The scope of the taxing power of local government units and the limits of tax exemption RTC: Dismissed

Dismissed the petition on the ground that the New Local Government Code of
privileges of government-owned and controlled corporations. 1991 or RA 7160 provides the express cancellation and withdrawal of exemption of taxes
by government-owned and controlled corporation per Sections after the effectivity of said
Mactan Cebu International Airport Authority vs. HON. FERDINAND J. MARCOS Code on January 1, 1992. The MR was also denied, hence this petition.

Mactan Cebu International Airport Authority, petitioner, Issue/s:

vs.
HON. FERDINAND J. MARCOS, respondent. WON Mactan Cebu is liable to pay realty property taxes to the City of Cebu.

GR No. 120082 Ruling:

Sept. 11, 1996

Case Brief:
Petition for review under Rule 45 of the Rules of Court on a pure question of law are the
decision of 22 March 1995[1] of the Regional Trial Court (RTC) of Cebu City, Branch
20, dismissing the petition for declaratory relief in Civil Case No. CEB-16900, entitled
Mactan Cebu International Airport Authority vs. City of Cebu, and its order of 4 May
1995[2]denying the motion to reconsider the decision.
Facts:
Mactan Cebu objected to the demand for payment made by the Cebu City as baseless and
unjustified, claiming in its favor by virtue of Section 14 of RA 6958 which exempts it from
payment of realty taxes.
The court ruled in the affirmative. The court explained that the petitioner cannot claim
that it was never a taxable person under its Charter. It was only exempted from the
payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes,
except real property tax. It further explained that even if the petitioner was originally not
a taxable person for purposes of real property tax, in light of the foregoing disquisitions,
it had already become, even if it be conceded to be an agency or instrumentality of the
Government, a taxable person for such purpose in view of the withdrawal in the last
paragraph of Section 234 of exemptions from the payment of real property taxes, which,
as earlier adverted to, applies to the petitioner.

As the City of Cebu was about to issue a warrant of levy against the properties of petitioner,
the latter was compelled to pay its tax account under protest and thereafter filed a Petition
for Declaratory Relief with the Regional Trial Court of Cebu, Branch 20, on December
29, 1994. Mactan Cebu basically contended that the taxing powers of local government
units do not extend to the levy of taxes or fees of any kind on an instrumentality of the
national government. It insisted that while it is indeed a government-owned corporation,
it nonetheless stands on the same footing as an agency or instrumentality of the national
government by the very nature of its powers and functions.

Respondent City, however, asserted that MCIAA is not an instrumentality of the

government but merely a government-owned corporation performing proprietary
functions. As such, all exemptions previously granted to it were deemed withdrawn by
operation of law, as provided under Sections 193 and 234 of the Local Government Code
when it took effect on January 1, 1992.

Actions of the Court:

Procedure for Approval of and Effectivity of Tax Ordinances (Sec. 187)
Hagonoy Market vs. Mun. Of Hagonoy
Hagonoy Market, petitioner,
vs.
Mun. Of Hagonoy, respondent.
GR No. 137621,
Feb. 6, 2002
Case Brief:
This is a petition for review of the Resolution of the Court of Appeals, dated February 15,
1999, dismissing the appeal of petitioner Hagonoy Market Vendor Association from the
Resolutions of the Secretary of Justice for being formally deficient.
Facts:
On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance,
Kautusan Blg. 28, which increased the stall rentals of the market vendors in Hagonoy.
Article 3 provided that it shall take effect upon approval. The subject ordinance was
posted from November 4-25, 1996. In the last week of November, 1997, the petitioners
members were personally given copies of the approved Ordinance and were informed
that it shall be enforced in January, 1998. On December 8, 1997, the petitioners President
filed an appeal with the Secretary of Justice assailing the constitutionality of the tax
ordinance. Petitioner claimed it was unaware of the posting of the ordinance. Respondent
opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and
that the ordinance, as approved, was posted as required by law. Hence, it was pointed out
that petitioner’s appeal, made over a year later, was already time-barred.
The Secretary of Justice dismissed the appeal on the ground that it was filed out of time,
i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as
prescribed under Section 187 of the 1991 Local Government Code. Citing the case of
Taada vs. Tuvera, the Secretary of Justice held that the date of effectivity of the subject
ordinance retroacted to the date of its approval in October 1996, after
the required publication or posting has been complied with, pursuant to Section 3 of said
ordinance.
After its motion for reconsideration was denied, petitioner appealed to the Court of
Appeals. Petitioner did not assail the finding of the Secretary of Justice that their appeal
was filed beyond the reglementary period. Instead, it urged that the Secretary of Justice
should have overlooked this mere technicality and ruled on its petition on the merits.
Actions of the Court:
CA: Petition for review was dismissed by the Court of Appeals for being formally deficient
as it was not accompanied by certified true copies of the assailed Resolutions of the
Secretary of Justice. The petitioner moved for reconsideration, but it was denied.
Issue/s:
WON the CA erred dismissing its motion for reconsideration on the failure of the
petitioner to attach the certified true copies of the assailed decision of the Secretary of
Justice.
Ruling:
The Court ruled in the negative. It explained that although it does not agree that the
Secretary of Justice should have not dismissed the case on the ground that it was not able
to attach the certified true copy of the resolution being assailed because the petitioner was
able to exert diligent efforts to have the decision certified. But it found that the petition
should still be dismissed on the ground that appeal to the Secretary of Justice is also time-
barred. The applicable law is Section 187 of the 1991 Local Government Code which
provides that an appeal of a tax ordinance or revenue measure should be made to the
Secretary of Justice within thirty (30) days from effectivity of the ordinance and even
during its pendency, the effectivity of the assailed ordinance shall not be suspended. In
the case at bar, Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed
its appeal only in December 1997, more than a year after the effectivity of the ordinance
in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time-barred. The
timeframe fixed by law for parties to avail of their legal remedies before competent courts
is not a mere technicality that can be easily brushed aside. The periods stated in Section
187 of the Local Government Code are mandatory. Ordinance No. 28 is a revenue
measure adopted by the municipality of Hagonoy to fix and collect public market stall
rentals. Being its lifeblood, collection of revenues by the government is of paramount
importance. The funds for the operation of its agencies and provision of basic services to
its inhabitants are largely derived from its revenues and collections. Thus, it is essential
that the validity of revenue measures is not left uncertain for a considerable length of time.
Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue
measures and tax ordinances. Thus, petition was dismissed.
Excise taxes under the NIRC/TFC on Petroleum Products
Petron Corp. Vs. Mayor Tobias Tiangco
Petron Corp., petitioner,
vs.
Mayor Tobias Tiangco, respondent.
GR No. 158881
April 16, 2008
Case Brief:
Petition for Review on Certiorari under Rule 45 filed by petitioner Petron Corporation
(Petron) directly assailing the Decision of the Regional Trial Court (RTC) of Malabon,
Branch 74, which dismissed petitioners complaint for cancellation of assessment made by
the then municipality (now City) of Navotas (Navotas) for deficiency taxes, and ordering
the payment of P10,204,916.17 in business taxes to Navotas.
Facts:
Petron maintains a depot or bulk plant at the Navotas Fishport Complex in Navotas and
engaged in the selling of diesel fuels to vessels used in commercial fishing in and around
Manila Bay. On 1 March 2002, Petron received a letter from the office of Navotas Mayor,
respondent Toby Tiangco, wherein the corporation was assessed taxes relative to the
figures covering sale of diesel declared by its Navotas Terminal from 1997 to 2001. The
stated total amount due was P6,259,087.62, a figure derived from the gross sales of the
depot during the years in question. The computation sheets that were attached to the letter
made reference to Ordinance 92-03, or the New Navotas Revenue Code (Navotas
Revenue Code).
Petron duly filed with Navotas a letter-protest to the notice of assessment pursuant to
Section 195 of the Code arguing that it was exempt from local business taxes in view of
Art. 232(h) of the Implementing Rules (IRR) of the Code, as well as a ruling of the Bureau
of Local Government Finance of the Department of Finance dated 31 July 1995 stating
that sales of petroleum fuels are not subject to local taxation. The letter-protest was denied
by the Navotas Municipal Treasurer followed by a letter which is captioned as Final
Demand to Pay from the Mayor, requiring that Petron pay the assessed amount within
five (5) days from receipt thereof, with a threat of closure of Petron’s operations within
Navotas should there be no payment. Petron, through counsel, replied to the Mayor by
another letter posing objections to the threat of closure. The Mayor did not respond to
this last letter. Petron filed with the Malabon RTC a Complaint for Cancellation of
Assessment for Deficiency Taxes with Prayer for the Issuance of a Temporary Restraining
Order (TRO) and/or Preliminary Injunction. The quested TRO was not issued by the
Malabon RTC upon manifestation of respondents that they would not proceed with the
closure of Petron’s Navotas bulk plant until after the RTC shall have decided the case on
the merits. However, while the case was pending decision, respondents refused to issue a
business permit to Petron, thus prompting Petron to file a Supplemental Complaint with
Prayer for Preliminary Mandatory Injunction against respondents.
Actions of the Court:
RTC: Dismissed Petron’s complaint and ordered payment of the assessed amount.
Petron received a Closure Order from the Mayor, directing Petron to cease and desist
from operating the bulk plant. Petron sought a TRO from the Malabon RTC, but this was
denied. Petron also filed a motion for reconsideration of the order of denial, but this was
likewise denied.
Petron has opted to assail the RTC Decision directly before the Supreme Court since the
matter at hand involves pure questions of law, a characterization conceded by the RTC
Decision itself.
Issue/s:
WON the RTC correctly interpreted Section 133(h) of the LGC, and the applicability of
Article 232 (h) of the IRR.
Ruling:
The Court ruled in the negative. It explained that Section 133(h) of the LGC provides
two kinds of taxes which cannot be imposed by local government units: excise taxes on
articles enumerated under the NIRC, as amended; and taxes, fees or charges on
petroleum products.
A tax on a business is distinct from a tax on the article itself, or for that matter, that a
business tax is distinct from an excise tax. However, such distinction is immaterial insofar
as the latter part of Section 133(h) is concerned, for the phrase taxes, fees or charges on
petroleum products does not qualify the kind of taxes, fees or charges that could withstand
the absolute prohibition imposed by the provision. It would have been a different matter
had Congress, in crafting Section 133(h), barred excise taxes or direct taxes, or any
category of taxes only, for then it would be understood that only such specified taxes on
petroleum products could not be imposed under the prohibition. The absence of such a
qualification leads to the conclusion that all sorts of taxes on petroleum products,
including business taxes, are prohibited by Section 133(h). Where the law does not
distinguish, we should not distinguish.
In this age where unfortunately dependence on petroleum as fuel has yet no equally
feasible alternative, the cost of petroleum products, though fully controlled by private
enterprise, remains an area of public concern. To be blunt about it, there is an inevitable
link between the fluctuation of oil prices and the prices of every other commodity. The
reality, indeed, is oil is a political commodity. Oil is a commodity whose supply and price
affect the ebb and flow of the lifeblood of the nation. Its shortage of supply or a slight,
upward spiral in its price shakes our economic foundation. Studies show that the areas
most impacted by the movement of oil are food manufacture, land transport, trade,
electricity and water. The upswing and downswing of our economy materially depend on
the oscillation of oil. Fluctuations in the supply and price of oil products have a dramatic
effect on economic development and public welfare.

It can be reasonably presumed that if municipalities, cities and provinces were authorized
to impose business taxes on manufacturers and retailers of petroleum products, the
resulting losses to these enterprises would be passed on to the consumers, triggering the
chain of increases that normally accompany the increase in oil prices. No similarly massive
trigger effect would ensue upon the imposition of business taxes on other commodities,
including those already subject to excise taxation under the NIRC.

While Section 133(h) does not generally bar the imposition of business taxes on articles
burdened by excise taxes under the NIRC, it specifically prohibits local government units
from extending the levy of any kind of taxes, fees or charges on petroleum products.
Accordingly, the subject tax assessment is ultra vires and void.

Hence, RTC decision was REVERSED and SET ASIDE and the subject assessment for

deficiency taxes on petitioner is ordered CANCELLED. The Temporary Restraining

Order dated 4 August 2003 is hereby made PERMANENT.