G.R. No. 99886 March 31, 1993 JOHN H. OSMEA, petitioner, vs. OSCAR ORBOS, in his capacit as E!

"c#ti$" S"cr"tar % JES&S ES'AN(S)AO, in his capacit as S"cr"tar o* +inanc"% ,ENCES)AO -E)A .A/, in his capacit as H"a0 o* th" O**ic" o* En"r1 A**airs% RE2 3. 'AN'(ONGCO, an0 th" ENERG4 REG&)A'OR4 BOAR-, respondents. NAR3ASA, C.J.: The petitioner seeks the corrective, 1 prohibitive and coercive remedies provided by Rule 65 of the Rules of Court,5 upon the following posited grounds, viz.: 3 ! the invalidity of the "TR#$T %CC&#'T" in the books of account of the (inistry of )nergy *now, the &ffice of )nergy %ffairs!, created pursuant to + ,, paragraph , of -... 'o. /56, as amended, "said creation of a trust fund being contrary to $ection 0/ *1!, %rticle 23 of the . . Constitution4 6 0! the unconstitutionality of + ,, paragraph *c! of -... 'o. /56, as amended by )5ecutive &rder 'o. 16, for "being an undue and invalid delegation of legislative power . . to the )nergy Regulatory 7oard4" 7 1! the illegality of the reimbursements to oil companies, paid out of the &il -rice $tabili8ation 9und, 6 because it contravenes + ,, paragraph 0 *0! of -. .. /56, as amended4 and :! the conse;uent nullity of the &rder dated .ecember <, //< and the necessity of a rollback of the pump prices and petroleum products to the levels prevailing prior to the said &rder. 3t will be recalled that on &ctober <, /,:, -resident 9erdinand (arcos issued -... /56 creating a $pecial %ccount in the =eneral 9und, designated as the &il -rice $tabili8ation 9und *&-$9!. The &-$9 was designed to reimburse oil companies for cost increases in crude oil and imported petroleum products resulting from e5change rate ad>ustments and from increases in the world market prices of crude oil. $ubse;uently, the &-$9 was reclassified into a "trust liability account," in virtue of ).&. <0:, 8 and ordered released from the 'ational Treasury to the (inistry of )nergy. The same )5ecutive &rder also authori8ed the investment of the fund in government securities, with the earnings from such placements accruing to the fund. -resident Cora8on C. %;uino, amended -... /56. $he promulgated )5ecutive &rder 'o. 16 on 9ebruary 06, /,6, e5panding 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 (inistry of 9inance. 'ow, the petition alleges that the status of the &-$9 as of (arch 1 , // showed a "Terminal 9und 7alance

deficit" of some - 0.,66 billion4 8 that to abate the worsening deficit, "the )nergy Regulatory 7oard . . issued an &rder on .ecember <, //<, approving the increase in pump prices of petroleum products," and at the rate of recoupment, the &-$9 deficit should have been fully covered in a span of si5 *6! months, but this notwithstanding, the respondents ? &scar &rbos, in his capacity as )5ecutive $ecretary4 @esus )stanislao, in his capacity as $ecretary of 9inance4 Aenceslao de la -a8, in his capacity as Bead of the &ffice of )nergy %ffairs4 Chairman Re5 2. Tantiongco and the )nergy Regulatory 7oard ? "are poised to accept, process and pay claims not authori8ed under -... /56." 9 The petition further avers that the creation of the trust fund violates + 0/*1!, %rticle 23 of the Constitution, reading as follows: *1! %ll money collected on any ta5 levied for a special purpose shall be treated as a special fund and paid out for such purposes only. 3f the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the =overnment. The petitioner argues that "the monies collected pursuant to . . -... /56, as amended, must be treated as a C$-)C3%D 9#'.,C not as a Ctrust accountC or a Ctrust fund,C and that "if a special ta5 is collected for a specific purpose, the revenue generated therefrom shall Cbe treated as a special fundC to be used only for the purpose indicated, and not channeled to another government ob>ective." 19 -etitioner further points out that since "a Cspecial fundC consists of monies collected through the ta5ing power of a $tate, such amounts belong to the State, although the use thereof is limited to the special purposeEob>ective for which it was created." 11 Be also contends that the "delegation of legislative authority" to the )R7 violates + 0, *0!. %rticle 23 of the Constitution, viz.: *0! The Congress may, by law, authori8e the -resident to fi5, within specified limits, and sub>ect to such limitations and restrictions as it may impose, tariff rates, import and e5port ;uotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the =overnment4 and, inasmuch as the delegation relates to the e5ercise of the power of ta5ation, "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." 15 The petitioner does not suggest that a "trust account" is illegal per se, but maintains that the monies collected, which form part of the &-$9, should be maintained in a special account of the general fund for the reason that the Constitution so provides, and because they are, supposedly, taxes levied for a special purpose. Be assumes that the 9und is formed from a ta5 undoubtedly because a portion thereof is taken from collections of ad valorem ta5es and the increases thereon. 3t thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to the )R7 under -... /56, as amended, partake of the nature of the ta5ation power of the $tate. The $olicitor =eneral observes that the "argument rests on the assumption that the &-$9 is a form of revenue measure drawing from a special ta5 to be e5pended for a special purpose." 13 The petitionerCs perceptions are, in the CourtCs view, not ;uite correct. To address this critical misgiving in the position of the petitioner on these issues, the Court recalls its holding inValmonte v. nergy !egulatory "oard, et al. 16 : The foregoing arguments suggest the presence of misconceptions about the nature and functions of the &-$9. The &-$9 is a "Trust %ccount" which was established "for the purpose of minimi8ing the fre;uent price changes brought about by e5change rate ad>ustment andEor changes in world market prices of crude oil and imported petroleum products." 17 #nder -... 'o. /56, as amended by )5ecutive &rder 'o. 16 dated 06 9ebruary /,6, this Trust %ccount may be funded from any of the following sources: a! #ny increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products sub>ect to ta5 under this .ecree arising from exchange rate ad$ustment, as may be determined by the (inister of 9inance in consultation with the 7oard of )nergy4 b! #ny increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the (inister of 9inance in consultation with the 7oard of )nergy: c! #ny additional amount to be imposed on petroleum products to augment the resources of the 9und

through an appropriate &rder that may be issued by the 7oard of )nergy re;uiring payment of persons or companies engaged in the business of importing, manufacturing andEor marketing petroleum products4 d! #ny 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 e5change rate as fi5ed by the 7oard of )nergy. 555 555 555 The fact that the world market prices of oil, measured by the spot market in Rotterdam, vary from day to day is of >udicial notice. 9reight rates for hauling crude oil and petroleum products from sources of supply to the -hilippines may also vary from time to time. The e5change rate of the peso vis%a%vis the #.$. dollar and other convertible foreign currencies also changes from day to day. These fluctuations in world market prices and in tanker rates and foreign e5change rates would in a completely free market translate into corresponding ad>ustments in domestic prices of oil and petroleum products with sympathetic fre;uency. 7ut domestic prices which vary from day to day or even only from week to week would result in a chaotic market with unpredictable effects upon the countryCs economy in general. &he '(S) was established precisely to protect local consumers from the adverse consequences that such frequent oil price ad$ustments may have upon the economy. &hus, the '(S) serves as a poc*et, as it were, into which a portion of the purchase price of oil and petroleum products paid by consumers as well as some tax revenues are inputted and from which amounts are drawn from time to time to reimburse oil companies, when appropriate situations arise, for increases in, as well as underrecovery of, costs of crude importation. &he '(S) is thus a buffer mechanism through which the domestic consumer prices of oil and petroleum products are stabilized, instead of fluctuating every so often, and oil companies are allowed to recover those portions of their costs which they would not otherwise recover given the level of domestic prices existing at any given time .&o the extent that some tax revenues are also put

into it, the '(S) is in effect a device through which the domestic prices of petroleum products are subsidized in part. +t appears to the ,ourt that the establishment and maintenance of the '(S) is well within that pervasive and non% waivable power and responsibility of the government to secure the physical and economic survival and well%being of the community, that comprehensive sovereign authority we designate as the police power of the State. The stabili8ation, and subsidy of domestic prices of petroleum products and fuel oil ? clearly critical in importance considering, among other things, the continuing high level of dependence of the country on imported crude oil ? are appropriately regarded as public purposes. %lso of relevance is this CourtCs ruling in relation to the sugar stabili8ation fund the nature of which is not far different from the &-$9. 3n -aston v. !epublic (lanters "an*, 16 this Court upheld the legality of the sugar stabili8ation fees and e5plained their nature and character, viz.: The stabili8ation fees collected are in the nature of a ta5, which is within the power of the $tate to impose for the promotion of the sugar industry *Dut8 v. %raneta, /, -hil. :,!. . . . &he tax collected is not in a pure exercise of the taxing power. +t is levied with a regulatory purpose, to provide a means for the stabilization of the sugar industry. &he levy is primarily in the exercise of the police power of the State (Dut8 v. %raneta, supra). 555 555 555 The stabili8ation fees in ;uestion are levied by the $tate upon sugar millers, planters and producers for a special purpose ? that of "financing the growth and development of the sugar industry and all its components, stabili8ation of the domestic market including the foreign market." The fact that the $tate has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose *Dawrence v. %merican $urety Co. 061 (ich. 5,6, 0:/ %DR 515, cited in :0 %m @ur $ec. 0, p. 6 ,!. Baving been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute,

"administered in trust" for the purpose intended. &nce the purpose has been fulfilled or abandoned, the balance if any, is to be transferred to the general funds of the =overnment. That is the essence of the trust intended *$)) /,6 Constitution, %rticle 23, $ec. 0/*1!, lifted from the /15 Constitution, %rticle 23, $ec. 01* !. 18 &he character of the Stabilization )und as a special *ind of fund is emphasized by the fact that the funds are deposited in the (hilippine .ational "an* and not in the (hilippine &reasury, moneys from which may be paid out only in pursuance of an appropriation made by law * /,6! Constitution, %rticle 23, $ec. 0/ *1!, lifted from the /15 Constitution, %rticle 23, $ec. 01* !. *)mphasis supplied!. Bence, it seems clear that while the funds collected may be referred to as ta5es, they are e5acted in the e5ercise of the police power of the $tate. (oreover, that the &-$9 is a special fund is plain from the special treatment given it by ).&. 16. 3t is segregated from the general fund4 and while it is placed in what the law refers to as a "trust liability account," the fund nonetheless remains sub>ect to the scrutiny and review of the C&%. The Court is satisfied that these measures comply with the constitutional description of a "special fund." 3ndeed, the practice is not without precedent. Aith regard to the alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the )R7 to impose additional amounts on petroleum products provides a sufficient standard by which the authority must be e5ercised. 3n addition to the general policy of the law to protect the local consumer by stabili8ing and subsidi8ing domestic pump rates, + ,*c! of -... /56 18 e5pressly authori8es the )R7 to impose additional amounts to augment the resources of the )und. Ahat petitioner would wish is the fi5ing of some definite, ;uantitative restriction, or "a specific limit on how much to ta5." 19 The Court is cited to this re;uirement by the petitioner on the premise that what is involved here is the power of ta5ation4 but as already discussed, this is not the case. Ahat is here involved is not so much the power of ta5ation as police power. %lthough the provision authori8ing the )R7 to impose additional amounts could be construed to refer to the power of ta5ation, it cannot be overlooked that the overriding consideration is to enable the delegate to act with e5pediency in carrying out the ob>ectives of the law which are embraced by the police power of the $tate.

The interplay and constant fluctuation of the various factors involved in the determination of the price of oil and petroleum products, and the fre;uently shifting need to either augment or e5haust the 9und, do not conveniently permit the setting of fi5ed or rigid parameters in the law as proposed by the petitioner. To do so would render the )R7 unable to respond effectively so as to mitigate or avoid the undesirable conse;uences of such fluidity. %s such, the standard as it is e5pressed, suffices to guide the delegate in the e5ercise of the delegated power, taking account of the circumstances under which it is to be e5ercised. 9or a valid delegation of power, it is essential that the law delegating the power must be * ! complete in itself, that is it must set forth the policy to be e5ecuted by the delegate and *0! it must fi5 a standard ? limits of which are sufficiently determinate or determinable ? to which the delegate must conform. 59 . . . %s pointed out in )du v. )ricta: "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. &therwise, the charge of complete abdication may be hard to repel. % standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. 3t indicates the circumstances under which the legislative command is to be effected. 3t is the criterion by which the legislative purpose may be carried out. Thereafter, the e5ecutive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may either be e5press or implied. 3f the former, the nonFdelegation ob>ection is easily met. The standard though does not have to be spelled out specifically. 3t could be implied from the policy and purpose of the act considered as a whole. 51 3t would seem that from the aboveF;uoted ruling, the petition for prohibition should fail. The standard, as the Court has already stated, may even be implied. 3n that light, there can be no ground upon which to sustain the petition, inasmuch as the challenged law sets forth a determinable standard which guides the e5ercise of the power granted to the )R7. 7y the same token, the proper e5ercise of the delegated power may be tested with ease. 3t seems obvious that what the law intended was to permit the additional imposts for as long as there e5ists a need to protect the general public and the petroleum industry from the adverse conse;uences of pump rate fluctuations. "Ahere the standards set up for the guidance of an

administrative officer and the action taken are in fact recorded in the orders of such officer, so that Congress, the courts and the public are assured that the orders in the >udgment of such officer conform to the legislative standard, there is no failure in the performance of the legislative functions." 55 This Court thus finds no serious impediment to sustaining the validity of the legislation4 the e5press purpose for which the imposts are permitted and the general ob>ectives and purposes of the fund are readily discernible, and they constitute a sufficient standard upon which the delegation of power may be >ustified. 3n relation to the third ;uestion ? respecting the illegality of the reimbursements to oil companies, paid out of the &il -rice $tabili8ation 9und, because allegedly in contravention of + ,, paragraph 0 *0! of -... /56, amended 53? the Court finds for the petitioner. The petition assails the payment of certain items or accounts in favor of the petroleum companies *i.e., inventory losses, financing charges, fuel oil sales to the 'ational -ower Corporation, etc.! because not authori8ed by law. -etitioner contends that "these claims are not embraced in the enumeration in + , of -... /56 . . since none of them was incurred /as a result of the reduction of domestic prices of petroleum products,C" 56 and since these items are reimbursements for which the &-$9 should not have responded, the amount of the - 0.,66 billion deficit "should be reduced by -5,066.0 million." 57 3t is argued "that under the principle of e$usdem generis . . . the term Cother factorsC *as used in + , of -... /56! . . can only include such Cother factorsC which necessarily result in the reduction of domestic prices of petroleum products." 56 The $olicitor =eneral, for his part, contends that "*t!o place said *term! within the restrictive confines of the rule ofe$usdem generis would reduce *).&. 16! to a meaningless provision." This Court, in ,altex (hilippines, +nc. v. &he 0onorable ,ommissioner on #udit, et al., 58 passed upon the application of e$usdem generis to paragraph 0 of + , of -... /56, viz.: The rule of e$usdem generis states that "GwHhere words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest e5tent, but are held to be as applying only to persons or things of the same kind or class as those specifically mentioned." 58% reading of subparagraphs *i! and *ii! easily discloses that they do not have a common characteristic. The first relates to price reduction as directed by the 7oard of )nergy while the second refers to reduction in internal ad valorem ta5es. Therefore,

subparagraph *iii! cannot be limited by the enumeration in these subparagraphs. Ahat should be considered for purposes of determining the "other factors" in subparagraph *iii! is the first sentence of paragraph *0! of the $ection which e5plicitly allows the cost underrecovery only if such were incurred as a result of the reduction of domestic prices of petroleum products. The Court thus holds, that the reimbursement of financing charges is not authori8ed by paragraph 0 of + , of -... /56, for the reason that they were not incurred as a result of the reduction of domestic prices of petroleum products. #nder the same provision, however, the payment of inventory losses is upheld as valid, being clearly a result of domestic price reduction, when oil companies incur a cost underrecovery for yet unsold stocks of oil in inventory ac;uired at a higher price. Reimbursement for cost underrecovery from the sales of oil to the 'ational -ower Corporation is e;ually permissible, not as coming within the provisions of -... /56, but in virtue of other laws and regulations as held in,altex 59 and which have been pointed to by the $olicitor =eneral. %t any rate, doubts about the propriety of such reimbursements have been dispelled by the enactment of R.%. 6/50, establishing the -etroleum -rice $tandby 9und, + 0 of which specifically authori8es the reimbursement of "cost underrecovery incurred as a result of fuel oil sales to the 'ational -ower Corporation." %nent the overpayment refunds mentioned by the petitioner, no substantive discussion has been presented to show how this is prohibited by -... /56. 'or has the $olicitor =eneral taken any effort to defend the propriety of this refund. 3n fine, neither of the parties, beyond the mere mention of overpayment refunds, has at all bothered to discuss the arguments for or against the legality of the soFcalled overpayment refunds. To be sure, the absence of any argument for or against the validity of the refund cannot result in its disallowance by the Court. #nless the impropriety or illegality of the overpayment refund has been clearly and specifically shown, there can be no basis upon which to nullify the same. 9inally, the Court finds no necessity to rule on the remaining issue, the same having been rendered moot and academic. %s of date hereof, the pump rates of gasoline have been reduced to levels below even those prayed for in the petition. AB)R)9&R), the petition is =R%'T). insofar as it prays for the nullification of the reimbursement of financing charges, paid pursuant to ).&. 16, and .3$(3$$). in all other respects. $& &R.)R)..

G.R. No. 95787 Ma 8, 1995 CA)'E2 .H()(..(NES, (NC., petitioner, vs. 'HE HONORAB)E COMM(SS(ON ON A&-(', HONORAB)E COMM(SS(ONER BAR'O)OME C. +ERNAN-E/ an0 HONORAB)E COMM(SS(ONER A)BER'O .. CR&/, respondents. -A3(-E, JR., J.: This is a petition erroneously brought under Rule :: of the Rules of Court 1 ;uestioning the authority of the Commission on %udit *C&%! in disallowing petitionerCs claims for reimbursement from the &il -rice $tabili8ation 9und *&-$9! and seeking the reversal of said CommissionCs decision denying its claims for recovery of financing charges from the 9und and reimbursement of underrecovery arising from sales to the 'ational -ower Corporation, %tlas Consolidated (ining and .evelopment Corporation *%TD%$! and (arcopper (ining Corporation *(%RFC&--)R!, preventing it from e5ercising the right to offset its remittances against its reimbursement vis%a%vis the &-$9 and disallowing its claims which are still pending resolution before the &ffice of )nergy %ffairs *&)%! and the .epartment of 9inance *.&9!. -ursuant to the /,6 Constitution, 5 any decision, order or ruling of the Constitutional Commissions 3 may be brought to this Court on certiorari by the aggrieved party within thirty *1<! days from receipt of a copy thereof. Thecertiorari referred to is the special civil action for certiorari under Rule 65 of the Rules of Court. 6 Considering, however, that the allegations that the C&% acted with: *a! total lack of >urisdiction in completely ignoring and showing absolutely no respect for the findings and rulings of the administrator of the fund itself and in disallowing a claim which is still pending resolution at the &)% level, and *b! "grave abuse of discretion and completely without >urisdiction" 7 in declaring that petitioner cannot avail of the right to offset any amount that it may be re;uired under the law to remit to the &-$9 against any amount that it may receive by way of reimbursement therefrom are sufficient to bring this petition within Rule 65 of the Rules of Court, and, considering further the importance of the issues raised, the error in the designation of the remedy pursued will, in this instance, be e5cused. The issues raised revolve around the &-$9 created under $ection , of -residential .ecree *-...! 'o. /56, as amended by )5ecutive &rder *).&.! 'o. 16. %s amended, said $ection , reads as follows: $ec. , . There is hereby created a Trust %ccount in the books of accounts of the (inistry of )nergy to be designated as

&il -rice $tabili8ation 9und *&-$9! for the purpose of minimi8ing fre;uent price changes brought about by e5change rate ad>ustments andEor changes in world market prices of crude oil and imported petroleum products. The &il -rice $tabili8ation 9und may be sourced from any of the following: a! %ny increase in the ta5 collection from ad valorem ta5 or customs duty imposed on petroleum products sub>ect to ta5 under this .ecree arising from e5change rate ad>ustment, as may be determined by the (inister of 9inance in consultation with the 7oard of )nergy4 b! %ny increase in the ta5 collection as a result of the lifting of ta5 e5emptions of government corporations, as may be determined by the (inister of 9inance in consultation with the 7oard of )nergy4 c! %ny additional amount to be imposed on petroleum products to augment the resources of the 9und through an appropriate &rder that may be issued by the 7oard of )nergy re;uiring payment by persons or companies engaged in the business of importing, manufacturing andEor marketing petroleum products4 d! %ny 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 e5change rate as fi5ed by the 7oard of )nergy. The 9und herein created shall be used for the following: ! To reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from e5change rate ad>ustment andEor increase in world market prices of crude oil4 0! To reimburse the oil companies for possible cost underFrecovery incurred as a result of the reduction of domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be determined by the (inistry of

9inance. "Cost underrecovery" shall include the following: i. Reduction in oil company take as directed by the 7oard of )nergy without the corresponding reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the price change4 ii. Reduction in internal ad valorem ta5es as a result of foregoing government mandated price reductions4 iii. &ther factors as may be determined by the (inistry of 9inance to result in cost underrecovery. The &il -rice $tabili8ation 9und *&-$9! shall be administered by the (inistry of )nergy. The material operative facts of this case, as gathered from the pleadings of the parties, are not disputed. &n 0 9ebruary /,/, the C&% sent a letter to Calte5 -hilippines, 3nc. *C-3!, hereinafter referred to as -etitioner, directing the latter to remit to the &-$9 its collection, e5cluding that unremitted for the years /,6 and /,,, of the additional ta5 on petroleum products authori8ed under the aforesaid $ection , of -... 'o. /56 which, as of 1 .ecember /,6, amounted to -115,<16,6:/.<< and informing it that, pending such remittance, all of its claims for reimbursement from the &-$9 shall be held in abeyance. 6 &n / (arch /,/, the C&% sent another letter to petitioner informing it that partial verification with the &)% showed that the grand total of its unremitted collections of the above ta5 is - ,0,6,66,,,0<.<<, broken down as follows: /,6 ? -011, /<,/ 6.<< /,6 ? 115,<65,65<.<< /,, ? 6 /,: 0,05:.<<4 directing it to remit the same, with interest and surcharges thereon, within si5ty *6<! days from receipt of the letter4 advising it that the C&% will hold in abeyance the audit of all its claims for reimbursement from the &-$94 and directing it to desist from further offsetting the ta5es collected against outstanding claims in /,/ and subse;uent periods. 8 3n its letter of 1 (ay /,/, petitioner re;uested the C&% for an early release of its reimbursement certificates from the &-$9 covering claims with the &ffice of )nergy %ffairs since @une /,6 up to (arch /,/, invoking in support thereof C&% Circular 'o. ,/F0// on the lifting of preFaudit of government transactions of national

government agencies and governmentFowned or controlled corporations. 8 3n its %nswer dated , (ay /,/, the C&% denied petitionerCs re;uest for the early release of the reimbursement certificates from the &-$9 and repeated its earlier directive to petitioner to forward payment of the latterCs unremitted collections to the &-$9 to facilitate C&%Cs audit action on the reimbursement claims. 9 7y way of a reply, petitioner, in a letter dated 1 (ay /,/, submitted to the C&% a proposal for the payment of the collections and the recovery of claims, since the outright payment of the sum of - .0,6 billion to the &)% as a prere;uisite for the processing of said claims against the &-$9 will cause a very serious impairment of its cash position. 19 The proposal reads: Ae, therefore, very respectfully propose the following: * ! %ny procedural arrangement acceptable to C&% to facilitate monitoring of payments and reimbursements will be administered by the )R7E9inance .ept.E&)%, as agencies designated by law to administerEregulate &-$9. *0! 9or the retroactive period, Calte5 will deliver to &)%, - .0,6 billion as payment to &-$9, similarly &)% will deliver to Calte5 the same amount in cash reimbursement from &-$9. *1! The C&% audit will commence immediately and will be conducted e5peditiously. *:! The review of current claims * /,/! will be conducted e5peditiously to preclude further accumulation of reimbursement from &-$9. &n 6 @une /,/, the C&%, with the Chairman taking no part, handed down .ecision 'o. /0 accepting the aboveFstated proposal but prohibiting petitioner from further offsetting remittances and reimbursements for the current and ensuing years. 11 .ecision 'o. /0 reads: This pertains to the within separate re;uests of (r. (anuel %. )strella, -resident, -etron Corporation, and (r. 9rancis %blan, -resident and (anaging .irector, Calte5 *-hilippines! 3nc., for reconsideration of this CommissionCs adverse action embodied in its letters dated 9ebruary 0, /,/ and (arch /, /,/, the former directing immediate remittance to the &il -rice $tabili8ation 9und of collections made by the firms pursuant to -... /56, as amended by ).&. 'o. 16, $. /,6, and the latter

reiterating the same directive but further advising the firms to desist from offsetting collections against their claims with the notice that "this Commission will hold in abeyance the audit of all . . . claims for reimbursement from the &-$9." 3t appears that under letters of authority issued by the Chairman, )nergy Regulatory 7oard, the aforenamed oil companies were allowed to offset the amounts due to the &il -rice $tabili8ation 9und against their outstanding claims from the said 9und for the calendar years /,6 and /,,, pending with the then (inistry of )nergy, the government entity charged with administering the &-$9. This Commission, however, e5pressing serious doubts as to the propriety of the offsetting of all types of reimbursements from the &-$9 against all categories of remittances, advised these oil companies that such offsetting was bereft of legal basis. %ggrieved thereby, these companies now seek reconsideration and in support thereof clearly manifest their intent to make arrangements for the remittance to the &ffice of )nergy %ffairs of the amount of collections e;uivalent to what has been previously offset, provided that this Commission authori8es the &ffice of )nergy %ffairs to prepare the corresponding checks representing reimbursement from the &-$9. 3t is alleged that the implementation of such an arrangement, whereby the remittance of collections due to the &-$9 and the reimbursement of claims from the 9und shall be made within a period of not more than one week from each other, will benefit the 9und and not unduly >eopardi8e the continuing daily cash re;uirements of these firms. #pon a circumspect evaluation of the circumstances herein obtaining, this Commission perceives no further ob>ectionable feature in the proposed arrangement, provided that 5I of whatever amount is due from the 9und is retained by the &ffice of )nergy %ffairs, the same to be answerable for suspensions or disallowances, errors or

discrepancies which may be noted in the course of audit and surcharges for late remittances without pre>udice to similar future retentions to answer for any deficiency in such surcharges, and provided further that no offsetting of remittances and reimbursements for the current and ensuing years shall be allowed. -ursuant to this decision, the C&%, on , %ugust /,/, sent the following letter to )5ecutive .irector Aenceslao R. .e la -a8 of the &ffice of )nergy %ffairs: 15 .ear %tty. dela -a8: -ursuant to the Commission on %udit .ecision 'o. /0 dated @une 6, /,/, and based on our initial verification of documents submitted to us by your &ffice in support of Calte5 *-hilippines!, 3nc. offsets *sic! for the year /,6 to (ay 1 , /,/, as well as its outstanding claims against the &il -rice $tabili8ation 9und *&-$9! as of (ay 1 , /,/, we are pleased to inform your &ffice that Calte5 *-hilippines!, 3nc. shall be re;uired to remit to &-$9 an amount of - ,5<5,66,,/<6, representing remittances to the &-$9 which were offset against its claims reimbursements *net of unsubmitted claims!. 3n addition, the Commission hereby authori8e *sic! the &ffice of )nergy %ffairs *&)%! to cause payment of - ,/5/, ,0,6 0 to Calte5, representing claims initially allowed in audit, the details of which are presented hereunder: . . . %s presented in the foregoing computation the disallowances totalled -1,6,6,1,515, which included - 1<,:0<,015 representing those claims disallowed by &)%, details of which is *sic! shown in $chedule as summari8ed as follows: 1isallowance of ,'# (articulars #mount Recovery of financing charges - 60,60,,:65 Ea -roduct sales :,,:<0,1/, Eb 3nventory losses 7orrow loan arrangement :,<1:,6,6 Ec $ales to %tlasE(arcopper 10,</6,<,1 Ed $ales to '-C 55, ?????? -056,061,1<<

.isallowances of &)% 1<,:0<,015 ????????? ? ????? Total -1,6,6,1,515 The reasons for the disallowances are discussed hereunder: a. !ecovery of )inancing ,harges Review of the provisions of -... 5/6 as amended by ).&. 16 seems to indicate that recovery of financing charges by oil companies is not among the items for which the &-$9 may be utili8ed. Therefore, it is our view that recovery of financing charges has no legal basis. The mechanism for such claims is provided in .&9 Circular F,6. b. (roduct Sales 22 Sales to +nternational Vessels3#irlines 7&) Resolution 'o. ,6F< dated 9ebruary 6, /,6 as implemented by &)% &rder 'o. ,6F<1F</5 indicating that *sic! 9ebruary 6, /,6 as the effectivity date that *sic! oil companies should pay &-$9 impost on e5port sales of petroleum products. )ffective 9ebruary 6, /,6 sales to international vesselsEairlines should not be included as part of its domestic sales. Changing the effectivity date of the resolution from 9ebruary 6, /,6 to &ctober 0<, /,6 as covered by subse;uent )R7 Resolution 'o. ,,F 0 dated 'ovember ,, /,, has allowed Calte5 to include in their domestic sales volumes to international vesselsEairlines and claim the corresponding reimbursements from &-$9 during the period. 3t is our opinion that the effectivity of the said resolution should be 9ebruary 6, /,6. c. +nventory losses 22 Settlement of #d Valorem Ae reviewed the system of handling 7orrow and Doan *7D%! transactions including the related 7D% agreement, as they affect the claims for reimbursements of ad valorem ta5es. Ae observed that oil companies immediately settle ad valorem ta5es for 7D% transaction *sic!. Doan balances therefore are not ta5 paid inventories of Calte5 sub>ect to reimbursements but those of the borrower. Bence, we recommend reduction of the claim for

@uly, %ugust, and 'ovember, /,6 amounting to - :,<1:,6,6. d. Sales to #tlas34arcopper D&3 'o. : 6 dated @uly 6, /,: provides that "3 hereby order and direct the suspension of payment of all ta5es, duties, fees, imposts and other charges whether direct or indirect due and payable by the copper mining companies in distress to the national and local governments." 3t is our opinion that D&3 : 6 which implements the e5emption from payment of &-$9 imposts as effected by &)% has no legal basis. 9urthermore, we wish to emphasi8e that payment to Calte5 *-hil.! 3nc., of the amount as herein authori8ed shall be sub>ect to availability of funds of &-$9 as of (ay 1 , /,/ and applicable auditing rules and regulations. Aith regard to the disallowances, it is further informed that the aggrieved party has 1< days within which to appeal the decision of the Commission in accordance with law. &n , $eptember /,/, petitioner filed an &mnibus Re;uest for the Reconsideration of the decision based on the following grounds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

555 555 555 &n 6 'ovember /,/, petitioner filed with the C&% a $upplemental &mnibus Re;uest for Reconsideration. 16 &n 6 9ebruary //<, the C&%, with Chairman .omingo taking no part and with Commissioner 9ernande8 dissenting in part, handed down .ecision 'o. 6 affirming the disallowance for recovery of financing charges, inventory losses, and sales to (%RC&--)R and %TD%$, while allowing the recovery of product sales or those arising from e5port sales. 17 .ecision 'o. 6 reads as follows: %nent the recovery of financing charges you contend that Calte5 -hil. 3nc. has the .authority to recover financing charges from the &-$9 on the basis of .epartment of 9inance *.&9! Circular F,6, dated 9ebruary ,, /,6, which allowed oil companies to "recover cost of financing working capital associated with crude oil shipments," and provided a schedule of reimbursement in terms of peso per barrel. 3t appears that on 'ovember 6, /,/, the .&9 issued a memorandum to the -resident of the -hilippines e5plaining the nature of these financing charges and >ustifying their reimbursement as follows: %s part of your program to promote economic recovery, . . . oil companies *were authori8ed! to refinance their imports of crude oil and petroleum products from the normal trade credit of 1< days up to 16< days from date of loading . . . Conformably . . ., the oil companies deferred their foreign e5change remittances for purchases by refinancing their import bills from the normal 1<Fday payment term up to the desired 16< days. This refinancing of importations carried additional costs *financing charges! which then became, due to government mandate, an inherent part of the cost of the purchases of our countryCs oil re;uirement. Ae beg to disagree with such contention. The >ustification that financing charges increased oil costs and the schedule of reimbursement rate in peso per barrel *)5hibit ! used to support alleged increase *sic! were not validated in our independent in;uiry. %s manifested in )5hibit 0, using the same

formula which the .&9 used in arriving at the reimbursement rate but using comparable percentages instead of pesos, the ineluctable conclusion is that the oil companies are actually gaining rather than losing from the e5tension of credit because such e5tension enables them to invest the collections in marketable securities which have much higher rates than those they incur due to the e5tension. The .ata we used were obtained from C-3 *C%DT)K! (anagement and can easily be verified from our records. Aith respect to product sales or those arising from sales to international vessels or airlines, . . ., it is believed that e5port sales *product sales! are entitled to claim refund from the &-$9. %s regard your claim for underrecovery arising from inventory losses, . . . 3t is the considered view of this Commission that the &-$9 is not liable to refund such surta5 on inventory losses because these are paid to 73R and not &-$9, in view of which C-3 *C%DT)K! should seek refund from 73R. . . . 9inally, as regards the sales to #tlas and 4arcopper, it is represented that you are entitled to claim recovery from the &-$9 pursuant to D&3 : 6 issued on @uly 6, /,:, since these copper mining companies did not pay C-3 *C%DT)K! and &-$9 imposts which were added to the selling price. #pon a circumspect evaluation, this Commission believes and so holds that the C-3 *C%DT)K! has no authority to claim reimbursement for this uncollected &-$9 impost because D&3 : 6 dated @uly 6, /,:, which e5empts distressed mining companies from "all ta5es, duties, import fees and other charges" was issued when &-$9 was not yet in e5istence and could not have contemplated &-$9 imposts at the time of its formulation. (oreover, it is evident that &-$9 was not created to aid distressed mining companies but rather to help the domestic oil industry by stabili8ing oil prices. #nsatisfied with the decision, petitioner filed on 0, (arch //< the present petition wherein it imputes to the C&% the commission of the following errors: 16

3 R)$-&'.)'T C&((3$$3&' )RR). 3' .3$%DD&A3'= R)C&2)RL &9 93'%'C3'= CB%R=)$ 9R&( TB) &-$9. 33 R)$-&'.)'T C&((3$$3&' )RR). 3' .3$%DD&A3'= C-3Cs 18 CD%3( 9&R R)3(7#R$)()'T &9 #'.)RR)C&2)RL %R3$3'= 9R&( $%D)$ T& '-C. 333 R)$-&'.)'T C&((3$$3&' )RR). 3' .)'L3'= C-3Cs CD%3($ 9&R R)3(7#R$)()'T &' $%D)$ T& %TD%$ %'. (%RC&--)R. 32 R)$-&'.)'T C&((3$$3&' )RR). 3' -R)2)'T3'= C-3 9R&( )K)RC3$3'= 3T$ D)=%D R3=BT T& &99$)T 3T$ R)(3TT%'C)$ %=%3'$T 3T$ R)3(7#R$)()'T V+S%#%V+S TB) &-$9. 2 R)$-&'.)'T C&((3$$3&' )RR). 3' .3$%DD&A3'= C-3Cs CD%3($ AB3CB %R) $T3DD -)'.3'= R)$&D#T3&' 7L *S+,! TB) &)% %'. TB) .&9. 3n the Resolution of 5 %pril //<, this Court re;uired the respondents to comment on the petition within ten * <! days from notice. 18 &n 6 $eptember //<, respondents C&% and Commissioners 9ernande8 and Cru8, assisted by the &ffice of the $olicitor =eneral, filed their Comment. 19 This Court resolved to give due course to this petition on 1< (ay // and re;uired the parties to file their respective (emoranda within twenty *0<! days from notice. 59 3n a (anifestation dated , @uly // , the &ffice of the $olicitor =eneral prays that the Comment filed on 6 $eptember //< be considered as the (emorandum for respondents. 51 #pon the other hand, petitioner filed its (emorandum on : %ugust // . 3. -etitioner dwells lengthily on its first assigned error contending, in support thereof, that: * ! 3n view of the e5panded role of the &-$9 pursuant to )5ecutive &rder 'o. 16, which added a second purpose, to wit: 0! To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction of domestic

10

prices of petroleum products. The magnitude of the underrecovery, if any, shall be determined by the (inistry of 9inance. "Cost underrecovery" shall include the following: i. Reduction in oil company take as directed by the 7oard of )nergy without the corresponding reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the price change4 ii. Reduction in internal ad valorem ta5es as a result of foregoing government mandated price reductions4 iii. &ther factors as may be determined by the (inistry of 9inance to result in cost underrecovery. the "other factors" mentioned therein that may be determined by the (inistry *now .epartment! of 9inance may include financing charges for "in essence, financing charges constitute unrecovered cost of ac;uisition of crude oil incurred by the oil companies," as e5plained in the 6 'ovember /,/ (emorandum to the -resident of the .epartment of 9inance4 they "directly translate to cost underrecovery in cases where the money market placement rates decline and at the same time the ta5 on interest income increases. The relationship is such that the presence of underrecovery or overrecovery is directly dependent on the amount and e5tent of financing charges." *0! The claim for recovery of financing charges has clear legal and factual basis4 it was filed on the basis of .epartment of 9inance Circular 'o. F,6, dated , 9ebruary /,6, which provides: To allow oil companies to recover the costs of financing working capital associated with crude oil shipments, the following guidelines on the utili8ation of the &il -rice $tabili8ation 9und pertaining to the payment of the foregoing *sic! e5change risk premium and recovery of financing charges will be implemented: . The &-$9 foreign e5change premium shall be reduced to a flat rate of one * ! percent for the first *6! months and E10 of one percent per month thereafter up to a ma5imum period of one year, to be applied on crude oilC shipments from @anuary , /,6. $hipments with outstanding financing as of @anuary , /,6 shall be charged on the basis of the fee applicable to the remaining period of financing.

0. 3n addition, for shipments loaded after @anuary /,6, oil companies shall be allowed to recover financing charges directly from the &-$9 per barrel of crude oil based on the following schedule: 9inancing -eriod Reimbursement Rate -esos per 7arrel Dess than ,< days 'one ,< days to 01/ days ./< 0: *sic! days to 0// :.<0 1<< days to 16/ *sic! days 6. 6 16< days or more ,.0, The above rates shall be sub>ect to review every si5ty days. 55 -ursuant to this circular, the .epartment of 9inance, in its letter of , 9ebruary /,6, advised the &ffice of )nergy %ffairs as follows: B&'. 23C)'T) T. -%T)R'& .eputy )5ecutive $ecretary 9or )nergy %ffairs &ffice of the -resident (akati, (etro (anila .ear $ir: This refers to the letters of the &il 3ndustry dated .ecember :, /,6 and 9ebruary 5, /,6 and subse;uent discussions held by the -rice Review committee on 9ebruary 6, /,6. &n the basis of the representations made, the .epartment of 9inance recogni8es the necessity to reduce the foreign e5change risk premium accruing to the &il -rice $tabili8ation 9und *&-$9!. $uch a reduction would allow the industry to recover partly associated financing charges on crude oil imports. %ccordingly, the &-$9 foreign e5change risk fee shall be reduced to a flat charge of I for the first si5 *6! months plus E10I of I per month thereafter up to a ma5imum period of one year, effective @anuary , /,6. 3n addition, since the prevailing company take would still leave unrecovered financing charges, reimbursement may be secured from the &-$9 in accordance with the provisions of the attached .epartment of 9inance circular. 53 %cting on this letter, the &)% issued on : (ay /,6 &rder 'o. ,6F<5F</6 which contains the guidelines for

11

the computation of the foreign e5change risk fee and the recovery of financing charges from the &-$9, to wit: 7. )+.#., ,0#!- S . &il companies shall be allowed to recover financing charges directly from the &-$9 for both crude and product shipments loaded after @anuary , /,6 based on the following rates: 9inancing -eriod Reimbursement Rate*-7bl.!Dess than ,< days 'one ,< days to 01/ days ./<0:< days to 00/ *sic! days :.<01<< days to 15/ days 6. 616< days to more ,.0, 0. The above rates shall be sub>ect to review every si5ty days. 56 Then on 00 'ovember /,,, the .epartment of 9inance issued Circular 'o. :F,, imposing further guidelines on the recoverability of financing charges, to wit: 9ollowing are the supplemental rules to .epartment of 9inance Circular 'o. F ,6 dated 9ebruary ,, /,6 which allowed the recovery of financing charges directly from the &il -rice $tabili8ation 9und. *&-$9!: . The Claim for reimbursement shall be on a per shipment basis. 0. The claim shall be filed with the &ffice of )nergy %ffairs together with the claim on peso cost differential for a particular shipment and duly certified supporting documents provided for under (inistry of 9inance 'o. F,5. 1. The reimbursement shall be on the form of reimbursement certificate *%nne5 %! to be issued by the &ffice of )nergy %ffairs. The said certificate may be used to offset against amounts payable to the &-$9. The oil companies may also redeem said certificates in cash if not utili8ed, sub>ect to availability of funds. 57 The &)% disseminated this Circular to all oil companies in its (emorandum Circular 'o. ,,F 0F< 6. 56 The C&% can neither ignore these issuances nor formulate its own interpretation of the laws in the light of the determination of e5ecutive agencies. The determination by the .epartment of 9inance and the &)% that financing charges are recoverable from the &-$9 is entitled to great weight and consideration. 58 The function of the C&%, particularly in the matter of allowing or disallowing certain e5penditures, is limited to the promulgation of accounting and auditing rules for, among others, the disallowance of irregular, unnecessary, e5cessive,

e5travagant, or unconscionable e5penditures, or uses of government funds and properties. 58 *1! .enial of petitionerCs claim for reimbursement would be ine;uitable. %dditionally, C&%Cs claim that petitioner is gaining, instead of losing, from the e5tension of credit, is belatedly raised and not supported by e5pert analysis. 3n impeaching the validity of petitionerCs assertions, the respondents argue that: . The Constitution gives the C&% discretionary power to disapprove irregular or unnecessary government e5penditures and as the monetary claims of petitioner are not allowed by law, the C&% acted within its >urisdiction in denying them4 0. -... 'o. /56 and ).&. 'o. 16 do not allow reimbursement of financing charges from the &-$94 1. #nder the principle of e$usdem generis, the "other factors" mentioned in the second purpose of the &-$9 pursuant to ).&. 'o. 16 can only include "factors which are of the same nature or analogous to those enumerated4" :. 3n allowing reimbursement of financing charges from &-$9, Circular 'o. F,6 of the .epartment of 9inance violates -... 'o. /56 and ).&. 'o. 164 and 5. .epartment of 9inance rules and regulations implementing -... 'o. /56 do not likewise allow reimbursement of financing charges. 59 Ae find no merit in the first assigned error. %s to the power of the C&%, which must first be resolved in view of its primacy, Ae find the theory of petitioner MM that such does not e5tend to the disallowance of irregular, unnecessary, e5cessive, e5travagant, or unconscionable e5penditures, or use of government funds and properties, but only to the promulgation of accounting and auditing rules for, among others, such disallowance MM to be untenable in the light of the provisions of the /,6 Constitution and related laws. $ection 0, $ubdivision ., %rticle 3K of the /,6 Constitution e5pressly provides: $ec. 0*l!. The Commission on %udit shall have the power, authority, and duty to e5amine, audit, and settle all accounts pertaining to the revenue and receipts of, and e5penditures or uses of funds and property, owned or held in trust by, or pertaining to, the =overnment, or any of its subdivisions, agencies, or instrumentalities, including governmentFowned and controlled corporations with original charters, and on a postFaudit basis: *a! constitutional bodies, commissions and

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offices that have been granted fiscal autonomy under this Constitution4 *b! autonomous state colleges and universities4 *c! other governmentF owned or controlled corporations and their subsidiaries4 and *d! such nonFgovernmental entities receiving subsidy or e;uity, directly or indirectly, from or through the government, which are re;uired by law or the granting institution to submit to such audit as a condition of subsidy or e;uity. Bowever, where the internal control system of the audited agencies is inade;uate, the Commission may adopt such measures, including temporary or special preF audit, as are necessary and appropriate to correct the deficiencies. 3t shall keep the general accounts, of the =overnment and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto. *0! The Commission shall have e5clusive authority, sub>ect to the limitations in this %rticle, to define the scope of its audit and e5amination, establish the techni;ues and methods re;uired therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, e5cessive, e5travagant, or, unconscionable e5penditures, or uses of government funds and properties. These present powers, consistent with the declared independence of the Commission, 39 are broader and more e5tensive than that conferred by the /61 Constitution. #nder the latter, the Commission was empowered to: )5amine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the revenues, and receipts of, and e5penditures or uses of funds and property, owned or held in trust by, or pertaining to, the =overnment, or any of its subdivisions, agencies, or instrumentalities including governmentFowned or controlled corporations, keep the general accounts of the =overnment and, for such period as may be provided by law, preserve the vouchers pertaining thereto4 and promulgate accounting and auditing rules and regulations including those for the prevention of irregular, unnecessary, e5cessive, or e5travagant e5penditures or uses of funds and property. 31 #pon the other hand, under the /15 Constitution, the power and authority of the C&%Cs precursor, the =eneral %uditing &ffice, were, unfortunately, limited4 its very role

was markedly passive. $ection 0 of %rticle K3 thereofprovided: $ec. 0. The %uditor =eneral shall e5amine, audit, and settle all accounts pertaining to the revenues and receipts from whatever source, including trust funds derived from bond issues4 and audit, in accordance with law and administrative regulations, all e5penditures of funds or property pertaining to or held in trust by the =overnment or the provinces or municipalities thereof. Be shall keep the general accounts of the =overnment and the preserve the vouchers pertaining thereto. 3t shall be the duty of the %uditor =eneral to bring to the attention of the proper administrative officer e5penditures of funds or property which, in his opinion, are irregular, unnecessary, e5cessive, or e5travagant. Be shall also perform such other functions as may be prescribed by law. %s clearly shown above, in respect to irregular, unnecessary, e5cessive or e5travagant e5penditures or uses of funds, the /15 Constitution did not grant the %uditor =eneral the power to issue rules and regulations to prevent the same. Bis was merely to bring that matter to the attention of the proper administrative officer. The ruling on this particular point, ;uoted by petitioner from the cases of -uevarra vs. -imenez 35 and !amos vs.#quino, 33 are no longer controlling as the two *0! were decided in the light of the /15 Constitution. There can be no doubt, however, that the audit power of the %uditor =eneral under the /15 Constitution and the Commission on %udit under the /61 Constitution authori8ed them to disallow illegal e5penditures of funds or uses of funds and property. &ur present Constitution retains that same power and authority, further strengthened by the definition of the C&%Cs general >urisdiction in $ection 06 of the =overnment %uditing Code of the -hilippines 36and %dministrative Code of /,6. 37 -ursuant to its power to promulgate accounting and auditing rules and regulations for the prevention of irregular, unnecessary, e5cessive or e5travagant e5penditures or uses of funds,36 the C&% promulgated on 0/ (arch /66 C&% Circular 'o. 66F55. $ince the C&% is responsible for the enforcement of the rules and regulations, it goes without saying that failure to comply with them is a ground for disapproving the payment of the proposed e5penditure. %s observed by one of the Commissioners of the /,6 Constitutional Commission, 9r. @oa;uin =. 7ernas: 38 3t should be noted, however, that whereas under %rticle K3, $ection 0, of the /15 Constitution the %uditor =eneral could not correct "irregular, unnecessary, e5cessive or

13

e5travagant" e5penditures of public funds but could only "bring Gthe matterH to the attention of the proper administrative officer," under the /,6 Constitution, as also under the /61 Constitution, the Commission on %udit can "promulgate accounting and auditing rules and regulations including those for the prevention and disallowance of irregular, unnecessary, e5cessive, e5travagant, or unconscionable e5penditures or uses of government funds and properties." Bence, since the Commission on %udit must ultimately be responsible for the enforcement of these rules and regulations, the failure to comply with these regulations can be a ground for disapproving the payment of a proposed e5penditure. 3ndeed, when the framers of the last two *0! Constitutions conferred upon the C&% a more active role and invested it with broader and more e5tensive powers, they did not intend merely to make the C&% a toothless tiger, but rather envisioned a dynamic, effective, efficient and independent watchdog of the =overnment. The issue of the financing charges boils down to the validity of .epartment of 9inance Circular 'o. F,6, .epartment of 9inance Circular 'o. :F,, and the implementing circulars of the &)%, issued pursuant to $ection ,, -... 'o. /56, as amended by ).&. 'o. 16, authori8ing it to determine "other factors" which may result in cost underrecovery and a conse;uent reimbursement from the &-$9. The $olicitor =eneral maintains that, following the doctrine of e$usdem generis, financing charges are not included in "cost underrecovery" and, therefore, cannot be considered as one of the "other factors." $ection , of -... 'o. /56, as amended by ).&. 'o. 16, does not e5plicitly define what "cost underrecovery" is. 3t merely states what it includes. Thus: . . . "Cost underrecovery" shall include the following: i. Reduction in oil company takes as directed by the 7oard of )nergy without the corresponding reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the price change4 ii. Reduction in internal ad valorem ta5es as a result of foregoing government mandated price reductions4 iii. &ther factors as may be determined by the (inistry of 9inance to result in cost under recovery. These "other factors" can include only those which are of the same class or nature as the two specifically enumerated in subparagraphs *i! and *ii!. % common characteristic of both is that they are in the nature of

government mandated price reductions. Bence, any other factor which seeks to be a part of the enumeration, or which could ;ualify as a cost underrecovery, must be of the same class or nature as those specifically enumerated. -etitioner, however, suggests that ).&. 'o. 16 intended to grant the .epartment of 9inance broad and unrestricted authority to determine or define "other factors." 7oth views are unacceptable to this Court. The rule of e$usdem generis states that "GwHhere general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest e5tent, but are held to be as applying only to persons or things of the same kind or class as those specifically mentioned. 38 % reading of subparagraphs *i! and *ii! easily discloses that they do not have a common characteristic. The first relates to price reduction as directed by the 7oard of )nergy while the second refers to reduction in internal ad valorem ta5es. Therefore, subparagraph *iii! cannot be limited by the enumeration in these subparagraphs. Ahat should be considered for purposes of determining the "other factors" in subparagraph *iii! is the first sentence of paragraph *0! of the $ection which e5plicitly allows cost underrecovery only if such were incurred as a result of the reduction of domestic prices of petroleum products. %lthough petitionerCs financing losses, if indeed incurred, may constitute cost underrecovery in the sense that such were incurred as a result of the inability to fully offset financing e5penses from yields in money market placements, they do not, however, fall under the foregoing provision of -... 'o. /56, as amended, because the same did not result from the reduction of the domestic price of petroleum products. #ntil paragraph *0!, $ection , of the decree, as amended, is further amended by Congress, this Court can do nothing. The duty of this Court is not to legislate, but to apply or interpret the law. 7e that as it may, this Court wishes to emphasi8e that as the facts in this case have shown, it was at the behest of the =overnment that petitioner refinanced its oil import payments from the normal 1<F day trade credit to a ma5imum of 16< days. -etitioner could be correct in its assertion that owing to the e5tended period for payment, the financial institution which refinanced said payments charged a higher interest, thereby resulting in higher financing e5penses for the petitioner. 3t would appear then that e;uity considerations dictate that petitioner should somehow be allowed to recover its financing losses, if any, which may have been sustained because it accommodated the re;uest of the =overnment. %lthough under $ection 0/ of the 'ational 3nternal Revenue Code such losses may

14

be deducted from gross income, the effect of that loss would be merely to reduce its ta5able income, but not to actually wipe out such losses. The =overnment then may consider some positive measures to help petitioner and others similarly situated to obtain substantial relief. %n amendment, as aforestated, may then be in order. #pon the other hand, to accept petitionerCs theory of "unrestricted authority" on the part of the .epartment of 9inance to determine or define "other factors" is to uphold an undue delegation of legislative power, it clearly appearing that the sub>ect provision does not provide any standard for the e5ercise of the authority. 3t is a fundamental rule that delegation of legislative power may be sustained only upon the ground that some standard for its e5ercise is provided and that the legislature, in making the delegation, has prescribed the manner of the e5ercise of the delegated authority. 39 9inally, whether petitioner gained or lost by reason of the e5tensive credit is rendered irrelevant by reason of the foregoing dis;uisitions. 3t may nevertheless be stated that petitioner failed to disprove C&%Cs claim that it had in fact gained in the process. &therwise stated, petitioner failed to sufficiently show that it incurred a loss. $uch being the case, how can petitioner claim for reimbursementN 3t cannot have its cake and eat it too. 33. %nent the claims arising from sales to the 'ational -ower Corporation, Ae find for the petitioner. The respondents themselves admit in their Comment that underrecovery arising from sales to '-C are reimbursable because '-C was granted full e5emption from the payment of ta5es4 to prove this, respondents trace the laws providing for such e5emption. 69 The last law cited is the 9iscal 3ncentives Regulatory 7oardCs Resolution 'o. 6F,6 of 0: @une /,6 which provides, in part, "that the ta5 and duty e5emption privileges of the 'ational -ower Corporation, including those pertaining to its domestic purchases of petroleum and petroleum products . . . are restored effective (arch <, /,6." 3n a (emorandum issued on 5 &ctober /,6 by the &ffice of the -resident, '-CCs ta5 e5emption was confirmed and approved. 9urthermore, as pointed out by respondents, the intention to e5empt sales of petroleum products to the '-C is evident in the recently passed Republic %ct 'o. 6/50 establishing the -etroleum -rice $tandby 9und to support the &-$9. 61 The pertinent part of $ection 0, Republic %ct 'o. 6/50 provides: $ec. 0. %pplication of the 9und shall be sub>ect to the following conditions: * ! That the 9und shall be used to reimburse the oil companies for *a! cost increases of imported crude oil and finished petroleum products resulting from foreign e5change rate ad>ustments

andEor increases in world market prices of crude oil4 *b! cost underrecovery incurred as a result of fuel oil sales to the .ational (ower ,orporation (.(,)5 and *c! other cost underrecoveries incurred as may be finally decided by the $upreme Court4 . . . Bence, petitioner can recover its claim arising from sales of petroleum products to the 'ational -ower Corporation. 333. Aith respect to its claim for reimbursement on sales to %TD%$ and (%RC&--)R, petitioner relies on Detter of 3nstruction *D&3! : 6, dated 6 @uly /,:, which ordered the suspension of payments of all ta5es, duties, fees and other charges, whether direct or indirect, due and payable by the copper mining companies in distress to the national government. -ursuant to this D&3, then (inister of )nergy, Bon. =eronimo 2elasco, issued (emorandum Circular 'o. ,:F F00 advising the oil companies that %tlas Consolidated (ining Corporation and (arcopper (ining Corporation are among those declared to be in distress. 3n denying the claims arising from sales to %TD%$ and (%RC&--)R, the C&%, in its , %ugust /,/ letter to )5ecutive .irector Aenceslao R. de la -a8, states that "it is our opinion that D&3 : 6 which implements the e5emption from payment of &-$9 imposts as effected by &)% has no legal basis4" 65 in its .ecision 'o. 6 , it ruled that "the C-3 *C%DT)K! *Calte5! has no authority to claim reimbursement for this uncollected impost because D&3 : 6 dated @uly 6, /,:, . . . was issued when &-$9 was not yet in e5istence and could not have contemplated &-$9 imposts at the time of its formulation." 63 3t is further stated that: "(oreover, it is evident that &-$9 was not created to aid distressed mining companies but rather to help the domestic oil industry by stabili8ing oil prices." 3n sustaining C&%Cs stand, respondents vigorously maintain that D&3 : 6 could not have intended to e5empt said distressed mining companies from the payment of &-$9 dues for the following reasons: a. D&3 : 6 granting the alleged e5emption was issued on @uly 6, /,:. -... /56 creating the &-$9 was promulgated on &ctober <, /,:, while ).&. 16, amending -... /56, was issued on 9ebruary 05, /,6. b. D&3 : 6 was issued in /,: to assist distressed copper mining companies in line with the governmentCs effort to prevent the collapse of the copper industry. -.. 'o. /56, as amended, was issued for the purpose of minimi8ing fre;uent price changes brought about by e5change rate ad>ustments andEor

15

changes in world market prices of crude oil and imported petroleum productCs4 and c. D&3 : 6 caused the "suspension of all ta5es, duties, fees, imposts and other charges, whether direct or indirect, due and payable by the copper mining companies in distress to the 'otional and Docal =overnments . . ." &n the other hand, &-$9 dues are not payable by *sic! distressed copper companies but by oil companies. 3t is to be noted that the copper mining companies do not pay &-$9 dues. Rather, such imposts are built in or already incorporated in the prices of oil products. 66 Dastly, respondents allege that while D&3 : 6 suspends the payment of ta5es by distressed mining companies, it does not accord petitioner the same privilege with respect to its obligation to pay &-$9 dues. Ae concur with the dis;uisitions of the respondents. %side from such reasons, however, it is apparent that D&3 : 6 was never published in the &fficial =a8ette 67 as re;uired by %rticle 0 of the Civil Code, which reads: Daws shall take effect after fifteen days following the completion of their publication in the &fficial =a8ette, unless it is otherwise provided. . . . 3n applying said provision, this Court ruled in the case of &a6ada vs. &uvera: 66 AB)R)9&R), the Court hereby orders respondents to publish in the &fficial =a8ette all unpublished presidential issuances which are of general application, and unless so published they shall have no binding force and effect. Resolving the motion for reconsideration of said decision, this Court, in its Resolution promulgated on 0/ .ecember /,6, 68 ruled: Ae hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fi5ed by the legislature. Covered by this rule are presidential decrees and e5ecutive orders promulgated by the -resident in the e5ercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. %dministrative rules and regulations must also be published if their purpose is to enforce or

implement e5isting laws pursuant also to a valid delegation. 555 555 555 AB)R)9&R), it is hereby declared that all laws as above defined shall immediately upon their approval, or as soon thereafter as possible, be published in full in the &fficial =a8ette, to become effective only after fifteen days from their publication, or on another date specified by the legislature, in accordance with %rticle 0 of the Civil Code. D&3 : 6 has, therefore, no binding force or effect as it was never published in the &fficial =a8ette after its issuance or at any time after the decision in the abovementioned cases. %rticle 0 of the Civil Code was, however, later amended by )5ecutive &rder 'o. 0<<, issued on , @une /,6. %s amended, the said provision now reads: Daws shall take effect after fifteen days following the completion of their publication either in the &fficial =a8ette or in a newspaper of general circulation in the -hilippines, unless it is otherwise provided. Ae are not aware of the publication of D&3 : 6 in any newspaper of general circulation pursuant to )5ecutive &rder 'o. 0<<. 9urthermore, even granting arguendo that D&3 : 6 has force and effect, petitionerCs claim must still fail. Ta5 e5emptions as a general rule are construed strictly against the grantee and liberally in favor of the ta5ing authority.68 The burden of proof rests upon the party claiming e5emption to prove that it is in fact covered by the e5emption so claimed. The party claiming e5emption must therefore be e5pressly mentioned in the e5empting law or at least be within its purview by clear legislative intent. 3n the case at bar, petitioner failed to prove that it is entitled, as a conse;uence of its sales to %TD%$ and (%RC&--)R, to claim reimbursement from the &-$9 under D&3 : 6. Though D&3 : 6 may suspend the payment of ta5es by copper mining companies, it does not give petitioner the same privilege with respect to the payment of &-$9 dues. 32. %s to C&%Cs disallowance of the amount of - 1<,:0<,015.<<, petitioner maintains that the .epartment of 9inance has still to issue a final and definitive ruling thereon4 accordingly, it was premature for C&% to disallow it. 7y doing so, the latter acted beyond its >urisdiction. 69 Respondents, on the other hand, contend that said amount was already disallowed by the &)% for failure to substantiate it. 79 3n fact, when &)% submitted the claims of petitioner for preFaudit, the abovementioned amount was already e5cluded.

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%n e5amination of the records of this case shows that petitioner failed to prove or substantiate its contention that the amount of - 1<,:0<,015.<< is still pending before the &)% and the .&9. %dditionally, Ae find no reason to doubt the submission of respondents that said amount has already been passed upon by the &)%. Bence, the ruling of respondent C&% disapproving said claim must be upheld. 2. The last issue to be resolved in this case is whether or not the amounts due to the &-$9 from petitioner may be offset against petitionerCs outstanding claims from said fund. -etitioner contends that it should be allowed to offset its claims from the &-$9 against its contributions to the fund as this has been allowed in the past, particularly in the years /,6 and /,,. 71 9urthermore, petitioner cites, as bases for offsetting, the provisions of the 'ew Civil Code on compensation and $ection 0 , 7ook 2, Title 3F7 of the Revised %dministrative Code which provides for "Retention of (oney for $atisfaction of 3ndebtedness to =overnment." 75 -etitioner also mentions communications from the 7oard of )nergy and the .epartment of 9inance that supposedly authori8e compensation. Respondents, on the other hand, citing )rancia vs. +#, and )ernandez, 73 contend that there can be no offsetting of ta5es against the claims that a ta5payer may have against the government, as ta5es do not arise from contracts or depend upon the will of the ta5payer, but are imposed by law. Respondents also allege that petitionerCs reliance on $ection 0 , 7ook 2, Title 3F7 of the Revised %dministrative Code, is misplaced because "while this provision empowers the C&% to withhold payment of a government indebtedness to a person who is also indebted to the government and apply the government indebtedness to the satisfaction of the obligation of the person to the government, like authority or right to make compensation is not given to the private person." 76 The reason for this, as stated in ,ommissioner of +nternal !evenue vs. #lgue, +nc., 77 is that money due the government, either in the form of ta5es or other dues, is its lifeblood and should be collected without hindrance. Thus, instead of giving petitioner a reason for compensation or setFoff, the Revised %dministrative Code makes it the respondentsC duty to collect petitionerCs indebtedness to the &-$9. Refuting respondentsC contention, petitioner claims that the amounts due from it do not arise as a result of ta5ation because "-... /56, amended, did not create a source of ta5ation4 it instead established a special fund . . .," 76and that the &-$9 contributions do not go to the general fund of the state and are not used for public purpose,i.e., not for the support of the government, the administration of law, or the payment of public e5penses.

This alleged lack of a public purpose behind &-$9 e5actions distinguishes such from a ta5. Bence, the ruling in the)rancia case is inapplicable. Dastly, petitioner cites R.%. 'o. 6/50 creating the -etroleum -rice $tandby 9und to support the &-$94 the said law provides in part that: $ec. 0. %pplication of the fund shall be sub>ect to the following conditions: 555 555 555 *1! That no amount of the -etroleum -rice $tandby 9und shall be used to pay any oil company which has an outstanding obligation to the =overnment without said obligation being offset first, sub>ect to the re;uirements of compensation or offset under the Civil Code. Ae find no merit in petitionerCs contention that the &-$9 contributions are not for a public purpose because they go to a special fund of the government. Ta5ation is no longer envisioned as a measure merely to raise revenue to support the e5istence of the government4 ta5es may be levied with a regulatory purpose to provide means for the rehabilitation and stabili8ation of a threatened industry which is affected with public interest as to be within the police power of the state. 78 There can be no doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare. %ny unregulated increase in oil prices could hurt the lives of a ma>ority of the people and cause economic crisis of untold proportions. 3t would have a chain reaction in terms of, among others, demands for wage increases and upward spiralling of the cost of basic commodities. The stabili8ation then of oil prices is of prime concern which the state, via its police power, may properly address. %lso, -... 'o. /56, as amended by ).&. 'o. 16, e5plicitly provides that the source of &-$9 is ta5ation. 'o amount of semantical >uggleries could dim this fact. 3t is settled that a ta5payer may not offset ta5es due from the claims that he may have against the government. 78Ta5es cannot be the sub>ect of compensation because the government and ta5payer are not mutually creditors and debtors of each other and a claim for ta5es is not such a debt, demand, contract or >udgment as is allowed to be setFoff. 79 Ae may even further state that technically, in respect to the ta5es for the &-$9, the oil companies merely act as agents for the =overnment in the latterCs collection since the ta5es are, in reality, passed unto the endFusers MM the consuming public. 3n that capacity, the petitioner, as one of such companies, has the primary obligation to account for and remit the ta5es collected to the administrator of the &-$9. This duty stems from the

17

fiduciary relationship between the two4 petitioner certainly cannot be considered merely as a debtor. 3n respect, therefore, to its collection for the &-$9 vis%a% vis its claims for reimbursement, no compensation is likewise legally feasible. 9irstly, the =overnment and the petitioner cannot be said to be mutually debtors and creditors of each other. $econdly, there is no proof that petitionerCs claim is already due and li;uidated. #nder %rticle 06/ of the Civil Code, in order that compensation may be proper, it is necessary that: * ! each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other4 *0! both debts consist in a sum of :money, or if the things due are consumable, they be of the same kind, and also of the same ;uality if the latter has been stated4 *1! the two *0! debts be due4 *:! they be li;uidated and demandable4 *5! over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. That compensation had been the practice in the past can set no valid precedent. $uch a practice has no legal basis. Dastly, R.%. 'o. 6/50 does not authori8e oil companies to offset their claims against their &-$9 contributions. 3nstead, it prohibits the government from paying any amount from the -etroleum -rice $tandby 9und to oil companies which have outstanding obligations with the government, without said obligation being offset first sub>ect to the rules on compensation in the Civil Code. AB)R)9&R), in view of the foregoing, $udgment is hereby rendered #))+!4+.- the challenged decision of the ,ommission on #udit, e5cept that portion thereof disallowing petitionerCs claim for reimbursement of underrecovery arising from sales to the 'ational -ower Corporation, which is hereby allowed. Aith costs against petitioner. $& &R.)R).. G.R. No. 179668 Apri; 17, 5997 COMM(SS(ONER O+ (N'ERNA) RE3EN&E, -etitioners, vs. CEN'RA) )&/ON -R&G COR.ORA'(ON, Respondent. .)C3$3&' .ANGAN(BAN, J.: The 0< percent discount re;uired by the law to be given to senior citi8ens is a tax credit, not merely a tax deduction from the gross income or gross sale of the

establishment concerned. % tax credit is used by a private establishment only after the ta5 has been computed4 a tax deduction, before the ta5 is computed. R% 6:10 unconditionally grants a tax credit to all covered entities. Thus, the provisions of the revenue regulation that withdraw or modify such grant are void. 7asic is the rule that administrative regulations cannot amend or revoke the law. The Case 7efore us is a -etition for Review under Rule :5 of the Rules of Court, seeking to set aside the %ugust 0/, 0<<0 .ecision0 and the %ugust , 0<<1 Resolution1 of the Court of %ppeals *C%! in C%F=R $- 'o. 66:1/. The assailed .ecision reads as follows: ",HERE+ORE, premises considered, the Resolution appealed from is A++(RME- in toto. 'o costs.": The assailed Resolution denied petitionerOs (otion for Reconsideration. The 9acts The C% narrated the antecedent facts as follows: "Respondent is a domestic corporation primarily engaged in retailing of medicines and other pharmaceutical products. 3n //6, it operated si5 *6! drugstores under the business name and style P(ercury .rug.O "9rom @anuary to .ecember //6, respondent granted twenty *0<I! percent sales discount to ;ualified senior citi8ens on their purchases of medicines pursuant to Republic %ct 'o. GR.%.H 6:10 and its 3mplementing Rules and Regulations. 9or the said period, the amount allegedly representing the 0<I sales discount granted by respondent to ;ualified senior citi8ens totaled -/<:,66/.<<. "&n %pril 5, //6, respondent filed its %nnual 3ncome Ta5 Return for ta5able year //6 declaring therein that it incurred net losses from its operations. "&n @anuary 6, //,, respondent filed with petitioner a claim for ta5 refundEcredit in the amount of -/<:,66/.<< allegedly arising from the 0<I sales discount granted by respondent to ;ualified senior citi8ens in compliance with GR.%.H 6:10. #nable to obtain affirmative response from petitioner, respondent elevated its claim to the Court of Ta5 %ppeals G*CT% or Ta5 Court!H via a -etition for Review. "&n 9ebruary 0, 0<< , the Ta5 Court rendered a 1ecision5 dismissing respondentOs -etition for lack of merit. 3n said decision, the GCT%H >ustified its ruling with the following ratiocination: P5 5 5, if no ta5 has been paid to the government, erroneously or illegally, or if no amount is due and collectible from the ta5payer, ta5 refund or ta5 credit is unavailing. (oreover, whether the recovery of the ta5 is made by means of a claim for refund or ta5 credit, before recovery is allowedG,H it must be first established that

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there was an actual collection and receipt by the government of the ta5 sought to be recovered. 5 5 5. P5 5 5 5 5 5 5 5 5 P-rescinding from the above, it could logically be deduced that ta5 credit is premised on the e5istence of ta5 liability on the part of ta5payer. 3n other words, if there is no ta5 liability, ta5 credit is not available.O "Respondent lodged a (otion for Reconsideration. The GCT%H, in its assailed resolution,6 granted respondentOs motion for reconsideration and ordered herein petitioner to issue a Ta5 Credit Certificate in favor of respondent citing the decision of the then $pecial 9ourth .ivision of Gthe C%H in C% =.R. $- 'o. 6<<56 entitled P,entral 78uzon9 1rug ,orporation vs. ,ommissioner of +nternal !evenue: promulgated on (ay 1 , 0<< , to wit: PBowever, $ec. 00/ clearly does not apply in the instant case because the ta5 sought to be refunded or credited by petitioner was not erroneously paid or illegally collected. Ae take e5ception to the CT%Os sweeping but unfounded statement that Pboth ta5 refund and ta5 credit are modes of recovering ta5es which are either erroneously or illegally paid to the government.O Ta5 refunds or credits do not e5clusively pertain to illegally collected or erroneously paid ta5es as they may be other circumstances where a refund is warranted. The ta5 refund provided under $ection 00/ deals e5clusively with illegally collected or erroneously paid ta5es but there are other possible situations, such as the refund of e5cess estimated corporate ;uarterly income ta5 paid, or that of e5cess input ta5 paid by a 2%TFregistered person, or that of e5cise ta5 paid on goods locally produced or manufactured but actually e5ported. The standards and mechanics for the grant of a refund or credit under these situations are different from that under $ec. 00/. $ec. :G.a!H of R.%. 6:10, is yet another instance of a ta5 credit and it does not in any way refer to illegally collected or erroneously paid ta5es, 5 5 5.O"6 Ruling of the Court of %ppeals The C% affirmed in toto the Resolution of the Court of Ta5 %ppeals *CT%! ordering petitioner to issue a ta5 credit certificate in favor of respondent in the reduced amount of -/<1,<1,.1/. 3t reasoned that Republic %ct 'o. *R%! 6:10 re;uired neither a ta5 liability nor a payment of ta5es by private establishments prior to the availment of a ta5 credit. (oreover, such credit is not tantamount to an unintended benefit from the law, but rather a >ust compensation for the taking of private property for public use. Bence this -etition., The 3ssues -etitioner raises the following issues for our consideration: "Ahether the Court of %ppeals erred in holding that respondent may claim the 0<I sales discount as a ta5

credit instead of as a deduction from gross income or gross sales. "Ahether the Court of %ppeals erred in holding that respondent is entitled to a refund."/ These two issues may be summed up in only one: whether respondent, despite incurring a net loss, may still claim the 0< percent sales discount as a ta5 credit. The CourtOs Ruling The -etition is not meritorious. So;" (ss#"< Claim of 20 Percent Sales Discount as 'a! Cr"0it Despite N"t )oss $ection :a! of R% 6:10 < grants to senior citi8ens the privilege of obtaining a 0< percent discount on their purchase of medicine from any private establishment in the country. The latter may then claim the cost of the discount as a tax credit. 0 7ut can such credit be claimed, even though an establishment operates at a lossN Ae answer in the affirmative. 'a! Cr"0it versus 'a! -"0#ction %lthough the term is not specifically defined in our Ta5 Code, 1 tax credit generally refers to an amount that is "subtracted directly from oneOs total ta5 liability." : 3t is an "allowance against the ta5 itself" 5 or "a deduction from what is owed" 6 by a ta5payer to the government. )5amples of tax credits are withheld ta5es, payments of estimated ta5, and investment ta5 credits. 6 &ax credit should be understood in relation to other ta5 concepts. &ne of these is tax deduction FF defined as a subtraction "from income for ta5 purposes," , or an amount that is "allowed by law to reduce income prior to GtheH application of the ta5 rate to compute the amount of ta5 which is due." / %n e5ample of a tax deduction is any of the allowable deductions enumerated in $ection 1:0< of the Ta5 Code. % tax credit differs from a tax deduction. &n the one hand, a tax credit reduces the ta5 due, including FF whenever applicable FF the income tax that is determined after applying the corresponding ta5 rates to taxable income.0 %tax deduction, on the other, reduces the income that is sub>ect to ta500 in order to arrive at taxable income.01 To think of the former as the latter is to avoid, if not entirely confuse, the issue. % tax credit is used only a*t"r the ta5 has been computed4 a tax deduction, ="*or". Tax Liability Re uire! for 'a! Cr"0it $ince a tax credit is used to reduce directly the ta5 that is due, there ought to be a ta5 liability ="*or" the tax creditcan be applied. Aithout that liability, any tax credit application will be useless. There will be no reason for deducting the latter when there is, to begin with, no

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e5isting obligation to the government. Bowever, as will be presented shortly, the existence of a ta5 credit or its grant by law is not the same as the availment or use of such credit. Ahile the grant is mandatory, the availment or use is not. 3f a net loss is reported by, and no other ta5es are currently due from, a business establishment, there will obviously be no ta5 liability against which any tax credit can be applied.0: 9or the establishment to choose the immediate availment of a tax credit will be premature and impracticable. 'evertheless, the irrefutable fact remains that, under R% 6:10, Congress has granted without conditions a tax credit benefit to all covered establishments. %lthough this tax credit benefit is available, it need not be used by losing ventures, since there is no ta5 liability that calls for its application. 'either can it be reduced to nil by the ;uick yet callow stroke of an administrative pen, simply because no reduction of ta5es can instantly be effected. 7y its nature, the tax credit may still be deducted from a future, not a present, ta5 liability, without which it does not have any use. 3n the meantime, it need not move. 7ut it breathes. Prior Tax Payments "ot Re uire! for 'a! Cr"0it Ahile a ta5 liability is essential to the availment or use of any tax credit, prior ta5 payments are not. &n the contrary, for the existence or grant solely of such credit, neither a ta5 liability nor a prior ta5 payment is needed. The Ta5 Code is in fact replete with provisions granting or allowing tax credits, even though no ta5es have been previously paid. 9or e5ample, in computing the estate tax due, $ection ,6*)! allows a tax credit FF sub>ect to certain limitations FF for estate ta5es paid to a foreign country. %lso found in $ection < *C! is a similar provision for donorOs ta5es FF again when paid to a foreign country FF in computing for the donor:s tax due. The tax credits in both instances allude to the prior payment of ta5es, even if not made to our government. #nder $ection <, a 2%T *2alueF%dded Ta5!F registered person engaging in transactions FF whether or not sub>ect to the 2%T FF is also allowed a tax credit that includes a ratable portion of any input ta5 not directly attributable to either activity. This input ta5 may either be the 2%T on the purchase or importation of goods or services that is merely due from FF not necessarily paid by FF such 2%TFregistered person in the course of trade or business4 or the transitional input ta5 determined in accordance with $ection *%!. The latter type may in fact be an amount e;uivalent to only eight percent of the value of a 2%TFregistered personOs beginning inventory of goods, materials and supplies, when such amount FF as computed FF is higher than the actual 2%T paid on the

said items.05 Clearly from this provision, the tax credit refers to an input ta5 that is either due only or given a value by mere comparison with the 2%T actually paid FF then later prorated. 'o ta5 is actually paid prior to the availment of such credit. 3n $ection *7!, a one and a half percent input tax credit that is merely presumptive is allowed. 9or the purchase of primary agricultural products used as inputs FF either in the processing of sardines, mackerel and milk, or in the manufacture of refined sugar and cooking oil FF and for the contract price of public work contracts entered into with the government, again, no prior ta5 payments are needed for the use of the tax credit. (ore important, a 2%TFregistered person whose sales are 8eroFrated or effectively 8eroFrated may, under $ection 0*%!, apply for the issuance of a tax credit certificate for the amount of creditable input ta5es merely due FF again not necessarily paid to FF the government and attributable to such sales, to the e5tent that the input ta5es have not been applied against output ta5es.06 Ahere a ta5payer is engaged in 8eroFrated or effectively 8eroFrated sales and also in ta5able or e5empt sales, the amount of creditable input ta5es due that are not directly and entirely attributable to any one of these transactions shall be proportionately allocated on the basis of the volume of sales. 3ndeed, in availing of such tax credit for 2%T purposes, this provision FF as well as the one earlier mentioned FF shows that the prior payment of ta5es is not a re;uisite. 3t may be argued that $ection 0,*7!*5!*b! of the Ta5 Code is another illustration of a tax credit allowed, even though no prior ta5 payments are not re;uired. $pecifically, in this provision, the imposition of a final withholding ta5 rate on cash andEor property dividends received by a nonresident foreign corporation from a domestic corporation is sub>ected to the condition that a foreign tax credit will be given by the domiciliary country in an amount e;uivalent to ta5es that are merely deemed paid.06 %lthough true, this provision actually refers to the tax credit as a condition only for the imposition of a lower ta5 rate, not as a deduction from the corresponding ta5 liability. 7esides, it is not our government but the domiciliary country that credits against the income ta5 payable to the latter by the foreign corporation, the ta5 to be foregone or spared. 0, 3n contrast, $ection 1:*C!*1!, in relation to $ection 1:*C! *6!*b!, categorically allows as credits, against the income ta5 imposable under Title 33, the amount of income ta5es merely incurred FF not necessarily paid FF by a domestic corporation during a ta5able year in any foreign country. (oreover, $ection 1:*C!*5! provides that for such ta5es incurred but not paid, a tax credit may be allowed, sub>ect to the condition precedent that the ta5payer shall

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simply give a bond with sureties satisfactory to and approved by petitioner, in such sum as may be re;uired4 and further conditioned upon payment by the ta5payer of any ta5 found due, upon petitionerOs redetermination of it. 3n addition to the aboveFcited provisions in the Ta5 Code, there are also ta5 treaties and special laws that grant or allow tax credits, even though no prior ta5 payments have been made. #nder the treaties in which the tax credit method is used as a relief to avoid double ta5ation, income that is ta5ed in the state of source is also ta5able in the state of residence, but the ta5 paid in the former is merely allowed as a credit against the ta5 levied in the latter.0/ %pparently, payment is made to the state of source, not the state of residence. 'o ta5, therefore, has been previously paid to the latter. #nder special laws that particularly affect businesses, there can also be tax credit incentives. To illustrate, the incentives provided for in %rticle :, of -residential .ecree 'o. *-.! 6,/, as amended by 7atas -ambansa 7lg. *7-! 1/ , include tax credits e;uivalent to either five percent of the net value earned, or five or ten percent of the net local content of e5ports.1< 3n order to avail of such credits under the said law and still achieve its ob>ectives, no prior ta5 payments are necessary. 9rom all the foregoing instances, it is evident that prior ta5 payments are not indispensable to the availment of atax credit. Thus, the C% correctly held that the availment under R% 6:10 did not re;uire prior ta5 payments by private establishments concerned.1 Bowever, we do not agree with its finding10 that the carryFover of tax creditsunder the said special law to succeeding ta5able periods, and even their application against internal revenue ta5es, did not necessitate the e5istence of a ta5 liability. The e5amples above show that a ta5 liability is certainly important in the availment or use, not the existence or grant, of a tax credit. Regarding this matter, a private establishment reporting a net loss in its financial statements is no different from another that presents a net income. 7oth are entitled to the tax credit provided for under R% 6:10, since the law itself accords that unconditional benefit. Bowever, for the losing establishment to immediately apply such credit, where no ta5 is due, will be an improvident usance. Sections 2.i an! # of Revenue Re$ulations "o. 2%&# 'rroneous R% 6:10 specifically allows private establishments to claim as tax credit the amount of discounts they grant.11 3n turn, the 3mplementing Rules and Regulations, issued pursuant thereto, provide the procedures for its availment.1: To deny such credit, despite the plain

mandate of the law and the regulations carrying out that mandate, is indefensible. )irst, the definition given by petitioner is erroneous. 3t refers to tax credit as the amount representing the 0< percent discount that "shall be deducted by the said establishments from their gross income for income ta5 purposes and from their gross sales for valueFadded ta5 or other percentage ta5 purposes."15 3n ordinary business language, the tax credit represents the amount of such discount. Bowever, the manner by which the discount shall be credited against ta5es has not been clarified by the revenue regulations. 7y ordinary acceptation, a discount is an "abatement or reduction made from the gross amount or value of anything."16 To be more precise, it is in business parlance "a deduction or lowering of an amount of money4"16 or "a reduction from the full amount or value of something, especially a price."1, 3n business there are many kinds of discount, the most common of which is that affecting the income statement1/ or financial report upon which theincome tax is based. (usiness Discounts De!ucte! from Gross Sa;"s % cash discount, for e5ample, is one granted by business establishments to credit customers for their prompt payment.:< 3t is a "reduction in price offered to the purchaser if payment is made within a shorter period of time than the ma5imum time specified.": %lso referred to as a sales discount on the part of the seller and a purchase discount on the part of the buyer, it may be e5pressed in such terms as "5E <, nE1<.":0 % quantity discount, however, is a "reduction in price allowed for purchases made in large ;uantities, >ustified by savings in packaging, shipping, and handling." :1 3t is also called a volume or bul* discount.:: % "percentage reduction from the list price 5 5 5 allowed by manufacturers to wholesalers and by wholesalers to retailers":5 is known as a trade discount. 'o entry for it need be made in the manual or computeri8ed boo*s of accounts, since the purchase or sale is already valued at the net price actually charged the buyer.:6 The purpose for the discount is to encourage trading or increase sales, and the prices at which the purchased goods may be resold are also suggested.:6 )ven a chain discount FF a series of discounts from one list price FF is recorded at net.:, 9inally, akin to a trade discount is a functional discount. 3t is "a supplierOs price discount given to a purchaser based on the GlatterOsH role in the GformerOsH distribution system.":/ This role usually involves warehousing or advertising. 7ased on this discussion, we find that the nature of a sales discount is peculiar. %pplying generally accepted

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accounting principles *=%%-! in the country, this type of discount is reflected in the income statement5< as a line item deducted FF along with returns, allowances, rebates and other similar e5penses FF from gross sales to arrive atnet sales.5 This type of presentation is resorted to, because the accounts receivable and sales figures that arise from sales discounts, FF as well as from quantity, volume or bul* discounts FF are recorded in the manual and computeri8ed boo*s of accounts and reflected in the financial statements at the gross amounts of the invoices.50This manner of recording credit sales FF known as the gross method FF is most widely used, because it is simple, more convenient to apply than the net method, and produces no material errors over time.51 Bowever, under the net method used in recording trade, chain or functional discounts, only the net amounts of the invoices FF after the discounts have been deducted FF are recorded in the boo*s of accounts5: and reflected in the financial statements. % separate line item cannot be shown, 55 because the transactions themselves involving bothaccounts receivable and sales have already been entered into, net of the said discounts. The term sales discounts is not e5pressly defined in the Ta5 Code, but one provision adverts to amounts whose sum FF along with sales returns, allowances and cost of goods sold56 FF is deducted from gross sales to come up with the gross income, profit or margin56 derived from business.5, 3n another provision therein, sales discountsthat are granted and indicated in the invoices at the time of sale FF and that do not depend upon the happening of any future event FF may be e5cluded from the gross sales within the same ;uarter they were given.5/ Ahile determinative only of the 2%T, the latter provision also appears as a suitable reference point for income ta5 purposes already embraced in the former. %fter all, these two provisions affirm that sales discounts are amounts that are always deductible from gross sales. Reason for t)e Senior Citi*en Discount: T)e La+, "ot Prompt Payment % distinguishing feature of the implementing rules of R% 6:10 is the private establishmentOs outright deduction of the discount from the invoice price of the medicine sold to the senior citi8en.6< 3t is, therefore, e5pected that for each retail sale made under this law, the discount period lasts no more than a day, because such discount is given FF and the net amount thereof collected FF immediately upon perfection of the sale.6 %lthough prompt payment is made for an armOsFlength transaction by the senior citi8en, the real and compelling reason for the private establishment giving the discount is that the law itself makes it mandatory.

Ahat R% 6:10 grants the senior citi8en is a mere discount privilege, not a sales discount or any of the above discounts in particular. -rompt payment is not the reason for *although a necessary conse;uence of! such grant. To be sure, the privilege en>oyed by the senior citi8en must be e;uivalent to the tax credit benefit en>oyed by the private establishment granting the discount. Let, under the revenue regulations promulgated by our ta5 authorities, this benefit has been erroneously likened and confined to a sales discount. To a senior citi8en, the monetary effect of the privilege may be the same as that resulting from a sales discount. Bowever, to a private establishment, the effect is different from a simple reduction in price that results from such discount. 3n other words, the tax credit benefit is not the same as a sales discount. To repeat from our earlier discourse, this benefit cannot and should not be treated as a tax deduction. To stress, the effect of a sales discount on the income statement and income tax return of an establishment covered by R% 6:10 is different from that resulting from the availment or use of its tax credit benefit. Ahile the former is a deduction before, the latter is a deduction after, the income tax is computed. %s mentioned earlier, a discount is not necessarily a sales discount, and a tax credit for a simple discount privilege should not be automatically treated like a sales discount. ;bi lex non distinguit, nec nos distinguere debemus. Ahere the law does not distinguish, we ought not to distinguish. $ections 0.i and : of Revenue Regulations 'o. *RR! 0F /: define tax credit as the 0< percent discount deductible from gross income for income tax purposes, or from gross sales for 2%T or other percentage ta5 purposes. 3n effect, the tax credit benefit under R% 6:10 is related to a sales discount. This contrived definition is improper, considering that the latter has to be deducted from gross sales in order to compute the gross income in theincome statement and cannot be deducted again, even for purposes of computing the income tax. Ahen the law says that the cost of the discount may be claimed as a tax credit, it means that the amount FF when claimed FF shall be treated as a reduction from any ta5 liability, plain and simple. The option to avail of the tax credit benefit depends upon the e5istence of a ta5 liability, but to limit the benefit to a sales discount FF which is not even identical to the discount privilege that is granted by law FF does not define it at all and serves no useful purpose. The definition must, therefore, be stricken down. La+s "ot -men!e! by Re$ulations Second, the law cannot be amended by a mere regulation. 3n fact, a regulation that "operates to create a

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rule out of harmony with the statute is a mere nullity"460 it cannot prevail. 3t is a cardinal rule that courts "will and should respect the contemporaneous construction placed upon a statute by the e5ecutive officers whose duty it is to enforce it 5 5 5."61 3n the scheme of >udicial ta5 administration, the need for certainty and predictability in the implementation of ta5 laws is crucial.6: &ur ta5 authorities fill in the details that "Congress may not have the opportunity or competence to provide."65 The regulations these authorities issue are relied upon by ta5payers, who are certain that these will be followed by the courts.66 Courts, however, will not uphold these authoritiesO interpretations when clearly absurd, erroneous or improper. 3n the present case, the ta5 authorities have given the term tax credit in $ections 0.i and : of RR 0F/: a meaning utterly in contrast to what R% 6:10 provides. Their interpretation has muddled up the intent of Congress in granting a mere discount privilege, not a sales discount. The administrative agency issuing these regulations may not enlarge, alter or restrict the provisions of the law it administers4 it cannot engraft additional re;uirements not contemplated by the legislature.66 3n case of conflict, the law must prevail. 6, % "regulation adopted pursuant to law is law."6/ Conversely, a regulation or any portion thereof not adopted pursuant to law is no law and has neither the force nor the effect of law.6< -vailment of 'a! Cr"0it .oluntary &hird, the word may in the te5t of the statute6 implies that the availability of the tax credit benefit is neither unrestricted nor mandatory.60 There is no absolute right conferred upon respondent, or any similar ta5payer, to avail itself of the tax credit remedy whenever it chooses4 "neither does it impose a duty on the part of the government to sit back and allow an important facet of ta5 collection to be at the sole control and discretion of the ta5payer."61 9or the ta5 authorities to compel respondent to deduct the 0< percent discount from either its gross income or its gross sales6: is, therefore, not only to make an imposition without basis in law, but also to blatantly contravene the law itself. Ahat $ection :.a of R% 6:10 means is that the tax credit benefit is merely permissive, not imperative. Respondent is given two options FF either to claim or not to claim the cost of the discounts as a tax credit. 3n fact, it may even ignore the credit and simply consider the gesture as an act of beneficence, an e5pression of its social conscience.

=ranting that there is a ta5 liability and respondent claims such cost as a tax credit, then the tax credit can easily be applied. 3f there is none, the credit cannot be used and will >ust have to be carried over and revalidated65accordingly. 3f, however, the business continues to operate at a loss and no other ta5es are due, thus compelling it to close shop, the credit can never be applied and will be lost altogether. 3n other words, it is the e5istence or the lack of a ta5 liability that determines whether the cost of the discounts can be used as a tax credit. R% 6:10 does not give respondent the unfettered right to avail itself of the credit whenever it pleases. 'either does it allow our ta5 administrators to e5pand or contract the legislative mandate. "The Pplain meaning ruleO or verba legis in statutory construction is thus applicable 5 5 5. Ahere the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation." 66 'a! Cr"0it (enefit Deeme! J#st Co>p"nsation )ourth, $ections 0.i and : of RR 0F/: deny the e5ercise by the $tate of its power of eminent domain. 7e it stressed that the privilege en>oyed by senior citi8ens does not come directly from the $tate, but rather from the private establishments concerned. %ccordingly, the tax credit benefit granted to these establishments can be deemed as their $ust compensation for private property taken by the $tate for public use.66 The concept of public use is no longer confined to the traditional notion of use by the public, but held synonymous with public interest, public benefit, public welfare, and public convenience.6, The discount privilege to which our senior citi8ens are entitled is actually a benefit en>oyed by the general public to which these citi8ens belong. The discounts given would have entered the coffers and formed part of the gross sales of the private establishments concerned, were it not for R% 6:10. The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit. %s a result of the 0< percent discount imposed by R% 6:10, respondent becomes entitled to a $ust compensation. This term refers not only to the issuance of a tax credit certificate indicating the correct amount of the discounts given, but also to the promptness in its release. );uivalent to the payment of property taken by the $tate, such issuance FF when not done within a reasonable time from the grant of the discounts FF cannot be considered as $ust compensation. 3n effect, respondent is made to suffer the conse;uences of being immediately deprived of its revenues while awaiting actual receipt, through the certificate, of the e;uivalent

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amount it needs to cope with the reduction in its revenues.6/ 7esides, the ta5ation power can also be used as an implement for the e5ercise of the power of eminent domain.,<Ta5 measures are but "enforced contributions e5acted on pain of penal sanctions", and "clearly imposed for apublic purpose.",0 3n recent years, the power to ta5 has indeed become a most effective tool to reali8e social >ustice, public welfare, and the e;uitable distribution of wealth.,1 Ahile it is a declared commitment under $ection of R% 6:10, social >ustice "cannot be invoked to trample on the rights of property owners who under our Constitution and laws are also entitled to protection. The social >ustice consecrated in our GCHonstitution GisH not intended to take away rights from a person and give them to another who is not entitled thereto.",: 9or this reason, a >ust compensation for income that is taken away from respondent becomes necessary. 3t is in the tax credit that our legislators find support to reali8e social >ustice, and no administrative body can alter that fact. To put it differently, a private establishment that merely breaks even,5 FF without the discounts yet FF will surely start to incur losses because of such discounts. The same effect is e5pected if its markFup is less than 0< percent, and if all its sales come from retail purchases by senior citi8ens. %side from the observation we have already raised earlier, it will also be grossly unfair to an establishment if the discounts will be treated merely as deductions from either its gross income or its gross sales. &perating at a loss through no fault of its own, it will reali8e that thetax credit limitation under RR 0F/: is inutile, if not improper. Aorse, profitFgenerating businesses will be put in a better position if they avail themselves of tax credits denied those that are losing, because no ta5es are due from the latter. /rant of 'a! Cr"0it 0nten!e! by t)e Le$islature )ifth, R% 6:10 itself seeks to adopt measures whereby senior citi8ens are assisted by the community as a whole and to establish a program beneficial to them.,6 These ob>ectives are consonant with the constitutional policy of making "health 5 5 5 services available to all the people at affordable cost",6 and of giving "priority for the needs of the 5 5 5 elderly.",, $ections 0.i and : of RR 0F/:, however, contradict these constitutional policies and statutory ob>ectives. 9urthermore, Congress has allowed all private establishments a simple tax credit, not a deduction. 3n fact, no cash outlay is re;uired from the government for the availment or use of such credit. The deliberations on 9ebruary 5, //0 of the 7icameral Conference Committee (eeting on $ocial @ustice, which finali8ed R% 6:10, disclose the true intent of our legislators to treat

the sales discounts as a tax credit, rather than as a deduction from gross income. Ae ;uote from those deliberations as follows: "TB) CB%3R(%' *Rep. #nico!. 7y the way, before that ano, about deductions from ta5able income. 3 think we incorporated there a provision na F on the responsibility of the private hospitals and drugstores, hindi baN $)'. %'=%R%. &o. TB) CB%3R(%'. *Rep. #nico!, $o, 3 think we have to put in also a provision here about the deductions from ta5able income of that private hospitals, di ba ganon CyanN ($. %.2)'T&. Qaya lang po sir, and mga discounts po nila affecting government and public institutions, so, puwede na po nating hindi isama yung mga less deductions ng ta5able income. TB) CB%3R(%'. *Rep. #nico!. -uwede na. Lung about the private hospitals. Lung isiningit natinN ($. %.2)'T&. $ingit na po ba yung 5I on credit. *inaudibleEdid not use the microphone!. $)'. %'=%R%. Bindi pa, hindi pa. TB) CB%3R(%'. *Rep. #nico! %h, Cdi pa ba naisama natinN $)'. %'=%R%. &o. Lou want to insert thatN TB) CB%3R(%' *Rep. #nico!. Lung ang proposal ni $enator $hahani, e. $)'. %'=%R%. 3n the case of private hospitals they got the grant of 5I discount, provided that, the private hospitals can claim the e5pense as a ta5 credit. R)-. %R#3'&. Lah could be allowed as deductions in the perpetrations of *inaudible! income. $)'. %'=%R%. 3Fta5 credit na lang natin para walang cashFout anoN R)-. %R#3'&. &o, ta5 credit. Tama, &kay. Bospitals ba o lahat ng establishments na covered. TB) CB%3R(%'. *Rep. #nico!. $a kuwan lang yon, as private hospitals lang. R)-. %R#3'&. %no ba yung establishments na coveredN $)'. %'=%R%. Restaurant lodging houses, recreation centers. R)-. %R#3'&. %ll establishments covered siguroN $)'. %'=%R%. 9rom all establishments. %lisin na natin CLung kuwan kung ganon. Can we go back to $ection : haN R)-. %R#3'&. &ho. $)'. %'=%R%. Detter %. To capture that thought, weCll say the grant of 0<I discount from all establishments et cetera, et cetera, provided that said establishments F provided that private establishments may claim the cost as a ta5 credit. =anon ba CyonN R)-. %R#3'&. Lah. $)'. %'=%R%. .ahil kung government, they donCt need to claim it.

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TB) CB%3R(%'. *Rep. #nico!. Ta5 credit. $)'. %'=%R%. #s a tax credit 7rather9 than a *uwan % deduction, &kay. R)-. %R#3'& &kay. $)'. %'=%R%. $ige &kay. .i sub>ect to style na lang sa Detter %".,/ Special La+ 1ver /eneral La+ Sixth and last, R% 6:10 is a special law that should prevail over the Ta5 Code FF a general law. "5 5 5 GTHhe rule is that on a specific matter the special law shall prevail over the general law, which shall be resorted to only to supply deficiencies in the former."/< 3n addition, "GwHhere there are two statutes, the earlier special and the later general FF the terms of the general broad enough to include the matter provided for in the special FF the fact that one is special and the other is general creates a presumption that the special is to be considered as remaining an e5ception to the general,/ one as a general law of the land, the other as the law of a particular case."/0 "3t is a canon of statutory construction that a later statute, general in its terms and not e5pressly repealing a prior special statute, will ordinarily not affect the special provisions of such earlier statute."/1 R% 6:10 is an earlier law not e5pressly repealed by, and therefore remains an e5ception to, the Ta5 Code FF a later law. Ahen the former states that a tax credit may be claimed, then the re;uirement of prior ta5 payments under certain provisions of the latter, as discussed above, cannot be made to apply. 'either can the instances of or references to a tax deduction under the Ta5 Code/: be made to restrict R% 6:10. 'o provision of any revenue regulation can supplant or modify the acts of Congress. AB)R)9&R), the -etition is hereby .)'3).. The assailed .ecision and Resolution of the Court of %ppeals %993R().. 'o pronouncement as to costs. $& &R.)R)..

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