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ASIA INT’L AUCTIONEERS INC vs CIR

Pascual vs Secretary of Public Works Case DigestWENCESLAU PASCUAL, AS PROVINCIAL GOVERNOR VS. SECRETARY OF PUBLIC WORKS

FACTS: On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this action fordeclaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds forPublic Works", approved on June 20, 1953, an item of P85,000.00, "for the construction, reconstruction, repair, extensionand improvement" of "Pasig feeder road terminals"; that, at the time of the passage and approval of said Act, theaforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, within the

Antonio Subdivision situated at Pasig, Rizal" which projected feeder roads "do not connect any government property orany important premises to the main highway"; that the aforementioned Antonio Subdivision were private properties ofrespondent Jose C. Zulueta, who, at the time of the passage and approval of said Act, was a member of the Senate of thePhilippines; that on May 29, 1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offeringto donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was accepted bythe council, subject to the condition "that the donor would submit a plan of the said roads and agree to change the namesof two of them"; that no deed of donation in favor of the municipality of Pasig was, however, executed; that on July 10,1953, respondent Zulueta wrote another letter to said council, calling attention to the approval of Republic Act No. 920,and the sum of P85,000.00 appropriated therein for the construction of the projected feeder roads in question; that themunicipal council of Pasig endorsed said letter of respondent Zulueta to the District Engineer of Rizal, who, up to thepresent "has not made any endorsement thereon"; that inasmuch as the projected feeder roads in question were private

property at the time of the passage and approval of Republic Act No. 920, the appropriation of P85,000.00 therein made,for the construction, reconstruction, repair, extension and improvement of said projected feeder roads, was "illegal and,therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress because its members were madeto believe that the projected feeder roads in question were "public roads and not private streets of a private subdivision'";that, "in order to give a semblance of legality, when there is absolutely none, to the aforementioned appropriation",respondent Zulueta executed, on December 12, 1953, while he was a member of the Senate of the Philippines, analleged deed of donation—copy of which is annexed to the petition—of the four (4) parcels of land constituting saidprojected feeder roads, in favor of the Government of the Republic of the Philippines; that said alleged deed of donationwas, on the same date, accepted by the then Executive Secretary; that being subject to an onerous condition, saiddonation partook of the nature of a contract; that, as such, said donation violated the provision of our fundamental lawprohibiting members of Congress from being directly or indirectly financially interested in any contract with theGovernment, and, hence, is unconstitutional, as well as null and void ab initio, for the construction of the projected feederroads in question with public funds would greatly enhance or increase the value of the aforementioned subdivision of

respondent Zulueta, "aside from relieving him from the burden of constructing his subdivision streets or roads at his ownexpense"; that the construction of said projected feeder roads was then being undertaken by the Bureau of PublicHighways; and that, unless restrained by the court, the respondents would continue to execute, comply with, follow andimplement the aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only to thepetitioner but to the Filipino nation."

ISSUE: Whether or not the statute is unconstitutional and void?

HELD: "It is a general rule that the legislature is without power to appropriate public revenue for anything but a publicpurpose. * * * It is the essential character of the direct object of the expenditure which must determine its validity as

justifying a tax, and not the magnitude of the interests to be affected nor the degree to which the general advantage of thecommunity, and thus the public welfare, may be ultimately benefited by their promotion. Incidental advantage to the publicor to the state, which results from the promotion of private interests and the prosperity of private enterprises or businessdoes not justify their aid by the use of public money." (25 R.L.C. pp. 398-400; Italics supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

"In accordance with the rule that the taxing power must be exercised for public purposes only, money raised by taxationcan be expended only for public purposes and not for the advantage of private individuals."

Explaining the reason underlying said rule, Corpus Juris Secundum states:

"Generally, under the express or implied provisions of the constitution, public funds may be used only for a publicpurpose. The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutionalprovisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and thedevotion thereof to another purpose, no appropriation of state funds can be made for other than a public purpose. * * *

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"The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promotethe public interests, as opposed to the furtherance of the advantage of individuals, although each advantage to individualsmight incidentally serve the public. * * * ." (81 C.J.S. p. 1147; italics supplied.)

The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon eventsoccurring, or acts performed, subsequently thereto. Referring to the P85,000.00 appropriation for the projected feederroads in question, the legality thereof depended upon whether said roads were public or private property when the bill,which, later on, became Republic Act No. 920, was passed by Congress, or, when said bill was approved by the Presidentand the disbursement of said sum became effective, or on June 20, 1953. Inasmuch as the land on which the projectedfeeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought aprivate purpose, and, hence, was null and void.4 The donation to the Government, over five (5) months after the approvaand effectivity of said Act, made, according to the petition, for the purpose of giving a "semblance of legality", or legalizingthe appropriation in question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of saiddonation need not precede the declaration of unconstitutionality of said appropriation.

Tio Vs. Videogram Regulatory Board Case DigestTio Vs. Videogram Regulatory Board151 SCRA 208G.R. No. L-75697June 18, 1987]

Facts: The case is a petition filed by petitioner on behalf of videogram operators adversely affected byPresidential Decree No. 1987, “An Act Creating the Videogram Regulatory Board" with broad powers toregulate and supervise the videogram industry.

A month after the promulgation of the said Presidential Decree, the amended the National Internal RevenueCode provided that:

"SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or importedblank video tapes shall be subject to sales tax."

"Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any provision of law tothe contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as thecase may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion

picture or audiovisual program.”

“Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent(50%) shall accrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, thetax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission.”

The rationale behind the tax provision is to curb the proliferation and unregulated circulation of videogramsincluding, among others, videotapes, discs, cassettes or any technical improvement or variation thereof, havegreatly prejudiced the operations of movie houses and theaters. Such unregulated circulation have caused asharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection ofsales, contractor's specific, amusement and other taxes, thereby resulting in substantial losses estimated atP450 Million annually in government revenues.

Videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales anddisposition of videograms, and these earnings have not been subjected to tax, thereby depriving theGovernment of approximately P180 Million in taxes each year.

The unregulated activities of videogram establishments have also affected the viability of the movie industry.

Issue:

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Whether or not tax imposed by the DECREE is a valid exercise of police power.

Whether or nor the DECREE is constitutional .

Held: Taxation has been made the implement of the state's police power. The levy of the 30% tax is for apublic purpose. It was imposed primarily to answer the need for regulating the video industry, particularlybecause of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the

tax remains a valid imposition.

We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No.1987 as unconstitutional and void. While the underlying objective of the DECREE is to protect the moribundmovie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfaircompetition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about bythe availability of unclassified and unreviewed video tapes containing pornographic films and films with brutallyviolent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mentionthe fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permitand municipal license fees are required to engage in business."

WHEREFORE, the instant Petition is hereby dismissed. No costs.

Pepsi Cola Bottling Company vs Municipality of Tanauan

Facts:

Pepsi Cola has a bottling plant in the Municipality of Tanauan, Leyte. In September 1962, the Municipality approved

Ordinance No. 23 which levies and collects “from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of

a centavo for every bottle of soft drink corked.”

In December 1962, the Municipality also approved Ordinance No. 27 which 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 ofvolume capacity.”

Pepsi Cola assailed the validity of the ordinances as it alleged that they constitute double taxation in two instances: a)

double taxation because Ordinance No. 27 covers the same subject matter and impose practically the same tax rate as with

Ordinance No. 23, b) double taxation because the two ordinances impose percentage or specific taxes.

Pepsi Cola also questions the constitutionality of Republic Act 2264 which allows for the delegation of taxing powers to

local government units; that allowing local governments to tax companies like Pepsi Cola is confiscatory and oppressive.

The Municipality assailed the arguments presented by Pepsi Cola. It argued, among others, that only Ordinance No. 27 is

being enforced and that the latter law is an amendment of Ordinance No. 23, hence there is no double taxation.

ISSUE: Whether or not there is undue delegation of taxing powers. Whether or not there is double taxation.

HELD: No. There is no undue delegation. As a rule the power of taxation being legislative in character cannot be

delegated. However 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. Under the New Constitution, local

governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5,Article XI provides: “Each local government unit shall have the power to create its sources of revenue and to levy taxes,

subject to such limitations as may be provided by law.” Withal, it cannot be said that Section 2 of Republic Act No. 2264

emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local

taxation.

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Moreover a tax measure becomes confiscatory only when when these guidelines was not complied with: (1) the tax is for

a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the

jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and

opportunity for hearing are provided. In this case there is no showing that the tax measure was for other purpose hence

violative of the constitutional mandate

Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is

imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in

assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer,although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not requirethat the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice

and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due

process of law. 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.

There is no double taxation. The argument of the Municipality is well taken. Further, Pepsi Cola’s assertion that the

delegation of taxing power in itself constitutes double taxation cannot be merited. 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 notforbidden by our fundamental law unlike in other jurisdictions. 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.

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