British American Tobacco v.

Camacho

Power to determine constitutionality of tax laws and implementing law

*Seemed to be an abandoned doctrine due to the trend that CTA has the power to review the validity of tax laws and
its implementing rules

FACTS: RA 8240, entitled "An Act Amending Sections 138, 139, 140, and 142 of the NIRC, as Amended
and For Other Purposes", took effect on January 1, 1997. In the same year, Congress passed RA 8424 or The
Tax Reform Act of 1997, re-codifying the NIRC. Section 142 was renumbered as Section 145 of the NIRC.
Paragraph (c) of Section 145 provides for four tiers of tax rates based on the net retail price per pack of
cigarettes.

To determine the applicable tax rates of existing cigarette brands, a survey of the net retail prices per pack of
cigarettes was conducted. As such, new brands of cigarettes shall be taxed according to their current net retail
price while existing or "old" brands shall be taxed based on their net retail price as of October 1, 1996. To
implement RA 8240, the Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 1-97, which
classified the existing brands of cigarettes as those duly registered or active brands prior to January 1, 1997.
New brands, or those registered after January 1, 1997, shall be initially assessed at their suggested retail price
until such time that the appropriate survey to determine their current net retail price is conducted.

Petitioner British American Tobacco introduced into the market Lucky Strike Filter, Lucky Strike Lights and
Lucky Strike Menthol Lights cigarettes, with a suggested retail price of P9.90 per pack. Pursuant to Sec. 145
(c) quoted above, the Lucky Strike brands were initially assessed the excise tax at P8.96 per pack.

Petitioner filed before the Regional Trial Court (RTC) of Makati, a petition for injunction with prayer for the
issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction. Said petition sought
to enjoin the implementation of Section 145 of the NIRC, Revenue Regulations Nos. 1-97, 9-2003, 22-2003
and Revenue Memorandum Order No. 6-2003 on the ground that they discriminate against new brands of
cigarettes, in violation of the equal protection and uniformity provisions of the Constitution.

The trial court rendered a decision upholding the constitutionality of Section 145 of the NIRC, Revenue
Regulations Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order No. 6-2003. The trial court also
lifted the writ of preliminary injunction.

While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997 NIRC among other took
effect on January 1, 2005 which in effect increased petitioners excise tax to P25/pack.

Petitioner filed a Motion to Admit attached supplement and a supplement to the petition for review assailing
the constitutionality of RA 9334 and praying a downward classification of Lucky Strike products at the
bracket taxable at P 8.96/pack since existing brands are still taxed based on their price as of October 1996
eventhough they are equal or higher than petitioner's product price.

Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp., Mighty Corp. and JT
International Intervened.

Fortune Tobacco claimed that the CTA should have the exclusive appellate jurisdiction over the decision of
the BIR in tax disputes.
ISSUE: Whether CTA has jurisdiction to determine the validity of the tax law and its implementing
rule

RULING: NO, CTA has no jurisdiction over the case

The jurisdiction of the Court of Tax Appeals is defined in Republic Act No. 1125, as amended by Republic
Act No. 9282. Section 7 thereof states, in pertinent part: x x x While the above statute confers on the CTA
jurisdiction to resolve tax disputes in general, this does not include cases where the constitutionality of a law
or rule is challenged. Where what is assailed is the validity or constitutionality of a law, or a rule or regulation
issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same.

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the validity or
constitutionality of a law, or a rule or regulation issued by the administrative agency in the performance of its
quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of
whether a specific rule or set of rules issued by an administrative agency contravenes the law or the
constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of
judicial review or the power to declare a law, treaty, international or executive agreement, presidential decree,
order, instruction, ordinance, or regulation in the courts, including the regional trial courts. This is within the
scope of judicial power, which includes the authority of the courts to determine in an appropriate action the
validity of the acts of the political departments. Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government.