CIR vs.

Santos,
277 SCRA 617 (1997)
Facts:

Guild of Phil. Jewelers questions the constitutionality of certain provisions of the

NIRC and Tariff and Customs Code of the Philippines. It is their contention that present
Tariff and tax structure increases manufacturing costs and render local jewelry
manufacturers uncompetitive against other countries., in support of their position, they
submitted what they purported to be an exhaustive study of the tax rates on jewelry
prevailing in other Asian countries, in comparison to tax rates levied in the country.
Judge Santos of RTC Pasig, ruled that the laws in question are confiscatory and
oppressive and declared them INOPERATIVE and WITHOUR FORCE AND EFFECT
insofar as petitioners are concerned. Petitioner CIR assailed decision rendered by
respondent judge contending that the latter has no authority to pass judgment upon the
taxation policy of the government. Petitioners also impugn the decision by asserting
that there was no showing that the tax laws on jewelry are confiscatory.

ISSUE:
Whether or not the Regional Trial Court has authority to pass judgment upon taxation
policy of the government.

Held:
The policy of the courts is to avoid ruling on constitutional questions and top
resume that the acts of the political departments are valid in the absence of a clear and
unmistakable showing to the contrary. This is not to say that RTC has no power
whatsoever to declare a law unconstitutional. But this authority does not extend to
deciding questions which pertain to legislative policy.RTC have the power to declare
the law unconstitutional but this authority does not extend to deciding questions
which pertain to legislative policy. RTC can only look into the validity of a provision,
that is whether or not it has been passed according to the provisions laid down by law,
and thus cannot inquire as to the reasons for its existence.

RULING ON THE EXTENT OF LEGISLATIVE POWER TO TAX

SC held that it is within the power f the legislature whether to tax jewelry or not. With
the legislature primarily lies the discretion to determine the nature (kind),
object(purpose), extent (rate), coverage (subject) and situs (place) of taxation.
Mactan Cebu International Airport Authority v. Marcos 261 SCRA 667 (1996)

Facts:
Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A.
6958, mandated to principally undertake the economical, efficient, and effective control,
management, and supervision of the Mactan International Airport and Lahug Airport,
and such other airports as may be established in Cebu.

Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption
from payment of realty taxes in accordance with Section 14 of its charter. However, on
October 11, 1994, Mr. Eustaquio B. Cesa, Officer in Charge, Office of the Treasurer of the
City of Cebu, demanded payment from realty taxes in the total amount of P2229078.79.
Petitioner objected to such demand for payment as baseless and unjustified claiming in
its favor the afore cited Section 14 of R.A. 6958. It was also asserted that it is an
instrumentality of the government performing governmental functions, citing Section
133 of the Local Government Code of 1991.

Section 133. Common limitations on the Taxing Powers of Local Government Units.

The exercise of the taxing powers of the provinces, cities, barangays, municipalities
shall not extend to the levi of the following:

xxx Taxes, fees or charges of any kind in the National Government, its agencies and
instrumentalities, and LGUs. xxx

Respondent City refused to cancel and set aside petitioners realty tax account, insisting
that the MCIAA is a government-controlled corporation whose tax exemption privilege
has been withdrawn by virtue of Sections 193 and 234 of Labor Code that took effect on
January 1, 1992.

Issue:
Whether or not the petitioner is a taxable person

Held:

Taxation is the rule and exemption is the exception. MCIAAs exemption from payment
of taxes is withdrawn by virtue of Sections 193 and 234 of Labor Code. Statutes granting
tax exemptions shall be strictly construed against the taxpayer and liberally construed
in favor of the taxing authority.

The petitioner cannot claim that it was never a taxable person under its Charter. It
was only exempted from the payment of realty taxes. The grant of the privilege only in
respect of this tax is conclusive proof of the legislative intent to make it a taxable person
subject to all taxes, except real property tax.
Luzon Stevedoring v. CTA

FACTS:
Luzon Stevedoring for the and maintenance of its tugboats, imported
various engine parts and other equipment for which it paid, under protest,
the assessed compensating tax. Unable to secure a tax refund from the CIR,
it filed a petition in the CTA. CTA denied its petition hence this appeal.
Luzon Stevedoring contends that Tug boats are embraced and included in
the term cargo vessel under the tax exemption provisions of Sec. 190 of the
NIRC, as amended by RA 3176. CTA argues that "tugboats" are not "Cargo
vessel" because they are neither designed nor used for carrying
and/or transporting persons or goods by themselves but are mainly
employed for towing and pulling purposes. Hence, Luzon Stevedoring
should be taxed.

ISSUE:
WON Luzon Stevedoring should be exempt from tax?

HELD: NO, tugboats not embraced in the provision hence Luzon

Stevedoring doesn't come under the exemption."As the power of taxation is
a high prerogative of sovereignty, the relinquishment is never presumed
and any reduction or diminution thereof with respect to its mode or its
rate, must be strictly construed, and the same must be coached in clear and
unmistakable terms in order that it may be applied." (84 C.J.S.pp. 659-800),
More specifically stated, the general rule is that any claim for exemption
from the tax statute should be strictly construed against the taxpayer.
De borja vs. gella

FACTS:
Jose de Borja has been delinquent in the payment of his real estate taxes
since 1958 and has offered to pay them with two negotiable certificates of
indebtedness to which he is only an assignee. These were rejected by the
City treasurers of both Manila and Pasay cities on the ground of their
limited negotiability. Borja brought the question to the Treasurer of the
Philippines who opined that the negotiable certificates cannot be accepted
as payment of real estate taxes inasmuch as the law provides for their
acceptance from their backpay holder only or the original applicant
himself, but not his assignee. Lower court ruled in favor of Borja.

ISSUES:
1. Whether Borja may apply to the payment of his real estate taxes the
certificates of indebtedness he holds; while, respondents have the
correlative legal duty to accept the certificates in payment of the taxes
2. Whether compensation can take place between Borjas real estate tax
liability and the credit represented by the certificate of indebtedness

RULING:
1. No, the respondents are not duty bound to accept the negotiable
certificates of indebtedness for the simple reason that they were not
obligations subsisting at the approval of RA 304 which took effect on June
18, 1948. Under RA 304, payment through a certificate of indebtedness may
be allowed if the tax is owed by the applicant himself. Furthermore, the
right to use the backpay certificate in settlement of taxes is given only to
the applicant himself. Futhermore, the right to use the backpay certificate
in settlement of taxes is given only to the applicant and not to any holder of
any negotiable certificate to whom the law only gives the right to have it
discounted by a Filipino citizen or corporation under certain limitations.
Borja is not himself the applicant of the certificate in question, he is merely
as assignee thereof.

2. No, the debtor insofar as the certificates of indebtedness are concerned is

the Republic of the Philippines, whereas the real estate taxes owed by Borja
are due to the City of Manila and Pasay City, each one of which having a
distinct and separate personality from our Republic. This is contrary to
Article 1279 (1) of the Civil Code which states that each one of the obligors
be bound principally, and that he be at the same time a principal creditor of
the other
Tan Tiong Bio, et al vs CIR; GR L-15778

Facts: A corporation Central Syndicate, allegedly purchased from Dee

Hong Lue stock of surplus properties from the Foreign Liquidation
Commission. Thus, it remitted the amount of P43,750 as deposit for the
sales tax. Later on, it claimed refund for the excess in the payment of the
sales tax due to the adjustment and reduction of the purchase price.
However, an agent of the CIR reported that it was the syndicate who was
the actual importer and original seller of the surplus goods. Thus, the
syndicate is liable to pay the whole amount of the sales tax. The CTA
rendered a decision holding the incorporators of the syndicate to be
severally liable, the syndicates personality having had expired.

Issue: WON the petitioners, the successors-in-interest of the defunct

Central Syndicate, can be held personally liable for the sales taxes.

Held: Affirmative.

Petitioners are the beneficiaries of the defunct corporation and as such

should be held liable to pay the taxes. However, there being no express
provision requiring the stockholders of the corporation to be solidarily
liable for its debts which liability must be express cannot be presumed,
petitioners should be held liable for the tax in question only in proportion
to their shares in the distribution of the assets of the defunct corporation.
Lutz vs. araneta

Facts: Commonwealth Act No. 567, otherwise known as Sugar Adjustment

Act was promulgated in 1940 to stabilize the sugar industry so as to
prepare it for the eventuality of the loss of its preferential position in the
United States market and the imposition of export taxes. Plaintiff, Walter
Lutz, in his capacity as Judicial Administrator of the Intestate Estate of
Antonio Jayme Ledesma, seeks to recover from the Collector of Internal
Revenue the sum of P14,666.40 paid by the estate as taxes, under Sec.3 of
the Act, alleging that such tax is unconstitutional and void, being levied for
the aid and support of the sugar industry exclusively, which in plaintiffs
opinion is not a public purpose for which a tax may be constitutionally
levied. The action has been dismissed by the Court of First Instance.

Issue: Whether or not the tax imposed is constitutional.

Held: Yes. The act is primarily an exercise of the police power. It is shown
in the Act that the tax is levied with a regulatory purpose, to provide
means for the rehabilitation and stabilization of the threatened sugar
industry.

It is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that inequalities which result
from a singling out of one particular class for taxation or exemption
infringe no constitutional limitation.

The funds raised under the Act should be exclusively spent in aid of the
sugar industry, since it is that very enterprise that is being protected. It
may be that other industries are also in need of similar protection; but the
legislature is not required by the Constitution to adhere to a policy of all
or none.
GOMEZ v. PALOMAR

FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in San
Fernando, Pampanga. It did not bear the special anti-TB stamp required by
the RA 1635. It was returned to the petitioner. Petitioner now assails the
constitutionality of the statute claiming that RA 1635 otherwise known as
the Anti-TB Stamp law is violative of the equal protection clause because it
constitutes mail users into a class for the purpose of the tax while leaving
untaxed the rest of the population and that even among postal patrons the
statute discriminatorily grants exemptions. The law in question requires an
additional 5 centavo stamp for every mail being posted, and no mail shall
be delivered unless bearing the said stamp.

ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly

violative of the equal protection clause?

HELD: No. It is settled that the legislature has the inherent power to select
the subjects of taxation and to grant exemptions. This power has aptly been
described as "of wide range and flexibility." Indeed, it is said that in the
field of taxation, more than in other areas, the legislature possesses the
greatest freedom in classification. The reason for this is that traditionally,
classification has been a device for fitting tax programs to local needs and
usages in order to achieve an equitable distribution of the tax burden. The
classification of mail users is based on the ability to pay, the enjoyment of a
privilege and on administrative convenience. Tax exemptions have never
been thought of as raising revenues under the equal protection clause.
Planters Products Inc vs Fertiphil Corp
FACTS: Petitioner PPI and respondent Fertiphil are private corporations
incorporated under Philippine laws, both engaged in the importation and
distribution of fertilizers, pesticides and agricultural chemicals. Marcos
issued Letter of Instruction (LOI) 1465, imposing a capital recovery
component of Php10.00 per bag of fertilizer. The levy was to continue until
adequate capital was raised to make PPI financially viable. Fertiphil
remitted to the Fertilizer and Pesticide Authority (FPA), which was then
remitted the depository bank of PPI. Fertiphil paid P6,689,144 to FPA from
1985 to 1986. After the 1986 Edsa Revolution, FPA voluntarily stopped the
imposition of the P10 levy. Fertiphil demanded from PPI a refund of the
amount it remitted, however PPI refused. Fertiphil filed a complaint for
collection and damages, questioning the constitutionality of LOI 1465,
claiming that it was unjust, unreasonable, oppressive, invalid and an
unlawful imposition that amounted to a denial of due process.

ISSUE: Whether or not the LOI is a valid exercise of the power of taxation.

Held:
The stabilization fees collected are in the nature of a tax, which is within
the power of the State to impose for the promotion of the sugar industry.
They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made
accrue to a "Special Fund," a "Development and Stabilization Fund," almost
Identical to the "Sugar Adjustment and Stabilization Fund" created under
Section 6 of Commonwealth Act 567.
The tax collected is not in a pure exercise of the taxing power. It is levied
with a regulatory purpose, to provide means for the stabilization of the
sugar industry. The levy is primarily in the exercise of the police power of
the State
Garcia vs executive secretary
In November 1990, President Corazon Aquino issued Executive Order No.
438 which imposed, in addition to any other duties, taxes and charges
imposed by law on all articles imported into the Philippines, an additional
duty of 5% ad valorem tax. This additional duty was imposed across the
board on all imported articles, including crude oil and other oil products
imported into the Philippines. In 1991, EO 443 increased the additional
duty to 9%. In the same year, EO 475 was passed reinstating the previous
5% duty except that crude oil and other oil products continued to be taxed
at 9%. Enrique Garcia, a representative from Bataan, avers that EO 475 and
478 are unconstitutional for they violate Section 24 of Article VI of the
Constitution which provides:
All appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose or
concur with amendments.
He contends that since the Constitution vests the authority to enact
revenue bills in Congress, the President may not assume such power by
issuing Executive Orders Nos. 475 and 478 which are in the nature of
revenue-generating measures.

ISSUE: Whether or not EO 475 and 478 are constitutional.

HELD: Under Section 24, Article VI of the Constitution, the enactment of
appropriation, revenue and tariff bills, like all other bills is, of course,
within the province of the Legislative rather than
the Executive Department. It does not follow, however, that
therefore Executive Orders Nos. 475 and 478, assuming they may be
characterized as revenue measures, are prohibited to be exercised by the
President, that they must be enacted instead by the Congress of the
Philippines.
Section 28(2) of Article VI of the Constitution provides as follows:
(2) The Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restrictions as it may
impose, tariff rates, import and export quotas, tonnage and wharfage dues,
and other duties or imposts within the framework of the national
development program of the Government.
There is thus explicit constitutional permission to Congress to authorize the
President subject to such limitations and restrictions as [Congress] may
impose to fix within specific limits tariff rates . . . and other duties or
imposts . . . . In this case, it is the Tariff and Customs Code which
authorized the President ot issue the said EOs.
Tolentino vs. Secretary of Finance

Facts: The value-added tax (VAT) is levied on the sale, barter or exchange
of goods and properties as well as on the sale or exchange of services. RA
7716 seeks to widen the tax base of the existing VAT system and enhance
its administration by amending the National Internal Revenue Code. There
are various suits challenging the constitutionality of RA 7716 on various
grounds.
One contention is that RA 7716 did not originate exclusively in the House
of Representatives as required by Art. VI, Sec. 24 of the Constitution,
because it is in fact the result of the consolidation of 2 distinct bills, H. No.
11197 and S. No. 1630. There is also a contention that S. No. 1630 did not
pass 3 readings as required by the Constitution.
Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the
Constitution
Held: The argument that RA 7716 did not originate exclusively in the
House of Representatives as required by Art. VI, Sec. 24 of the Constitution
will not bear analysis. To begin with, it is not the law but the revenue bill
which is required by the Constitution to originate exclusively in the House
of Representatives. To insist that a revenue statute and not only the bill
which initiated the legislative process culminating in the enactment of the
law must substantially be the same as the House bill would be to deny the
Senates power not only to concur with amendments but also to propose
amendments. Indeed, what the Constitution simply means is that the
initiative for filing revenue, tariff or tax bills, bills authorizing an increase
of the public debt, private bills and bills of local application must come
from the House of Representatives on the theory that, elected as they are
from the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. Nor does the Constitution
prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body
is withheld pending receipt of the House bill.
The next argument of the petitioners was that S. No. 1630 did not pass 3
readings on separate days as required by the Constitution because the
second and third readings were done on the same day. But this was
because the President had certified S. No. 1630 as urgent. The presidential
certification dispensed with the requirement not only of printing but also
that of reading the bill on separate days. That upon the certification of a bill
by the President the requirement of 3 readings on separate days and of
printing and distribution can be dispensed with is supported by the weight
of legislative practice.