
taxes but since it is exempt from such, both the BPC and NPC arent liable for its
payment.
ISSUES
1. Whether BPCs 6-year tax holiday commenced on the day of its registration or on the
date of its actual commercial operation as certified by the BOI.
2. Whether NPCs tax exemption privileges under its Charter were withdrawn
by Sec.193 of the LGC.
HELD
1. Sec.133(g) of the LGC applies specifically to taxes imposed by the local government.
The provision of the LGC should apply on the tax claim of Batangas City against the
BPC. The 6-years tax claim should thus commence from the date of BPCs registration
with the BOI on July 16, 1993 and end on July 15, 1999.
2. In the case of NPC vs. City of Cabanatuan, the removal of the blanket exclusion of
government instrumentalities from local taxation is recognized as one of the most
significant provisions of the 1991 LGC. Sec.193 of the LGC withdrew the sweeping tax
privileges previously enjoined by the NPC under its Charter.
The power to tax is no longer exclusively vested on Congress; local legislative bodies
are now given authority to levy taxes, fees and other charges pursuant to Art.X, Sec.5
of the 1987 Constitution. The LGC effectively deals with the fiscal constraints faced by
the LGUs. It widens the tax base of LGUs to include taxes which were prohibited by
previous laws.
When NPC assumed tax liabilities of the BPC under their 1992 BOT Agreement, the LGC
which removed NPCs tax exemption privileges had already been in effect for 6 months.
Thus, while the BPC remains to be the entity doing business in the city, it is the NPC
that is ultimately liable to pay said taxes under the provisions of both the 1992 BOT
Agreement & the 1991 LGC.

Valentin Tio vs Videogram

Regulatory Board
151 SCRA 208 Political Law The Embrace of Only One Subject by a Bill
Delegation of Power Delegation to Administrative Bodies
In 1985, Presidential Dedree No. 1987 entitled An Act Creating the Videogram Regulatory Board
was enacted which gave broad powers to the VRB to regulate and supervise the videogram industry.
The said law sought to minimize the economic effects of piracy. There was a need to regulate the
sale of videograms as it has adverse effects to the movie industry. The proliferation of videograms
has significantly lessened the revenue being acquired from the movie industry, and that such loss
may be recovered if videograms are to be taxed. Section 10 of the PD imposes a 30% tax on the
gross receipts payable to the LGUs.
In 1986, Valentin Tio assailed the said PD as he averred that it is unconstitutional on the following
grounds:
1. Section 10 thereof, which imposed the 30% tax on gross receipts, is a rider and is not germane to
the subject matter of the law.
2. There is also undue delegation of legislative power to the VRB, an administrative body, because
the law allowed the VRB to deputize, upon its discretion, other government agencies to assist the
VRB in enforcing the said PD.
ISSUE: Whether or not the Valentin Tios arguments are correct.
HELD: No.
1. The Constitutional requirement that every bill shall embrace only one subject which shall be
expressed in the title thereof is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. In the case at bar, the questioned
provision is allied and germane to, and is reasonably necessary for the accomplishment of, the
general object of the PD, which is the regulation of the video industry through the VRB as expressed
in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a
tool for regulation it is simply one of the regulatory and control mechanisms scattered throughout the
PD.
2. There is no undue delegation of legislative powers to the VRB. VRB is not being tasked to
legislate. What was conferred to the VRB was the authority or discretion to seek assistance in
the execution, enforcement, and implementation of the law. Besides, in the very language of the
decree, the authority of the BOARD to solicit such assistance is for a fixed and limited period with
the deputized agencies concerned being subject to the direction and control of the [VRB].

REPUBLIC OF THE PHILIPPINES et al. v. HONORABLE RAMON S. CAGUIOA et

al.

536 SCRA 193 (2007), EN BANC

Congress enacted Republic Act (R.A) No. 7227 or the Bases Conversion and Development Act of
1992 which created the Subic Special Economic and Freeport Zone (SBF) and the Subic Bay
Metropolitan Authority (SBMA). Section 12 of R.A No. 7227 of the law provides that no taxes,
local and national, shall be imposed within the Subic Special Economic Zone. Pursuant to the
law, Indigo Distribution Corporation, et al., which are all domestic corporations doing business
at the SBF, applied for and were granted Certificates of Registration and Tax Exemption by the
SBMA.

Congress subsequently passed R.A. No. 9334, which provides that all applicable taxes, duties,
charges, including excise taxes due thereon shall be applied to cigars and cigarettes, distilled
spirits, fermented liquors and wines brought directly into the duly chartered or legislated
freeports of the Subic Economic Freeport Zone. On the basis of Section 6 of R.A. No. 9334,
SBMA issued a Memorandum declaring that, all importations of cigars, cigarettes, distilled
spirits, fermented liquors and wines into the SBF, shall be treated as ordinary importations
subject to all applicable taxes, duties and charges, including excise taxes.

Upon its implementation, Indigo et al., sought for a reconsideration of the directives on the
imposition of duties and taxes, particularly excise taxes by the Collector of Customs and the
SBMA Administrator. Their request was subsequently denied prompting them to file with the
RTC of Olongapo City a special civil action for declaratory relief to have certain provisions of
R.A. No. 9334 declared as unconstitutional. They prayed for the issuance of a writ of preliminary
injunction and/or Temporary Restraining Order (TRO) and preliminary mandatory injunction.
The same was subsequently granted by Judge Ramon Caguioa. The injunction bond was
approved at One Million pesos (P1,000,000).

ISSUES:

Whether or not public respondent judge committed grave abuse of discretion amounting to lack
or excess in jurisdiction in peremptorily and unjustly issuing the injunctive writ in favor of
private respondents despite the absence of the legal requisites for its issuance

HELD:

One such case of grave abuse obtained in this case when Judge Caguioa issued his Order of May
4, 2005 and the Writ of Preliminary Injunction on May 11, 2005 despite the absence of a clear
and unquestioned legal right of private respondents. In holding that the presumption of
constitutionality and validity of R.A. No. 9334 was overcome by private respondents for the
reasons public respondent cited in his May 4, 2005 Order, he disregarded the fact that as a
condition sine qua non to the issuance of a writ of preliminary injunction, private respondents
needed also to show a clear legal right that ought to be protected. That requirement is not
satisfied in this case. To stress, the possibility of irreparable damage without proof of an actual
existing right would not justify an injunctive relief.

Indeed, Sections 204 and 229 of the NIRC provide for the recovery of erroneously or illegally
collected taxes which would be the nature of the excise taxes paid by private respondents should
Section 6 of R.A. No. 9334 be declared unconstitutional or invalid.

The Court finds that public respondent had also ventured into the delicate area which courts are
cautioned from taking when deciding applications for the issuance of the writ of preliminary
injunction. Having ruled preliminarily against the prima facie validity of R.A. No. 9334, he
assumed in effect the proposition that private respondents in their petition for declaratory relief
were duty bound to prove, thereby shifting to petitioners the burden of proving that R.A. No.
9334 is not unconstitutional or invalid.

In the same vein, the Court finds Judge Caguioa to have overstepped his discretion when he
arbitrarily fixed the injunction bond of the SBF enterprises at only P1million. Rule 58, Section
4(b) provides that a bond is executed in favor of the party enjoined to answer for all damages
which it may sustain by reason of the injunction. The purpose of the injunction bond is to
protect the defendant against loss or damage by reason of the injunction in case the court finally
decides that the plaintiff was not entitled to it, and the bond is usually conditioned accordingly.

Whether this Court must issue the writ of prohibition, suffice it to stress that being possessed of
the power to act on the petition for declaratory relief, public respondent can proceed to
determine the merits of the main case. Moreover, lacking the requisite proof of public
respondents alleged partiality, this Court has no ground to prohibit him from proceeding with
the case for declaratory relief. For these reasons, prohibition does not lie.
CIR vs SM Prime Holdings Inc.

FACTS:

In a number of CTA cases, the BIR sent SM Prime and First Asia a Preliminary Assessment Notice (PAN) for VAT
deficiency on cinema ticket sales for taxable year 2000 (SM), 1999 (First Asia), 2000 (First Asia), 2002 (First Asia),
and 2003 (First Asia).
o SM and First Asia filed for protest but the BIR just denied them and sent them a Letter of Demand
subsequently.
o All the PANs were subjected to a Petition for Review filed by SM and First Asia to the CTA.
The CTA First Division ruled that there should only be one business tax applicable to theater and movie houses, the
30% amusement tax. Hence, the CIR is wrong in collecting VAT from the ticket sales.
o CIR appealed the case to the CTA En Banc.
The CTA En Banc affirmed the ruling of the CTA First Division.

ISSUE: Whether the cinema ticket sales are subject to VAT and thus included in the meaning of Sale
or Exchange of Services?

RULING: NO!
When VAT was enacted it replaced the tax on original and subsequent sales tax and percentage tax
on certain services. When the VAT law was implemented, it exempted persons subject to amusement
tax under the NIRC from the coverage of VAT. When the Local Tax Code was repealed by the Local
Government Code of 1991, the local government continued to impose amusement tax on admission
tax on ticket sales. The following amendments to the VAT law have been consistent that those
subject to amusement tax is no liable under VAT. Only lessors or distributors of cinematographic films
are included in the coverage of VAT.

It can be seen from the foregoing that the legislative intent was not to impose VAT on persons
already covered by the amusement tax. To hold otherwise would impose an unreasonable burden on
cinema/theater houses operators and proprietors, who would be paying an additional 10% VAT on top
of the 30% amusement tax.

**Yung susunod the discussion ay yung sinabi ng court bago nila inalam yung legislative
intent na nakamention sa itaas**
Sec. 108 of the NIRC provides that, there shall be levied, assessed and collected, a VAT equivalent to
10% of gross receipts derived from the sale or exchange of services, including the use or lease of
properties. The phrase sale or exchange of services means the performance of all kinds of services
in the Philippines for others for a fee, remuneration or consideration, including those.lessors or
distributors of cinematographic films..and similar services regardless of whether or not the
performance thereof calls for the exercise or use of the physical or mental faculties. The phrase
sale or exchange of services shall likewise include: (7) lease of motion picture films, films, tapes
and discs.

A reading of the foregoing provision clearly shows that the enumeration of the sale or exchange of
services subject to VAT is not exhaustive. The words, including, similar services, and shall
likewise include, indicate that the enumeration is by way of example only.
CIR V TOKYO SHIPPING CO., LTD. May 26, 1995
Facts: Private respondent is a foreign corporation represented in the Philippines by
Soriamont Steamship Agencies, Inc. It owns and operates tramper vessel M/V Gardenia. In
December 1980, NASUTRA chartered M/VGardenia to load 16,500 metric tons of raw sugar
in the Philippines. On December 23, 1980 Mr. Edilberto Lising, the operations supervisor of
Soriamont Agency, paid the required income and common carriers taxes in the sum total of
P107,142.75 based on the expected gross receipts of the vessel. Upon arriving, however, at
Guimaras Port of Iloilo, the vessel found no sugar for loading. On January 10, 1981,
NASUTRA and private respondents agent mutually agreed to have the vessel sail for Japan
without any cargo.

Claiming the pre-payment of income and common carriers taxes as erroneous since no
receipt was realized from the charter agreement private respondent instituted a claim for
tax credit or refund of the sum of P107,142,75 before petitioner commissioner
of Internal Revenue on March 23, 1981. Petitioner failed to act promptly on the claim,
hence, on May 14, 1981, private respondent filed a petition for review before public
respondent CTA.

Petitioner contested the petition. As special and affirmative defenses, it alleged the
following: that taxes are presumed to have been collected in accordance with law; that in
an action for refund, the burden of proof is upon the taxpayer to show that taxes are
erroneously or illegally collected and the taxpayers failure to sustain said burden is fatal to
the action for refund; and that claims for refund are construed strictly against tax
claimants.

After trial, respondent tax court decided in favor of the private respondent.

Issue: Whether or not tax claimants has the burden of proof to support its claim of refund.

Held: A claim for refund is in the nature of a claim for exemption and should be construed
in strictissimi juris against the taxpayer. Likewise, there can be no disagreement with
petitioners stance that private respondent has the burden of proof to establish the factual
basis of its claimfor tax refund.

Coconut Oil Refiners Association vs Torres

G.R. No. 132527. July 29, 2005

Facts: This is a Petition for Prohibition and Injunction seeking to enjoin and prohibit the Executive
Branch, through the public respondents Ruben Torres in his capacity as Executive Secretary, the
Bases Conversion Development Authority (BCDA), the Clark Development Corporation (CDC) and
the Subic Bay Metropolitan Authority (SBMA), from allowing, and the private respondents from
continuing with, the operation of tax and duty-free shops located at the Subic Special Economic
Zone (SSEZ) and the Clark Special Economic Zone (CSEZ), and to declare the following issuances
as unconstitutional, illegal, and void:

1. Section 5 of Executive Order No. 80,[1] dated April 3, 1993, regarding the CSEZ.

2. Executive Order No. 97-A, dated June 19, 1993, pertaining to the SSEZ.

3. Section 4 of BCDA Board Resolution No. 93-05-034,[2] dated May 18, 1993, pertaining to the
CSEZ.

Petitioners contend that the aforecited issuances are unconstitutional and void as they constitute
executive lawmaking, and that they are contrary to Republic Act No. 7227 [3] and in violation of the
Constitution, particularly Section 1, Article III (equal protection clause), Section 19, Article XII
(prohibition of unfair competition and combinations in restraint of trade), and Section 12, Article XII
(preferential use of Filipino labor, domestic materials and locally produced goods).

Issue: Whether the issuances are unconstitutional for supposedly violating the equal protection
clause

Held: No.

It is an established principle of constitutional law that the guaranty of the equal protection of the laws
is not violated by a legislation based on a reasonable classification. Classification, to be valid, must
(1) rest on substantial distinction, (2) be germane to the purpose of the law, (3) not be limited to
existing conditions only, and (4) apply equally to all members of the same class.

Applying the foregoing test to the present case, this Court finds no violation of the right to equal
protection of the laws. First, contrary to petitioners claim, substantial distinctions lie between the
establishments inside and outside the zone, justifying the difference in their treatment. In Tiu v.
Court of Appeals, the constitutionality of Executive Order No. 97-A was challenged for being
violative of the equal protection clause. In that case, petitioners claimed that Executive Order No. 97-
A was discriminatory in confining the application of Republic Act No. 7227 within a secured area of
the SSEZ, to the exclusion of those outside but are, nevertheless, still within the economic zone.

Upholding the constitutionality of Executive Order No. 97-A, this Court therein found substantial
differences between the retailers inside and outside the secured area, thereby justifying a valid and
reasonable classification:

Certainly, there are substantial differences between the big investors who are being lured to
establish and operate their industries in the so-called secured area and the present business
operators outside the area. On the one hand, we are talking of billion-peso investments and
thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the
economic impact will be national; in the second, only local. Even more important, at this time the
business activities outside the secured area are not likely to have any impact in achieving the
purpose of the law, which is to turn the former military base to productive use for the benefit of the
Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and
incentives accorded in R.A. 7227. Additionally, as the Court of Appeals pointed out, it will be easier
to manage and monitor the activities within the secured area, which is already fenced off, to
prevent fraudulent importation of merchandise or smuggling.

It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As
long as there are actual and material differences between territories, there is no violation of the
constitutional clause. And of course, anyone, including the petitioners, possessing the requisite
investment capital can always avail of the same benefits by channeling his or her resources or
business operations into the fenced-off free port zone.

The Court in Tiu found real and substantial distinctions between residents within the secured area
and those living within the economic zone but outside the fenced-off area. Similarly, real and
substantial differences exist between the establishments herein involved. A significant distinction
between the two groups is that enterprises outside the zones maintain their businesses within
Philippine customs territory, while private respondents and the other duly-registered zone enterprises
operate within the so-called separate customs territory. To grant the same tax incentives given to
enterprises within the zones to businesses operating outside the zones, as petitioners insist, would
clearly defeat the statutes intent to carve a territory out of the military reservations in Subic Bay
where free flow of goods and capital is maintained.

The classification is germane to the purpose of Republic Act No. 7227. As held in Tiu, the real
concern of Republic Act No. 7227 is to convert the lands formerly occupied by the US military bases
into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to
extend economic incentives to the establishments within the zone to attract and encourage foreign
and local investors. This is the very rationale behind Republic Act No. 7227 and other similar special
economic zone laws which grant a complete package of tax incentives and other benefits.

The classification, moreover, is not limited to the existing conditions when the law was promulgated,
but to future conditions as well, inasmuch as the law envisioned the former military reservation to
ultimately develop into a self-sustaining investment center.

And, lastly, the classification applies equally to all retailers found within the secured area. As ruled
in Tiu, the individuals and businesses within the secured area, being in like circumstances or
contributing directly to the achievement of the end purpose of the law, are not categorized further.
They are all similarly treated, both in privileges granted and in obligations required.

With all the four requisites for a reasonable classification present, there is no ground to invalidate
Executive Order No. 97-A for being violative of the equal protection clause.

WHEREFORE, the petition is PARTLY GRANTED. Section 5 of Executive Order No. 80 and
Section 4 of BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID and are
accordingly declared of no legal force and effect. Respondents are hereby enjoined from
implementing the aforesaid void provisions. All portions of Executive Order No. 97-A are valid and
effective, except the second sentences in paragraphs 1.2 and 1.3 of said Executive Order, which are
hereby declared INVALID.
Chavez v Ongpin (1990)

Chavez v Ongpin
GR No 76778, June 6, 1990

FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978, there shall be a provincial or city
general revision of real property assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January 1, 1987, the 1984 assessments
shall be the basis of real property taxes. Francisco Chavez, a taxpayer and landowner, questioned the constitutionality of EO
74. He alleges that it will bring unreasonable increase in real property taxes.

ISSUE:
Is EO 73 constitutional?

RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values. Certainly, to
continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the
value of real properties that have occurred since then is not in consonance with a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue must be adequate
to meet government expenditures and their variations.
 ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS
NETWORK, INC. (ECN), Petitioners
vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL
POWER CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY ELECTRIC
COMPANY INC. (PECO),
Respondents
G.R. No. 159796, July 17, 2007

Facts:
RA 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), which sought to impose a
universal charge on all end-users of electricity for the purpose of funding NAPOCORs projects, was enacted and
took effect in 2001.

Petitioners contest the constitutionality of the EPIRA, stating that the imposition of the universal charge on all end-
users is oppressive and confiscatory and amounts to taxation without representation for not giving the consumers a
chance to be heard and be represented.

Issue:
W/N the universal charge is a tax

Ruling:
NO. The assailed universal charge is not a tax, but an exaction in the exercise of the States police power. That
public welfare is promoted may be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the State
regarding electrification. Moreover, the Special Trust Fund feature of the universal charge reasonably serves and
assures the attainment and perpetuity of the purposes for which the universal charge is imposed (e.g. to ensure the
viability of the countrys electric power industry), further boosting the position that the same is an exaction
primarily in pursuit of the States police objectives.

If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.

The taxing power may be used as an implement of police power.

The theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and well-being of the people.
Case Brief: Chevron Philippines Inc v
Bases Conversion
Development Authority
NOVEMBER 26, 2013 JEFF REY
G.R. No. 173863 September 15, 2010
CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES,
INC.), Petitioner,
vs.
BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK
DEVELOPMENT CORPORATION, Respondents
Facts:
On June 28, 2002, the Board of Directors of respondent Clark Development
Corporation (CDC) issued and approved Policy Guidelines on the Movement
of Petroleum Fuel to and from the Clark Special Economic Zone. In one of
its provisions, it levied royalty fees to suppliers delivering Coastal fuel from
outside sources for Php0.50 per liter for those delivering fuel to CSEZ
locators not sanctioned by CDC and Php1.00 per litter for those bringing-in
petroleum fuel from outside sources. The policy guidelines were
implemented effective July 27, 2002.

The petitioner Chevron Philippines Inc (formerly Caltex Philippines Inc) who
is a fuel supplier to Nanox Philippines, a locator inside the CSEZ, received a
Statement of Account from CDC billing them to pay the royalty fees
amounting to Php115,000 for its fuel sales from Coastal depot to Nanox
Philippines from August 1 to September 21, 2002.

Petitioner, contending that nothing in the law authorizes CDC to impose

royalty fees based on a per unit measurement of any commodity sold
within the special economic zone, protested against the CDC and Bases
Conversion Development Authority (BCDA). They alleged that the royalty
fees imposed had no reasonable relation to the probably expenses of
regulation and that the imposition on a per unit measurement of fuel sales
was for a revenue generating purpose, thus, akin to a tax.

BCDA denied the protest. The Office of the President dismissed the appeal
as well for lack of merit.

Upon appeal, CA dismissed the case. CA held that in imposing the royalty
fees, CDC was exercising its right to regulate the flow of fuel into CSEZ
under the vested exclusive right to distribute fuel within CSEZ pursuant to
its Joint Venture Agreement (JVA) with Subic Bay Metropolitan Authority
(SBMA) and Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996.
The appellate court also found that royalty fees were assessed on fuel
delivered, not on the sale, by petitioner and that the basis of such
imposition was petitioners delivery receipts to Nanox Philippines. The fact
that revenue is incidentally also obtained does not make the imposition a
tax as long as the primary purpose of such imposition is regulation.

When elevated in SC, petitioner argued that: 1) CDC has no power to

impose fees on sale of fuel inside CSEZ on the basis of income generating
functions and its right to market and distribute goods inside the CSEZ as
this would amount to tax which they have no power to impose, and that
the imposed fee is not regulatory in nature but rather a revenue
generating measure; 2) even if the fees are regulatory in nature, it is
unreasonable and are grossly in excess of regulation costs.

Respondents contended that the purpose of royalty fees is to regulate the

flow of fuel to and from the CSEZ and revenue (if any) is just an incidental
product. They viewed it as a valid exercise of police power since it is aimed
at promoting the general welfare of public; that being the CSEZ
administrator, they are responsible for the safe distribution of fuel
products inside the CSEZ.

Issue:
Whether the act of CDC in imposing royalty fees can be considered as valid
exercise of the police power.
Held:
Yes. SC held that CDC was within the limits of the police power of the State
when it imposed royalty fees.
In distinguishing tax and regulation as a form of police power, the
determining factor is the purpose of the implemented measure. If the
purpose is primarily to raise revenue, then it will be deemed a tax even
though the measure results in some form of regulation. On the other hand,
if the purpose is primarily to regulate, then it is deemed a regulation and
an exercise of the police power of the state, even though incidentally,
revenue is generated.

In this case, SC held that the subject royalty fee was imposed for
regulatory purposes and not for generation of income or profits. The Policy
Guidelines was issued to ensure the safety, security, and good condition of
the petroleum fuel industry within the CSEZ. The questioned royalty fees
form part of the regulatory framework to ensure free flow or movement
of petroleum fuel to and from the CSEZ. The fact that respondents have
the exclusive right to distribute and market petroleum products within
CSEZ pursuant to its JVA with SBMA and CSBTI does not diminish the
regulatory purpose of the royalty fee for fuel products supplied by
petitioner to its client at the CSEZ.

However, it was erroneous for petitioner to argue that such exclusive right
of respondent CDC to market and distribute fuel inside CSEZ is the sole
basis of the royalty fees imposed under the Policy Guidelines. Being the
administrator of CSEZ, the responsibility of ensuring the safe, efficient and
orderly distribution of fuel products within the Zone falls on CDC.
Addressing specific concerns demanded by the nature of goods or products
involved is encompassed in the range of services which respondent CDC is
expected to provide under Sec. 2 of E.O. No. 80, in pursuance of its general
power of supervision and control over the movement of all supplies and
equipment into the CSEZ.

There can be no doubt that the oil industry is greatly imbued with public
interest as it vitally affects the general welfare. Fuel is a highly
combustible product which, if left unchecked, poses a serious threat to life
and property. Also, the reasonable relation between the royalty fees
imposed on a per liter basis and the regulation sought to be attained is
that the higher the volume of fuel entering CSEZ, the greater the extent
and frequency of supervision and inspection required to ensure safety,
security, and order within the Zone.

Respondents submit that the increased administrative costs were triggered

by security risks that have recently emerged, such as terrorist strikes. The
need for regulation is more evident in the light of 9/11 tragedy considering
that what is being moved from one location to another are highly
combustible fuel products that could cause loss of lives and damage to
properties.

As to the issue of reasonableness of the amount of the fees, SC held that

no evidence was adduced by the petitioner to show that the fees imposed
are unreasonable. Administrative issuances have the force and effect of
law. They benefit from the same presumption of validity and
constitutionality enjoyed by statutes. These two precepts place a heavy
burden upon any party assailing governmental regulations. Petitioners
plain allegations are simply not enough to overcome the presumption of
validity and reasonableness of the subject imposition.

WHEREFORE, the petition is DENIED for lack of merit and the Decision of
the Court of Appeals dated November 30, 2005 in CA-G.R. SP No. 87117 is
hereby AFFIRMED.
Planters Products Inc vs Fertiphil Corp G.R. No. 166006 March 14,
2008
FACTS: Petitioner PPI and respondent Fertiphil are private corporations incorporated under
Philippine laws, both engaged in the importation and distribution of fertilizers, pesticides
and agricultural chemicals.
Marcos issued Letter of Instruction (LOI) 1465, imposing a capital recovery component of
Php10.00 per bag of fertilizer. The levy was to continue until adequate capital was raised to
make PPI financially viable. Fertiphil remitted to the Fertilizer and Pesticide Authority (FPA),
which was then remitted the depository bank of PPI. Fertiphil paid P6,689,144 to FPA from
1985 to 1986.
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.
Fertiphil demanded from PPI a refund of the amount it remitted, however PPI refused.
Fertiphil filed a complaint for collection and damages, questioning the constitutionality of
LOI 1465, claiming that it was unjust, unreasonable, oppressive, invalid and an unlawful
imposition that amounted to a denial of due process. PPI argues that Fertiphil has no locus
standi to question the constitutionality of LOI No. 1465 because it does not have a "personal
and substantial interest in the case or will sustain direct injury as a result of its
enforcement." It asserts that Fertiphil did not suffer any damage from the imposition
because "incidence of the levy fell on the ultimate consumer or the farmers themselves, not
on the seller fertilizer company.
ISSUE: Whether or not Fertiphil has locus standi to question the constitutionality of LOI No.
1465.
What is the power of taxation?
RULING: Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a
mere procedural technicality which may be waived.
The imposition of the levy was an exercise of the taxation power of the state. While it is
true that the power to tax can be used as an implement of police power, the primary
purpose of the levy was revenue generation. If the purpose is primarily revenue, or if
revenue is, at least, one of the real and substantial purposes, then the exaction is properly
called a tax.
Police power and the power of taxation are inherent powers of the State. These powers are
distinct and have different tests for validity. Police power is the power of the State to enact
legislation that may interfere with personal liberty or property in order to promote the
general welfare, while the power of taxation is the power to levy taxes to be used for public
purpose. The main purpose of police power is the regulation of a behavior or conduct, while
taxation is revenue generation. The "lawful subjects" and "lawful means" tests are used to
determine the validity of a law enacted under the police power. The power of taxation, on
the other hand, is circumscribed by inherent and constitutional limitations.
=)*george*