Republic vs. Cocofed Case Digest Republic of the Philippines vs.

Cocofed [GRs 147062-64, 14 December 2001] Facts: Immediately after the 1986 EDSA Revolution, then President Corazon C. Aquino issued Executive Orders 1, 5 2 6 and 14. On the explicit premise that vast resources of the government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad, the Presidential Commission on Good Government (PCGG) was created by Executive Order 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad. Executive Order 2 stated that the ill-gotten assets and properties are in the form of bank accounts, deposits, trust accounts, shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal properties in the Philippines and in various countries of the world. Executive Order 14, on the other hand, empowered the PCGG, with the assistance of the Office of the Solicitor General and other government agencies, inter alia, to file and prosecute all cases investigated by it under EOs 1 and 2. Pursuant to these laws, the PCGG issued and implemented numerous sequestrations, freeze orders and provisional takeovers of allegedly ill-gotten companies, assets and properties, real or personal. Among the properties sequestered by the Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged one million coconut farmers, the so called Coconut Industry Investment Fund companies (CIIF companies) and Eduardo Cojuangco Jr. In connection with the sequestration of the said UCPB shares, the PCGG, on 31 July 1987, instituted an action for reconveyance, reversion, accounting, restitution and damages (Case 0033) in the Sandiganbayan. On 15 November 1990, upon Motion of COCOFED, the Sandiganbayan issued a Resolution lifting the sequestration of the subject UCPB shares on the ground that COCOFED and the so-called CIIF companies had not been impleaded by the PCGG as parties-defendants in its 31 July 1987 Complaint for reconveyance, reversion, accounting, restitution and damages. The Sandiganbayan ruled that the Writ of Sequestration issued by the Commission was automatically lifted for PCGGs failure to commence the corresponding judicial action withi n the six-month period ending on 2 August 1987 provided under Section 26, Article XVIII of the 1987 Constitution. The anti-graft court noted that though these entities were listed in an annex appended to the Complaint, they had not been named as parties-respondents. The Sandiganbayan Resolution was challenged by the PCGG in a Petition for Certiorari (GR 96073) in the Supreme Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered the holding of elections for the Board of Directors of UCPB. However, the PCGG applied for and was granted by this Court a Restraining Order enjoining the holding of the election. Subsequently, the Court lifted the Restraining Order and ordered the UCPB to proceed with the election of its board of directors. Furthermore, it allowed the sequestered shares to be voted by their registered owners. The victory of the registered shareholders was fleeting because the Court, acting on the solicitor generals Motion for Clarification/Manifestation, issued a Resolution on 16 February 1993, declaring that the right of COCOFED, et. al. to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimate owners of UCPB stock and cannot be accorded the right to vote them. On 23 January 1995, the Court rendered its final Decision in GR 96073, nullifying and setting aside the 15 November 1990 Resolution of the Sandiganbayan which lifted the sequestration of the subject UCPB shares. A month thereafter, the PCGG pursuant to an Order of the Sandiganbayan subdivided Case 0033 into eight Complaints (Cases 0033-A to 0033-H). Six years later, on 13 February 2001, the

Board of Directors of UCPB received from the ACCRA Law Office a letter written on behalf of the COCOFED and the alleged nameless one million coconut farmers, demanding the holding of a stockholders meeting for the purpose of, among others, electing the board of directors. In response, the board approved a Resolution calling for a stockholders meeting on 6 March 2001 at 3 p.m. On 23 February 2001, COCOFED, et al. and Ballares, et al. filed the Class Action Omnibus Motion in Sandiganbayan Civil Cases 0033-A, 0033-B and 0033-F, asking the Sandiganbayan to enjoin the PCGG from voting the UCPB shares of stock registered in the respective names of the more than one million coconut farmers; and to Republic vs. Cocofed Page 2 enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIIF holding companies including those registered in the name of the PCGG. On 28 February 2001, the Sandiganbayan, after hearing the parties on oral argument, issued the Order, authorizing COCOFED, et. al. and Ballares, et. al. as well as Cojuangco, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from the Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders Meeting on 6 March 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders. The Republic of the Philippines represented by the PCGG filed the petition for certiorari. Issue: Whether the PCGG can vote the sequestered UCPB shares. Held: The registered owner of the shares of a corporation exercises the right and the privilege of voting. This principle applies even to shares that are sequestered by the government, over which the PCGG as a mere conservator cannot, as a general rule, exercise acts of dominion. On the other hand, it is authorized to vote these sequestered shares registered in the names of private persons and acquired with allegedly ill-gotten wealth, if it is able to satisfy the two-tiered test devised by the Court in Cojuangco v. Calpo and PCGG v. Cojuangco Jr. Two clear public character exceptions under which the government is granted the authority to vote the shares exist (1) Where government shares are taken over by private persons or entities who/which registered them in their own names, and (2) Where the capitalization or shares that were acquired with public funds somehow landed in private hands. The exceptions are based on the common-sense principle that legal fiction must yield to truth; that public property registered in the names of non-owners is affected with trust relations; and that the prima facie beneficial owner should be given the privilege of enjoying the rights flowing from the prima facie fact of ownership. In short, when sequestered shares registered in the names of private individuals or entities are alleged to have been acquired with ill-gotten wealth, then the two-tiered test is applied. However, when the sequestered shares in the name of private individuals or entities are shown, prima facie, to have been (1) originally government shares, or (2) purchased with public funds or those affected with public interest, then the two-tiered test does not apply. Rather, the public character exceptions in Baseco v. PCGG and Cojuangco Jr. v. Roxas prevail; that is, the government shall vote the shares. Herein, the money used to purchase the sequestered UCPB shares came from the Coconut Consumer Stabilization Fund (CCSF), otherwise known as the coconut levy funds. The sequestered UCPB shares are confirmed to have been acquired with coco levies, not with alleged ill-gotten wealth. As the coconut levy funds are not only affected with public interest, but are in fact prima facie public funds, the Court believes that the government should be allowed to vote the questioned shares, because they belong to it as the prima facie beneficial and true owner. The Sandiganbayan committed grave abuse of discretion in grossly contradicting and effectively reversing existing jurisprudence, and in depriving the

government of its right to vote the sequestered UCPB shares which are prima facie public in character. Osmea v. Orbos G.R. No. 99886 March 31, 1993 Narvasa, C.J.

Facts: On October 10, 1984, Pres. Marcos issued P.D. 1956 creating a Special Account in the General Fund, designated as the Oil Price Stabilization Fund (OPSF). The OPSF was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustments and from increases in the world market prices of crude oil. Subsequently, the OPSF was reclassified into a trust liability account, in virtue of E.O. 1024, an d ordered released from the National Treasury to the Ministry of Energy. Pres. Aquino, amended P.D. 1956. She promulgated Executive Order No. 137 on February 27, 1987, expanding the grounds for reimbursement to oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products, the amount of the underrecovery being left for determination by the Ministry of Finance. The petition avers that the creation of the trust fund violates 29(3), Article VI of the Constitution, reading as follows: (3) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purposes only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the Government. The petitioner argues that the monies collected pursuant to . . P.D. 1956, as amended, must be treated as a SPECIAL FUND, not as a trust account or a trust fund, and that if a special tax is collected for a specific purpose, the revenue generated therefrom shall be treated as a special fund to be used only for the purpose indicated, and not channeled to another government objective. Petitioner further points out that since a special fund consists of monies collected through the taxing power of a State, such amounts belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. He also contends that the delegation of legislative authority to the ERB violates 28 (2). Article VI of the Constitution, viz.: (2) 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 and, inasmuch as the delegation relates to the exercise of the power of taxation, the limits, limitations and restrictions must be quantitative, that is, the law must not only specify how to tax, who (shall) be taxed (and) what the tax is for, but also impose a specific limit on how much to tax. Issue: whether or Not the invalidity of the TRUST ACCOUNT in the books of account of the Ministry of Energy (now, the Office of Energy Affairs), created pursuant to 8, paragraph 1, of P.D. No. 1956, as amended, said creation of a trust fund being contrary to Section 29 (3), Article VI of the Constitution Held:

The OPSF is a Trust Account which was established for the purpose of minimizing the frequent price changes brought about by exchange rate adjustment and/or changes in world market prices of crude oil and imported petroleum products. Under P.D. No. 1956, as amended by Executive Order No. 137 dated 27 February 1987, this Trust Account may be funded from any of the following sources: a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy; c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of the State. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a trust liability account, the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a special fund. Indeed, the practice is not without precedent. Issue: whether or Not the unconstitutionality of 8, paragraph 1 (c) of P.D. No. 1956, as amended by Executive Order No. 137, for being an undue and invalid delegation of legislative power to the Energy Regulatory Board Held: The Court finds that the provision conferring the authority upon the ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing domestic pump rates, 8(c) of P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the resources of the Fund. What petitioner would wish is the fixing of some definite, quantitative restriction, or a specific limit on how much to tax. The Court is cited to this requirement by the petitioner on the premise that what is involved here is the power of taxation; but as already discussed, this is not the case. What is here involved is not so much the power of taxation as police power. Although the provision authorizing the ERB to impose additional amounts could be construed to refer to the power of taxation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with expediency in carrying out the objectives of the law which are embraced by the police power of the State.

The interplay and constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products, and the frequently shifting need to either augment or exhaust the Fund, do not conveniently permit the setting of fixed or rigid parameters in the law as proposed by the petitioner. To do so would render the ERB unable to respond effectively so as to mitigate or avoid the undesirable consequences of such fluidity. As such, the standard as it is expressed suffices to guide the delegate in the exercise of the delegated power, taking account of the circumstances under which it is to be exercised. Tan vs Del Rosario G.R. No. 109289, October 3, 1994 FACTS: These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxationn Scheme (SNIT), amending certain provisions of the National Internal Revenue Regulations No. 293, promulgated by public respondents pursuant to said law. Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that taxation shall be uniform and equitable in that the law would now attempt to tax single proprietorships and professionals differently from the manner it imposes the tax on corporations and partnerships. Petitioners claim to be taxpayers adversely affected by the continued implementation of the amendatory legislation. ISSUES: 1. Is Republic Act No. 7496 a misnomer or, at least, 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) 2. Does Republic Act No. 7496 violate the Constitution for imposing taxes that are not uniform and equitable. 3. Did the Secretary of Finance and the BIR Commissioner exceed their rule-making authority in applying SNIT to general professional partnerships? HELD: The Petition is dismissed. Uniformity of taxation, like the kindred 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 (Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend 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 (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 771).

What may instead be perceived to be 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. We certainly do not view this classification to be arbitrary and inappropriate. Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for being violative of due process must perforce fail. 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. Shell Co. vs Vano (1954) Facts: The municipal council of Cordova, Cebu adopted Ordinance 10 (1946) imposing an annual tax of P150 on occupation or the exercise of the privilege of installation manager; Ordinance 9 (1947) imposing an annual tax of P40 for local deposits in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories; and Ordinance 11 (1948) imposing an annual tax of P150 on tin can factories having a maximum annual output capacity of 30,000 tin cans. Shell Co., a foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the ordinances imposing such taxes are ultra vires. Issue: Whether Ordinance 10 is discriminatory and hostile because there is no other person in the locality who exercise such designation or occupation. Held: The fact that there is no other person in the locality who exercises such a designation or calling does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person or firm who exercises such calling or occupation named or designated as installation manager.

Arturo Tolentino vs Secretary of Finance Political Law Origination of Revenue Bills EVAT Amendment by Substitution FACTS: Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded Value Added Tax (EVAT) Law. Tolentino averred that this revenue bill did not exclusively originate from the House of Representatives as required by Section 24, Article 6 of the Constitution. Even though RA 7716 originated as HB 11197 and that it passed the 3 readings in the HoR, the same did not complete the 3 readings in Senate for after the 1st reading it was referred to the Senate Ways & Means Committee thereafter Senate passed its own version known as Senate Bill 1630. Tolentino averred that what Senate could have done is amend HB 11197 by striking out its text and substituting it w/ the text of SB 1630 in that way the bill remains a House Bill and the Senate version just becomes the text (only the text) of the HB. Tolentino and co-petitioner Roco [however] even signed the said Senate Bill. ISSUE: Whether or not EVAT originated in the HoR. HELD: By a 9-6 vote, the SC rejected the challenge, holding that such consolidation was consistent with the power of the Senate to propose or concur with amendments to the version originated in the HoR. What the Constitution simply means, according to the 9 justices, is that the initiative must come from the HoR. Note also that there were several instances before where Senate passed its own version rather than having the HoR version as far as revenue and other such bills are concerned. This practice of amendment by substitution has always been accepted. The proposition of Tolentino concerns a mere matter of form. There is no showing that it would make a significant difference if Senate were to adopt his over what has been done.

ABAKADA Guro Party List vs. Ermita G.R. No. 168056 September 1, 2005 FACTS: Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005 questioning the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniformp ro v is o authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after specified conditions have been satisfied. Petitioners argue that the law is unconstitutional. ISSUES: 1. Whether or not there is a violation of Article VI, Section 24 of the Constitution. 2. Whether or not there is undue delegation of legislative power in violation of Article VI Sec 28(2) of the Constitution. 3. Whether or not there is a violation of the due process and equal protection under Article III Sec. 1 of the Constitution. RULING: 1. Since there is no question that the revenue bill exclusively originated in the House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, and excise and franchise taxes. 2. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward. 3. The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.

Coconut Oil Refiners Association, Inc. vs. Ruben Torres (Case Digest) Facts: This is a Petition to enjoin and prohibit the public respondent Ruben Torres in his capacity as Executive Secretary from allowing other private respondents to continue with the operation of tax and duty-free shops located at the Subic Special Economic Zone (SSEZ) and the Clark Special Economic Zone (CSEZ). The petitioner seeks to declare Republic Act No. 7227 as unconstitutional on the ground that it allowed only tax-free (and duty-free) importation of raw materials, capital and equipment. It reads: The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of thePhilippines [RA 7227, Sec 12 (b)]. Petitioners contend that the wording of Republic Act No. 7227 clearly limits the grant of tax incentives to the importation of raw materials, capital and equipment only thereby violating the equal protection clause of the Constitution. He also assailed the constitutionality of Executive Order No. 97-A for being violative of their right to equal protection. They asserted that private respondents operating inside the SSEZ are not different from the retail establishments located outside. The respondent moves to dismiss the petition on the ground of lack of legal standing and unreasonable delay in filing of the petition. Issues: (1) Statutory Construction; Political Law; Taxation Law:Whether or not there is a violation of equal protection clause. (2) Political Law:Whether or not the case can be dismiss due to lack of the petitioners legal standing. (3) Remedial Law:Whether or not the case can be dismissed due to unreasonable delay in filing of the petition. Held: (1) The SC ruled in the negative. The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius

est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. The petition with respect to declaration of unconstitutionality of Executive Order No. 97-A cannot be, likewise, sustained. The guaranty of the equal protection of the laws is not violated by a legislation based which was based on reasonable classification. A 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. There is a substantial distinctions lying between the establishments inside and outside the zone. There are substantial differences in a sense that, investors will be lured to establish and operate their industries in the so-called secured area and the present business operators outside the area. There is, then, hardly any reasonable basis to extend to them the benefits and incentives accorded in R.A. 7227. (2) No. Anent the claim on lack of legal standing, respondents argue that petitioners, being mere suppliers of the local retailers operating outside the special economic zones, do not stand to suffer direct injury in the enforcement of the issuances being assailed herein. Assuming this is true, this Court has nevertheless held that in cases of paramount importance where serious constitutional questions are involved, the standing requirements may be relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review. (3) No. With respect to the other alleged procedural flaws, even assuming the existence of such defects, this Court, in the exercise of its discretion, brushes aside these technicalities and takes cognizance of the petition considering the importance to the public of the present case and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution

John Hay PAC v. Lim Facts: The controversy stemmed from the issuance of Proclamation No. 420 by then President Ramos declaring a portion of Camp John Hay as a Special Economic Zone (SEZ) and creating a regime of tax exemption within the John Hay Special Economic Zone. In the present petition, petitioners assailed the constitutionality of the proclamation. The Court also held that it is the legislature, unless limited by a provision of the Constitution, that has the full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. The challenged grant of tax exemption would circumvent the Constitution's imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. Moreover, the claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based. Thus, the Court declared that the grant by Proclamation No. 420 of tax exemption and other privileges to the John Hay SEZ was void for being violative of the Constitution. However, the entire assailed proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant to the law or the Constitution. The delineation and declaration of a portion of the area covered by Camp John Hay as a SEZ was well within the powers of the President to do so by means of a proclamation. Where part of a statute is void as contrary to the Constitution, while another part is valid, the valid portion, if separable from the invalid, as in t he case at bar, may stand and be enforced. Issue: WON the petitioners have legal standing to bring the petition Ruling: YES Rationale: R.A. No. 7227 expressly requires the concurrence of the affected local government units to the creation of SEZs out of all the base areas in the country. The grant by the law on local government units of the right of concurrence on the bases' conversion is equivalent to vesting a legal standing on them, for it is in effect a recognition of the real interests that communities nearby or surrounding a particular base area have in its utilization. Thus, the interest of petitioners, being inhabitants of Baguio, in assailing the legality of Proclamation No. 420, is personal and substantial such that they have sustained or will sustain direct injury as a result of the government act being challenged. Theirs is a material interest, an interest in issue affected by the proclamation and not merely an interest in the question involved or an incidental interest, for what is at stake in the enforcement of Proclamation No. 420 is the very economic and social existence of the people of Baguio City. ... Moreover, petitioners Edilberto T. Claravall and Lilia G. Yaranon were duly elected councilors of Baguio at the time, engaged in the local governance of Baguio City and whose duties included deciding for and on behalf of their constituents the question of whether to concur with the declaration of a portion of the area covered by Camp John Hay as a SEZ. Certainly then, petitioners Clarav all and Yaranon, as city officials who voted against the sanggunian Resolution No. 255 (Series of 1994)supporting the issuance of the now challenged Proclamation No. 420, have legal standing to bring the present petition.

Commissioner of Internal Revenue vs Lincoln Philippine Life Insurance Company, Inc. Insurance Law The Policy Automatic Increase in the Coverage Documentary Stamp Tax Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-CMA Life Insurance Company, Inc.) used to issue policies called Junior Estate Builder Policy. A clause therein provides for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by Lincoln Philippine only on the initial sum assured. When the clause became effective in 1984, the Commissioner of Internal Revenue assessed an additional tax on the increased amount of the coverage of the said policies. Said tax was to cover the deficiency documentary stamps tax for said year. The Court of Appeals ruled that there is only one policy and the automatic increase is not a separate policy; that said increase of coverage is not covered by another documentary stamp tax. ISSUE: Whether or not there is only one policy. HELD: Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set forth. Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance. The subject insurance policy at the time it was issued contained an automatic increase clause. Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the junior estate builder policy called the automatic increase clause already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age. The said increase however is imposable with documentary stamp taxes. The original documentary stamps tax paid by Lincoln Philippine covers the original amount of the policies without the projected increase. The said increase was already definite at the time of the issuance of the policy. Thus, the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy. While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade the payment of just taxes. In the case at bar, to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy.

PHILEX MINING CORP. v. CIR GR No. 125704, August 28, 1998 294 SCRA 687 FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of Tax Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P120 M plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities. ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the petitioner? HELD: ]No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Evidently, to countenance Philex's whimsical reason would render ineffective our tax collection system. Too simplistic, it finds no support in law or in jurisprudence. To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a pending tax claim for refund or credit against the government which has not yet been granted. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. xxx There can be no off-setting of taxes against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.

SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, THE SECRETARY OF THE DEPARTMENT OF TRADE AND INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents. RESOLUTION Department of Trade and Industry (DTI) and private respondent Philippine Cement Manufacturers Corporation (Philcemcor),[1] who now seek reconsideration of our Decision dated 8 July 2004 (Decision), which granted the petition of petitioner Southern Cross Cement Corporation (Southern Cross). This case, of course, is ultimately not just about cement. For respondents, it is about love of country and the future of the domestic industry in the face of foreign competition. For this Court, it is about elementary statutory construction, constitutional limitations on the executive power to impose tariffs and similar measures, and obedience to the law. Just as much was asserted in the Decision, and the same holds true with this present Resolution. An extensive narration of facts can be found in the Decision.[2] As can well be recalled, the case centers on the interpretation of provisions of Republic Act No. 8800, the Safeguard Measures Act (SMA), which was one of the laws enacted by Congress soon after the Philippines ratified the General Agreement on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.[3] The SMA provides the structure and mechanics for the imposition of emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious injury on them.[4] A brief summary as to how the present petition came to be filed by Southern Cross. Philcemcor, an association of at least eighteen (18) domestic cement manufacturers filed with the DTI a petition seeking the imposition of safeguard measures on gray Portland cement,[5] in accordance with the SMA. After the DTI issued a provisional safeguard measure,[6] the application was referred to the Tariff Commission for a formal investigation pursuant to Section 9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement. The Tariff Commission held public hearings and conducted its own investigation, then on 13 March 2002, issued its Formal Investigation Report (Report). The Report determined as follows: 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.[7] After the Secretary of Justice opined that the DTI could not do so under the SMA,[8] the DTI Secretary then promulgated a Decision[9] wherein he expressed the DTIs disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying Philcemcors application for safeguard measures on the ground that the he was bound to do so in light of the Tariff Commissions negative findings.[10]

Philcemcor challenged this Decision of the DTI Secretary by filing with the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus[11] seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. It prayed that the Court of Appeals direct the DTI Secretary to disregard the Report and to render judgment independently of the Report. Philcemcor argued that the DTI Secretary, vested as he is under the law with the power of review, is not bound to adopt the recommendations of the Tariff Commission; and, that the Report is void, as it is predicated on a flawed framework, inconsistent inferences and erroneous methodology.[12] The Court of Appeals Twelfth Division, in a Decision[13] penned by Court of Appeals Associate Justice Elvi John Asuncion,[14] partially granted Philcemcors petition. The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion. While it refused to annul the findings of the Tariff Commission,[15] it also held that the DTI Secretary was not bound by the factual findings of the Tariff Commission since such findings are merely recommendatory and they fall within the ambit of the Secretarys discretionary review. It determined that the legislative intent is to grant the DTI Secretary the power to make a final decision on the Tariff Commissions recommendation.[16] On 23 June 2003, Southern Cross filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcors petition, as the proper remedy is a petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence of conditions warranting the imposition of general safeguard measures are binding upon the DTI Secretary. The Court ruled that the Court of Appeals had no jurisdiction over Philcemcors Petition, the proper remedy under Section 29 of the SMA being a petition for review with the CTA; and that the Court of Appeals erred in ruling that the DTI Secretary was not bound by the negative determination of the Tariff Commission and could therefore impose the general safeguard measures, since Section 5 of the SMA precisely required that the Tariff Commission make a positive final determination before the DTI Secretary could impose these measures. Anent the argument that Southern Cross had committed forum-shopping, the Court concluded that there was no evident malicious intent to subvert procedural rules so as to match the standard under Section 5, Rule 7 of the Rules of Court of willful and deliberate forum shopping. Accordingly, the Decision of the Court of Appeals dated 5 June 2003 was declared null and void. The Court likewise found it necessary to nullify the Decision of the DTI Secretary dated 25 June 2003, rendered after the filing of this present Petition. This Decision by the DTI Secretary had cited the obligatory force of the null and void Court of Appeals Decision, notwithstanding the fact that the decision of the appellate court was not yet final and executory. Considering that the decision of the Court of Appeals was a nullity to begin with, the inescapable conclusion was that the new decision of the DTI Secretary, prescinding as it did from the imprimatur of the decision of the Court of Appeals, was a nullity as well. Both respondents promptly filed their respective motions for reconsideration. I. Jurisdiction of the Court of Tax Appeals Under Section 29 of the SMA

The first core issue resolved in the assailed Decision was whether the Court of Appeals had jurisdiction over the special civil action for certiorari filed by Philcemcor assailing the 5 April 2002 Decision of the DTI Secretary. The general jurisdiction of the Court of Appeals over special civil actions for certiorari is beyond doubt. The Constitution itself assures that judicial review avails to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. At the same time, the special civil action of certiorari is available only when there is no plain, speedy and adequate remedy in the ordinary course of law.[31] Philcemcors recourse of special civil action before the Court of Appeals to challenge the Decision of the DTI Secretary not to impose the general safeguard measures is not based on the SMA, but on the general rule on certiorari. Thus, the Court proceeded to inquire whether indeed there was no other plain, speedy and adequate remedy in the ordinary course of law that would warrant the allowance of Philcemcors special civil action. The answer hinged on the proper interpretation of 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.[32] (Emphasis supplied) The matter is crucial for if the CTA properly had jurisdiction over the petition challenging the DTI Secretarys ruling not to impose a safeguard measure, then the special civil action of certiorari resorted to instead by Philcemcor would not avail, owing to the existence of a plain, speedy and adequate remedy in the ordinary course of law.[33] The Court of Appeals, in asserting that it had jurisdiction, merely cited the general rule on certiorari jurisdiction without bothering to refer to, or possibly even study, the import of Section 29. In contrast, this Court duly considered the meaning and ramifications of Section 29, concluding that it provided for a plain, speedy and adequate remedy that Philcemcor could have resorted to instead of filing the special civil action before the Court of Appeals. Interestingly, Republic Act No. 9282, promulgated on 30 March 2004, expressly vests unto the CTA jurisdiction over [d]ecisions of the Secretary of Trade and Industry, in case of nonagricultural product, commodity or article . . . involving . . . safeguard measures under Republic Act No. 8800, where either party may appeal the decision to impose or not to impose said duties.[34] It is clear that any future attempts to advance the literalist position of the respondents would consequently fail. However, since Republic Act No. 9282 has no retroactive effect, this Court had to decide whether Section 29 vests jurisdiction on the CTA over rulings of the DTI Secretary not to impose a safeguard measure. And the Court, in its assailed Decision, ruled that the CTA is endowed with such jurisdiction. Respondents argue that the Court has given an expansive interpretation to Section 29, contrary to the established rule requiring strict construction against the existence of jurisdiction in specialized courts.[35] But it is the express provision of Section 29, and not this Court, that mandates CTA

jurisdiction to be broad enough to encompass more than just a ruling imposing the safeguard measure. The key phrase remains in connection with. It has connotations that are obvious even to the layman. A ruling issued in connection with the imposition of a safeguard measure would be one that bears some relation to the imposition of a safeguard measure. Obviously, a ruling imposing a safeguard measure is covered by the phrase in connection with, but such ruling is by no means exclusive. Rulings which modify, suspend or terminate a safeguard measure are necessarily in connection with the imposition of a safeguard measure. So does a ruling allowing for a provisional safeguard measure. So too, a ruling by the DTI Secretary refusing to refer the application for a safeguard measure to the Tariff Commission. It is clear that there is an entire subset of rulings that the DTI Secretary may issue in connection with the imposition of a safeguard measure, including those that are provisional, interlocutory, or dispositive in character.[36] By the same token, a ruling not to impose a safeguard measure is also issued in connection with the imposition of a safeguard measure. The Court is simply asserting, as it should, the clear intent of the legislature in enacting the SMA. Without in connection with or a synonymous phrase, the Court would be compelled to favor the respondents position that only rulings imposing safeguard measures may be elevated on appeal to the CTA. But considering that the statute does make use of the phrase, there is little sense in delving into alternate scenarios. Respondents fail to convincingly address the absurd consequences pointed out by the Decision had their proposed interpretation been adopted. Indeed, suffocated beneath the respondents legalistic decision to impose a safeguard measure, but not on one choosing not to impose. Of course, it is not for the Court to inquire into the wisdom of legislative acts, hence the rule that jurisdiction must be expressly vested and not presumed. Yet ultimately, respondents muddle the issue by making it appear that the Decision has uniquely expanded the jurisdictional rules. For the respondents, the proper statutory interpretation of the crucial phrase in connection with is to pretend that the phrase did not exist at all in the statute. The Court, in taking the effort to examine the meaning and extent of the phrase, is merely giving breath to the legislative will. Finally on this point, Philcemcor argues that assuming this Courts interpretation of Section 29 is correct, such ruling should not be given retroactive effect, otherwise, a gross violation of the right to due process would be had. This erroneously presumes that it was this Court, and not Congress, which vested jurisdiction on the CTA over rulings of non-imposition rendered by the DTI Secretary. We have repeatedly stressed that Section 29 expressly confers CTA jurisdiction over rulings in connection with the imposition of the safeguard measure, and the reassertion of this point in the Decision was a matter of emphasis, not of contrivance. The due process protection does not shield those who remain purposely blind to the express rules that ensure the sporting play of procedural law. II. Positive Final Determination By the Tariff Commission an Indispensable Requisite to the Imposition of General Safeguard Measures The second core ruling in the Decision was that contrary to the holding of the Court of Appeals, the DTI Secretary was barred from imposing a general safeguard measure absent a positive final determination rendered by the Tariff Commission. The fundamental premise rooted in this ruling is

based on the acknowledgment that the required positive final determination of the Tariff Commission exists as a properly enacted constitutional limitation imposed on the delegation of the legislative power to impose tariffs and imposts to the President under Section 28(2), Article VI of the Constitution. Congressional Limitations Pursuant To Constitutional Authority on the Delegated Power to Impose Safeguard Measures The safeguard measures imposable under the SMA generally involve duties on imported products, tariff rate quotas, or quantitative restrictions on the importation of a product into the country. Concerning as they do the foreign importation of products into the Philippines, these safeguard measures fall within the ambit of Section 28(2), Article VI of the Constitution, which states: 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.[49] The Court acknowledges the basic postulates ingrained in the provision, and, hence, governing in this case. They are: (1) It is Congress which authorizes the President to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. Thus, the authority cannot come from the Finance Department, the National Economic Development Authority, or the World Trade Organization, no matter how insistent or persistent these bodies may be. (2) The authorization granted to the President must be embodied in a law. Hence, the justification cannot be supplied simply by inherent executive powers. It cannot arise from administrative or executive orders promulgated by the executive branch or from the wisdom or whim of the President. (3) The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations and restrictions which Congress may impose. Consequently, if Congress specifies that the tariff rates should not exceed a given amount, the President cannot impose a tariff rate that exceeds such amount. If Congress stipulates that no duties may be imposed on the importation of corn, the President cannot impose duties on corn, no matter how actively the local corn producers lobby the President. Even the most picayune of limits or restrictions imposed by Congress must be observed by the President. There is one fundamental principle that animates these constitutional postulates. These impositions under Section 28(2), Article VI fall within the realm of the power of taxation, a power which is within the sole province of the legislature under the Constitution. Without Section 28(2), Article VI, the executive branch has no authority to impose tariffs and other similar tax levies involving the importation of foreign goods. Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA by Congress would be voided on the ground that it would constitute an undue delegation of the legislative power to tax. The constitutional provision shields such delegation from constitutional infirmity, and should be recognized as an

exceptional grant of legislative power to the President, rather than the affirmation of an inherent executive power. This being the case, the qualifiers mandated by the Constitution on this presidential authority attain primordial consideration. First, there must be a law, such as the SMA. Second, there must be specified limits, a detail which would be filled in by the law. And further, Congress is further empowered to impose limitations and restrictions on this presidential authority. On this last power, the provision does not provide for specified conditions, such as that the limitations and restrictions must conform to prior statutes, internationally accepted practices, accepted jurisprudence, or the considered opinion of members of the executive branch. Concurrently, the tasking of the Tariff Commission under the SMA should be likewise construed within the same context as part and parcel of the legislative delegation of its inherent power to impose tariffs and imposts to the executive branch, subject to limitations and restrictions. In that regard, both the Tariff Commission and the DTI Secretary may be regarded as agents of Congress within their limited respective spheres, as ordained in the SMA, in the implementation of the said law which significantly draws its strength from the plenary legislative power of taxation. Indeed, even the President may be considered as an agent of Congress for the purpose of imposing safeguard measures. It is Congress, not the President, which possesses inherent powers to impose tariffs and imposts. Without legislative authorization through statute, the President has no power, authority or right to impose such safeguard measures because taxation is inherently legislative, not executive. When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature. It is basic agency law that the agent may not act beyond the specifically delegated powers or disregard the restrictions imposed by the principal. In short, Congress may establish the procedural framework under which such safeguard measures may be imposed, and assign the various offices in the government bureaucracy respective tasks pursuant to the imposition of such measures, the task assignment including the factual determination of whether the necessary conditions exists to warrant such impositions. Under the SMA, Congress assigned the DTI Secretary and the Tariff Commission their respective functions[50] in the legislatures scheme of things. 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 It is evident from the text of Section 5 that there must be a positive final determination by the Tariff Commission that a product is being imported into the country in increased quantities (whether absolute or relative to domestic production), as to be a substantial cause of serious injury or threat to the domestic industry. Any disputation to the contrary is, at best, the product of wishful thinking. As the DOJ Secretary has no denominated role in the SMA, he was able to render his Opinion from the vantage of judicious distance. Should not his Opinion, studied and direct to the point as it is,

carry greater weight than the spontaneous remarks of the Tariff Commissions Chairman which do not even expressly disavow the binding power of the Commissions positive final determination? III. DTI Secretary has No Power of Review Over Final Determination of the Tariff Commission It is necessary to clarify the paradigm established by the SMA and affirmed by the Constitution under which the Tariff Commission and the DTI operate, especially in light of the suggestions that the Courts rulings on the functions of quasi-judicial power find application in this case. Perhaps the reflexive application of the quasi-judicial doctrine in this case, rooted as it is in jurisprudence, might allow for some convenience in ruling, yet doing so ultimately betrays ignorance of the fundamental power of Congress to reorganize the administrative structure of governance in ways it sees fit. Absent Section 5 of the SMA, the President has no inherent, constitutional, or statutory power to impose a general safeguard measure. Tellingly, the Separate Opinion does not directly confront the inevitable question as to how the DTI Secretary may get away with imposing a general safeguard measure absent a positive final determination from the Tariff Commission without violating Section 5 of the SMA, which along with Section 13 of the same law, stands as the only direct legal authority for the DTI Secretary to impose such measures. This is a constitutionally guaranteed limitation of the highest order, considering that the presidential authority exercised under the SMA is inherently legislative. Thus, in ascertaining the appropriate legal milieu governing the relationship between the DTI and the Tariff Commission, it is imperative to apply foremost, if not exclusively, the provisions of the SMA. The argument that the usual rules on administrative control and supervision apply between the Tariff Commission and the DTI as regards safeguard measures is severely undercut by the plain fact that there is no long-standing tradition of administrative interplay between these two entities. The Court has no issue with upholding administrative control and supervision exercised by the head of an executive department, but only over those subordinate offices that are attached to the department, or which are, under statute, relegated under its supervision and control. To declare that a department secretary, even if acting as alter ego of the President, may exercise such control or supervision over all executive offices below cabinet rank would lead to absurd results such as those adverted to above. As applied to this case, there is no legal justification for the DTI Secretary to exercise control, supervision, review or amendatory powers over the Tariff Commission and its positive final determination. In passing, we note that there is, admittedly, a feasible mode by which administrative review of the Tariff Commissions final determination could be had, but it is not the procedure adopted by respondents and now suggested for affirmation. This mode shall be discussed in a forthcoming section. It is within reason to assume the framers of the Constitution deemed it too onerous to spell out all the possible limitations and restrictions on this presidential authority to impose tariffs. Hence, the Constitution especially allowed Congress itself to prescribe such limitations and restrictions itself, a prudent move considering that such authority inherently belongs to Congress and not the President. Since Congress has no power to amend the Constitution, it should be taken to mean that such limitations and restrictions should be provided by mere statute. Then again, even the presidential authority to impose tariffs arises only by mere statute. Indeed, this presidential privilege is both contingent in nature and legislative in origin. These characteristics, when

weighed against the aspect of executive control and supervision, cannot militate against Congresss exercise of its inherent power to tax. At the same time, Congress can enact additional tasks or responsibilities on either the Tariff Commission or the DTI Secretary, such as their respective roles on the imposition of general safeguard measures under the SMA. In doing so, the same Congress, which has the putative authority to abolish the Tariff Commission or the DTI, is similarly empowered to alter or expand its functions through modalities which do not align with established norms in the bureaucratic structure. The Court is bound to recognize the legislative prerogative to prescribe such modalities, no matter how atypical they may be, in affirmation of the legislative power to restructure the executive branch of government. Thus, if the Congress enacted the law so that the DTI Secretary is bound by the Tariff Commission in the sense the former cannot impose general safeguard measures absent a final positive determination from the latter the Court is obliged to respect such legislative prerogative, no matter how such arrangement deviates from traditional norms as may have been enshrined in jurisprudence. The only ground under which such legislative determination as expressed in statute may be successfully challenged is if such legislation contravenes the Constitution. No such argument is posed by the respondents, who do not challenge the validity or constitutionality of the SMA. IV. Courts Interpretation of SMA In Harmony with Other Constitutional Provisions In response to our citation of Section 28(2), Article VI, respondents elevate two arguments grounded in constitutional law. One is based on another constitutional provision, Section 12, Article XIII, which mandates that [t]he State shall promote the preferential use of Filipino lab or, domestic materials and locally produced goods and adopt measures that help make them competitive. By no means does this provision dictate that the Court favor the domestic industry in all competing claims that it may bring before this Court. If it were so, judicial proceedings in this country would be rendered a mockery, resolved as they would be, on the basis of the personalities of the litigants and not their legal positions. he Congress, in enacting the SMA, has delegated the power to impose general safeguard measures to the executive branch, but at the same time subjected such imposition to limitations, such as the requirement of a positive final determination by the Tariff Commission under Section 5. For the executive branch to ignore these boundaries imposed by Congress is to set up an ignoble clash between the two co-equal branches of government. Considering that the exercise of police power emanates from legislative authority, there is little question that the prerogative of the legislative branch shall prevail in such a clash. VII. Effects of Courts Resolution Philcemcor argues that the granting of Southern Crosss Petition should not necessarily lead to the voiding of the Decision of the DTI Secretary dated 5 August 2003 imposing the general safeguard measures. For Philcemcor, the availability of appeal to the CTA as an available and adequate remedy would have made the Court of Appeals Decision merely erroneous or irregular, but not void. Moreover, the said Decision merely required the DTI Secretary to render a decision, which could have very well been a decision not to impose a safeguard measure; thus, it could not be said that the annulled decision resulted from the judgment of the Court of Appeals.

The Court of Appeals Decision was annulled precisely because the appellate court did not have the power to rule on the petition in the first place. Jurisdiction is necessarily the power to decide a case, and a court which does not have the power to adjudicate a case is one that is bereft of jurisdiction. We find no reason to disturb our earlier finding that the Court of Appeals Decision is null and void. At the same time, the Court in its Decision paid particular heed to the peculiarities attaching to the 5 August 2003 Decision of the DTI Secretary. In the DTI Secretarys Decision, he expressly stated that as a result of the Court of Appeals Decision, there is no legal impediment for the Secretary to decide on the application. Yet the truth remained that there was a legal impediment, namely, that the decision of the appellate court was not yet final and executory. Moreover, it was declared null and void, and since the DTI Secretary expressly denominated the Court of Appeals Decision as his basis for deciding to impose the safeguard measures, the latter decision must be voided as well. Otherwise put, without the Court of Appeals Decision, the DTI Secretarys Decision of 5 August 2003 would not have been rendered as well. Accordingly, the Court reaffirms as a nullity the DTI Secretarys Decision dated 5 August 2003. As a necessary consequence, no further action can be taken on Philcemcors Petition for Extension of the Safeguard Measure. Obviously, if the imposition of the general safeguard measure is void as we declared it to be, any extension thereof should likewise be fruitless. The proper remedy instead is to file a new application for the imposition of safeguard measures, subject to the conditions prescribed by the SMA. Should this step be eventually availed of, it is only hoped that the parties involved would content themselves in observing the proper procedure, instead of making a mockery of the rule of law. WHEREFORE, respondents Motions for Reconsideration are DENIED WITH FINALITY. Respondent DTI Secretary is hereby ENJOINED from taking any further action on the pending Petition for Extension of the Safeguard Measure. Hironobu Ryu, President of petitioner Southern Cross Cement Corporation, and Angara Abello Concepcion Regala & Cruz, counsel petitioner, are hereby given FIVE (5) days from receipt of this Resolution to EXPLAIN why they should not be meted disciplinary sanction for failing to timely inform the Court of the filing of Southern Crosss Petition for Review with the Court of Tax Appeals, as adverted to earlier in this Resolution.

CIR vs. MARUBENI GR No. 137377| J. Puno Facts: CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting the 1985 deficiency income, branch profit remittance and contractors taxes from Marubeni Corp after finding the latter to have properly availed of the tax amnesty under EO 41 & 64, as amended. Marubeni, a Japanese corporation, engaged in general import and export trading, financing and construction, is duly registered in the Philippines with Manila branch office. CIR examined the Manila branchs books of accounts for fiscal year ending March 1985, and found that respondent had undeclared income from contracts with NDC and Philphos for construction of a wharf/port complex and ammonia storage complex respectively. On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that the income respondent derived were income from Philippine sources, hence subject to internal revenue taxes. On Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency income, branch profit remittance and contractors tax assessments and second questioned the deficiency commercial brokers assessment. On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85, and that taxpayers who wished to avail this should on or before Oct 31, 1986. Marubeni filed its tax amnesty return on Oct 30, 1986. On Nov 17, 1986, EO 64 expanded EO 41s scope to include estate and donors taxes under Title 3 and business tax under Chap 2, Title 5 of NIRC, extended the period of availment to Dec 15, 1986 and stated those who already availed amnesty under EO 41 should file an amended return to avail of the new benefits. Marubeni filed a supplemental tax amnesty return on Dec 15, 1986. CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the deficiency taxes. CA affirmed on appeal. Issue: W/N Marubeni is exempted from paying tax Held: Yes.

1. On date of effectivity CIR claims Marubeni is disqualified from the tax amnesty because it falls under the exception in Sec 4b of EO 41: Sec. 4. Exceptions.The following taxpayers may not avail themselves of the amnesty herein granted: xxx b) Those with income tax cases already filed in Court as of the effectivity hereof; Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30, 1986, a case had already been filed and was pending before the CTA and Marubeni therefore fell under the exception. However, the point of reference is the date of effectivity of EO 41 and that the filing of income tax cases must have been made before and as of its effectivity. EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed with CTA on Sept 26, 1986. When EO 41 became effective, the case had not yet been filed. Marubeni does not fall in the exception and is thus, not disqualified from availing of the amnesty under EO 41 for taxes on income and branch profit remittance. The difficulty herein is with respect to the contractors tax assessment (business tax) and respondents availment of the amnesty under EO 64, which expanded EO 41s coverage. When EO 64 took effect on Nov 17, 1986, it did not provide for exceptions to the coverage of the amnesty for business, estate and donors taxes. Instead, Section 8 said EO provided that: Section 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to or inconsistent with this amendatory Executive Order shall remain in full force and effect. Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its date of effectivity. The general rule is that an amendatory act operates prospectively. It may not be given a retroactive effect unless it is so provided expressly or by necessary implication and no vested right or obligations of contract are thereby impaired. 2. On situs of taxation Marubeni contends that assuming it did not validly avail of the amnesty, it is still not liable for the deficiency tax because the income from the projects came from the Offshore Portion as opposed to Onshore Portion. It claims all materials and equipment in the contract under the Offshore Portion were manufactured and completed in Japan, not in the Philippines, and are therefore not subject to Philippine taxes. (BG: Marubeni won in the public bidding for projects with government corporations NDC and Philphos. In the contracts, the prices were broken down into a Japanese Yen Portion (I and II) and Philippine Pesos Portion and financed either by OECF or by suppliers credit. The Japanese Yen Portion I corresponds to the Foreign Offshore Portion, while Japanese Yen Portion II and the Philippine Pesos Portion correspond to the Philippine Onshore Portion. Marubeni has already paid the Onshore Portion, a fact that CIR does not deny.) CIR argues that since the two agreements are turn-key, they call for the supply of both materials and services to the client, they are contracts for a piece of work and are indivisible. The situs of the two projects is in the Philippines, and the materials provided and services rendered were all done and completed within the territorial jurisdiction of the Philippines. Accordingly, respondents entire receipts from the contracts, including its receipts from the Offshore Portion, constitute income from

Philippine sources. The total gross receipts covering both labor and materials should be subjected to contractors tax (a tax on the exercise of a privilege of selling services or labor rather than a sale on products). Marubeni, however, was able to sufficiently prove in trial that not all its work was performed in the Philippines because some of them were completed in Japan (and in fact subcontracted) in accordance with the provisions of the contracts. All services for the design, fabrication, engineering and manufacture of the materials and equipment under Japanese Yen Portion I were made and completed in Japan. These services were rendered outside Philippines taxing jurisdiction and are therefore not subject to contractors tax. Petition denied.

CIR vs. Santos, 277 SCRA 617 (1997) FACTS: Guild of Phil. Jewellers questions the constitutionality of certain provisions of the NIRC and Tariff and Customs Code of the Philippines. It is their contention that present Tariff and tax structure increases manufacturing costs and render local jewelry manufacturers uncompetitive against other countries., in support of their position, they submitted what they purported to be an exhaustive study of the tax rates on jewelry prevailing in other Asian countries, in comparison to tax rates levied in the country. Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and oppressive and declared them INOPERATIVE and WITHOUR FORCE AND EFFECT in so far as petitioners are concerned. Petitioner CIR assailed decision rendered by respondent judge contending that the latter has no authority to pass judgment upon the taxation policy of the government. Petitioners also impugn the decision by asserting that there was no showing that the tax laws on jewelry are confiscatory. ISSUE: Whether or not the Regional Trial Court has authority to pass judgment upon taxation policy of the government. RULING: The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. This is not to say that RTC has no power whatsoever to declare a law unconstitutional. But this authority does not extend to deciding questions which pertain to legislative policy.RTC have the power to declare the law unconstitutional but this authority does not extend to deciding questions which pertain to legislative policy. RTC can only looking to the validity of a provision, that

is whether or not it has been passed according to the provisions laid down by law, and thus cannot inquire as to the reasons for its existence. RULING ON THE EXTENT OF LEGISLATIVE POWER TO TAX SC held that it is within the power f the legislature whether to tax jewelry or not. With the legislature primarily lies the discretion to determine the nature (kind), object(purpose), extent (rate), coverage (subject) and situs (place) of taxation.

MERALCO Securities Corporation vs Victorino Savellano Taxation Courts Cannot Issue Mandamus to Compel CIR to Collect Taxes FACTS: In 1967, Juan Maniago informed the Commissioner of Internal Revenue (CIR) that MERALCO Securities Corporation did not pay the proper taxes from 1962 to 1966. The CIR conducted an investigation and it found out that MERALCO did actually pay the proper amount of tax due within said period. The CIR then informed Maniago of its decision and also informed him that since no deficiency tax was collected, Maniago is not entitled to the informers reward then offered to individuals who report tax evaders. Maniago then filed a petition for mandamus against the CIR. After hearing, Judge Victorino Savellano granted Maniagos petition and ordered the CIR to collect the deficiency taxes and further ordered the CIR to pay Maniagos informers reward. ISSUE: Whether or not Judge Savellano is correct. HELD:

No. The power to assess or not to assess tax deficiency against a taxpayer is a discretionary function vested in the CIR. As such, the CIR may not be compelled by mandamus. Mandamus only lies to

enforce the performance of a ministerial act or duty and not to control the performance of a discretionary power. Especially so in this case where the CIR found that no tax deficiency is due. It should be noted further that regular courts have no jurisdiction over the subject matter of this case. Section 7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue.

CIR v. SC Johnson & Son (Tax Treaties) Facts: S. C. Johnson and Son, Inc. entered into a license agreement with SC Johnson and Son, United States of America (USA) For the use of the trademark or technology, S. C. Johnson and Son, Inc. was obliged to pay SC Johnson and Son, USA royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments S. C. Johnson and Son, Inc. filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties arguing that the preferential tax rate of 10% should apply to them Issue Whether or not SC Johnson and Son, USA is entitled to the "most favored nation" tax rate of 10% on royalties as provided in the RP-US Tax Treaty in relation to the RP-West Germany Tax Treaty. Held/Ratio NO. Under Article 13 of the RP-US Tax Treaty, the Philippines may impose one of three rates 25 percent of the gross amount of the royalties; 15 percent when the royalties are paid by a corporation registered with the Philippine Board of Investments and engaged in preferred areas of activities; or the lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a resident of a third state. The RP-US and the RP-West Germany Tax Treaties do not contain similar provisions on tax crediting. Since the RP-US Tax Treaty does not give a matching tax credit of 20 percent for the taxes paid to the Philippines on royalties as allowed under the RP-West Germany Tax Treaty, private respondent cannot be deemed

entitled to the 10percent rate granted under the latter treaty for the reason that there is no payment of taxes on royalties under similar circumstances.

Pepsi Cola Bottling Company vs Municipality of Tanauan 69 SCRA 460 Taxation Delegation to Local Governments Double Taxation Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In September 1962, the Municipality approved Ordinance No. 23 which levies and collects from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked. In December 1962, the Municipality also approved Ordinance No. 27 which levies and collects on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of one centavo P0.01) on each gallon of volume capacity. Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute double taxation in two instances: a) double taxation because Ordinance No. 27 covers the same subject matter and impose practically the same tax rate as with Ordinance No. 23, b) double taxation because the two ordinances impose percentage or specific taxes. Pepsi Cola also questions the constitutionality of Republic Act 2264 which allows for the delegation of taxing powers to local government units; that allowing local governments to tax companies like Pepsi Cola is confiscatory and oppressive. The Municipality assailed the arguments presented by Pepsi Cola. It argued, among others, that only Ordinance No. 27 is being enforced and that the latter law is an amendment of Ordinance No. 23, hence there is no double taxation. ISSUE: Whether or not there is undue delegation of taxing powers. Whether or not there is double taxation.

HELD: No. There is no undue delegation. The Constitution even allows such delegation. Legislative powers may be delegated to local governments in respect of matters of local concern. By necessary implication, the legislative power to create political corporations for purposes of local selfgovernment carries with it the power to confer on such local governmental agencies the power to tax. Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides: Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law. Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation. There is no double taxation. The argument of the Municipality is well taken. Further, Pepsi Colas assertion that the delegation of taxing power in itself constitutes double taxation cannot be merited. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law unlike in other jurisdictions. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality. Kilosbayan vs Guingona GR No. 113375, May 5, 1994 FACTS: Pursuant to Section 1 of the charter of the PCSO (R.A. No. 1169, as amended by B.P. Blg. 42) which grants it the authority to hold and conduct charity sweepstakes races, lotteries and other similar activities, the PCSO decided to establish an on-line lottery system for the purpose of increasing its revenue base and diversifying its sources of funds. Sometime before March 1993, after learning that the PCSO was interested in operating an on-line lottery system, the Berjaya Group Berhad, a multinational company and one of the ten largest public companies in Malaysia, became interested to offer its services and resources to PCSO. As an initial step, Berjaya Group Berhad (through its individual nominees) organized with some Filipino investors in March 1993 a Philippine corporation known as the Philippine Gaming Management Corporation (PGMC), which was intended to be the medium through which the technical and management services required for the project would be offered and delivered to PCSO. Before August 1993, the PCSO formally issued a Request for Proposal (RFP) for the Lease Contract of an on-line lottery system for the PCSO. On 15 August 1993, PGMC submitted its bid to the PCSO. On 21 October 1993, the Office of the President announced that it had given the respondent PGMC the go-signal to operate the countrys on-line lottery system and that the corresponding implementing contract would be submitted not later than 8 November 1993 for final clearance and approval by the Chief Executive. On 4 November 1993, KILOSBAYAN sent an open letter to President Fidel V. Ramos strongly opposing the setting up of the on-line lottery system on the basis of serious moral and ethical considerations. Considering the denial by the Office of the President of its protest and the statement

of Assistant Executive Secretary Renato Corona that only a court injunction can stop Malacaang, and the imminent implementation of the Contract of Lease in February 1994, KILOSBAYAN, with its co-petitioners, filed on 28 January 1994 this petition. Petitioner claims that it is a non-stock domestic corporation composed of civic-spirited citizens, pastors, priests, nuns, and lay leaders. The rest of the petitioners, except Senators Freddie Webb and Wigberto Taada and Representative Joker P. Arroyo, are suing in their capacities as members of the Board of Trustees of KILOSBAYAN and as taxpayers and concerned citizens. Senators Webb and Taada and Representative Arroyo are suing in their capacities as members of Congress and as taxpayers and concerned citizens of the Philippines. The public respondents, meanwhile allege that the petitioners have no standing to maintain the instant suit, citing the Courts resolution in Valmonte vs. Philippine Charity Sweepstakes Office. ISSUES: 1. Whether or not the petitioners have locus standi 2. Whether or the Contract of Lease in the light of Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, which prohibits the PCSO from holding and conducting lotteries in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign. is legal and valid. HELD: We find the instant petition to be of transcendental importance to the public. The ramifications of such issues immeasurably affect the social, economic, and moral well-being of the people even in the remotest barangays of the country and the counter-productive and retrogressive effects of the envisioned on-line lottery system are as staggering as the billions in pesos it is expected to raise. The legal standing then of the petitioners deserves recognition and, in the exercise of its sound discretion, this Court hereby brushes aside the procedural barrier which the respondents tried to take advantage of. The language of Section 1 of R.A. No. 1169 is indisputably clear. The PCSO cannot share its franchise with another by way of collaboration, association or joint venture. Neither can it assign, transfer, or lease such franchise. Whether the contract in question is one of lease or whether the PGMC is merely an independent contractor should not be decided on the basis of the title or designation of the contract but by the intent of the parties, which may be gathered from the provisions of the contract itself. Animus hominis est anima scripti. The intention of the party is the soul of the instrument. Undoubtedly, from the very inception, the PCSO and the PGMC mutually understood that any arrangement between them would necessarily leave to the PGMC the technical, operations, and management aspects of the on-line lottery system while the PSCO would, primarily, provide the franchise. The so-called Contract of Lease is not, therefore, what it purports to be. Woven therein are provisions which negate its title and betray the true intention of the parties to be in or to have a joint venture for a period of eight years in the operation and maintenance of the on-line lottery system. We thus declare that the challenged Contract of Lease violates the exception provided for in paragraph B, Section 1 of R.A. No. 1169, as amended by B.P. Blg. 42, and is, therefore, invalid for

being contrary to law. This conclusion renders unnecessary further discussion on the other issues raised by the petitioners.

Mactan Cebu (MCIAA) vs. Marcos GR 120082 September 11, 1996 261 SCRA 667

Davide Jr., .: (CJ) FACTS: Mactan Cebu International Airport Authority (MCIAA) was created to principally undertake to economical, efficient and effective control, management and supervision of the Mactan International Airport and such other airports as may be established in the province of Cebu Section 14 of its charter excempts the Authority from payment of realty taxes but in 1994, the City Treasurer demanded payment for realty taxes on several parcels of land belonging to the other. MCIAA filed a petition in RTC contending that, by nature of its powers and functions, it has the same footing of an agency or instrumentality of the national government. The RTC dismissed the petition based on Section 193 & 234 of the local Government Code or R.A. 7160. Thus this petition. ISSUE: Whether or not the MCIAA is excempted from realty taxes? RULING:

With the repealing clause of RA 7160 the tax exemption provided. All general and special in the charter of the MCIAA has been expressly repeated. It state laws, acts, City Charters, decrees, executive orders, proclamations and administrative regulations, or part of parts thereof which are inconsistent with any of the provisions of the Code are hereby repeated or modified accordingly. Therefore the SC affirmed the decision and order of the RTC and herein petitioner has to pay the assessed realty tax of its properties effective January 1, 1992 up to the present.

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.

Gerochi vs. DOE 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: Whether or not the universal charge is a tax. Held: 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.

REPUBLIC OF THE PHILIPINES, petitioner, vs. THE COURT OF APPEALS and PRECISION PRINTING INC. respondents. D E C I S I O N PURISIMA, J.: At bar is a Petition for Review under Rule 45 seeking to set aside the decision of the Court of Appeals[1] affirming the Order of dismissal by the Trial Court[2] of Quezon City in the case, entitled "Republic of the Philippines vs. Precision Printing, Inc.", on the ground of extinguishment of tax liability as Precision Printing, Inc., had availed of tax amnesty under Executive Order Nos. 54 and 64. On June 10, 1985, the Bureau of Internal Revenue (BIR) issued an assessment notice and letter against Precision Printing, Inc., demanding payment of the sum of P248,406.11. Despite repeated demands, however, the latter failed to pay within the period prescribed by law. Consequently, the said tax assessment became final and demandable. On October 31, 1986, it turned out that Printing Precision, Inc. filed a Tax Amnesty Return together with the Statements of Net Worth as of December 31, 1985 and December 31, 1980 and other supporting documents under File No. 00696 and its Amended Tax Return filed on December 21, 1986.[3] The said amnesty return was fired pursuant to Executive Order No. 41, as amended by Executive Order Nos. 54 and 64 respectively, dated August 26, 1986, November 4, 1986, and November 17, 1986.

On June 9, 1990, BIR brought before Branch CV of the Regional Trial Court of Quezon City, a Complaint against Precision Printing, Inc. for the collection of the amount of P248,406.11 as deficiency income tax for 1981 inclusive of interest. The defendant, Precision Printing, Inc., put up the affirmative defense that it is not liable for such tax deficiencies because it availed of tax amnesty under Executive Order No. 41, as amended by Executive Order Nos. 54 and 64. On June 27, 1991, after a preliminary hearing on the aforestated affirmative defense, Presiding Judge Tomas V. Tadeo of Branch 105 of Regional Trial Court of Quezon City, issued an Order of dismissal, ratiocinating thus: "WHEREFORE, premises considered, the Court finds defendant's affirmative defense of availment of tax amnesty to be well-taken and hereby dismisses this case. No costs. SO ORDERED." The aforesaid Order was seasonably appealed to the Court of Appeals but to no avail. On February 23, 1993, the Court of Appeals promulgated its Decision affirming the appealed Order of Dismissal. Dissatisfied therewith, the Republic of the Philippines has come to this Court via the present Petition for 11/6/13 RP vs CA : 109193 : February 1, 2000 : J. Purisima : Third Division sc.judiciary.gov.ph/jurisprudence/2000/feb2000/109193.html 2/3 Review under Rule 45 of the Revised Rules of Court; posing for resolution the sole issue: "WHETHER OR NOT THE RESPONDENT COURT ERRED IN AFFIRMING THE TRIAL COURT'S FINDING THAT PRIVATE RESPONDENT'S TAX LIABILITY WAS EXTINGUISHED WHEN IT AVAILED OF TAX AMNESTY UNDER EXECUTIVE ORDER NO. 41." Petitioner anchors its submission on the fact that the respondent corporation was already assessed of its tax deficiency prior to the promulgation of Revenue Memorandum 4-87 which implemented E.O. 41. The tax assessment letter was received by respondent corporation on June 10, 1985 while the said Revenue Memorandum 4-87 explicitly refers only to assessments made after August 21, 1986. The issue raised by petitioner is not a novel one. It was settled in the case of Commissioner of Internal Revenue vs. Court of Appeals, 240 SCRA 368, wherein the issues raised for resolution were similar to the theories and issues here. Executive Order No. 41 (E.O. 41) declaring a tax amnesty on unpaid income taxes was promulgated on August 22, 1986. It was later amended to include estate and donor's taxes and taxes on business, for the taxable years 1981-1985. Thereafter, Revenue Memorandum 4-87 (R.O. 4-87) issued to implement the law. However, R.O. 4-87 as the following provisions: "TO: ALL INTERNAL REVENUE OFFICERS AND OTHER CONCERNED: 1.02. To give effect and substance to the immunity provisions of the Tax Amnesty under Executive Order No. 41, as expanded by Executive Order No. 64, the following instructions are hereby issued: xxx xxx xxx 1.02. A certification by the Tax Amnesty Implementation officer of the fact of availment of the said tax amnesty shall be a sufficient basis for: xxx xxx xxx

1.02.3. In appropriate cases, the cancellation/withdrawal of assessment notice and letters of demand, issued after August 21, 1986 for the collection of income, business, estate or donor's taxes during the taxable years."[4] It is therefore decisively clear that R.O. 4-87 reckoned the applicability of the tax amnesty from August 22, 1986 - the date when E.O. 41 took effect. However, Executive Order No. 41 contained no limitation whatsoever delimiting its applicability to assessments made prior to its effectivity. Rather, the said E.O. 41 merely provided for a general statement covering all tax liabilities incurred from 1981-1985. Thus, as to whether assessments made prior to August 21, 1986 are still covered by Executive Order No. 41 the Court had this to say: "If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a 11/6/13 RP vs CA : 109193 : February 1, 2000 : J. Purisima : Third Division sc.judiciary.gov.ph/jurisprudence/2000/feb2000/109193.html 3/3 general grant of tax amnesty subject only to cases specifically excepted by it."[5] The above ruling is in consonance with the tenet in administrative law that administrative issuances seeking to carry into effect an act of Congress must be in harmony with the provisions of the law, it cannot modify nor supplant the same.[6] WHEREFORE, the decision of the court of Appeals dated February 23, 1993 in CA-G.R. CV No. 34003 is hereby AFFIRMED without any pronouncement as to costs. SO ORDERED. LACKING CIR V BENGUET 2 cases