PHILIPPINE PETROLEUM,

CORPORATION,petitioners.
v.
MUNICIPALITY OF PILILLA, RIZAL,
Represented by MAYOR NICOMEDES F.
PATENIA,respondent.

G.R. No. 90776

June 3, 1991

G.R. No. 90776

This is a petition forcertiorariseeking to annul and set
aside:
(a)the March 17, 1989 decision*of the Regional Trial Court,
Branch 80, Tanay, Rizal in Civil Case No. 057-T entitled,
"Municipality of Pililla, Rizal, represented by Mayor Nicomedes
F. Patenia vs. Philippine Petroleum Corporation", (PPC for
short) upholding the legality of the taxes, fees and charges
being imposed in Pililla under Municipal Tax Ordinance No. 1
and directing the herein petitioner to pay the amount of said
taxes, fees and charges due the respondent: and
(b)the November 2, 1989 resolution of the same court
denying petitioner's motion for reconsideration of the said
decision.

Facts of the Case

Petitioner:
PHILIPPINE PETROLEUM CORPORATION

Facts: Relevant Laws

Commonwealth Act No. 466 NIRC of 1939

Presidential Decree No. 231 Local Tax Code
Provincial Circular No. 26-73
Provincial Circular No. 26 A-73
Municipal Ordinance No. 1 - The Pililla Tax Code of
1974
Presidential Decree No. 426
Presidential Decree No. 436
Provincial Circular No. 6-77
Presidential Decree No. 1158 NIRC of 1977

CA No. 466: NIRC of 1939

SECTION 142. Specific Tax on Manufactured Oils and Other Fuels. On refined
and manufactured mineral oils and motor fuels, there shall be collected the
following taxes:
a)Kerosene or petroleum, per liter of volume capacity, one and one-half
centavos;
b)Lubricating oils, per liter of volume capacity, four centavos;
c)Naphtha, gasoline, and all other similar products of distillation, per liter of
volume capacity, five centavos; and
d)On denatured alcohol to be used for motive power, per liter of volume
capacity, one-half centavo: Provided, That if the denatured alcohol is mixed
with gasoline the specific tax on which has already been paid, only the alcohol
content shall be subject to the tax herein prescribed. For the purposes of this
sub-section, the removal of denatured alcohol of not less than one hundred
eighty degrees proof (ninety per centum absolute alcohol) shall be deemed to
have been removed for motive power, unless shown to the contrary.
Whenever the above-mentioned oils are used in aviation, the specific tax
thereon shall be refunded by the Collector of Internal Revenue upon the
submission of a sworn certificate satisfactory to him proving that the said oils
were actually used in aviation.

PD No. 231: Local Tax

Code
SECTION 19.Tax on Business. The
municipality may impose a tax on
businesses as follows:
(a) Tax on the business of manufacturing,
importing, exporting, producing, wholesaling
or retailing of, or dealing in, any article of
commerce of whatever kind or nature,
except those for which fixed taxes are
provided herein:

Provincial Circular No. 2673

Directed to all provincial, city and municipal
treasurers to refrain from collecting any local
tax imposed in old or new tax ordinances in
the business of manufacturing, wholesaling,
retailing, or dealing in petroleum products
subject to the specific tax under the National
Internal Revenue Code.

Provincial Circular No. 26

A-73
instructing all City Treasurers to refrain from
collecting any local tax imposed in tax
ordinances enacted before or after the
effectivity of the Local Tax Code on July 1,
1973, on the businesses of
manufacturing,wholesaling, retailing, or
dealing in, petroleum products subject to the
specific tax under the National Internal
Revenue Code.

The Pililla Tax Code of 1974

Sections 9 and 10 of the said ordinance imposed a tax
on business, except for those for which fixed taxes are
provided in the Local Tax Code on manufacturers,
importers, or producers of any article of commerce of
whatever kind or nature, including brewers, distillers,
rectifiers, repackers, and compounders of liquors,
distilled spirits and/or wines in accordance with the
schedule found in the Local Tax Code, as well as mayor's
permit, sanitary inspection fee and storage permit fee
for flammable, combustible or explosive substances
(Rollo, pp. 183-187), while Section 139 of the disputed
ordinance imposed surcharges and interests on unpaid
taxes, fees or charges.

Presidential Decree No.

426
Amending certain provisions of P.D. 231 but retaining
Sections 19 and 19 (a) with adjusted rates and 22(b).

Presidential Decree No. 436

Increasing the specific tax on lubricating oils, gasoline, bunker fuel
oil, diesel fuel oil and other similar petroleum products levied under
Sections 142, 144 and 145 of the National Internal Revenue Code, as
amended, and granting provinces, cities and municipalities certain
shares in the specific tax on such productsin lieu of local taxes
imposed on petroleum products.

Provincial Circular No. 677

Directing all city and municipal treasurers to
refrain from collecting the so-called storage
fee on flammable or combustible materials
imposed under the local tax ordinance of
their respective locality, said fee partaking
of the nature of a strictly revenue measure
or service charge.

PD No. 1158 NIRC of 1977

Section 145.Manufactured oils and other fuels. There shall be collected on refined and
manufactured mineral oils and motor fuels, the following specific taxes which shall attach to
the goods hereunder enumerated as soon as they are in existence as such:
(1)Lubricating oils and greases including but not limited to basestock for lube oils and greases, high vacuum distillates, aromatic extracts and other
similar preparations, and additives for lubricating oils and greases whether such additives are petroleum based or not per liter of volume capacity,
Four pesos and fifty centavos (P4.50): Provided, however, That the specific taxes paid on the purchased feedstock (bunker) used in the manufacture of
exciseable articles and forming part thereof shall be credited against the specific tax due therefrom: Provided, further, That lubricating oils and
greases produced from basestocks and additives on which the specific tax has already been paid shall no longer be subject to specific tax:
(2)Processed gas, per liter of volume capacity, Five centavos (P0.05);
(3)Waxes and petroleum, per kilogram, Three pesos and fifty centavos (P3.50);
(4)On denatured alcohol to be used for motive power, per liter of volume capacity, Five centavos (P0.05); Provided, That unless otherwise provided by
special laws, if the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject
to the tax herein prescribed. For purposes of this subsection, the removal of denatured alcohol of not less than one hundred eighty degrees proof
(ninety percent absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise;
(5)Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Two pesos and twenty-eight centavos (P2.28);
(6)Premium gasoline, per liter of volume capacity, Two pesos and fifty-two centavos (2.52);
(7)Aviation turbo jet fuel, per liter of volume capacity, Two pesos and thirty-eight centavos (P2.38);
(8)Kerosene, per liter of volume capacity, Fifty centavos (P0.50);
(9)Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Forty-five centavos (P0.45);
(10)Liquefied petroleum, per liter, zero (P0.00): Provided, that liquefied petroleum gas used for motive power shall be taxed at the equivalent rate as
the specific tax on diesel fuel oil;
(11)Asphalts, pert kilogram, Fifty-six centavos (P0.56);
(12)Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, zero (P0.00); and
(13)Naphtha, when used as a raw material in the production of petrochemical products, per liter of volume capacity, zero (P0.00): Provided, That
naphtha processed by domestic refineries, if available as determined by the Energy Regulatory Board, shall be utilized before any naphtha may be
imported for this purpose: Provided, further, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquified petroleum gases
and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be
subject to the applicable specific tax specified in this section, except when such by-products are transferred to any of the local oil refineries through
sale, barter, or exchange, for the purpose of further processing or blending into finished products which are subject to specific tax under this section.
(As amended by R.A. 6965)

Civil Case No. 057-T

RTCs Decision

CLAIMS

AMOUNT

ACCOUNT

PERIOD

Tax on Business

1979 1986

P5,301,385

Storage Fees

1975 1986

P3,321,730

Mayors Permit

1975 1984

P12,120

Sanitary
Inspection Fee

1975 1984

P1,010

inclusive plus
such amount of
tax/fee that
may accrue
until final
determination
of the case

and to pay the cost of suit

Issue of the Case

Whether or not petitioner PPC whose oil
products are subject to specific tax under the
NIRC, is still liable to pay
a)tax on business and
b)storage fees, considering Provincial Circular
No. 6-77; and
c)mayor's permit and
d)sanitary inspection fee
unto the respondent Municipality of Pililla, Rizal,
based on Municipal Ordinance No. 1.

Ruling
COURTS DECISION
PREMISES CONSIDERED, with the MODIFICATION that
Tax on Business
Storage Fees
Mayors Permit
Sanitary Inspection
Fee

Accruing prior to 1976 are not to be paid

Tax on Business
PD No. 231:
Local Tax
Code

PC No. 26-73
PC No. 26 A73

The Pililla Tax

Code of 1974

PD No. 426

Business

Article

Ruling
COURTS DECISION
PREMISES CONSIDERED, with the MODIFICATION that
Tax on Business

Accruing prior to 1976 are not to be paid

Storage Fees

Not to be paid by PPC

Mayors Permit
Sanitary Inspection
Fee

Storage Fees
According to the Pillila Tax Code,

STORAGE

FEE is a fee for the installation and keeping in

storage of any flammable, combustible or
explosive substances; a charge for any service
rendered by the municipality (Sec. 37).

Ruling
COURTS DECISION
PREMISES CONSIDERED, with the MODIFICATION that
Tax on Business

Accruing prior to 1976 are not to be paid

Storage Fees

Not to be paid by PPC

Mayors Permit
Sanitary Inspection
Fee

Affirmed

Mayors Permit and Sanitary Inspection Fee

Exemptions from taxation are construed

construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing
authority.

Statutory Construction
Well-settled is the rule that administrative
regulations must be in harmony with the
provisions of the law. In case of discrepancy
between the basic law and an implementing
rule or regulation, the former prevails.

THANK YOU!!!