ASTURIAS SUGAR CENTRAL, INC. v. COMMISSIONER OF CUSTOMS and CTASeptember 30, 1969

CASTRO, J.Facts:

Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two importations of jute bags. The first shipment consisting of 44,800 jute bags and on January 8, 1967, entered free of customs duties and special import tax upon the petitioner's filing of re-exportation and special import tax bond no. 1 in the amounts of p25,088 and p2,464.50, conditioned upon the exportation of the jute bags within one year from the date of importation. The second shipment consisting of 75,200 jute bags declared on February 8, 1957, likewise entered free of customs duties and special import tax upon the petitioner's filing of re-exportation and special import tax bond no. 6 in the amounts of p42,112 and p7,984.44, with the same conditions as stated in bond no. 1.

Of the 44,800 jute bags declared under the first entry, only 8,647 were exported within one year from the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under the second entry, only 25,000 were exported within the said period of one year. In other words, of the total number of imported jute bags only 33,647 bags were exported within one year after their importation. The remaining 86,353 bags were exported after the expiration of the one-year period but within three years from their importation.

Petitioner requested the Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire the following day, giving the following as the reasons for its failure to export the remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the Central railroad line from November 6 to December 21, 1957 by certain union elements in the employ of the Philippine Railway Company, which hampered normal operations; and (c) delay in the arrival of the vessel aboard which the petitioner was to ship its sugar which was then ready for loading. However, this request was denied by the Commissioner per his letter of April 15, 1958.

Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of p28,629.42 representing the customs duties and special import tax due thereon , which the petitioner paid under protest.

Petitioner then demanded the refund of the amount it had paid, on the ground that its request for extension of the period of one year was filed on time, and that its failure to export the jute bags within the required one-year period was due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the central railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a drawback under section 106(b) in relation to section 105(x) of the tariff and customs code.

Collector of Customs of Iloilo - Denied the claim for refund. Commissioner of Customs – Affirmed. Court of Tax Appeals - Affirmed Hence, the present Petition.

Issues/Held: Whether the Commissioner of Customs is vested with discretion to extend the period of one year provided for in section 23 of the Philippine Tariff Act of 1909. NO. Period is non-extendible,

Ratio: Section 23 of the Philippine Tariff Act Of 1909 and the superseding sec. 105(x) of the Tariff snd

Customs Code, while fixing at one year the period within which the containers therein mentioned must be exported, are silent as to whether the said period may be extended. By reason of this silence, the Bureau of Customs Issued Administrative Orders 389 and 66 to eliminate confusion and provide a guide as to how it shall apply the law, and, more specifically, to make officially known its policy to consider the one-year period mentioned in the law as non-extendible.

Considering that the statutory provisions in question have not been the subject of previous judicial interpretation, then the application of the doctrine of "judicial respect for administrative construction," 3 would, initially, be in order.

Only where the court of last resort has not previously interpreted the statute is the rule applicable that courts will give consideration to construction by administrative or executive departments of the state.

The administrative orders in question appear to be in consonance with the intention of the legislature to limit the period within which to export imported containers to one year, without extension, from the date of importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the long-standing view of the Commissioner of Customs that the one-year period therein mentioned is not extendible.

Considering that the Bureau of Customs is the office charged with implementing and enforcing the provisions of our Tariff and Customs Code, the construction placed by it thereon should be given controlling weight.

In applying the doctrine or principle of respect for administrative or practical construction, the courts often refer to several factors which may be regarded as bases of the principle, as factors leading the courts to give the principle controlling weight in particular instances, or as independent rules in themselves. These factors are the respect due the governmental agencies charged with administration, their competence, expertness, experience, and informed judgment and the fact that they frequently are the drafters of the law they interpret; that the agency is the one on which the legislature must rely to advise it as to the practical working out of the statute, and practical application of the statute presents the agency with unique opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the statute;

In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory.

TAN v. DEL ROSARIO, JR. and ONGCARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, et al v. DEL ROSARIO and ONG

October 3, 1994Vitug, J.

Facts These are two consolidated special civil actions challenging the constitutionalist of RA7496 or

Simplified Net Income Taxation Scheme (SNIT). Tan asserts that such violates Art.VI Secs. 26(1)1 and 28(1)2 and Art.III Sec.13 of the 1987

Constitution. Carag, et al asserts that Del Rosario and Ong have exceeded their rule-making authority in applying SNIT to general professional partnerships (GPP).

Issues1. Whether SNIT is a misnomer or deficiently titled in violation of Art.VI Sec26 of the Constitution2. Whether SNIT desecrates the constitutional requirement that taxation shall be uniform and equitable since it taxes single proprietorships and partnerships differently from corporations and partnerships3. Whether Del Rosario and Ong have exceeded their authority I promulgating Sec.64 Revenue Regulations No2-94 to carry out RA7496

1 Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.2 The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.3 No person shall be deprived of…property without due process of law, nor shall any person be denied equal protection of laws.4 General Professional Partnership – The GPP and the partners comprising the GPP are covered by RA7496. Thus, in determining the net profit of the partnership, only the direct costs mentioned in the said law are to be deducted from partnership income. Also, the expenses paid or incurred by partners in their individual capacities in the practice of their profession which are not reimbursed or paid by the partnership but are not considered as direct cost, are not deductible from his gross income.

Held/Ratio1. No. The full text of the title is An Act Adopting the Simplified Net Income Taxation Scheme for the Self-Employed and Professionals Engaged in the Practice of their Profession, Amending Sections 21 and 29 of the National Internal Revenue Code, As Amended. Sec. 21 is the Tax on citizens and residents with paragraph f being SNIT for the Self-Employed and/or Professionals Engaged in the Practice of Profession and Sec. 29 is the Deductions from gross income. The allowance for deductible items may have been significantly reduced by the law in comparison with which has prevailed prior to the amendment. Limiting, however, allowable deductions from gross income is neither discordant with nor opposed to the net income tax concept. The fact of the matter is still that various deductions continue to be well provided under the new law. Art. VI has been envisioned to prevent log rolling legislation intended to unite the members of the legislative who favour any one of unrelated subjects in support of the whole act, to avoid surprises or even fraud, and to fairly apprise the people. These objectives appear to have been sufficiently met by the law.2. No. Uniformity of taxation merely requires that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. Uniformity doesn’t forfend classification as long as standards used are substantial and not arbitrary, categorization is germane to legislative purpose, law applies to all things equal to both present and future conditions, and the classification applies equally to all those belonging to the same class.3. No. It must be understood that GPP, unlike ordinary business partnerships which are treated as corporations for tax purposes, is not itself an income taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on the partners in their individual capacity. There’s no distinction in income tax liability between a person practicing his profession alone and one who does it through a partnership with others in exercise of a common profession. SNIT is not envisioned to cover corporations or partnerships which are independently subject to payment of income tax. On the administrative interpretation applying SNIT to GPPsSection 6 Of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing rule as now so modified by Republic Act No. 7496 on basically the extent of allowable deductions applicable to all individual income taxpayers on their non-compensation income. There is no evident intention of the law, either before or after the amendatory legislation, to place in an unequal footing or in significant variance the income tax treatment of professionals who practice their respective professions individually and of those who do it through a general professional partnership.

CIR v. SEAGATE TECHNOLOGY (PHILIPPINES)February 11, 2005

PANGANIBAN, J.

Facts: Seagate Technology (Seagate) is registered with the Philippine export Zone Authority (PEZA) and has

been issued a PEZA certificate It is also a VAT registered entity An administrative claim for refund of VAT input taxes in the amount of PHP 28,369.88 was filed on

October 4, 1999 No final action as been received by Seagate from the CIR on its claim for VAT refund Seagate thus elevated the case to the CTA by way of petition for review in order to toll the running of

the two year prescriptive period

Issues/Held: Whether Seagate is entitled to the tax refund or credit – YES. However, Seagate had chosen the fiscal incentives in EO 226 over those in RA 7916 and PD 66. It opted for the income tax holiday regime instead of the 5 percent preferential tax regime, Thus, it is only from the payment of income tax for certain number of years depending on its registration.

Ratio:

Seagate is a PEZA registered enterprise

As a PEZA registered enterprise within a special economic zone, Seagate is entitled in the fiscal incentives and benefits, provided for in either PD66 or EO 226. It shall moreover enjoy all privileges, benefits, advantages, or exemptions under both RA 7227 and RA 7844. Seagate enjoys preferential tax treatment. Thus, It is not subject to internal revenue laws and regulations and is even entitled to tax credits. The VAT on capital goods is an internal revenue from which Seagate as an entity is exempt. Although the transactions involving such tax is are not exempt, Seagate as a VAT registered person however is entitled to their credits

VAT is a uniform tax ranging at present from 0-10% levied on every importation of goods, whether or not in the course of trade or business, or imposed on each sale, barter, exchange or lease of goods or properties, or on each rendition of services in the course of trade or business as they pass along the production and distribution chain, the tax being limited only to the value added to such goods, properties or services by the seller, transferor or lessor It is an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods, properties, or services

Under the present method (drawn from the tax credit method) that relied on invoices, and entity can credit against or subtract from the VAT charged on its sales or outputs the Vat paid on its purchases, inputs and imports.

If at the end of a taxable quarter the output taxes charged by a seller are equal to the input taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed the input taxes that the excess has to be paid. If, however, the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result from zero rated or effectively zero rated transactions or from the acquisition of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes

Exemption Sales made by a VAT registered person in the customs territory to a PEZA registered entity are

considered exports to a foreign country, conversely, sales by a PEZA registered entity to a VAT registered person in the customs territory are deemed imports from a foreign country. This legal fiction is necessary to give meaningful effect to the policies of the special law creating the zone. If Seagate is located in an export processing zone within that ecozone, sales to the export processing zone , even without being actually exported, shall in fact be viewed as constructively exported under EO 226. Considered as export sales, such purchase transactions by Seagate would indeed be subject to a zero rate

Applying the special laws (EO 226 and PD 66 [precursor of RA7916]), Seagate as an entity is exempt from internal revenue laws and regulations. This exemption covers both direct and indirect taxes, stemming from the very nature of the VAT as a tax on consumption, for which the direct liability is imposed on one person but the indirectly made to bear, as added cost to such sales, the equivalent VAT its purchases. RA 7916 states that “no taxes, local, and national, shall be imposed on the business establishments operating within the ecozone” Since this law does not exclude the VAT from the prohibition, it is deemed included. Further, when RA 8748 was enacted to amend RA 7916, the same prohibition applied, except for real property taxes that presently are imposed on land owned by developers. Third, foreign and domestic merchandise, raw materials, equipment and the like “shall not be subject to internal revenue laws and regulations” under PD 66 – the original charter provisions on the latter law modify such exemption. Fourth, even the rules implementing the PEZA law clearly reiterate that merchandise – except those prohibited by law – shall not be subject to internal revenue laws and regulations” if brought to the ecozone’s restricted area for manufacturing by registered export enterprises of which Seagate is one. These rules also apply to all enterprises registered with the PEZA prior to the effectivity of such ruled

Tax Refund as Tax Exemption To be sure, statutes that grant tax exemptions are construed strictissimi juris against the taxpayer

and liberally in favor of the taxing authority Tax refunds are in the nature of such exemptions. Accordingly, the claimants of those refunds bear

the burden of proving the factual basis of them claims and of showing by words to plain to be mistaken, that the legislature intended to exempt them. In the present case, all the cited legal provisions with respect to the grant of the tax exemptions are too vivid to pass unnoticed.

Seagate which as an entity is exempt, is different from its transactions which are not exempt. The end result, however, is that it is not subject to the VAT. The non taxability of transactions that are otherwise taxable is merely a necessary incident to the tax exemption conferred by law upon it as an entity, not upon the transactions themselves. Nonetheless, its exemption as an entity and the non exemption of its transactions lead to the same result.

Registration Requirement VAT registration, not application for effective zone rating indispensable to Vat refund Registration is an indispensable requirement under our Vat law By the VAT’s very nature as a tax on consumption, the capital goods and services Seagate has

purchased are subject to VAT, although at zero rate. Registration does not determine taxability under the VAT law.

The BIR regulations additionally requiring an approved prior application for effective zero rating cannot prevail over the clear VAT nature of Seagate’s transactions. The scope of such regulations is not “within the statutory authority granted by the legislature.

Other than the general registration of a taxpayer, the VAT status of which is aptly determined, no provision under our VAT law requires an additional application to be made for such taxpayer’s transactions to be considered effectively zero rated. An effectively zero rated transaction does not and cannot become exempt simply because an application therefore was not made or if made, was denied. To allow the additional requirement is to give unfettered discretion to those officials or agents who without fluid consideration, are bent on denying a valid application

Tax Refund or credit in order Having determined that Seagate’s purchase transactions are subject to a zero VAT rate, the tax refund

or credit is in order. As correctly held by the lower courts, Seagate had chosen the fiscal incentives in EO 226 over those

in RA 7916 and PD 66. It opted for the income tax holiday regime instead of the 5 percent preferential tax regime,

These two regimes are incompatible and cannot be availed of simultaneously by the same entity. While EO 226 merely exempts it from income taxes, the PEZA law exempts it from all taxes.

Therefore Seagate can be considered exempt not from the VAT but only from the payment of income tax for certain number of years depending on its registration.

CIR v. BURROUGHS LIMITED AND CTAJune 19, 1986

PARAS, J.Facts:March 1979 - the branch office of Burroughs Ltd. In the country applied with the Central Bank for authority to remit to its parent company abroad branch profit amounting to P7,647,058.00.March 14, 1979 - it paid the 15% branch profit remittance tax pursuant to Sec. 24 (b) (2) (ii)6. Based on this law Burroughs Ltd remitted to its head office the amount of P6,499,999.30December 24, 1980 - Burroughs Ltd. filed a written claim for the refund or tax credit of the amount of P172,058.90 representing alleged overpaid branch profit remittance tax.BIR - ruled in favor of the refund on January 21, 1980.CIR contends that there should be no refund because Memorandum Circular No. 8-82 dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980.Memorandum Circular No. 8-82 states that “Considering that the 15% branch profit remittance tax imposed and collected at source, necessarily the tax base should be the amount actually applied for by the branch with the Central Bank of the Philippines as profit to be remitted abroad.”Issues/Held: Whether Burroughs Limited is entitled to a refund (amounting to P172,058.90). YESRatio:

In a BIR ruling dated January 21, 1980 by then Acting Commissioner of Internal Revenue Hon. Efren I. Plana the aforequoted provision had been interpreted to mean that "the tax base upon which the 15% branch profit remittance tax ... shall be imposed...(is) the profit actually remitted abroad and not on the total branch profits out of which the remittance is to be made."

BIR Ruling of January 21, 1980 is still applicable in the present case because Burroughs Ltd. paid the branch profit remittance tax in question on March 14, 1979.

Memorandum Circular No. 8-82 dated March 17, 1982 cannot be given retroactive effect in the light of Section 327 of the National Internal Revenue Code. (Sec. 327. Non-retroactivity of rulings. Any revocation, modification, or reversal of any ofthe rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shag not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayer except in the following cases (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based, or (c) where the taxpayer acted in bad faith.)

The prejudice that would result to private Burroughs Ltd. by a retroactive application of Memorandum Circular No. 8-82 is beyond question for it would be deprived of the substantial amount of P172,058.90.

CIR v. MEGA GENERAL MERCHANDISING CORPORATION and CTASeptember 30, 1988

PARAS, J.

Facts: Prior to the promulgation of P.D. No. 392 on February 18, 1974, importations of all kinds of paraffin

wax were subject to 7% advance sales tax on landed costs plus 25% mark up pursuant to Section 183(b) now Section 197(II) in relation to Section 186 (now Section 200) of the Tax Code.

With the promulgation of P.D. No. 392, a new provision for the imposition of specific tax was added to Section 142 of the Tax Code (effective Feb 18 1974)

Section 142. Specific tax on manufactured oils and other fuels.—On refined and manufactured mineral oils and othermotor fuels, there shall be collected the following taxes:xxx xxx xxxGreases, waxes and petroleum, per kilogram,thirty-five centavos; ...

On April 1975 Mega wrote the CIR for clarification as to whether imported crude paraffin wax is subject to specific tax

or advance sales tax. On May 14, 1975 Former Commissioner Vera ruled that only wax used as high pressure lubricant and

micro crystallin is subject to specific tax; that paraffin which was used as raw material in the manufacture of candles, wax paper, matches, crayons, drugs, appointments etc., is subject to the 7% advance sales tax, the tax to be based on the landed cost thereof, plus 25% mark-up.

Due to Commissioner Vera's ruling Mega filed several claims for tax refund/tax credit of the specific tax paid by them.

However, on January 28, 1977, then Acting CIR Efren Plana denied Mega’s claim. According to him the law does not make any distinction as to the kind of wax subject to specific tax.

During the pendency of Mega’s request for reconsideration, an investigation was conducted by the BIR in connection with the importations of wax and petroleum that arrived in the country on or subsequent to the date of the ruling of January 28, 1977 and it was ascertained that Mega owes the government specific tax for importation of paraffin wax on June 21, 1977 and August 17, 1977 which gave rise to the letter of assessment dated May 8, 1978.

However, prior to the issuance of said letter of assessment of May 8, 1978, CIR in a letter dated January 11, 1978, granted Mega’s claim for refund or tax credit since the importation which had arrived in Manila on April 18, 1975 was covered by the ruling of May 14, 1975 (before its revocation by the ruling of January 28, 1977).

Issues/Held: Whether Mega’s importation of crude paraffin wax on June 21 and August 17, 1977 is subject to specific tax under Section 142(i) of the Tax Code promulgated on February 18, 1974. YES.Ratio:

Contrary to the CTA’s ruling which states that “rulings or circulars promulgated by the Commissioner of Internal Revenue, such as the rulings of January 28, 1977 and those of May 8, 1978 and February 15, 1980, cannot have any retroactive application, where to do so, as it did in the case at bar, would prejudice the taxpayer”, the SC believes that the letter of Commissioner Plana dated January 11, 1978 did not in any way revoke his ruling dated January 28,1977 which ruling applied the specific tax to wax (without distinction). The reason he removed in 1978 private respondent's liability for the spe-cific tax was NOT because he wanted to revoke, expressly or implicitly, his ruling of January 28, 1977 but because the P321,436.79 tax referred to importation BEFORE January 28, 1977 and hence still covered by the ruling of Commissioner Vera,

Mega’s request for refund of the amount of P321,436.79 was granted in CIR’s letter dated January 11, 1978 because the importation of private respondent was made on April 18,1975 wherein petitioner made clear that all importation of crude paraffin wax only after the ruling of January 28, 1977, is sub-ject to specific tax

The importation which gave rise to the assessment in the amount of P275,652.00 subject of this case, was made on June 27, 1977 and August 17, 1977 and that the petitioner's ruling of Jan-uary 28,1977 was not revoked or overruled by his letter of January 11, 1978 granting respondent corporation's request for refund of the amount of P321,436.79.

PHILIPPINE BANK OF COMMUNICATIONS v. CIR, CTA and CAJanuary 28, 1999QUISUMBING, J.

 Facts:Philippine Bank of Communications (PBCom) filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying PBCom's tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memos. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. In 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in the first and second quarters of 1985. Thereafter in 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69. Pending the investigation Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). CTA  denied the request of petitioner for a tax refund or credit in the sum amount of P5,299,749.95, on the ground that it was filed beyond the two-year reglamentary period provided for by law. CA affirmed.Issue/Held: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioner's reliance on RMC No. 7-85, changing the prescriptive period of two years to ten years? NO.Ratio:Revenue Memorandum Circular No. 7-85 was issued on April 1, 1985. The circular states that overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years under Article 1144 of the Civil Code.Contrary to the petitioner's contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law. Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the State to finance the needs of the citizenry and

to advance the common weal.  Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible. From the same perspective, claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters.

Sec. 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year. When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous.   Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with the law they seek to apply and implement.

Tuzon v. CAAugust 21, 1992

Cruz, J.

Facts: On March 14, 1977, Sangguniang Bayan of Camalaniugan, Cagayan, adopted Resolution No. 9 which

solicited 1% donation of the palay threshed from the thresher operators who will apply for a permit to thresh. The proceeds will fund the construction of the Sports and Nutrition Center Bldg of the municipality.

Petitioner Lope Mapagu (treasurer) prepared a document for signature of all thresher/ owner/ operators who applied for a mayor’s permit.

Private respondent Saturnino Jurado sent his agent to the municipal treasurer's office to pay the license fee of P285 for thresher operators. Mapagu refused to accept the payment and required him to first secure a mayor's permit. For his part, Mayor Domingo Tuzon said that Jurado should first comply with Resolution 9 and sign the agreement (to give 1% of the palay he produced) before the permit could be issued. Jurado ignored the requirement. Instead, he sent the P285 license fee by postal money order to the office of the treasurer who returned the said amount. The reason given was the failure of the respondent to comply with Resolution No. 9.

Jurado filed for an action for mandamus with the RTC to compel the issuance of the mayor’s permit and license.

He filed another petition for declaratory judgment against the resolution for being illegal either as a donation or as a tax measure.

The trial court upheld the challenged measure. However, it dismissed the claims for damages of both parties for lack of evidence.

The CA affirmed, nevertheless, it found Tuzon and Mapagu to have acted maliciously and in bad faith when they denied Jurado's application for the mayor's permit and license. Mayor Tuzon and Treasurer Mapagu are liable to pay P20,000 as actual damages and P5,000 as moral damages.

As for the Resolution, it was passed by the Sanggunian in the lawful exercise of its legislative powers granted by the 1973 Constitution which provided that each LGU shall have the power to create its own source revenue and to levy taxes, subject to such limitation as may be provided by law.

Sec. 29, PD 231: The barrio council may solicit money, materials, and other contributions from private agencies and individuals.

Issues/Held: Whether a resolution imposing a 1% donation is a valid exercise of the taxing power of an LGU. NO RULING. Resolution presumed valid because the issue has not been raised in this petition as an assigned error of the respondent court. The measures have been sustained in the challenged decision, from which the respondent has not appealed. The decision is final and binding as to him.Ratio:However, the SC commented that the procedure in the CA was over simplified. The CA has not offered any explanation for its conclusion that the challenged measures are valid nor does it discuss its own concept of the nature of the resolution. While it would appear from the wording of the resolution that the municipal government merely intends to "solicit" the 1% contribution from the threshers, the implementing agreement seems to make the donation obligatory and a condition precedent to the issuance of the mayor's permit. This goes against the nature of a donation, which is an act of liberality and is never obligatory. (On tax ordinances)If, on the other hand, it is to be considered a tax ordinance, then it must be shown in view of the challenge raised by the private respondents to have been enacted in accordance with the requirements of the Local Tax Code. These would include the holding of a public hearing on the measure and its subsequent approval by the Secretary of Finance, in addition to the usual requisites for publication of ordinances in general.

HAGONOY MARKET VENDOR ASSOCIATION v. MUNICIPALITY OF HAGONOY, BULACANFebruary 6, 2002

PUNO, J.

Facts: On October 1, 1996, the Sangguniang Bayan of Hagonoy, Bulacan, enacted an ordinance, Kautusan Blg. 28, which increased the stall rentals of the market vendors in Hagonoy. Article 3 provided that it shall take effect upon approval. The subject ordinance was posted from November 4-25, 1996. In the last week of November, 1997, the petitioner’s members were personally given copies of the approved Ordinance and were informed that it shall be enforced in January, 1998. On December 8, 1997, the petitioner’s President filed an appeal with the Secretary of Justice assailing the constitutionality of the tax ordinance. Petitioner claimed it was unaware of the posting of the ordinance.

Respondent opposed the appeal. It contended that the ordinance took effect on October 6, 1996 and that the ordinance, as approved, was posted as required by law. Hence, it was pointed out that petitioner’s appeal, made over a year later, was already time-barred. The Secretary of Justice dismissed the appeal on the ground that it was filed out of time, i.e., beyond thirty (30) days from the effectivity of the Ordinance on October 1, 1996, as prescribed under Section 187 of the 1991 Local Government Code. Citing the case of Tañada vs. Tuvera, the Secretary of Justice held that the date of effectivity of the subject ordinance retroacted to the date of its approval in October 1996, after the required publication or posting has been complied with, pursuant to Section 3 of said ordinance.

Issues/Held: Whether the appeal to the Secretary of Justice was time-barred. YES.

Ratio:On tax/revenue OrdinancesSection 187 of the Local Gov’t Code requires that an appeal of a tax ordinance or revenue measure should be made to the Secretary of Justice within thirty (30) days from effectivity of the ordinance and even

during its pendency, the effectivity of the assailed ordinance shall not be suspended . In the case at bar, Municipal Ordinance No. 28 took effect in October 1996. Petitioner filed its appeal only in December 1997, more than a year after the effectivity of the ordinance in 1996. Clearly, the Secretary of Justice correctly dismissed it for being time-barred. At this point, it is apropos to state that the timeframe fixed by law for parties to avail of their legal remedies before competent courts is not a “mere technicality” that can be easily brushed aside. The periods stated in Section 187 of the Local Government Code are mandatory. Ordinance No. 28 is a revenue measure adopted by the municipality of Hagonoy to fix and collect public market stall rentals. Being its lifeblood, collection of revenues by the government is of paramount importance. The funds for the operation of its agencies and provision of basic services to its inhabitants are largely derived from its revenues and collections. Thus, it is essential that the validity of revenue measures is not left uncertain for a considerable length of time. Hence, the law provided a time limit for an aggrieved party to assail the legality of revenue measures and tax ordinances.

JARDINE DAVIES INSURANCE BROKERS, INC. v. ALIPOSA and CARLOSFebruary 27, 2003

Callejo, Sr., J.

Facts: The Sangguniang Bayan of Makati enacted Municipal, Ordinance No. 92-072 which providesfor the

schedule of real estate, business and franchise taxes in the Municipality of Makati. Thereafter, the Department of Justice came out with a resolution after an appeal from a taxpayer, declaring "null and void and without legal effect" the said ordinance for having been enacted in contravention of Section 187 of the Local Government Code of 1991.

Makati filed a petition with the RTC of Makati. In the meantime, Makati continued to implement the ordinance.

Jardine Davies Insurance Brokers, Inc., a duly-organized corporation, was assessed and billed by Makati an amount for taxes, fees and charges. Petitioner did not protest the assessment but in fact, paid the said amounts without any protest.

The RTC rendered judgment declaring the ordinance valid. Jardine Davies, relying on the resolution of the DOJ, filed a complaint with the RTC of Makati against

Makati and its Acting Municipal Treasurer for a refund or tax credit. The defendants filed a motion to dismiss the complaint on the ground of prematurity.

Issue/Held: Whether Jardine Davies proscribed from filing its complaint with the RTC for a refund of the alleged payment without any protest of the taxes due and without any appeal with the Secretary of Justice as to the legality or constitutionality of the ordinance. YES.Ratio:

As a general precept, a taxpayer may file a complaint assailing the validity of the ordinance and praying for a refund of its perceived overpayments without first filing a protest to the payment of taxes due under the ordinance.

However, the Court agrees with the contention of respondents that petitioner was proscribed from filing its complaint with the RTC of Makati for the reason that petitioner failed to appeal to the Secretary of Justice within 30 days from the effectivity date of the ordinance as mandated by Section 187 of the Local Government Code .

A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective instrument to raise needed revenues to finance and support the myriad activities of local government units for the delivery of basic services essential to the promotion of the general welfare and enhancement of peace, progress, and prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the public. It is for this reason that protests over tax ordinances are required to be done within certain time frames. In the present case, the failure of Jardine Davies to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A. 7160 is fatal to their cause. Moreover, Jardine Davies even paid without any protest the amounts of taxes assessed by respondents Makati and Acting Treasurer as provided for in the ordinance.

TANADA and COSETENG et al vs. ANGARA et al.May 2, 1997

Panganiban, J.

Facts: DTI secretary Rizalino Navarro signed the Final Act Embodying the Results of the Uruguay Round of

Multilateral Negotiations. (Final Act). By signing it, he agreed on behalf of the Philippineso To submit the WTO agreement to competent authorities for their approvalo Adopt the ministerial declarations and decisions

Basically, the final act aims to liberalize and expand world trade and strengthen the interrelationship between trade and economic policies affecting growth and development. The president then sent to the senate a letter which submits the Uruguay Round Final Act for their

concurrence Another letter was sent by the president. This time, he submits the Uruguay Final Round Act, the

Agreement Establishing the WTO, the Ministerial Declarations and Decisions and the Understanding on Commitments in Financial Services to the Senate for its concurrence.

The Senate adopted Resolution number 97, which expresses their concurrence in the ratification of the president of the Agreement Establishing the WTO.

The President signed the Instrument of Ratification of the Agreement Establishing the WTO and the agreements and associated legal instruments of that agreement.

The final act signed by Secretary Navarro, on the other hand, embodies not only the WTO agreement but also the ministerial declarations and decisions and the understanding on commitments in financial services.

Petitioners assail the constitutionality of the treaty. They also claim that since the Senate only concurred with the WTO agreement and not on all the contents of the Final act, they impliedly rejected the Final act.

Issues/Held:1. Whether or not the case is justiciable. YES.2. Whether or not the parity provisions and national treatment clauses in the WTO agreement violates Sec.

19 Article 2, Sec. 10 and 12 Article 12 of the Constitution (“economic nationalism” clauses). NO.3. Whether or not the WTO agreement unduly limits, restricts and impairs legislative power of the

Congress. NO. (see Ratio on Treaties and International Comity)4. Whether or not the WTO agreement intrudes on the power of the Supreme Court to promulgate rules

concerning pleading, practice and procedures. NO.5. Whether or not the concurring of the senate only in the WTO agreement and not in the final act implies

rejection of the final act. NO.

Ratio:1. The judiciary has the duty and power to strike down grave abuse of discretion on the part of any branch

or instrumentality of government including Congress2. The declaration of principles are not intended to be self-executing, rather, they are just aid and guides by

the judiciary in judicial review, and by the legislature in enacting laws. These broad principles need legislative enactments to implement them. The economic nationalism provisions should be read with other constitutional mandates, especially Sec 1 and 13 of Article 12. The WTO protects the weak economies. There are specific provisos in the agreement with respect to tariffs, domestic subsidies and protection from unfair competition which are intended to help developing economies. The Constitution does not rule out foreign competition. Independence refers to the freedom from undue foreign control of the national economy. The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any specific pronouncement that Filipino companies should be pampered with total prescription of foreign competition. Constitutions are designed to meet not only the

vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances.

3. (TOPICAL) Sovereignty is not absolute because it is subject to restrictions and voluntarily agreed to by the Philippines, expressly or impliedly as a member of the family of nations. The Constitution did not envision a hermit type isolation of the country. By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. After all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination of war, the regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of claims, the laying down of rules governing conduct in peace and the establishment of international organizations. There are certain restrictions to the Constitution: a) Limitations imposed by the very nature of membership in the family of nations and b) Limitations imposed by treaty stipulations. When the Philippines join the UN, it consented to restrict its sovereign rights under the concept of auto-limitation. The underlying concept in the partial surrender of sovereignty is the reciprocal commitment of the other contracting states granting the same privilege and immunities to the Philippines, its officials and its citizens.

4. The burden of proof is not transferred in cases of patent infringement. It is still on the patent owner to introduce evidence of the existence of the alleged identical product. The new rule should not really present any problem in changing the rules of evidence as the present law on the subject, RA 165 (Patent Law), provides a similar presumption in cases of infringement of patent design.

5. The final act need not be ratified. It is not the treaty itself. Rather, it is just a summary of the proceedings. The final act only required that the senate concur with the WTO agreement, which they did. The Senate was well-aware of what it was concurring to as shown by the member’s deliberations.

LUTZ vs. ARANETADecember 22, 1955

Reyes, JBL J.

Facts: 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 section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action having been dismissed by the Court of First Instance, the plaintiffs appealed the case directly to this Court.

Issue/Held: Are the taxes valid? YES.

Ratio:The basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other words, the act is primarily an exercise of the police power.

This Court can take judicial notice of the fact that sugar production in one of the great industries of our nation, sugar occupying a leading position among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of the important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general

welfare. Hence it was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power, the law-making body could provide that the distribution of benefits there from be readjusted among its components to enable it to resist the added strain of the increase in taxes that it had to sustain As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida —

That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. At any rate, 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".

From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in question, 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."

Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by- products and solution of allied problems, as well as to the improvement of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes.

PASCUAL v. SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL.December 29, 1960

CONCEPCION, J.

Facts:RA 920 (Act appropriating funds for public works) was enacted in1953 containing an item (Section 1 c[a]) ap-propriating P85,000.00 for the construction, reconstruction, repair, extension and improvement of Pasig feeder road terminals (the projected and planned subdivision roads, which were not yet constructed, within Antonio Subdivision owned by Senator Jose C. Zulueta)[private road] . Zulueta “donated” said parcels of land to the Government 5 months after the enactment of RA 920, on the condition that if the Government violates such condition the lands would revert to Zulueta. The provincial governor of Rizal, Wenceslao Pascual, ques-tioned the validity of the donation and the Constitutionality of the item in RA 920, it being not for a public purpose. petitioned for a writ of certiorari against the dismissal of the case and dissolving of the preliminary injunction held by the Court of the First Instance. Petitioner prayed for that RA #920 be declared null and void, that the alleged Deed of Donation made by Zulueta be declared unconstitutional. Petitioner also prayed for an injunction enjoining Secretary of Public Works and Communications, Director of Public Works and Highways and the disbursing officers of the latter department from making and securing any further release of funds for the said road projectIssue/Held:Whether the item in the appropriation is valid. NO.

Ratio:(Inherent Limitation: Public Purpose)The right of the legislature to appropriate funds is correlative with its right to tax, under constitutional provi-sions against taxation, except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds can be made for other than a public purpose.

The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occupying, or acts performed, subsequently thereto, unless the latter consist of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute. Herein, inasmuch as the land on which the projected feeder roads were to be constructed belonged to Senator Zulueta at the time RA 920 was passed by Congress, or approved by the President, and the disbursement of said sum became effective on 20 June 1953 pursuant to Section 13 of the Act, the result is that the appropri-ating sough a private purpose and hence, null and void.

PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION v. ALCUAZ and NTCDecember 18, 1989

REGALADO, J.

Facts: By virtue of Republic Act 5514, the Philippine Communications Satellite Corporation (PHILCOMSAT)

was granted “a franchise to establish, construct, maintain and operate in the Philippines, at such places as the grantee may select, station or stations and associated equipment and facilities for international satellite communications,” the authority to “construct and operate such ground facilities as needed to deliver telecommunications services from the communications satellite system and ground terminal or terminals.” By designation of the Republic of the Philippines, it is also the sole signatory for the Philippines in the Agreement and the Operating Agreement relating to the International Telecommunications Satellite Organization (INTELSAT), as well as in the Convention and the Operating Agreement of the International Maritime Satellite Organization (INMARSAT), which two global commercial telecommunications satellite corporations were collectively established by various states in line with the principles set forth in Resolution 1721 (XVI) of the United Nations’s General Assembly.

Since 1968, It has been leasing its satellite circuits to PLDT, Philippine Global Communications, Eastern Telecom, Globe Mackay Cable and Radio Corp. ITT, and Capitol Wireless or their predecessors-in-interest. The satellite services thus provided by PHILCOMSAT enable said international carriers to serve the public with indispensable communication services, such as overseas telephone, telex, facsimile, telegrams, high speed data, live television in full color, and television standard conversion from European to American or vice versa. It was exempt from the jurisdiction of the then Public Service Commission, now National Telecommunications Commission (NTC).

However, pursuant to EO 196 issued on 17 June 1987, it was placed under the jurisdiction, control and regulation of NTC, including all its facilities and services and the fixing of rates. Implementing said executive order, NTC required PHILCOMSAT to apply for the requisite certificate of public convenience and necessity covering its facilities and the services it renders, as well as the corresponding authority to charge rates therefor.

On 9 September 1987, PHILCOMSAT filed with NTC an application for authority to continue operating and maintaining the same facilities it has been continuously operating and maintaining since 1967, to continue providing the international satellite communications services it has likewise been providing since 1967, and to charge the current rates applied for in rendering such services. Pending hearing, it also applied for a provisional authority so that it can continue to operate and maintain the facilities, provide the services and charge therefor the aforesaid rates therein applied for. On 16 September 1987, PHILCOMSAT was granted a provisional authority to continue operating its existing facilities, to render the services it was then offering, and to charge the rates it was then charging. This authority was valid for 6 months from the date of said order. When said provisional authority expired on 17 March 1988, it was extended for another 6 months, or up to 16 September 1988. Thereafter, the NTC further extended the provisional authority of PHILCOMSAT for another 6 months, counted from 16 September 1988, but it directed PHILCOMSAT to charge modified reduced rates through a reduction of 15% on the present authorized rates (basing its power to fix the rates on EO 546).

PHILCOMSAT assailed the said directive and holds that the enabling act (EO 546) of respondent NTC empowering it to fix rates for public service communications does not provide the necessary

standards constitutionally required hence there is an undue delegation of legislative power, particularly the adjudicatory powers of NTC.

PHILCOMSAT asserts that nowhere in the provisions of EO 546, providing for the creation of respondent NTC and granting its rate-fixing powers, nor of EO 196, placing petitioner under the jurisdiction of respondent NTC, can it be inferred that respondent NTC is guided by any standard in the exercise of its rate-fixing and adjudicatory powers. PhilComSat subsequently clarified its said submission to mean that the order mandating a reduction of certain rates is undue delegation not of legislative but of quasi-judicial power to respondent NTC, the exercise of which allegedly requires an express conferment by the legislative body

Issue/Held: Whether there is an undue delegation of power. NO. The NTC, in the exercise of its rate-fixing power, is limited by the requirements of public safety, public interest, reasonable feasibility and reasonable rates, which conjointly more than satisfy the requirements of a valid delegation of legislative power.Ratio:Fundamental is the rule that delegation of legislative power may be sustained only upon the ground that some standard for its exercise is provided and that the legislature in making the delegation has prescribed the manner of the exercise of the delegated power. Therefore, when the administrative agency concerned, NTC in this case, establishes a rate, its act must both be non-confiscatory and must have been established in the manner prescribed by the legislature; otherwise, in the absence of a fixed standard, the delegation of power becomes unconstitutional. In case of a delegation of rate-fixing power, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. However, it has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied. In the case at bar, the fixed rate is found to be of merit and reasonable. (However, NTC order violates procedural due process for being issued motu proprio, without notice to PHILCOMSAT and without benefit of a hearing.)