Petron Corp. v.

Mayor Tiangco and Treasurer Enriquez

of the Municipality of Navotas
Facts:

Petron maintains a depot or bulk plant in Navotas Fishport Complex.

Through the said depot, it sells diesel fuels to the vessels used in commercial
fishing in and around Manila Bay.

Later, Petron received a letter from the office of Mayor Tiangco assessing it for
business taxes in the amouont of 6.2M covering 1997-2001 pursuant to the
Navotas Revenue Code.

A protest was filed by Petron arguing that under the IRR of the NIRC, it is
exempt from local business tax. Also, an opinion was rendered by the Bureau
of Local Government Finance providing for that sales of petroleum fuels are
NOT subject to local taxation. Letter protest was denied and a final demand to
pay was sent to Petron.

Petron filed a complaint for cancellation of assessment with TRO before the
RTC. RTC dismissed the complaint.
Issue:
WON the municipality of Navotas may impose a business tax on
Petron? NO!
Ratio:
Section 133(h) of the LGC reads as follows:
Sec. 133. Common Limitations on the Taxing Powers of Local
Government Units.
- Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and Barangays shall not extend to the levy of
the following:
xxx
(h) Excise taxes on articles enumerated under the National Internal Revenue
Code, as amended, and taxes, fees or charges on petroleum products;
The language of Section 133(h) makes plain that the prohibition with respect
to petroleum products extends not only to excise taxes thereon, but all "taxes,
fees and charges." The earlier reference in paragraph (h) to excise taxes
comprehends a wider range of subjects of taxation: all articles already covered

by excise taxation under the NIRC, such as alcohol products, tobacco

products, mineral products, automobiles, and such non-essential goods as
jewelry, goods made of precious metals, perfumes, and yachts and other
vessels intended for pleasure or sports. In contrast, the later reference to
"taxes, fees and charges" pertains only to one class of articles of the many
subjects of excise taxes, specifically, "petroleum products".
While local government units are authorized to burden all such other class of
goods with "taxes, fees and charges," excepting excise taxes, a specific
prohibition is imposed barring the levying of any other type of taxes with
respect to petroleum products.

LTO vs CITY OF BUTUAN

Facts:
Relying on the fiscal autonomy granted to LGU's by the Constittuion
and the provisons of the Local Government Code, the Sangguniang
Panglunsod of the City of Butuan enacted an ordinance "Regulating the
Operation of Tricycles-for-Hire, providing mechanism for the issuance of
Franchise, Registration and Permit, and Imposing Penalties for Violations
thereof and for other Purposes." The ordinance provided for, among other
things, the payment of franchise fees for the grant of the franchise of tricyclesfor-hire, fees for the registration of the vehicle, and fees for the issuance of a
permit for the driving thereof.
Petitioner LTO explains that one of the functions of the national
government that, indeed, has been transferred to local government units is the
franchising authority over tricycles-for-hire of the Land Transportation
Franchising and Regulatory Board ("LTFRB") but not, it asseverates, the
authority of LTO to register all motor vehicles and to issue to qualified persons
of licenses to drive such vehicles.
The RTC and CA ruled that the power to give registration and license
for driving tricycles has been devolved to LGU's.
Issue:
Whether or not, the registration of tricycles was given to LGU's,
hence the ordinance is a valid exercise of police power?

Ruling:
No, based on the-"Guidelines to Implement the Devolution of
LTFRBs Franchising Authority over Tricycles-For-Hire to Local Government
units pursuant to the Local Government Code"- the newly delegated powers to
LGU's pertain to the franchising and regulatory powers exercised by the
LTFRB and not to the functions of the LTO relative to the registration of motor
vehicles and issuance of licenses for the driving thereof. Corollarily, the
exercised of a police power must be through a valid delegation. In this case
the police power of registering tricycles was not delegated to the LGUs, but
remained in the LTO.
Clearly unaffected by the Local Government Code are the powers of
LTO under R.A. No.4136 requiring the registration of all kinds of motor
vehicles "used or operated on or upon any public highway" in the country.
The Commissioner of Land Transportation and his deputies are
empowered at anytime to examine and inspect such motor vehicles to
determine whether said vehicles are registered, or are unsightly, unsafe,
improperly marked or equipped, or otherwise unfit to be operated on because
of possible excessive damage to highways, bridges and other infrastructures.
The LTO is additionally charged with being the central repository and
custodian of all records of all motor vehicles.

The power over tricycles granted under Section 458(a)(3)(VI) of the

Local Government Code to LGUs is the power to regulate their operation and
to grant franchises for the operation thereof. The exclusionary clause
contained in the tax provisions of Section 133 (1) of the Local Government
Code must not be held to have had the effect of withdrawing the express
power of LTO to cause the registration of all motor vehicles and the issuance
of licenses for the driving thereof. These functions of the LTO are essentially
regulatory in nature, exercised pursuant to the police power of the State,
whose basic objectives are to achieve road safety by insuring the road
worthiness of these motor vehicles and the competence of drivers prescribed
by R. A. 4136. Not insignificant is the rule that a statute must not be construed
in isolation but must be taken in harmony with the extant body of laws.
LGUs indubitably now have the power to regulate the operation of
tricycles-for-hire and to grant franchises for the operation thereof, and not to
issue registration.
Ergo, the ordinance being repugnant to a statute is void and ultra
vires.

LEPANTO CONSOLIDATED MINING VS. AMBANLOC

Adds the Court, the reliance made by respondents on the broad

taxing power of local government units, specifically under Section 133 of the
Local Government Code, is tangential.

BUT
Note that this has been appealed to the SC.
The two decisions are herein provided in sum:

Police power and taxation, along with eminent domain, are inherent
powers of sovereignty which the State might share with local government units
by delegation given under a constitutional or a statutory fiat. All these inherent
powers are for a public purpose and legislative in nature but the similarities
just about end there. The basic aim of police power is public good and welfare.
Taxation, in its case, focuses on the power of government to raise revenue in
order to support its existence and carry out its legitimate objectives. Although
correlative to each other in many respects, the grant of one does not
necessarily carry with it the grant of the other. The two powers are, by tradition
and jurisprudence, separate and distinct powers, varying in their respective
concepts, character, scopes and limitations.

The national government issued to petitioner Lepanto Consolidated Mining

Company (Lepanto) a mining lease contract

To construe the tax provisions of Section 133 (1) of the LGC

indistinctively would result in the repeal to that extent of LTO's regulatory
power which evidently has not been intended. If it were otherwise, the law
could have just said so in Section 447 and 458 of Book III of the Local
Government Code in the same manner that the specific devolution of LTFRB's
power on franchising of tricycles has been provided. Repeal by implication is
not favored.

Respondent Mauricio Ambanloc, the provincial treasurer of Benguet, sent a

demand letter to Lepanto, asking it to pay the province P1,901,893.22 as sand
and gravel tax, for the quarry materials that it extracted from its mining site
from 1997 to 2000. Lepanto sent a letter-protest to the provincial treasurer
(June 25, 200) , but the latter denied the same, insisting on payment (July 31,
2001).

Lepanto used the quarried materials to back-fill stopesportions of the earth

excavated as a result of mining replacing what had been mined to maintain
the integrity of the ground. It also used sand and gravel to construct and
maintain concrete structures needed in its mining operation, such as a tailings
dam, access roads, and offices. Its use of quarry resources, readily available
within its mining claim, was more practical and cheaper than having to
outsource them.

Lepanto filed a petition with the Regional Trial Court (RTC) of Benguet to

question the assessment.

The RTC ruled that Lepanto was liable for the amount assessed, with interest
at the rate of 2 percent per month from the time the tax should have been
paid. Lepanto appealed the RTC decision to the Court of Tax Appeals (CTA)
where it was raffled to its Second Division. The Second Division affirmed the
ruling of the RTC with the modification that the interest of 2 percent per month
shall not exceed 36 months.
Lepanto appealed the decision of the Second Division to the CTA En Banc.
Three justices of the CTA voted to affirm the decision but three justices
dissented. Because the needed vote of four members could
ISSUE:
Is Lepanto liable for the tax imposed by Benguet on the sand and
gravel that it extracted from within the area of its mining claim used exclusively
in its mining operations?
CTA:
YES. A mining company is subject to the sand and gravel tax,
imposed by a province on the stones, sand, gravel, earth and other quarry
resources extracted by it from public lands. The tax applies regardless of
whether the extraction was made for commercial purpose or merely incidental
to its primary purpose since no distinction is made under Sections 134 and
138 of the LGC of 1991 which authorizes provinces to impose the sand and
gravel tax.

public lands, and not the extracted minerals, which are not the same as those

----SUPREME COURT LEVEL---- JUNE 29, 2010

SC RULING:
YES. The CTA erred in applying the provision of the Local
Government Code (Section 138) since the basis of Benguet province
emanates from the Revised Benguet Revenue Code itself. This
notwithstanding, the provincial revenue measure still did not distinguish
between commercial and non-commercial extractions.
In addition, the Petitioners argument that when a company is taxed on its
main business it can no longer be taxable for engaging in an activity that is but
part of, incidental to, and necessary to such main business, was held to be
inapplicable. The Court said that the cases where the above principle has
been applied involved business taxes and thus the incidental activities could
not be treated as separate and distinct from the main business. Here the tax
being imposed was an excise tax levied on the privilege of extracting gravel
and sand.
***PRINCIPLE:
The principle that when a company is taxed on its main business, it is no
longer taxable for engaging in an activity that is but a part of incidental to, and
necessary to such main business, applies to business taxes and not to taxes
such as the sand and gravel tax imposed by the provincial government. The
reasoning was that the incidental

Likewise, a province is entitled to impose the sand and gravel tax on mining
companies, since the subject of the tax is the sand and gravel extracted from