Pepsi-Cola Bottling Co. v.

City of Butuan
Concepcion G.R. No. L-22814, August 28, 1968
RATIO DECIDENDI The uniformity required under the Constitution is not absolute
uniformity. It only requires that people belonging to the same class be taxed
uniformly. For classification to be valid, the following must concur: (1) it is based upon
substantial distinctions; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies to present conditions and future ones
substantially identical to those of the present; and (4) the classification applies
equally to those belonging to the same class.
FACTS:

Pepsi-Cola Bottling Co. of the Philippines (Pepsi-Cola) has a storage facility in

the City of Butuan for its soft drinks manufactured in Cebu. Products from this facility
are sold to consumers in the said city. The City of Butuan (Butuan) enacted Ordinance
No. 110, which imposed a tax on dealers engaged in selling soft drinks or carbonated
drinks. Ordinance No. 110 was later amended by Ordinance No. 122. Consequently,
the tax was now imposed on any agent and/or consignee of any person, association,
partnership, company, or corporation engaged in selling x x x soft drinks or
carbonated drinks. According to the Court, this obviously pertains to a situation
wherein an outside dealer taps a local agent and/or consignee to sell his products in
said agents and/or consignees locality. Since Pepsi-Cola has a storage facility in the
city receiving soft drinks from Cebu, and since said facility sells the same carbonated
beverages to the people of the city, it was assessed the tax imposed by Ordinance
110, as amended by Ordinance 122 (Ordinance 110, as amended). Pepsi-Cola paid
under protest. Pepsi-Cola brought the matter of recovering the amounts paid before
the lower court. It dismissed the complaint, hence this appeal.
ISSUE:
W/N the tax imposed by Ordinance 110, as amended, violates the uniformity
requirement.
HELD:
YES, Ordinance 110, as amended, unfairly singles out agents and/or consignees of
outside dealers.
The Constitution (what is being referred to here is the 1935 Constitution) provides:
The rule of taxation shall be uniform and equitable. x x x (See also par. 1, Sec. 28,
Art. VI, 1987 Constitution) Ordinance 110, as amended, defines what it means by
agent or consignee, to wit: any person, association, partnership, company, or
corporation who acts in the place of another x x x or one entrusted with the business
of another or to whom is consigned or shipped x x x cases of hard liquor[s] or soft
drinks every month for resale, either retail or wholesale.
For classification to be valid, the following must concur: (1) it is based upon
substantial distinctions; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies to present conditions and future ones
substantially identical to those of the present; and (4) the classification applies
equally to those belonging to the same class. The ordinance exempts local dealers
not acting for or in behalf of outside merchants from paying the tax it imposes. It only
applies to local dealers acting for or in behalf of outside merchants. Butuan did not
offer any explanation as to why a distinction between the two was made. If the
purpose of the tax measure was merely to create a new revenue source by levying
tax upon the sale of soft drinks, there is no reason for favoring one over the other.

WHEREFORE, the decision appealed from is hereby reversed, and another one shall
be entered annulling Ordinance No. 110, as amended by Ordinance No. 122, and
sentencing the City of Butuan to refund to plaintiff herein the amounts collected from
and paid under protest by the latter, with interest thereon at the legal rate from the
date of the promulgation of this decision, in addition to the costs, and defendants
herein are, accordingly, restrained and prohibited permanently from enforcing said
Ordinance, as amended. It is so ordered.