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TIO v. VIDEOGRAM REGULATORY BOARD ISSUES:

151 SCRA 208 (1) Whether or not tax imposed by the DECREE is a valid exercise of police power.
FACTS: (2) Whether or nor the DECREE is constitutional.
The case is a petition filed by petitioner on behalf of videogram operators adversely affected by
Presidential Decree No. 1987, “An Act Creating the Videogram Regulatory Board” with broad
RULING:
powers to regulate and supervise the videogram industry.
Taxation has been made the implement of the state’s police power. The levy of the 30% tax is for
A month after the promulgation of the said Presidential Decree, the amended the National Internal
a public purpose. It was imposed primarily to answer the need for regulating the video industry,
Revenue Code provided that:
particularly because of the rampant film piracy, the flagrant violation of intellectual property
“SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready rights, and the proliferation of pornographic video tapes. And while it was also an objective of the
for playback, regardless of length, an annual tax of five pesos; Provided, That locally DECREE to protect the movie industry, the tax remains a valid imposition.
manufactured or imported blank video tapes shall be subject to sales tax.”
We find no clear violation of the Constitution which would justify us in pronouncing Presidential
“Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision Decree No. 1987 as unconstitutional and void. While the underlying objective of the DECREE is
of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase to protect the moribund movie industry, there is no question that public welfare is at bottom of its
price or rental rate, as the case may be, for every sale, lease or disposition of a videogram enactment, considering “the unfair competition posed by rampant film piracy; the erosion of the
containing a reproduction of any motion picture or audiovisual program.” moral fiber of the viewing public brought about by the availability of unclassified and
unreviewed video tapes containing pornographic films and films with brutally violent sequences;
“Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the
and losses in government revenues due to the drop in theatrical attendance, not to mention the
other fifty percent (50%) shall accrue to the municipality where the tax is collected; PROVIDED,
fact that the activities of video establishments are virtually untaxed since mere payment of
That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Mayor’s permit and municipal license fees are required to engage in business.”
Metropolitan Manila Commission.”
WHEREFORE, the instant Petition is hereby dismissed. No costs.
The rationale behind the tax provision is to curb the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or any technical improvement or
variation thereof, have greatly prejudiced the operations of movie houses and theaters. Such
TOLENTINO v. SECRETARY OF FINANCE
unregulated circulation have caused a sharp decline in theatrical attendance by at least forty
percent (40%) and a tremendous drop in the collection of sales, contractor’s specific, amusement 235 SCRA 730
and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in
government revenues. FACTS:

Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales
and disposition of videograms, and these earnings have not been subjected to tax, thereby
depriving the Government of approximately P180 Million in taxes each year.
The unregulated activities of videogram establishments have also affected the viability of the
movie industry.
The present case involves motions seeking reconsideration of the Court’s decision dismissing the
petitions for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the
Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by
the several petitioners.
The Philippine Press Institute, Inc. (PPI) contends that by removing the exemption of the press
from the VAT while maintaining those granted to others, the law discriminates against the press.

At any rate, it is averred, “even nondiscriminatory taxation of constitutionally guaranteed
freedom is unconstitutional”, citing in support of the case of Murdock v. Pennsylvania.
Chamber of Real Estate and Builders Associations, Invc., (CREBA), on the other hand, asserts
that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies transactions as covered
or exempt without reasonable basis and (3) violates the rule that taxes should be uniform and
equitable and that Congress shall “evolve a progressive system of taxation”.
Further, the Cooperative Union of the Philippines (CUP), argues that legislature was to adopt a
definite policy of granting tax exemption to cooperatives that the present Constitution embodies
provisions on cooperatives. To subject cooperatives to the VAT would, therefore, be to infringe a
constitutional policy.
ISSUE:
Whether or not, based on the aforementioned grounds of the petitioners, the Expanded Value-
Added Tax Law should be declared unconstitutional.
RULING:
No. With respect to the first contention, it would suffice to say that since the law granted the press
a privilege, the law could take back the privilege anytime without offense to the Constitution. The
reason is simple: by granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative. Indeed, in withdrawing the exemption, the law merely subjects the press to
the same tax burden to which other businesses have long ago been subject. The PPI asserts that it
does not really matter that the law does not discriminate against the press because “even
nondiscriminatory taxation on constitutionally guaranteed freedom is unconstitutional.” The
Court was speaking in that case (Murdock v. Pennsylvania) of a license tax, which, unlike an
ordinary tax, is mainly for regulation. Its imposition on the press is unconstitutional because it
lays a prior restraint on the exercise of its right. The VAT is, however, different. It is not a license
tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on
the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and
the lease of properties purely for revenue purposes. To subject the press to its payment is not to
burden the exercise of its right any more than to make the press pay income tax or subject it to
general regulation is not to violate its freedom under the Constitution.
Anent the first contention of CREBA, it has been held in an early case that even though such
taxation may affect particular contracts, as it may increase the debt of one person and lessen the
security of another, or may impose additional burdens upon one class and release the burdens of
another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it
impairs the obligation of any existing contract in its true legal sense. It is next pointed out that
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while Section 4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products,
food items, petroleum, and medical and veterinary services, it grants no exemption on the sale of
real property which is equally essential. The sale of food items, petroleum, medical and
veterinary services, etc., which are essential goods and services was already exempt under
Section 103, pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in
error in claiming that R.A. No. 7716 granted exemption to these transactions while subjecting
those of petitioner to the payment of the VAT. Finally, it is contended that R.A. No. 7716 also
violates Art. VI, Section 28(1) which provides that “The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation”. Nevertheless, equality
and uniformity of taxation mean that all taxable articles or kinds of property of the same class be
taxed at the same rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or
ordinance applies equally to all persons, firms, and corporations placed in similar situation.
Furthermore, the Constitution does not really prohibit the imposition of indirect taxes which, like
the VAT, are regressive. What it simply provides is that Congress shall “evolve a progressive
system of taxation.” The constitutional provision has been interpreted to mean simply that “direct
taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized.” The
mandate to Congress is not to prescribe, but to evolve, a progressive tax system.
As regards the contention of CUP, it is worth noting that its theory amounts to saying that under
the Constitution cooperatives are exempt from taxation. Such theory is contrary to the
Constitution under which only the following are exempt from taxation: charitable institutions,
churches, and parsonages, by reason of Art. VI, §28 (3), and non-stock, non-profit educational
institutions by reason of Art. XIV, §4 (3).
With all the foregoing ratiocinations, it is clear that the subject law bears no constitutional
infirmities and is thus upheld.
ANTONIO ROXAS, EDUARDO ROXAS v. COURT OF TAX APPEALS
G.R. No. L-25043, April 26, 1968
FACTS:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren
by hereditary succession several properties. To manage the above-mentioned properties, said
children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called
Roxas y Compania. At the conclusion of the WW2, the tenants who have all been tilling the
lands in Nasugbu for generations expressed their desire to purchase from Roxas y Cia. the parcels
which they actually occupied. For its part, the Government, in consonance with the constitutional

mandate to acquire big landed estates and apportion them among landless tenant-farmers,
persuaded the Roxas brothers to part with their landholdings. Conferences were held with the
farmers in the early part of 1948 and finally the Roxas brothers agree to sell 13,500 hectares to
the Government for distribution to actual occupants for a price of P2,079,048.47 plus P300,000
for survey and distribution expenses. It turned out however that the Government did not have
funds to cover the purchase price, and so a special arrangement was made for the Rehabilitation
Finance Corporation to advance to Roxas y Cia. the amount of P1,500,000.00 as loan. Collateral
for such loan were the lands proposed to be sold to the farmers. Under the arrangement, Roxas y
Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted
with the Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly
amortizations paid by the farmers.
The CIR demanded from Roxas y Cia. the payment of deficiency income taxes resulting from the
inclusion as income of Roxas y Cia. of the unreported 50% of the net profits for 1953 and 1955
derived from the sale of the Nasugbu farmlands to the tenants, and the disallowance of deductions
from gross income of various business expenses and contributions claimed by Roxas y Cia. and
the Roxas brothers. For the reason that Roxas y CIa. subdivided its Nasugbu farmlands and sold
them to the farmers on installment, the Commissioner considered the partnership as engaged in
the business of real estate, hence, 100% of the profits derived there from was taxed. The Roxas
brothers protested the assessment but inasmuch as said protest was denied, they instituted an
appeal in the CTA which sustained the assessment. Hence, this appeal.
ISSUE:
I. Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100%
taxable? And is Roxas y Cia liable for the payment of deficiency income for the sale of Nasugbu
farmlands?
II. Are the deductions for business expenses and contributions deductible?
RULING:
I. NO. The proposition of the CIR cannot be favorably accepted in this isolated transaction with
its peculiar circumstances inspite of the fact that there were hundreds of vendees. Although they
paid for their respective holdings in installment for the period of 10 years, it would nevertheless
make the vendor Roxas y Cia. a real estate dealer during the 10-year amortization period. It
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should be borne in mind that the sale of the Nasugbu farmlands to the very farmers who tilled
them for generations was not only in consonance with, but more in obedience to the request and
pursuant to the policy of our Government to allocate lands to the landless. It was the bounden
duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to
sell its haciendas, and to subsequently subdivide them among the farmers at very reasonable
terms and prices. However, the Government could not comply with its duty for lack of funds.
Obligingly, Roxas y Cia. shouldered the Government’s burden, went out of its way and sold lands
directly to the farmers in the same way and under the same terms as would have been the case
had the Government done it itself. For this magnanimous act, the municipal council of Nasugbu
passed a resolution expressing the people’s gratitude.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence,
pursuant to section 34 of the Tax Code, the land sold to the farmers are capital assets, and the gain
derived from the sale thereof is capital gain, taxable only to the extent of 50%.
II. DISALLOWED DEDUCTIONS
Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given
in honor of Sergio Osmena and P28.00 for San Miguel beer given as gifts to various persons. The
deduction were claimed as representation expenses. Representation expenses are deductible from
gross income as expenditures incurred in carrying on a trade or business under Section 30(a) of
the Tax Code provided the taxpayer proves that they are reasonable in amount, ordinary and
necessary, and incurred in connection with his business. In the case at bar, the evidence does not
show such link between the expenses and the business of Roxas y Cia. The findings of the Court
of Tax Appeals must therefore be sustained (disallowed deduction).
The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City
Firemen, and Baguio City Police Christmas funds, Manila Police Trust Fund, Philippines Herald's
fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern University.
The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and
Baguio City Police are not deductible for the reason that the Christmas funds were not spent for
public purposes but as Christmas gifts to the families of the members of said entities. Under
Section 39(h), a contribution to a government entity is deductible when used exclusively for
public purposes. For this reason, the disallowance must be sustained. On the other hand, the
contribution to the Manila Police trust fund is an allowable deduction for said trust fund belongs
to the Manila Police, a government entity, intended to be used exclusively for its public functions.

The contributions to the Philippines Herald's fund for Manila's neediest families were
disallowed on the ground that the Philippines Herald is not a corporation or an association
contemplated in Section 30 (h) of the Tax Code. It should be noted however that the contributions
were not made to the Philippines Herald but to a group of civic spirited citizens organized by the
Philippines Herald solely for charitable purposes. There is no question that the members of this
group of citizens do not receive profits, for all the funds they raised were for Manila's neediest
families. Such a group of citizens may be classified as an association organized exclusively for
charitable purposes mentioned in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of
Fatima chapel at the Far Eastern University on the ground that the said university gives
dividends to its stockholders (it should be non-profit institution. Located within the premises of
the university, the chapel in question has not been shown to belong to the Catholic Church or any
religious organization. On the other hand, the lower court found that it belongs to the Far Eastern
University, contributions to which are not deductible under Section 30(h) of the Tax Code for the
reason that the net income of said university injures to the benefit of its stockholders. The
disallowance should be sustained.
Doctrines:
I. Sale of property by landowners to tenants under government policy to allocate lands to the
landless subject not subject to real estate dealer’s tax.
II. The power of taxation is sometimes called also the power to destroy. Therefore it should be
exercised with caution to minimize injury to the proprietary rights of a taxpayer. It must be
exercised fairly, equally and uniformly, lest the tax collector kill the “hen that lays the golden
egg”.
COMMISSIONER OF INTERNAL REVENUE v. ALAGUE, INC AND THE CTA
G.R. NO. L-28896, February 17, 1988
Facts:
Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities
On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes
from 1958-1959, amtg to P83,183.85
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A letter of protest or reconsideration was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty.
Guevara, who refused to receive it on the ground of the pending protest
Since the protest was not found on the records, a file copy from the corp was produced and given
to BIR Agent Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and
it was only then that he accepted the warrant of distraint and levy earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax
Appeals
CIR contentions:
1. the claimed deduction of P75,000.00 was properly disallowed because it was not an
ordinary reasonable or necessary business expense
2. payments are fictitious because most of the payees are members of the same family in
control of Algue and that there is not enough substantiation of such payments
CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of
promotional fees. These were collected by the Payees for their work in the creation of the
Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the
properties of the Philippine Sugar Estate Development Company.
ISSUE:
W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed
by Algue as legitimate business expenses in its income tax returns
RULING:
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance, made in accordance with law.
RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling
challenged
During the intervening period, the warrant was premature and could therefore not be served.
Originally, CIR claimed that the 75K promotional fees to be personal holding company income,
but later on conformed to the decision of CTA

There is no dispute that the payees duly reported their respective shares of the fees in their
income tax returns and paid the corresponding taxes thereon. CTA also found, after examining the
evidence, that no distribution of dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary
deduction
Algue Inc. was a family corporation where strict business procedures were not applied and
immediate issuance of receipts was not required. at the end of the year, when the books were to
be closed, each payee made an accounting of all of the fees received by him or her, to make up
the total of P75,000.00. This arrangement was understandable in view of the close relationship
among the persons in the family corporation
The amount of the promotional fees was not excessive. The total commission paid by the
Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After deducting the said fees,
Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of
P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that
it was the payees who did practically everything, from the formation of the Vegetable Oil
Investment Corporation to the actual purchase by it of the Sugar Estate properties.
Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and
necessary expenses paid or incurred during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or other compensation for personal
services actually rendered xxx
the burden is on the taxpayer to prove the validity of the claimed deduction
In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in
the light of the efforts exerted by the payees in inducing investors and prominent businessmen to
venture in an experimental enterprise and involve themselves in a new business requiring millions
of pesos.
Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed
for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to
surrender part of one's hard earned income to the taxing authorities, every person who is able to
must contribute his share in the running of the government. The government for its part, is
expected to respond in the form of tangible and intangible benefits intended to improve the lives
of the people and enhance their moral and material values.
Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is
not, then the taxpayer has a right to complain and the courts will then come to his succor
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Algue Inc.’s appeal from the decision of the CIR was filed on time with the CTA in accordance
with Rep. Act No. 1125. And we also find that the claimed deduction by Algue Inc. was permitted
under the Internal Revenue Code and should therefore not have been disallowed by the CIR.
COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM
G.R. NO. 197945, July 9, 2018
FACTS:
Pilipinas Shell Petroleum Corporation (Shell) and Petron Corporation (Petron) are domestic
corporations engaged in the production of petroleum products and are duly registered with the
Board of Investments (BOI) under the Omnibus Investments Code of 1987. 5
On different occasions during 1988 to 1996, respondents separately sold bunker oil and other fuel
products to other BOI-registered entities engaged in the export of their own manufactured goods
(BOI export entities).6 These BOI-registered export entities used Tax Credit Certificates (TCCs)
originally issued in their name to pay for these purchases.
To proceed with this mode of payment, the BOI-registered export entities executed Deeds of
Assignment in favor of respondents, transferring the TCCs to the latter. Subsequently, the
Department of Finance (DOF), through its One Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (DOF Center), approved the Deeds of Assignment. 7
Thereafter, respondents sought the DOF Center's permission to use the assigned TCCs in settling
respondents' own excise tax liabilities. The DOF Center issued Tax Debit Memoranda (DOF TD
Ms) addressed to the Collection Program Division of the Bureau of Internal Revenue
(BIR),8 allowing respondents to do so.
Thus, to pay for their excise tax liabilities from 1992 to 1997 (Covered Years), 9 respondents
presented the DOF TDMs to the BIR. The BIR accepted the TDMs and issued the following: (a)
TDMs signed by the BIR Assistant Commissioner for Collection Service 10 (BIR TDMs); (b)
Authorities to Accept Payment for Excise Taxes (ATAPETs) signed by the BIR Regional District
Officer; and (c) corresponding instructions to BIR's authorized agent banks to accept respondents'
payments in the form of BIR TDMs.11
Three significant incidents arising from the foregoing antecedents resulted in the filing of several
petitions before this Court, viz.:
 Page 6 of 14

Significant Incidents Resultant Petition/s before the Court
(a) 1998 Collection Letters issued by the BIR G.R. Nos. 204119-20 (one of the present
against respondents petitions)
(b) 1999 Assessments issued by the BIR against Pilipinas Shell Petroleum Corporation v.
respondents Commissioner of Internal Revenue, G.R. No.
172598, December 21, 2007 (2007 Shell Case)
Petron Corporation v. Commissioner of Internal
Revenue, G.R. No. 180385, July 28, 2010 (2010
Petron Case)
(c) 2002 Collection Letter issued by the BIR G.R. No. 197945 (one of the present petitions)
against respondent Shell
The Tax Code provides two types of remedies to enforce the collection of unpaid taxes, to wit:
(a) summary administrative remedies, such as the distraint and/or levy of taxpayer's
property;52 and/or (b)judicial remedies,such as the filing of a criminal or civil action against the
erring taxpayer. 53
Verily, pursuant to the lifeblood doctrine, the Court has allowed tax authorities ample discretion
to avail themselves of the most expeditious way to collect the taxes, 54 including summary
processes, with as little interference as possible. 55 However, the Court, at the same time, has not
hesitated to strike down these processes in cases wherein tax authorities disregarded due
process. 56 The BIR' s power to collect taxes must yield to the fundamental rule that no person
shall be deprived of his/her property without due process of law. 57 The rule is that taxes must be
collected reasonably and in accordance with the prescribed procedure. 58

COMMISSIONER ON INTERNAL REVENUE v. BASF COATING + INK PHILS, INC.,

G.R. NO. 198677, November 26, 2014
ISSUE:
FACTS:
W/N the petitioner violated the respondents right to due process for failing to observe the
prescribed procedure for collection of taxes through summary administrative remedies. Taxpayer had its BIR-registered address at Barrio Talon, Las Piñas City. Following the resolution
of the stockholders and directors to shorten its corporate life, taxpayer moved its office to
RULING: Calamba, Laguna.

The Court dismisses the present petitions for it cannot allow petitioner to collect any excise tax
deficiency from respondents by mere issuance of the 1998 and 2002 Collection Letters. Petitioner
had failed to comply with the prescribed procedure for collection of unpaid taxes through
summary administrative remedies and, thus, violated respondents' right to due process.
That taxation is an essential attribute of sovereignty and the lifeblood of every nation- are
doctrines well-entrenched in our jurisdiction. Taxes are the government's primary means to
generate funds needed to fulfill its mandate of promoting the general welfare and well-being
of the people47 and so should be collected without unnecessary hindrance. 48
While taxation per se is generally legislative in nature, collection of tax is administrative in
character. 49 Thus, Congress delegated the assessment and collection of all national internal
revenue taxes, fees, and charges to the BIR. 50 And as the BIR's chief, the CIR has the power to
make assessments and prescribe additional requirements for tax administration and
enforcement. 51
Following the change in address, taxpayer sent two letters to the Revenue District Office in
Alabang, Muntinlupa City, which has jurisdiction over the taxpayer’s address in Las Pinas.
The first letter was a notice of taxpayer’s dissolution and the second letter was a manifestation
indicating the submission of various documents supporting the taxpayer’s dissolution, among
which was BIR Form No. 1905, which refers to an update of information contained in taxpayer’s
tax registration.
Thereafter, a Formal Assessment Notice was sent by the BIR through registered mail on January
24, 2003 at the taxpayer’s former address in Las Piñas City, assessing the taxpayer of various
deficiency taxes for the year 1999. On March 4, 2004, a First Notice Before Issuance of Warrant
of Distraint and Levy was sent to the residence of one of the taxpayer’s directors.
On March 19, 2004, taxpayer filed a protest letter citing lack of due process and prescription as
grounds. For lack of action by the BIR on the taxpayer’s protest, the latter filed a Petition for
Review with the CTA. The CTA Division and En Banc granted the petition.
 Page 7 of 14

On appeal to the Supreme Court, the Court ruled that under Section 223 of the Tax Reform Act of records. As a consequence, the running of the three-year period to assess respondent was not
1997, the running of the Statute of Limitations provided under the provisions of Sections 203 and suspended and has already prescribe.
222 of the same Act shall be suspended when the taxpayer cannot be located in the address given
t is true that taxes are the lifeblood of the government. However, in spite of all its plenitude, the
by him in the return filed upon which a tax is being assessed or collected.
power to tax has its limits. 40 Thus, in Commissioner of Internal Revenue v. Algue, Inc., 41 this
Also, under Section 11 of Revenue Regulations No. 12-85, in case of change of address, the Court held:
taxpayer is required to give a written notice to the Revenue District Officer or the district having
Taxes are the lifeblood of the government and so should be collected without unnecessary
jurisdiction over his former legal residence and/or place of business.
hindrance.1âwphi1 On the other hand, such collection should be made in accordance with law as
ISSUE: any arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real
W/N the running of the 3-year prescriptive period to assess suspended when BC failed to notify
purpose of taxation, which is the promotion of the common good, may be achieved.
the CIR of its change of address?
It is said that taxes are what we pay for civilized society. Without taxes, the government would be
RULING:
paralyzed for the lack of the motive power to activate and operate it. Hence, despite the natural
No, the 3-year prescriptive period to assess was not suspended in favor of the CIR even if BC reluctance to surrender part of one’s hard-earned income to taxing authorities, every person who
failed notify regarding its change of address. is able to must contribute his share in the running of the government. The government for its
partis expected torespond in the form of tangible and intangible benefits intended to improve the
It is true that, under the Tax Code, the running of the Statute of Limitations shall be suspended lives of the people and enhance their moral and material values. This symbiotic relationship is the
when the taxpayer cannot be located in the address given in the return filed upon which a tax is rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of
being assessed or collected. In addition, Section 11 of RR 12-85 states that, in case of change of exaction by those in the seat of power.
address, the taxpayer is required to give a written notice thereof to the RDO or the district having
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
jurisdiction over his former legal residence and/or place of business.
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to
However, the Supreme Court ruled that the above-mentioned provisions on the suspension of the
his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if
3-year period to assess apply only if the CIR is not aware of the whereabouts of the taxpayer.
the taxpayer can demonstrate x x x that the law has not been observed. 42
In the present case, the CIR, by all indications, was well aware that BC had moved to its new
address in Calamba, Laguna, as shown by the documents which formed part of respondent's
CIR v. NIPPON EXPRESS PHILS
records with the BIR.
771 SCRA 27
Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter regarding the
results of its investigation and an invitation to an information conference. This could not have FACTS:
been done without being aware of BC's new address. Finally, the PAN was "returned to sender" Nippon is a domestic corporation duly organized and existing under Philippine laws which is
before the FAN was sent. primarily engaged in the business of freight forwarding, namely, in the international and domestic
air and sea freight and cargo forwarding, hauling, carrying, handling, distributing, loading, and
Hence, despite the absence of a formal written notice of Bc's change of address, the fact remains unloading general cargoes and all classes of goods, wares, and merchandise, and the operation of
that petitioner became aware of respondent's new address as shown by documents replete in its container depots, warehousing, storage, hauling, and packing facilities. 6 It is a Value-Added Tax

(VAT) registered entity with Tax Identification No. VAT Registration As such, it filed its quarterly
VAT returns for the year 2002 on April 25, 2002, July 25, 2002, October 25, 2002, and January
27, 2003, respectively.8 It maintained that during the said period it incurred input VAT attributable
to its zero-rated sales in the amount of P28,405,167.60, from which only P3,760,660.74 was
applied as tax credit, thus, reflecting refundable excess input VAT in the amount of
P24,644,506.86.9
On April 22, 2004, Nippon filed an administrative claim for refund of its unutilized input VAT in
the amount of P24,644,506.86 for the year 2002 before the Bureau of Internal Revenue (BIR). A
day later, or on April 23, 2004, it filed a judicial claim for tax refund, by way of petition for
review, before the CTA.
For its part, petitioner the Commissioner of Internal Revenue (CIR) asserted, inter alia, that the
amounts being claimed by Nippon as unutilized input VAT were not properly documented, hence,
should be denied.14
Compelled by the BIR's supervening issuance of the July 27, 2011 Tax Credit Certificate, Nippon
filed a motion to withdraw the case, proffering that:
Having arrived at a reasonable settlement of the issues with the [CIR]/BIR, and to avoid
incurring further legal and related costs, not to mention the time and resources of [the
CTA], [Nippon] most respectfully moves for the withdrawal of its Petition for Review. 37
ISSUE:
W/N the CTA properly granted Nippon's motion to withdraw.
RULING:
Finding the aforementioned grounds to be justified, the CTA Division allowed the withdrawal of
Nippon's appeal thereby ordering the case closed and terminated.
The primary reason, however, that militates against the granting of the motion to withdraw is the
fact that the CTA Division, in its August 10, 2011 Decision, had already determined that Nippon
was only entitled to refund the reduced amount of P2,614,296.84 since it failed to prove that the
recipients of its services were non-residents "doing business outside the Philippines"; hence,
Page 8 of 14
Nippon's purported sales therefrom could not qualify as zero-rated sales, necessitating the
reduction in the amount of refund claimed. Markedly different from this is the BIR's
determination that Nippon should receive P21,675,128.91 as per the July 27, 2011 Tax Credit
Certificate, which is, in all, P19,060,832.07 larger than the amount found due by the CTA
Division. Therefore, as aptly pointed out by Associate Justice Teresita J. Leonardo-De Castro
during the deliberations on this case, the massive discrepancy alone between the administrative
and judicial determinations of the amount to be refunded to Nippon should have already raised a
red flag to the CTA Division. Clearly, the interest of the government, and, more significantly, the
public, will be greatly prejudiced by the erroneous grant of refund - at a substantial amount at that
- in favor of Nippon. Hence, under these circumstances, the CTA Division should not have
granted the motion to withdraw.
In this relation, it deserves mentioning that the CIR is not estopped from assailing the validity of
the July 27, 2011 Tax Credit Certificate which was issued by her subordinates in the BIR. In
matters of taxation, the government cannot be estopped by the mistakes, errors or omissions
of its agents for upon it depends the ability of the government to serve the people for whose
benefit taxes are collected.40
Finally, the Court has observed that based on the records, Nippon's administrative claim for the
first taxable quarter of 2002 which closed on March 31, 2002 was already time-barred 41 for being
filed on April 22, 2004, or beyond the two (2)-year prescriptive period pursuant to Section
112(A)42 of the National Internal Revenue Code of 1997. Although prescription was not raised as
an issue, it is well-settled that if the pleadings or the evidence on record show that the claim is
barred by prescription, the Court may motu proprio order its dismissal on said ground.43
CIR v. DASH ENGINEERING PHILIPPINES
712 SCRA 347
FACTS:
Respondent DASH ENGINEERING PHILIPPINES, INC. (DASH) filed its monthly and
quarterly value-added tax (VAT) returns for the period from January 1, 2003 to June 30, 2003. On
August 9, 2004, it filed a claim for tax credit or refund in the amount of P2,149,684.88
representing unutilized input VAT attributable to its zero-rated sales.
 Page 9 of 14

Because petitioner Commissioner of Internal Revenue (CIR) failed to act upon the said claim,
DASH was compelled to file a petition for review with the CTA on May 5, 2005. The 120-day
period within which the CIR should have acted expired on December 7, 2004. 30 days from the
lapse of the said period is on January 6, 2005.
The contention of the commissioner is that DASH's petition was filed out of time because
following Section 112(C) of the NIRC, it should have been filed on or before January 6, 2005.
The 30-day period to appeal under Section 112(C) is mandatory and jurisdictional. Hence, the
CTA had no jurisdiction to entertain it.
DASH argues that the petition was seasonably filed before the CTA according to Section 112, in
relation to Section 229. DASH argues that the taxpayer has the option to appeal to the CTA within
30 days from receipt of the CIR's denial and within the two-year period ORto appeal the unacted
claim to the CTA anytime after the 120-day period so long as it is within the two-year period.
ISSUE:
Whether or not respondent’s judicial claim for refund was filed within the prescriptive period
provided under the Tax Code.
RULING:
The 120+30 day period under Sec. 112 is mandatory and jurisdictional.(Aichi, G.R. NO. 184823,
and San Roque, GR 187485)
In the present case, DASH’s claim for refund was filed after the expiration of the 30-day period
from the failure of the Commissioner to make a decision within 120 days from the submission of
the documents in support of respondent’s administrative claim. Hence, DASH's judicial claim for
refund must be denied for having been filed late. Although DASH filed its administrative claim
with the BIR on August 9, 2004 before the expiration of the two-year period in Section l12(A),
it undoubtedly failed to comply with the 120+ 30-day period in Section l l2(C) which requires
that upon the inaction of the CIR for 120 days after the submission of the documents in support of
the claim, the taxpayer has to file its judicial claim within 30 days after the lapse of the said
period.
The 120 days granted to the CIR to decide the case ended on December 7, 2004.
Thus, DASH had 30 days therefrom, or until January 6, 2005, to file a petition for review with the
CTA. Unfortunately, DASH only sought judicial relief on May 5, 2005 when it belatedly filed its
petition to the CTA, despite having had ample time to file the same, almost four months after the
period allowed by law. As a consequence of DASH's late filing, the CTA did not properly acquire
jurisdiction over the claim.

COMMISSIONER’S PETITION IS MERITORIOUS. The Court has held time and again that taxes are the lifeblood of the government and,
consequently, tax laws must be faithfully and strictly implemented as they are not intended
– Sec. 229 is inapplicable; two-year period in Sec. 112 refers only to administrative claims. to be liberally construed.24 Hence, We are left with no other recourse but to deny
Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes. respondent's judicial claim for refund for non-compliance with the provisions of Section 112
In Commissioner v. San Roque Power Corporation (GR 187485, Feb. 12, 2013), the Court of the NIRC.
clarified that input VAT is not ‘excessively’ collected as understood under section 229 because at
the time the input VAT is collected the amount paid is correct and proper.Section 112 is the more
specific and appropriate provision of law for claims for excess input VAT.
The two-year prescriptive period referred to in Section 112(A) applies only to the filing of
administrative claims with the CIR and not to the filing of judicial claims with the CTA. In other
words, for as long as the administrative claim is filed with the CIR within the two-year
prescriptive period, the 30-day period given to the taxpayer to file a judicial claim with the CTA
need not fall in the same two year period. At any rate, respondent’s compliance with the two-year
prescriptive period under Section 112(A) is not an issue. What is being questioned in this case is
DASH’s failure to observe the requisite 120+30-day period as mandated by Section 112(C) of the
NIRC.
 Page 10 of 14

public improvement designed for the enjoyment of the citizenry and those which come within the
State's territory, and facilities and protection which a government is supposed to provide.
Considering that the reinsurance premiums in question were afforded protection by the
government and the recipient foreign reinsurers exercised rights and privileges guaranteed by our
laws, such reinsurance premiums and reinsurers should share the burden of maintaining the
state.

The petitioner's defense of reliance of good faith on rulings of the CIR requiring no withholding
of tax due on reinsurance premiums may free the taxpayer from the payment of surcharges or
IV. NATURE OF TAXATION
penalties imposed for failure to pay the corresponding withholding tax, but it certainly would not
Attribute of Sovereignty exculpate it from liability to pay such withholding tax. The Government is not estopped from
collecting taxes by the mistakes or errors of its agents.
The Philippine Guaranty Co., Inc. v. The Commissioner of Internal Revenue And The
Court Of Tax Appeals
G.R. No. L-22074, April 30, 1965 Batangas City v. Pilipinas Shell Petroleum Corporation
G.R. No. 187631, July 8, 2015
FACTS:
The petitioner Philippine Guaranty Co., Inc., a domestic insurance company, entered into FACTS:
reinsurance contracts with foreign insurance companies not doing business in the country, thereby Batangas City sent Shell a notice of assessment demanding the payment of P92,373,720.50 and
ceding to foreign reinsurers a portion of the premiums on insurance it has originally underwritten P312,656,253.04 as business taxes for its manufacture and distribution of petroleum products. In
in the Philippines. The premiums paid by such companies were excluded by the petitioner from addition, Shell was required and assessed to pay the amount of P4,299,851.00 as Mayor's Permit
its gross income when it file its income tax returns Fee based on the gross sales of its Tabagao Refinery.
for 1953 and 1954.
Shell protested the assessment saying that it is not liable to pay the amount and that the Mayor's
Furthermore, it did not withhold or pay tax on them. Consequently, the CIR assessed against Permit Fees are exorbitant, confiscatory, arbitrary, unreasonable and not commensurable with the
the petitioner withholding taxes on the ceded reinsurance premiums to which the latter protested cost of issuing a license. Shell paid under protest.
the assessment on the ground that the premiums are not subject to tax for the premiums did not
constitute income from sources within the Philippines because the foreign reinsurers did not ISSUE:
engage in business in the Philippines, and CIR's previous rulings did not require insurance Does Batangas have the power to collect taxes from Shell on its manufacture and distribution of
companies to withhold income tax due from foreign companies. petroleum products?

ISSUE:
W/N insurance companies are not required to withhold tax on reinsurance premiums ceded to
foreign insurance companies, which deprives the government from collecting the tax due from
them.
HELD:
No. The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a
necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to
resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve,
HELD:
No, Batangas does not have said power under the Local Government Code.
Section 133 of the LGC puts a limitation on LGUs power to tax. They shall have no power to
levy taxes, fees or charges on petroleum products. Thus, the omnibus grant of power to LGUs
under Section 143(h) of the LGC cannot overcome the specific exception or exemption in Section
133(h) of the same Code.

The power to tax "is an attribute of sovereignty," and as such, inheres in the State. Such, however,
is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather,
there are mere "territorial and political subdivisions of the Republic of the Philippines."
The rule governing the taxing power of provinces, cities, municipalities and barangays is
summarized in Icard v. City Council of Baguio:
It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent
power of taxation. The charter or statute must plainly show an intent to confer that power or the
municipality, cannot assume it. And the power when granted is to be construed in strictissimi
juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved
against the municipality. Inferences, implication, deductions – all these- have no place in the
interpretation of the taxing power of a municipal corporation.
Therefore, the power of a province to tax is limited to the extent that such power is delegated to it
either by the Constitution or by statute.
Film Development Council Of The Philippines v. Colon Heritage Realty Corporation
G.R. No. 203754, June 16, 2015
FACTS:
The City of Cebu passed Ordinance No. 69 whereby Sections 42 and 43 thereof require
proprietors, lessees or operators of theatres, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement, to pay an amusement tax equivalent to thirty percent (30%) of the
gross receipts of admission fees to the Office of the City Treasurer of Cebu City. Thereafter,
Republic Act (R.A.) No. 9167, Sections 13 and 14 thereof states that producers of graded A and B
films shall be entitled to incentives equivalent to the amusement tax imposed and collected on
such graded films.
The Film Development Council of the Philippines (FDCP), in implementing the statute, argued
that the Congress restricted the delegated power of the City of Cebu in imposing amusement
taxes, when it enacted Secs. 13 and 14 of R.A. No. 9167. The lower court ruled, however, that
said provisions are contrary to the basic policy in local autonomy that all taxes, fees, and charges
imposed by the LGUs shall accrue exclusively to them, as articulated in Article X, Sec. 5 of the
1987 Constitution.
ISSUE:
Whether or not Secs. 13 and 14 of R.A. No. 9167 violates fiscal autonomy.
Page 11 of 14
RULING:
Yes, Secs. 13 and 14 of R.A. No. 9167 violates fiscal autonomy.
The basic rationale for the current rule on local fiscal autonomy is the strengthening of LGUs and
the safeguarding of their viability and self-sufficiency through a direct grant of general and broad
tax powers. Nevertheless, the fundamental law did not intend the delegation to be absolute and
unconditional. The legislature must still see to it that (a) the taxpayer will not be over-burdened or
saddled with multiple and unreasonable impositions; (b) each LGU will have its fair share of
available resources; (c) the resources of the national government will not be unduly disturbed;
and (d) local taxation will be fair, uniform, and just.
It is beyond cavil that the City of Cebu had the authority to issue its City Ordinance No. LXIX
and impose an amusement tax on cinemas pursuant to Sec. 140 in relation to Sec. 151 of the
LGC. Sec. 140 states, among other things, that a “province may levy an amusement tax to be
collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement at a rate of not more than thirty percent (30%) of
the gross receipts from admission fees.” By operation of said Sec. 151, extending to them the
authority of provinces and municipalities to levy certain taxes, fees, and charges, cities, such as
respondent city government, may therefore validly levy amusement taxes subject to the
parameters set forth under the law.
The power of taxation, being an essential and inherent attribute of sovereignty, belongs, as a
matter of right, to every independent government, and needs no express conferment by the people
before it can be exercised. It is purely legislative and, thus, cannot be delegated to the executive
and judicial branches of government without running afoul to the theory of separation of powers.
It, however, can be delegated to municipal corporations, consistent with the principle that
legislative powers may be delegated to local governments in respect of matters of local
concern.19 The authority of provinces, cities, and municipalities to create their own sources of
revenue and to levy taxes, therefore, is not inherent and may be exercised only to the extent that
such power might be delegated to them either by the basic law or by statute.
Legislative
Pepsi Cola Bottling Co. of the Phils. Inc. vs Municipality of Tanauan, Leyte
G.R. NO. L-31156
FACTS:
Plaintiff-appellant Pepsi-Cola commenced a complaint with preliminary injunction to declare
Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act,
unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos.

23 and 27 denominated as "municipal production tax" of the Municipality of Tanauan, Leyte, null
and void. Ordinance 23 levies and collects from soft drinks producers and manufacturers a tax of
one-sixteenth (1/16) of a centavo for every bottle of soft drink corked, and Ordinance 27 levies
and collects on soft drinks produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. Aside from the undue delegation of authority, appellant contends that it allows double
taxation, and that the subject ordinances are void for they impose percentage or specific tax.
ISSUE:
Are the contentions of the appellant tenable?
HELD:
No. On the issue of undue delegation of taxing power, it is settled that the power of taxation is an
essential and inherent attribute of sovereignty, belonging as a matter of right to every independent
government, without being expressly conferred by the people.
It is a power that is purely legislative and which the central legislative body cannot delegate
either to the executive or judicial department of the government without infringing upon the
theory of separation of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. By necessary implication, the legislative
power to create political corporations for purposes of local self-government carries with it
the power to confer on such local governmental agencies the power to tax. Also, there is no
validity to the assertion that the delegated authority can be declared unconstitutional on the theory
of double taxation. It must be observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised.
The reason is that the State has exclusively reserved the same for its own prerogative. Moreover,
double taxation, in general, is not forbidden by our fundamental law, so that double taxation
becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity or by the same jurisdiction for the same purpose, but not in a case where one
tax is imposed by the State and the other by the city or municipality.
On the last issue raised, the ordinances do not partake of the nature of a percentage tax on sales,
or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not)
and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered
solely for purposes of determining the tax rate on the products, but there is not set ratio between
the volume of sales and the amount of the tax.
Page 12 of 14
Pepsi vs. City of Butuan
24 SCRA 827
FACTS:
Plaintiff-appellant Pepsi-Cola sought to recover the sums paid by it under protest, to the City of
Butuan, and collected by the latter, pursuant to its Municipal Ordinance No. 110 which plaintiff
assails as null and void because it partakes of the nature of an import tax, amounts to double
taxation, highly unjust and discriminatory, excessive, oppressive and confiscatory, and constitutes
an invlaid delegation of the power to tax. The ordinance imposes taxes for every case of
softdrinks, liquors and other carbonated beverages, regardless of the volume of sales, shipped to
the agents and/or consignees by outside dealers or any person or company having its actual
business outside the City.
ISSUE:
Does the tax ordinance violate the uniformity requirement of taxation?
HELD:
Yes. The tax levied is discriminatory. Even if the burden in question were regarded as a tax on
the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the
uniformity required by the Constitution and the law therefor, since only sales by "agents or
consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or
on behalf of other merchants, regardless of the volume of their sales, and even if the same
exceeded those made by said agents or consignees of producers or merchants established outside
the City of Butuan, would be exempt from the disputed tax.
It is true that the uniformity essential to the valid exercise of the power of taxation does not
require identity or equality under all circumstances, or negate the authority to classify the objects
of taxation. The classification made in the exercise of this authority, to be valid, must, however,
be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial
distinctions which make real differences; (2) these are germane to the purpose of the legislation
or ordinance; (3) the classification applies, not only to present conditions, but, also, to future
conditions substantially identical to those of the present; and (4) the classification applies equally
to all those who belong to the same class.
Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the
nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and
confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No.
2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative
powers.

The second and last objections are manifestly devoid of merit. Indeed — independently of
whether or not the tax in question, when considered in relation to the sales tax prescribed by Acts
of Congress, amounts to double taxation, on which we need not and do not express any opinion -
double taxation, in general, is not forbidden by our fundamental law. We have not adopted, as part
thereof, the injunction against double taxation found in the Constitution of the United States and
of some States of the Union.1 Then, again, the general principle against delegation of
legislative powers, in consequence of the theory of separation of powers2 is subject to one
well-established exception, namely: legislative powers may be delegated to local
governments — to which said theory does not apply3 — in respect of matters of local
concern.
Non-delegable
Exceptions:
a. Taxing power of local governments (Section 5, Art. X, 1987
Constitution)
b. When allowed by the Constitution [Section 28(2), Article VI, 1987
Constitution]
Hon. Exec. Sec V. Southwing Heavy Industries, et al.,
G.R. NO. 164171
FACTS:
On December 12, 2002, President Gloria Macapagal Arroyo issued Executive Order 156 entitled
"Providing for a comprehensive industrial policy and directions for the motor vehicle
development program and its implementing guidelines." The said provision prohibits
the importation of all types of used motor vehicles in the country including the Subic Bay
Freeport, or the Freeport Zone, subject to a few exceptions. Consequently, three separate actions
for declaratory relief were filed by Southwing Heavy Industries Inc., Subic Integrated Macro
Ventures Corp, and Motor Vehicle Importers Association of Subic Bay Freeport Inc. praying that
judgment be rendered declaring Article 2, Section3.1 of the EO 156 unconstitutional and illegal.
The RTC rendered a summary judgment declaring that Article 2, Section 3.1 of EO 156
constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress
and that the proviso is contrary to the mandate of Republic Act 7227(RA7227) or the Bases
Conversion and Development Act of 1992 which allows the free flow of goods and capital within
the Freeport.
Page 13 of 14
Appeal in the CA was denied.
ISSUES:
Whether or not the Executive Order banning the importation of used vehicles through the Free
Trade Zone is valid.
HELD:
NO. EO 156, exceeded the scope of its application by extending the prohibition on the
importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign
territory. The domestic industry which the EO seeks to protect is actually the "customs territory"
which is defined under the Rules and Regulations Implementing RA 7227 which states: "the
portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of
the Philippines and other national tariff and customs laws are in force and effect."
To be valid, an administrative issuance must not be ultra vires or beyond the limits of the
authority conferred. It must not supplant or modify the Constitution, its enabling statute and other
existing laws, for such is the sole function of the legislature which the other branches of the
government cannot usurp. As held in United BF Homeowner’s Association v. BF Homes, Inc.:38
The rule-making power of a public administrative body is a delegated legislative power, which it
may not use either to abridge the authority given it by Congress or the Constitution or to enlarge
its power beyond the scope intended. Constitutional and statutory provisions control what rules
and regulations may be promulgated by such a body, as well as with respect to what fields are
subject to regulation by it. It may not make rules and regulations which are inconsistent with the
provisions of the Constitution or a statute, particularly the statute it is administering or which
created it, or which are in derogation of, or defeat, the purpose of a statute.
Administrative Implementation
Cervantes v. Auditor Gen.
91 Phil. 359
FACTS:
It appears that petitioner was in 1949 the manager of the NAFCO with a salary of P15,000 a year.
By a resolution of the Board of Directors of this corporation approved on January 19 of that year,
he was granted quarters allowance of not exceeding P400 a month effective the first of that
month. Submitted the Control Committee of the Government Enterprises Council for approval,
the said resolution was disapproved on August 3, 1949.
 Page 14 of 14

The Government Enterprises Council was created by the President under Executive Order No. 93
pursuant to Republic Act No. 51, authorizing the President of the Philippines, among other things,
to effect such reforms and changes in government owned and controlled corporations for the
purpose of promoting simplicity, economy and efficiency in their operation. The petitioner
challenged the action of the Government Enteprises Council, contending that Executive Order
No. 93 was an undue delegation of power.

ISSUE:
Whether or not Executive Order No. 93 is null and void because it is based on a law that is
unconstitutional as an illegal delegation of legislative power to the President

RULING:
No. As to the first ground, the rule is that so long as the Legislature "lays down a policy and a
standard is established by the statute" there is no undue delegation. Republic Act No. 51 in
authorizing the President of the Philippines, among others, to make reforms and changes in
government-controlled corporations, lays down a standard and policy that the purpose shall be to
meet the exigencies attendant upon the establishment of the free and independent government of
the Philippines and to promote simplicity, economy and efficiency in their operations. The
standard was set and the policy fixed. The President had to carry the mandate. This he did by
promulgating the executive order in question which, tested by the rule above cited, does not
constitute an undue delegation of legislative power. RATIO: Delegation to Administrative
Agencies. Under the sufficient standard test, there must be adequate guidelines or limitations in
the law to map out the boundaries of the delegate authority and prevent the delegation from
running riot.