CASE 2013-0028: MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC.

,
PETITIONERS, -VERSUS- SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT AND THE SECRETARY OF THE DEPARTMENT OF FINANCE (G.R. NO. 175356,
03 DECEMBER 2013, DEL CASTILLO J.)SUBJECT/S: LEGALITY OF DISCOUNTS FOR SENIOR
CITIZENS (BRIEF TITLE: MANILA MEMORIAL VS. DSWD SECRETARY)

Facts: On April 23, 1992, RA 7432 was passed into law, granting senior citizens the
following privileges under Sec. 4 of the same:

20% discount on:

o Medical-related privileges
Medicine and drug purchases
Medical supplies, accessories and equipment
Medical and dental services
Professional fees of attending physician
Professional fees of licensed health workers providing home health
care services
o Transportation
Air and Sea
Land: LRT, MRT, PNR, buses, jeepneys, taxi and shuttle services
o Hotels, restaurants, recreational facilities, places of leisure
Hotels, restaurants, theaters, cinemas, concert halls, circuses, leisure
and amusement
o Recreation centers
Fees, charges and rental for sports facilities and equipment
o Funeral services
Funeral and burial expenses include casket or urn, embalming,
cremation cost, and other services.

The establishments may claim the discounts as tax deduction based on the net cost of
the goods sold or services rendered provided that the cost of the discount shall be
allowed as deduction from gross income for the same taxable year the discount is
granted. Provided further, that the total amount of the claimed tax deduction net of
value added tax if applicable shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the
NIRC as amended. Petitioners argue that the discount given to senior citizens (under
r.a. 7432 as amended by r.a. 9257) will force establishments to raise their prices in order
to compensate for its impact on overall profits or income/gross sales. The general
public, or those not belonging to the senior citizen class, are, thus, made to
effectively shoulder the subsidy for senior citizens. This, in petitioners view, is unfair.

Issue: WON petitioners contention is correct?

Held: NO.
Congress may be reasonably assumed to have foreseen this eventuality. But, more
importantly, this goes into the wisdom, efficacy and expediency of the subject law
which is not proper for judicial review.

In a way, this law pursues its social equity objective in a non-traditional manner unlike
past and existing direct subsidy programs of the government for the poor and
marginalized sectors of our society. Verily, congress must be given sufficient leeway in
formulating welfare legislations given the enormous challenges that the government
faces relative to, among others, resource adequacy and administrative capability in
implementing social reform measures which aim to protect and uphold the
interests of those most vulnerable in our society. In the process, the individual, who
enjoys the rights, benefits and privileges of living in a democratic polity, must bear his
share in supporting measures intended for the common good.

Without the requisite showing of a clear and unequivocal breach of the constitution,
the validity of the assailed law must be sustained.

City of Manila, et al vs. Judge Colet, and Malaysian Airline System

G.R. No. 120051, December 10, 2014

Facts: The case involves 10 consolidated petitions involving several corporations

operating as transportation contractors, persons who transport passenger or freight for
hire, and common carriers by land, air or water with principal offices in Metro Manila,
and City of Manilas Ordinance No. 7807 which amended Sec. 21 (B) of the Manila
Revenue Code. Sec.21 (B) imposed business tax on transportation contractors, persons
who transport passenger or freight for hire, and common carriers by land, air or water;
while the subject ordinance amended such by lowering the tax rate from 3% per
annum to .5% per annum. The City of Manila, through its City Treasurer, began imposing
and collecting the business tax under Section 21(B) of the Manila Revenue Code, as
amended, beginning January 1994.
Because they were assessed and/or compelled to pay business taxes pursuant to
Section 21(B) of the Manila Revenue Code before they were issued their business
permits for 1994, several corporations questioned the constitutionality of Sec. 21 (B) for
being contrary to the Constitution and the Local Government Code, and asked for the
refund of what they had paid as business tax.
The City of Manila, argued that it was constitutional and valid; and such position was
adopted by the RTC and the CA when the case reached the respective fora. The City
argued that the enactment of Sec. 21 (B) is based on the exempting clause found at
the beginning of Sec. 133, in conjunction with Section 143(h), of the LGC.
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:

xxxx

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or
water, except as provided in this Code;
 SEC. 143. Tax on Business. The municipality may impose taxes on the following
businesses:

x xxx

(h) On any business, not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax: Provided, That on any business
subject to the excise, value-added or percentage tax under the National Internal
Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross
sales or receipts of the preceding calendar year.

The sanggunian concerned may prescribe a schedule of graduated tax rates but in no
case to exceed the rates prescribed herein. (Emphases supplied by the Supreme Court)

Issue: WON Sec. 21 (B) of the Manila Revenue Code, as amended, is unconstitutional.

Held: Yes. The power to tax is not inherent in LGUs to whom the power must be
delegated by Congress and must be exercised within the guidelines and limitations that
Congress may provide.

Sec. 5 of Article X of the Constitution granted LGUs the power to create its own sources
of revenues and to levy taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide... In conformity with said constitutional
provision, the Local Govt Code was enacted by Congress.

Sec. 130 of the LGC provides for the fundamental principles governing the taxing
powers of LGUs. Sec. 133 provides for the common limitations on the taxing powers of
LGUs. Among the common limitations on the taxing power of LGUs is Section 133(j) of
the LGC, which states that unless otherwise provided herein, the taxing power of LGUs
shall not extend to taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water, except as provided in this Code.
Section 133(j) of the LGC clearly and unambiguously proscribes LGUs from imposing any
tax on the gross receipts of transportation contractors, persons engaged in the
transportation of passengers or freight by hire, and common carriers by air, land, or
water. Yet, confusion arose from the phrase unless otherwise provided herein, found
at the beginning of the said provision, and the City of Manila anchors the validity of
Sec. 21 (B) on said phrase.

However, the Court is not convinced with the Citys contention. Sec. 133(j) of the LGC
prevails over Sec. 143 (h) of the same Code, and Sec. 21(B) of the Manila Revenue
Code, as amended, was manifestly in contravention of the former.

Sec. 133(j) of the LGC is a specific provision that explicitly withholds from any LGU the
power to tax the gross receipts of transportation contractors, common carriers, persons
engaged in the transportation of passengers or freight by hire, and common carriers by
air, land, or water. In contrast, Sec. 143 of the LGC defines the general power of the
municipality (as well as the city, if read in relation to Section 151 of the same Code) to
tax businesses within its jurisdiction.

The succeeding proviso of Section 143(h) of the LGC, viz., Provided, That on any
business subject to the excise, value-added or percentage tax under the National
Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%)
of gross sales or receipts of the preceding calendar year, is not a specific grant of
power to the municipality or city to impose business tax on the gross sales or receipts of
such a business. Rather, the proviso only fixes a maximum rate of imposable business
tax in case the business taxed under Section 143(h) of the LGC happens to be subject
to excise, value added, or percentage tax under the NIRC.

The omnibus grant of power to municipalities and cities under Section 143(h) of the LGC
cannot overcome the specific exception/exemption in Section 133(j) of the same
Code.

In the case at bar, the Sanggunian of the municipality or city cannot enact an
ordinance imposing business tax on the gross receipts of transportation contractors,
persons engaged in the transportation of passengers or freight by hire, and common
carriers by air, land, or water, when said Sanggunian was already specifically prohibited
from doing so.
Such construction gives effect to both Sections 133(j) and 143(h) of the LGC. Also, Sec.
5(b) of the LGC itself, on Rules of Interpretation, provides that in case of doubt, any tax
ordinance shall be construed strictly against the LGU enacting it, and liberally in favor of
the taxpayer. Furthermore, such a construction is pursuant to the legislative intent to
exclude from the taxing power of the LGU the imposition of business tax against
common carriers to prevent a duplication of the so-called common carriers tax.

Commissioner of Internal Revenue v. Solidbank Corporation

GR 148191, November 25, 2003

Facts:
In a Court of Tax Appeals case (Asian Bank v. CIR), the CTA decided that the 20% final
withholding tax on a banks interest/passive income should not form part of its taxable
gross receipts in computing the taxable gross receipts. On the strength of such
decision, Solidbank sent a letter-request to the BIR claiming for refund or issuance of tax
credit for the amount that was allegedly overpaid as gross receipts tax. Without waiting
for the BIRs decision, Solidbank filed a petition for review before the CTA in order to toll
the running of 2-year prescriptive period. The CTA ruled in favor of Solidbank; the CA
affirmed the ruling. The Commissioner questioned the rulings before the SC via Rule 45.
The Commissioner contended that although the 20% FWT on respondents interest
income was not actually received by respondent because it was remitted directly to
the government, the fact that the amount redounded to the banks benefit makes it
part of the taxable gross receipts in computing the 5% GRT.
Issue1: WON the 20% final withholding tax on a banks interest income forms part of the
taxable gross receipts in computing the 5% gross receipts tax.

Held: Yes. Under Sec 119, the earnings of banks from passive income are subject to a
20% FWT. This tax is withheld at source and is thus not actually and physically received
by the banks, because it is paid directly to the government by the entities from which
the banks derived the income. Apart from the 20% FWT, banks are also subject to a 5%
GRT which is imposed by Sec 24 (a)(1) on their gross receipts, including the passive or
interest income.
Since the 20% FWT is constructively received by the banks and forms part of their gross
receipts or earnings, it follows that it is subject to the 5% GRT. That they do not actually
receive the amount does not alter the fact that it is remitted for their benefit in
satisfaction of their tax obligations.

Issue 2: WON there is double taxation.

Held: No. Subjecting interest income to a 20% FWT and including it in the computation
of the 5% GRT is not double taxation.
First, the taxes are imposed on two different subject matters. The subject matter of the
FWT is the passive income generated in the form of interest on deposits and yield on
deposit substitutes, while the subject matter of the GRT is the privilege of engaging in
the business of banking.
A tax based on receipts is a tax on business rather than on the property; it is an
excise rather than a property tax. It is not an income tax, unlike the FWT. In fact, one
can be taxed for engaging in business and further taxed differently for the income
derived therefrom. These two taxes are entirely distinct and are assessed under different
provisions.
Second, although both taxes are national in scope because they are imposed by the
same taxing authority the national government under the Tax Code and operate
within the same Philippine jurisdiction for the same purpose of raising revenues,
the taxing periods they affect are different. The FWT is deducted and withheld as soon
as the income is earned, and is paid after every calendar quarter in which it is earned.
On the other hand, the GRT is neither deducted nor withheld, but is paid only after
every taxable quarter in which it is earned.
Lastly, these two taxes are of different kinds or characters. The FWT is an income tax
subject to withholding, while the GRT is a percentage tax not subject to withholding.

ABAKADA Guro Party List vs. Ermita

G.R. No. 168056 September 1, 2005

Facts: Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed
a petition for prohibition on May 27, 2005 questioning the constitutionality of Sections 4,
5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods
and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6
imposes a 10% VAT on sale of services and use or lease of properties. These questioned
provisions contain a uniform proviso authorizing the President, upon recommendation
of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after
specified conditions have been satisfied. Petitioners argue that the law is
unconstitutional.

Issue1: Whether or not there is a violation of Article VI, Section 24 of the Constitution.

Held: No. Since there is no question that the revenue bill exclusively originated in the
House of Representatives, the Senate was acting within its constitutional power to
introduce amendments to the House bill when it included provisions in Senate Bill No.
1950 amending corporate income taxes, percentage, and excise and franchise taxes.

Issue2: Whether or not there is undue delegation of legislative power in violation of

Article VI Sec 28(2) of the Constitution.

Held: There is no undue delegation of legislative power but only of the discretion as to
the execution of a law. This is constitutionally permissible. Congress does not abdicate
its functions or unduly delegate power when it describes what job must be done, who
must do it, and what is the scope of his authority; in our complex economy that is
frequently the only way in which the legislative process can go forward.

Issue3: Whether or not there is a violation of the due process and equal protection
under Article III Sec. 1 of the Constitution.

Held: The power of the State to make reasonable and natural classifications for the
purposes of taxation has long been established. Whether it relates to the subject of
taxation, the kind of property, the rates to be levied, or the amounts to be raised, the
methods of assessment, valuation and collection, the States power is entitled to
presumption of validity. As a rule, the judiciary will not interfere with such power absent
a clear showing of unreasonableness, discrimination, or arbitrariness.

PHILIPPINE AIRLINES, INC. v. EDU

G.R. No. L- 41383, August 15, 1988

Facts: The Philippine Airlines (PAL) is a corporation engaged in the air transportation
business under a legislative franchise, Act No. 42739. Under its franchise, PAL is exempt
from the payment of taxes.
Sometime in 1971, however, Land Transportation Commissioner Romeo F. Elevate
(Elevate) issued a regulation pursuant to Section 8, Republic Act 4136, otherwise known
as the Land and Transportation and Traffic Code, requiring all tax exempt entities,
among them to pay motor vehicle registration fees.
Despite PAL's protestations, Elevate refused to register PAL's motor vehicles unless the
amounts imposed under Republic Act 4136 were paid. PAL thus paid, under protest,
registration fees of its motor vehicles. After paying under protest, PAL through its
counsel, wrote a letter dated May 19,1971, to Land Transportation Commissioner
Romeo Edu demanding a refund of the amounts paid. Edu denied the request for
refund. Hence, PAL filed a complaint against Comm. Edu and National Treasurer
Ubaldo Carbonell.
The trial court dismissed PAL's complaint. PAL appealed to the Court of Appeals which
in turn certified the case to the Supreme Court.

Issue: Whether or not motor vehicle registration fees are considered as taxes.

Ruling: Yes. If the purpose is primarily revenue, or if revenue is, at least, one of the real
and substantial purposes, then the exaction is properly called a tax. Such is the case of
motor vehicle registration fees. The motor vehicle registration fees are actually taxes
intended for additional revenues of the government even if one fifth or less of the
amount collected is set aside for the operating expenses of the agency administering
the program.

Apostolic Prefect of Mountain Province v City Treasurer of Baguio City (1941)

Facts: In 1937, an ordinance (Ord. 137) was passed in the City of Baguio which benefits
from its drainage and sewerage system. On the other hand, Apostolic Prefect is a
corporation sole, of religious character, organized under the Philippine laws, and with
residence in Baguio. The Apostolic Prefect contends that its properties should be free
from tax being a religious corporation.

Issue: Is the Apostolic Prefect exempt from paying?

Held: No, it is liable. In its broad meaning, tax includes both general taxes and special
assessment. Yet actually, there is a recognized distinction between them in that
assessment is confined to local impositions upon property for the payment of the cost of
public improvements in its immediate vicinity and levied with reference to special
benefits to the property assessed.

A special assessment is not, strictly speaking, a tax; and neither the decree nor the
Constitution exempt the Apostolic Prefect from payment of said special assessment.

Furthermore, arguendo that exemption may encompass such assessment, the Apostolic
Prefect cannot claim exemption as it has not proven the property in question is used
exclusively for religious purposes; but that it appears that the same is being used to
other non-religious purposes.

Thus, the Apostolic Prefect is required to pay the special assessment.

Smart Communications Inc. v. Municipality of Malvar, Batangas (G.R. No. 204429,

February 18, 2014)

Facts: Petitioner Smart is a domestic corporation engaged in the business of providing

telecommunications services to the general public. Smart constructed a
telecommunications tower within the jurisdiction of Malvar for the purpose of receiving
and transmitting cellular communications within the covered area. On July 30, 2003, the
municipality of Melvar passed Ordinance No. 18, series of 2003 entitled An Ordinance
Regulating Establishment of Special Projects. SMART then received from the Malvar
Mayors Office an assessment letter with scheduled payment of P398k for SMARTs
telecom tower. Due to the arrears (balance due to failure of payment) in the payment
of assessment, Municipality of Malvar caused the posting of the closure notice of the
telecom tower against Smart. Smart filed a protest for lack of due process in the
issuance of assessment and closure notice. It also challenged the validity of said
ordinance arguing that the fees imposed under the ordinance are actually taxes
since they are not regulatory, but revenue-raising.

Issue: WON the ordinace is valid.

Held: Yes. In affirming the validity of the ordinance, the Supreme Court explained that
consistent with the constitutional mandate, the Local Government Code (LGC) grants
municipalities the power to levy taxes, fees and charges not otherwise levied by
provinces. Section 147 of the same law, allows municipalities to impose and collect
such reasonable fees and charges on business and occupation and on the practice of
any profession or calling, commensurate with the cost of regulation, inspection and
licensing before any person may engage in such business or occupation, or practice
such profession or calling.

Under the LGC, the term charges refer to pecuniary liability, as rents or fees against
persons or property, while the term fee means a charge fixed by law or ordinance
for the regulation or inspection of a business or activity.

The High Tribunal pointed out that in the whereas clauses of the assailed ordinance, the
primary purpose is to regulate the placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and telephone wires, conduits, meters
and other apparatus listed therein, which included telecommunications tower.
Evidently, the purpose of the ordinance is to regulate the enumerated activities
particularly related to the construction and maintenance of various structures. Thus, the
fees in the ordinance are not impositions on the building or structure itself but on the
activity subject of government regulation, such as the installation and construction of
the structures.
The Court ruled that since the main purpose of the ordinance is to regulate certain
construction activities of the identified special projects, which included cell sites or
telecommunications towers, the fees imposed in the Ordinance are primarily regulatory
in nature, and not primarily revenue-raising. While the fees may contribute to the
revenues of the Municipality, this effect is merely incidental.

The Supreme Court reiterated its ruling in Victorias Milling Co., Inc. v. Municipality of
Victorias (134 Phil. 180 [1968]) that the purpose and effect of the imposition determine
whether it is a tax or a fee, and that the lack of any standards for such imposition gives
the presumption that the same is a tax.
Further, as in the case of Progressive Development Corporation v. Quezon City (254 Phil.
635, 643 [1989]), if the generating of revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if regulation is the primary purpose, the
fact that incidentally revenue is also obtained does not make the imposition a tax.

G.R. No. 92585 May 8, 1992CALTEX PHILIPPINES, INC., petitioner,vs.THE HONORABLE

COMMISSION ON AUDIT, HONORABLECOMMISSIONER BARTOLOME C. FERNANDEZ and
HONORABLECOMMISSIONER ALBERTO P. CRUZ, respondents.

Facts: In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil
Price Stabilization Fund (OPSF), excluding that unremitted for the years 1986 and 1988,
of the additional tax on petroleum products authorized under the PD 1956. Pending
such remittance, all of its claims for reimbursement from the OPSF shall be held in
abeyance. The grant total of its unremitted collections of the above tax is
P1,287,668,820.

Caltex submitted a proposal to COA for the payment and the recovery of claims. COA
approved the proposal but prohibited Caltex from further offsetting remittances and
reimbursements for the current and ensuing years. Caltex moved for reconsideration
but was denied. Hence, the present petition.

Issue: WON the amounts due from Caltex to the OPSF may be offsetted against Caltexs
outstanding claims from said funds.

Held: No. Taxation is no longer envisioned as a measure merely to raise revenue to

support the existence of government. Taxes may be levied with a regulatory purpose to
provide means for the rehabilitation and stabilization of a threatened industry which is
affected with public interest as to be within the police power of the State. PD 1956, as
amended by EO 137, explicitly provides that the source of OPSF is taxation.

A taxpayer may not offset taxes due from the claims he may have against the
government. Taxes cannot be subject of compensation because the government and
taxpayer are not mutually creditors and debtors of each other and a claim for taxes is
not such a debt, demand,, contract or judgment as is allowed to be set-off.

Hence, COA decision is affirmed except that Caltexs claim for reimbursement of under
recovery arising from sales to the National Power Corporation is allowed.

G.R. No. L-18994 June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price,respondents.

Facts: This is a petition for certiorari and mandamus against the Judge of the Court of
First Instance of Leyte, Ron. Lorenzo C. Garlitos, presiding, seeking to annul certain
orders of the court and for an order in this Court directing the respondent court below
to execute the judgment in favor of the Government against the estate of Walter Scott
Price for internal revenue taxes.

The CFI of Leyte ordered the payment of estate and inheritance taxes, charges and
penalties amounting to P40,058.55 by the Estate of the late Walter Scott Price. The
petition for execution filed by the fiscal, however, was denied by the lower court. The
Court held that the execution is unjustified as the Government itself is indebted to the
Estate for 262,200; and ordered the amount of inheritance taxes be deducted from the
Governments indebtedness to the Estate.

Issue: Whether or not a tax and a debt may be compensated.

Held: The court having jurisdiction of the Estate had found that the claim of the Estate
against the Government has been recognized and an amount of P262,200 has already
been appropriated by a corresponding law (RA 2700). Under the circumstances, both
the claim of the Government for inheritance taxes and the claim of the intestate for
services rendered have already become overdue and demandable as well as fully
liquidated. Compensation, therefore, takes place by operation of law, in accordance
with Article 1279 and 1290 of the Civil Code, and both debts are extinguished to the
concurrent amount.

SILKAIR (SINGAPORE) PTE, LTD. v. COMMISSIONER OF INTERNAL REVENUE. G.R. No.

173594. February 6, 2008

Facts: Petitioner is a corporation organized under the laws of Singapore which has a
Philippine representative office, is an online international air carrier.

Silkair filed with the Bureau of Internal Revenue (BIR) for the refund of excise taxes for
their purchase of jet fuel.

The CIR, in their reply, said that petitioner failed to prove that the sale of the fuel was
directly made from a domestic oil company to them. The excise tax on petroleum
products is the direct liability of the manufacturer/producer, and when added to the
cost of the goods sold to the buyer, it is no longer a tax but part of the price which the
buyer has to pay to obtain the article.
The CTA denying Silkairs petition stated that as the excise tax was imposed
manufacturer of petroleum products, any claim for refund should be filed by the latter;
and where the burden of tax is shifted to the purchaser, the amount passed on to it is
no longer a tax but becomes an added cost of the goods purchased.

Issue: Whether or not Silkair PTE. Ltd. can claim for tax credit.

Held: No. The proper party to question, or seek a refund of, an indirect tax is the
statutory taxpayer, the person on whom the tax is imposed by law and who paid the
same even if he shifts the burden thereof to another. Thus, Petron Corporation, not
Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135
of the NIRC of 1997.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional
amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had to
pay as a purchaser.

British American Tobacco Corporation v. Finance Secretary Camacho, BIR Commissioner Parayno (2009)

Facts: British American Tobacco is the distributor of Lucky Cigarette in the Philippines. It questioned the
constitutionality of RA 8240 An Act Amending Sections 138, 139, 140 and 142 of the NIRC, as Amended
and For Other Purposes which took effect on January 1, 1997.

The law provided a legislative freeze on brands of cigarettes introduced between the period January 2,
1997 to December 31, 2003, such that said cigarettes shall remain in the classification under which the BIR
has determined them to belong as of December 31, 2003, until revised by congress. Thus, older brands or
existing brands will have, in the long term, lower price and and tax rate as inflation and price appreciation
were not factored in.

Issue: WON the law violates the equal protection and uniformity of taxation clauses of
the Constitution.

Held: No. A levy of tax is not unconstitutional because it is not intrinsically equal and
uniform in its operation. The uniformity rule does not prohibit classification for purposes
of taxation.

The rational basis test was properly applied to gauge the constitutionality of theassailed
law in the face of an equal protection challenge. The classification is considered valid
and reasonable provided that: (1) it rests on substantial distinctions; (2) it is germane to
the purpose of the law; (3) it applies, all things being equal, to both present and future
conditions; and (4) it applies equally to all those belonging to the same class.
Theclassification freeze provisionwas inserted in the law for reasons of practicality and
expediency. Since a new brand was not yet in existence at the time of the passage of
RA8240, then Congress needed a uniform mechanism to fix the tax bracket of anew
brand.

The classification freeze provision was in the main the result of Congresss earnestefforts
to improve the efficiency and effectivity of the tax administration over sinproducts while
trying to balance the same with other State interests