FIRST DIVISION

508 and 93-584 in the Department of Justice and I.S. No. 93-17942 in the Office of the City Prosecutors of Quezon City wherein private respondents were respondents and denying petitioners Motion to Dismiss said Civil Case No. 94-18790.2 In resolving the issue raised in the petition, the Court may be guided by its definition of what constitutes grave abuse of discretion. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion and hostility.3 On June 1, 1993, the President issued a Memorandum creating a Task Force to investigate the tax liabilities of manufacturers engaged in tax evasion scheme, such as selling products through dummy marketing corporations to avoid payment of correct internal revenue tax, to collect from them any tax liabilities discovered from such investigation, and to file the necessary criminal actions against those who may have violated the tax code. The task force was composed of the Commissioner of Internal Revenue as Chairman, a representative of the Department of Justice and a representative of the Executive Secretary. On July 1, 1993, the Commissioner of Internal Revenue issued a Revenue Memorandum Circular No. 37-93 reclassifying best selling cigarettes bearing the brands Hope, More, and Champion as cigarettes of foreign brands subject to a higher rate of tax. On August 3, 1993, respondent Fortune Tobacco Corporation (Fortune) questioned the validity of the reclassification of said brands of cigarettes as violative of its right to due process and equal protection of law. Parenthetically, on September 8, 1993, the Court of Tax Appeals by resolution ruled that the reclassification made by the Commissioner is of doubtful legality and enjoined its enforcement. In a letter of August 13, 1993 which was received by Fortune on August 24, 1993, the Commissioner assessed against Fortune the total amount of P7,685,942,221.66 representing deficiency income, ad valorem and value-added tax for the year 1992 with the request that the said amount be paid within thirty (30) days upon receipt thereof.4 Fortune on September 17, 1993 moved for reconsideration of the assessments. On September 7, 1993, the Commissioner of Internal Revenue filed a complaint with the Department of Justice against respondent Fortune, its corporate officers, nine (9) other corporations and their respective corporate officers for alleged fraudulent tax evasion for supposed non-payment by Fortune of the correct amount of income tax, ad valorem tax and value-added tax for the year 1992. The complaint alleged, among others, that: In the said income tax return, the taxpayer declared a net taxable income of P183,613,408.00 and an income tax due of P64,264,693.00. Based mainly on documentary evidence submitted by the taxpayer itself, these declarations are false and fraudulent because the correct taxable income of the corporation for the said year is P 1,282,959,399.25.

[G.R. No. 119322. June 4, 1996]

COMMISSIONER OF INTERNAL REVENUE, SENIOR STATE PROSECUTOR AURORA S. LAGMAN, SENIOR STATE PROSECUTOR BERNELITO R. FERNANDEZ, SENIOR STATE PROSECUTOR HENRICK P. GINGOYON, ROGELIO F. VISTA, STATE PROSECUTOR ALFREDO AGCAOILI, PROSECUTING ATTORNEY EMMANUEL VELASCO, CITY PROSECUTOR CANDIDO V. RIVERA, AND ASSISTANT CITY PROSECUTOR LEOPOLDO E. BARAQUIA, petitioners, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE TIRSO DC VELASCO, PRESIDING JUDGE, REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 88, FORTUNE TOBACCO CORPORATION, LUCIO TAN, HARRY C. TAN, CARMEN KAO TAN, FLORENCIO SANTOS, SALVADOR MISON, CHUNG POE KEE, ROJAS CHUA, MARIANO TANENGLIAN, JUANITA LEE AND ANTONIO P. ABAYA, respondents. DAGUPAN COMBINED COMMODITIES, INC., TOWNSMAN COMMERCIALS, INC., LANDMARK SALES AND MARKETING, INC., CRIMSON CROCKER DISTRIBUTORS, INC., MOUNT MATUTUM MARKETING CORP., FIRST UNION TRADING CORP., CARLSBURG AND SONS, INC., OMAR ALI DISTRIBUTORS, INC., ORIEL AND COMPANY, NEMESIO TAN, QUINTIN CALLEJA, YOLANDA MANALILI, CARLOS CHAN, ROMEO TAN, VICENTE CO, WILLIAM YU, LETICIA LIM, GLORIA LOPEZ, ROBERT TANTAMCO, FELIPE LOY, ROLANDO CHUA, HONORINA TAN, WILLIE TANTAMCO, HENRY WEECHEE, JESUS LIM, TEODORO TAN, ANTONIO APOSTOL, DOMINGO TENG, CANDELARIO LI, ERLINDA CRUZ, CARLOS TUMPALAN, LARRY JOHN SY, ERNESTO ONG, WILFREDO MACROHON, ANTONIO TIU, ROSARIO LESTER, WILFREDO ONG, BONIFACIA CHUA, GO CHING CHUAN, HENRY CHUA, LOPE LIM GUAN, EMILIO TAN, FELIPE TAN SHE CHUAN, ANDRES CO, FELIPE KEE, HENRY GO CO, NARCISO GO, ADOLFO LIM, CO SHU, DANIEL YAO CABIGUN, GABRIEL QUINTELA, NELSON TE, EMILIO GO, EDWIN LEE, CESAR LEDESMA, JR., JAO CHEP SENG, ARNULFO TAN, BENJAMIN T. HONG, PHILIP JAO, JOSE P. YU, AND DAVID R. CORTES,respondents-intervenors. DECISION KAPUNAN, J.: The pivotal issue in this petition for review is whether or not respondent Court of Appeals in its decision1 in CA-G.R. SP No. 33599 correctly ruled that the Regional Trial Court of Quezon City (Branch 88) in Civil Case No. Q-94-18790 did not commit grave abuse of discretion amounting to lack of jurisdiction in issuing four (4) orders directing the issuance of writs of preliminary injunction restraining petitioner prosecutors from continuing with the preliminary injunction of I.S. Nos. 93-

This underdeclaration which resulted in the evasion of the amount of P723,773,759.79 as deficiency income tax for the year 1992 is a violation of Section 45 of the Tax Code, penalized under Section 253 in relation to Sections 252(b) and (d) and 253 thereof, thus: x x x. xxx xxx xxx

Fortune Tobacco Corporation, through its Vice-President for Finance, Roxas Chua, likewise filed value-added tax returns for the 1st, 2nd, 3rd and 4th quarters of 1992 with the Rev. District Office of Marikina, Metro Manila, declaring therein gross taxable sales, as follows: 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. P2,924,418,055.00 2,980,335,235.00 2,839,519,325.00 2,992,386,005.00

The fraudulent scheme allegedly adopted by private respondents consisted of making fictitious and simulated sales of Fortunes cigarette products to non-existing individuals and to entities incorporated and existing only for the purpose of such fictitious sales by declaring registered wholesale prices with the BIR lower than Fortunes actual wholesale prices which are required for determination of Fortunes correct income, ad valorem, and value-added tax liabilities. The ghosts wholesale buyers then ostensibly sold the products to customers and other wholesalers/retailers at higher wholesale prices determined by Fortune. The tax returns and manufacturers sworn statements filed by Fortune would then declare the fictitious sales it made to the conduit corporators and non-existing individual buyers as its gross sales.5 On September 8, 1993, the Department of Justice Task Force issued a subpoena directing private respondents to submit their counter-affidavits not later than September 20, 1993.6 Instead of filing their counter-affidavits, the private respondents on October 15, 1993 filed a Verified Motion to Dismiss; Alternatively Motion to Suspend,7 based principally on the following grounds: 1. The complaint of petitioner Commissioner follows a pattern of prosecution against private respondents in violation of their right to due process and equal protection of the law. 2. Petitioner Commissioner and the Court of Tax Appeals have still to determine Fortunes tax liability for 1992 in question; without any tax liability, there can be no tax evasion. 3. Exclusive jurisdiction to determine tax liability is vested in the Court of Tax Appeals; therefore, the DOJ is without jurisdiction to conduct preliminary investigation. 4. The complaint of petitioner Commissioner is not supported by any evidence to serve as adequate basis for the issuance of subpoena to private respondents and to put them to their defense. At the scheduled preliminary investigation on October 15 1993, private respondents were asked by the panel of prosecutors to inform it of the aspects of the Verified Motion to Dismiss which counsel for private respondents did so briefly. Counsel for the Commissioner of Internal Revenue asked for fifteen (15) days within which to file a reply in writing to private respondents Verified Motion to Dismiss. Thereupon, the panel of prosecutors declared a recess. Upon reconvening, the panel of prosecutors denied the motion to dismiss and treated the same as private respondents counter-affidavits.8 On October 20, 1993, private respondents filed a motion for reconsideration of the order of October 15, 1993.9 On October 21, 1993, private respondents filed a motion to require the submission by the Bureau of Internal Revenue of certain documents in further support of their Verified Motion to Dismiss. Among the documents sought to be produced are the Daily Manufacturers Sworn Statements which according to petitioner Commissioner in her complaint were submitted by Fortune to the BIR and which were the basis of her conclusion that Fortunes tax declarations were false and fraudulent. Fortune claimed that without the Daily Manufacturers Sworn Statements, there is no evidence to support the complaint, hence, warranting its outright dismissal.

However, contrary to what have been reported in the said value-added tax returns, and based on documentary evidence obtained from the taxpayer, the total actual taxable sales of the corporation for the year 1992 amounted to P16,158,575,035.00 instead of P 11,929,322,334.52 as declared by the corporation in the said VAT returns. These fraudulent under declarations which resulted in the evasion of value-added taxes in the aggregate amount of P 1,169,688,645.63 for the entire year 1992 are violations of Section 110 in relation to Section 100 of the Tax Code, which are likewise penalized under the aforequoted Section 253, in relation to Section 252, thereof. Sections 110 and 100 provide: xxx xxx xxx

Furthermore, based on the corporations VAT returns, the corporation reported its taxable sales for 1992 in the amount of P11,736,658,580. This declaration is likewise false and fraudulent because based on the daily manufacturers sworn statements submitted to the BIR by the taxpayer, its total taxable sales during the year 1992 is P16,686,372,295.00. As a result thereof, the corporation was able to evade the payment of ad valorem taxes in the aggregate amount of P5,792,479,816.24 in violation of Section 127 in relation to Section 142, as amended by R.A. 6956, penalized under the aforequoted Section 253, in relation to Section 252, all of the Tax Code. Sections 127 and 142, as amended by R.A. 6956, are quoted as follows: x x x. The complaint docketed as I.S. No. 93-508, was referred to the Department of Justice Task Force on revenue cases which found sufficient basis to further investigate the allegations that Fortune, through fraudulent means, evaded payment of income tax, ad valorem tax, and value-added tax for the year 1992 thus, depriving the government of revenues in the amount of Seven and Onehalf (P7.5) Billion Pesos.

On October 26, 1993, private respondents moved for the inhibition of the State Prosecutors assigned to the case for alleged lack of impartiality.10 Private respondents also sought the production of the Daily Manufacturers Sworn Statements submitted by certain cigarette companies similarly situated as Fortune but were not proceeded against, thus, private respondents charged that Fortune and its officers were being singled out for criminal prosecution which is discriminatory and in violation of the equal protection clause of the Constitution. On December 20, 1993, the panel of prosecutors issued an Omnibus Order11 denying private respondents motion for reconsideration, motion for suspension of investigation, motion to inhibit the State Prosecutors, and motion to require submission by the BIR of certain documents to further support private respondents motion to dismiss. On January 4, 1994, private respondents filed a petition for certiorari and prohibition with prayer for preliminary injunction with the Regional Trial Court, Branch 88, Quezon City, docketed as Q-94-18790, praying that the complaint of the Commissioner of Internal Revenue and the orders of the prosecutors in I.S. No. 93-508 be dismissed or set aside, alternatively, the proceedings on the preliminary investigation be suspended pending final determination by the Commissioner of Fortunes motion for reconsideration/reinvestigation of the August 13, 1993 assessment of the taxes due.12 On January 17, 1994, petitioners filed a motion to dismiss the petition13 on the grounds that (a) the trial court is bereft of jurisdiction to enjoin a criminal prosecution under preliminary investigation; (b) a criminal prosecution for tax fraud can proceed independently of criminal or administrative action; (c) there is no prejudicial question to justify suspension of the preliminary investigation; (d) private respondents rights to due process was not violated; and (e) selective prosecution is not a valid defense in this jurisdiction. On January 19, 1994, at the hearing of the incident for the issuance of a writ of preliminary injunction in the petition, private respondents offered in evidence their verified petition for certiorari and prohibition and its annexes. Petitioners responded by praying that their motion to dismiss the petition for certiorari and prohibition be considered as their opposition to private respondents application for the issuance of a writ of preliminary injunction. On January 25, 1994, the trial court issued an order granting the prayer for the issuance of a preliminary injunction.14 The trial court rationalized its order in this wise: a) It is private respondents claim that the ad valorem tax for the year 1992 was levied, assessed and collected by the BIR under Section 142(c) of the Tax Code on the basis of the manufacturers registered wholesale price duly approved by the BIR. Fortunes taxable sales for 1992 was in the amount of P11,736,658,580.00. b) On the other hand, it is petitioners contention that Fortunes declaration was false and fraudulent because, based on its daily manufacturers sworn statements submitted to the BIR, its taxable sales in 1992 were P 16,686,372,295.00, as a result of which, Fortune was able to evade the payment of ad valorem tax in the aggregate amount of P5,792,479,816.24. c) At the hearing for preliminary investigation, the Daily Manufacturers Sworn Statements which, according to petitioners, were submitted to the BIR by private respondents and made the

basis of petitioner Commissioners complaint that the total taxable sales of Fortune in 1992 amounted to P16,686,372, 295.00 were not produced as part of the evidence for petitioners. In fact, private respondents had filed a motion to require petitioner Commissioner to submit the aforesaid daily manufacturers sworn statements before the DOJ panel of prosecutors to show that Fortunes actual taxable sales totaled P16,686,373,295.00, but the motion was denied. d) There is nothing on record in the preliminary investigation before the panel of investigators which supports the allegation that Fortune made a fraudulent declaration of its 1992 taxable sales. e) Since, as alleged by private respondents, the ad valorem tax for the year 1992 should be based on the manufacturers registered wholesale price while, as claimed by petitioners, the ad valorem taxes should be based on the wholesale price at which the manufacturer sold the cigarettes, which is a legal issue as admitted by a BIR lawyer during the hearing for preliminary injunction, the correct interpretation of the law involved, which is Section 142(c) of the Tax Code, constitutes a prejudicial question which must first be resolved before criminal proceedings for tax evasion may be pursued. In other words, the BIR must first make a final determination, which it has not, of Fortunes tax liability relative to its 1992 ad valorem, value-added and income taxes before the taxpayer can be made liable for tax evasion. f) There was a precipitate issuance by the panel of prosecutors of subpoenas to private respondents, on the very day following the filing of the complaint with the DOJ consisting of about 600 pages, and the precipitate denial by the panel of prosecutors, after a recess of about twenty (20) minutes, of private respondents motion to dismiss, consisting of one hundred and thirty-five (135) pages. g) Private respondents had been especially targeted by the government for prosecution. Prior to the filing of the complaint in I.S. No. 93-508, petitioner Commissioner issued Revenue Memorandum Circular No. 37-93 reclassifying Fortunes best selling cigarettes, namely Hope, More, and Champion as cigarettes bearing a foreign brand, thereby imposing upon them a higher rate of tax that would price them out of the market. h) While in petitioner Commissioners letter of August 13, 1993, she gave Fortune a period of thirty (30) days from receipt thereof within which to pay the alleged tax deficiency assessments, she filed the criminal complaint for tax evasion before the period lapsed. i) Based on the foregoing, the criminal complaint against private respondents was filed prematurely and in violation of their constitutional right to equal protection of the laws. On January 26, 1994, private respondents filed with the trial court a Motion to Admit Supplemental Petition and sought the issuance of a writ of preliminary injunction to enjoin the State Prosecutors from continuing with the preliminary investigation filed by them against private respondents with the Quezon City Prosecutors Office, docketed as I.S. 93-17942, for alleged fraudulent tax evasion, committed by private respondents for the taxable year 1990. Private respondents averred in their motion that no supporting documents or copies of the complaint were attached to the subpoena in I.S. 93-17942; that the subpoena violates private respondents constitutional right to due process, equal protection and presumption of innocence; that IS. 93-17942 is substantially the same as I. S. 93-508; that no tax assessment has been issued by the Commission of Internal Revenue and considering that taxes paid have not been challenged, no tax liability exists; and

that since Assistant City Prosecutor Baraquia was a former classmate of Presidential Legal Counsel Antonio T. Carpio, the former cannot conduct the preliminary investigation in an impartial manner. On January 28, 1994, private respondents filed with the trial court a second supplemental petition,15 also seeking to stay the preliminary investigation in I.S. 93-584, which was the third complaint filed against private respondents with the DOJ for alleged fraudulent tax evasion for the taxable year 1991. On January 31, 1994, the lower court admitted the two (2) supplemental petitions and issued a temporary restraining order in I.S. 93-17942 and I.S. 93-584.16 Also, on the same day, petitioners filed an Urgent Motion for Immediate Resolution of petitioners motion to dismiss. On February 7, 1994, the trial court issued an order denying petitioners motion to dismiss private respondents petition seeking to stay preliminary investigation in I.S. 93-508, ruling that the issue of whether Sec. 127(b) of the National Tax Revenue Code should be the basis of private respondents tax liability as contended by the Bureau of Internal Revenue, or wh ether it is Section 142(c) of the same Code that applies, as argued by herein private respondents, should first be settled before any complaint for fraudulent tax evasion can be initiated.17 On February 14, 1994, the trial court issued an order granting private respondents petition for a supplemental writ of preliminary injunction, likewise enjoining the preliminary investigation of the two (2) other complaints filed with the Quezon City Prosecutors Office and the DOJ for fraudulent tax evasion, I.S. 93-17942 and I.S. 93- 584, for alleged tax evasion for the taxable years 1990 and 1991, respectively.18 In granting the supplemental writ, the trial court stated that the two other complaints are the same as in I.S. 93-508, except that the former refer to the taxable years 1990 and 1991. On March 7, 1994, petitioners filed a petition for certiorari and prohibition with prayer forpreliminary injunction before this Court. However, the petition was referred to the Court of Appeals for disposition by virtue of its original concurrent jurisdiction over the petition. On December 19, 1994, the Court of Appeals in CA-G.R. No. SP-33599 rendered a decision denying the petition. The Court of Appeals ruled that the trial court committed no grave abuse of discretion in ordering the issuance of writs of preliminary injunction and in denying petitioners motion to dismiss. In upholding the reasons and conclusions given by the trial court in its orders for the issuance of the questioned writs, the Court of Appeals said in part: In making such conclusion the respondent Court must have understood from herein petitioner Commissioners letter-complaint of 14 pages (pp. 477-490, rollo of this case) and the joint affidavit of eight revenue officers of 17 pages attached thereto (pp. 491-507, supra) and its annexes (pp. 5081077, supra) , that the charge against herein respondents is for tax evasion for non-payment by herein respondent Fortune of the correct amounts of income tax, ad valorem tax and value added tax, not necessarily fraudulent tax evasion. Hence, the need for previous assessment of the correct amount by herein petitioner Commissioner before herein respondents may be charged criminally. Certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. As long as a Court acts within its jurisdiction, any alleged error committed in the exercise of its jurisdiction, will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari (Santos, Jr. vs. Court of Appeals, 152 SCRA 378; Gold City Integrated Port Services, Inc. vs. Intermediate Appellate Court, 171 SCRA 579).

The questioned orders issued after hearing (Annexes A, B, C and D, petition) being but interlocutory, review thereof by this Court is inappropriate until final judgment is rendered, absent a showing of grave abuse of discretion on the part of the issuing court (See Van Dom vs. Romillo, 139 SCRA 139, 141; Newsweek, Inc. vs. IAC, 171, 177; Mendoza vs. Court of Appeals, 201 SCRA 343, 352). The factual and legal issues involved in the main case still before the respondent Court are best resolved after trial. Petitioners, therefore, instead of resorting to this petition for certiorari and prohibition should have filed an answer to the petition as ordained in Section 4, Rule 16, in connection with Rule 11 of the Revised Rules of Court, interposing as defense or defenses the objection or objections raised in their motion to dismiss, then proceed to trial in order that thereafter the case may be decided on the merits by the respondent Court. In case of an adverse decision, they may appeal therefrom by which the entire record of the case would be elevated for review (See Mendoza vs. Court of Appeals, supra). Therefore, certiorari and prohibition resorted to by herein petitioners will not lie in view of the remedy open to them. Thus, the resulting delay in the final disposition of the case before the respondent Court would not have been incurred. Grave abuse of discretion as a ground for issuance of writs of certiorari and prohibition implies capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility, amounting to an evasion of positive duty or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law (Confederation of Citizens Labor Union vs. NLRC, 60 SCRA 84; Bustamante vs. Commission on Audit, 216 SCRA 134). For such writs to lie, there must be capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in accordance with centuries of both civil law and common law traditions (Young vs. Sulit, 162 SCRA 659, 664; FCC vs. IAC, 166 SCRA 155; Purefoods Corp. vs. NLRC, 171 SCRA 45). Certiorari and prohibition are remedies narrow in scope and inflexible in character. They are not general utility tools in the legal workshop (Vda. de Guia vs. Veloso, 158 SCRA 340, 344). Their function is but limited to correction of defects of jurisdiction solely, not to be used for any other purpose (Garcia vs. Ranada, 166 SCRA 9), such as to cure errors in proceedings or to correct erroneous conclusions of law or fact (Gold City Integrated Ports Services vs. IAC, 171 SCRA 579). Due regard for the foregoing teachings enunciated in the decisions cited can not bring about a decision other than what has been reached herein. Needless to say, the case before the respondent court involving those against herein respondents for alleged non-payment of the correct amounts due as income tax, ad valorem tax and value added tax for the years 1990, 1991 and 1992 (Civil Case No. Q-94-18790) is not ended by this decision. The respondent Court is still to try the case and decide it on the merits. All that is decided here is but the validity of the orders of the respondent Court granting herein respondents application for preliminary njunction and denying herein petitioners motion to dismiss. If upon the facts established after trial and the applicable law, dissolution of the writ of preliminary injunction allowed to be issued by the respondent Court is called for and a judgment favorable to herein petitioners is demanded, the respondent Court is duty bound to render judgment accordingly. WHEREFORE, the instant petition for certiorari and prohibition with application for issuance of restraining order and writ of preliminary injunction is DISMISSED. Costs de officio.19 Their motion for reconsideration having been denied by respondent appellate court on February 23, 1995, petitioners filed the present petition for review based on the following grounds:

THE RESPONDENT COURTS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OFJURISDICTION IN HOLDING THAT: I. THERE IS A PREJUDICIAL AND/OR LEGAL QUESTION TO JUSTIFY THE SUSPENSION OF THE PRELIMINARY INVESTIGATION. II. PRIVATE RESPONDENTS RIGHTS TO DUE PROCESS, EQUAL PROTECTION AND PRESUMPTION OF INNOCENCE WERE VIOLATED; ON THE CONTRARY, THE STATE ITSELF WAS DEPRIVED OF DUE PROCESS. III. THE ADMISSION OF PRIVATE RESPONDENTS SUPPLEMENTAL PETITIONS WERE PROPER. IV. THERE WAS SELECTIVE PROSECUTION. V. THE FACTUAL ALLEGATIONS IN THE PETITION ARE HYPOTHETICALLY ADMITTED IN A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS. VI. THE ISSUANCE OF THE WRITS OF INJUNCTION IS NOT A DECISION ON THE MERITS OF THE PETITION BEFORE THE LOWER COURT.20 The petition is bereft of merit. In essence, the complaints in I.S. Nos. 93-508, 93-584 and 93-17942 charged private respondents with fraudulent tax evasion or wilfully attempting to evade or defeat payment of income tax, ad valorem tax and value-added tax for the year 1992, as well as for the years 1990-1991. The pertinent provisions of law involved are Sections 127(b) and 142(c) of the National Internal Revenue Code which state: Sec. 127.xxx (b) Determination of gross selling price of goods subject to ad valorem tax. -Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale price in another establishment of which he is the owner or in the profits at which he has an interest, the wholesale price in such establishment shall constitute the gross selling price. Should such price be less than the costs of manufacture plus expenses incurred until the goods are finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing costs and expenses, shall be added to constitute the gross selling price. Sec. 142.xxx (c) Cigarettes packed in twenties. There shall be levied, assessed and collected on cigarettes packed in twenties an ad valorem tax at the rates prescribed below based on the manufacturers registered wholesale price: xxx xxx xxx

Private respondents contend that per Fortunes VAT returns, correct taxable sales for 1992 was in the amount of P11,736,658,580.00 which was the manufacturers registered wholesale price in accordance with Section 142(c) of the Tax Code and paid the amount of P4,805,254,523 as ad valorem tax. On the other hand, petitioners allege, as specifically worded in the complaint in I.S. No. 93 508, that based on the daily manufacturers sworn statements submitted to the BIR by the Taxpayer (Fortunes) total taxable sales during the year 1992 is P16,686,372,295.00, as a result of which Fortune was able to evade the payment of ad valorem taxes in the aggregate amount of P5,792,479,816.24 xxx. Petitioners now argue that Section 127(b) lays down the rule that in determining the gross selling price of goods subject to ad valorem tax, it is the price, excluding the value-added tax, at which the goods are sold at wholesale price in the place of production or through their sales agents to the public. The registered wholesale price shall then be used for computing the ad valorem tax which is imposable upon removal of the taxable goods from the place of production. However, petitioners claim that Fortune used the manufacturers registered wholesale price in selling the goods to alleged fictitious individuals and dummy corporations for the purpose of evading the payment of the correct ad valorem tax. There can be no question that under Section 127(b), the ad valorem tax should be based on the correct price excluding the value-added tax, at which goods are sold at wholesale in the place of production. It is significant to note that among the goods subject to ad valorem tax, the law specifically Section 142(c) requires that the corresponding tax on cigarettes shall be levied, assessed and collected at the rates based on the manufacturers registered wholesale price. Why does the wholesale price need to be registered and what is the purpose of the registration? The reason is self-evident, which is to ensure the payment of the correct taxes by the manufacturers of cigarettes through close supervision, monitoring and checking of the business operations of the cigarette companies. As pointed out by private respondents, no industry is as intensely supervised by the BIR and also by the National Tobacco Administration (NTA). Thus, the purchase and use of raw materials are subject to prior authorization and approval by the NTA. Importations of bobbins or cigarette paper, the manufacture, sale, and utilization of the same, are subject to BIR supervision and approval 21 Moreover, as pointed to by private respondents, for purposes of closer supervision by the BIR over the production of cigarettes, Revenue Enforcement Officers are detailed on a 24-hour basis in the premises of the manufacturer to secure production and removal of finished products. Composite Mobile Teams conduct counter-security on the business operations as well as the performance of the Revenue Enforcement Officers detailed thereat. Every transfer of any raw material is not allowed unless, in addition to the required permits, accompanied by Revenue Enforcement Officer. For the purpose of determining the Manufacturers Registered Wholesale Price a cigarette manufacturer is required to file a Manufacturers Declaration (BIR Form No. 31.03) for each brand of cigarette manufactured, stating: a.) Materials; b) Labor; c) Overhead; d) Tax Burden and the Wholesale Price by Case. The data submitted therewith is verified by the Revenue Officers and approved by the Commission of Internal Revenue. Any change in the manufacturers registered wholesale price of any brand cannot be effected without submitting the corresponding Sworn Manufacturers Declaration and verified by the Revenue Officer and approved by the Commissioner on Internal Revenue.22 The

amount of ad valorem tax payments together with the Payment Order and Confirmation Receipt Nos. must be indicated in the sales and delivery invoices and together with the Manufacturers Sworn Declarations on (a) the quantity of raw materials used during the days operations; (b) the total quantity produced according to brand; and (c) the corresponding quantity removed during the day, the corresponding wholesale price thereof, and the VAT paid thereon must be presented to the corresponding BIR representative for authentication before removal. Thus, as observed by the trial court in its order of January 25, 1994 granting private respondents prayer for the issuance of a writ of preliminary injunction, Fortunes registered wholesale price (was) duly approved by the BIR, which fact is not disputed by petitioners.23 Now, if every step in the production of cigarettes was closely monitored and supervised by the BIR personnel specifically assigned to Fortunes premises, and considering that the Manufacturers Sworn Declarations on the data required to be submitted by the manufacturer were scrutinized and verified by the BIR and, further, since the manufacturers wholesale price was duly approved by the BIR, then it is presumed that such registered wholesale price is the same as, or approximates the price, excluding the value-added tax, at which the goods are sold at wholesale in the place production, otherwise, the BIR would not have approved the registered wholesale price of the goods for purposes of imposing the ad valorem tax due. In such case, and in the absence of contrary evidence, it was precipitate and premature to conclude that private respondents made fraudulent returns or wilfully attempted to evade payment of taxes due. Wilful means premeditated; malicious; done with intent, or with bad motive or purpose, or with indifference to the natural consequence x x x24 Fraud in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage taken of another.25 Fraud cannot be presumed. If there was fraud or wilful attempt to evade payment of ad valorem taxes by private respondents through the manipulation of the registered wholesale price of the cigarettes, it must have been with the connivance or cooperation of certain BIR officials and employees who supervised and monitored Fortunes production activities to see to it that the correct taxes were paid. But there is no allegation, much less evidence, of BIR personnels malfeasance. In the very least, there is the presumption that the BIR personnel performed their duties in the regular course in ensuring that the correct taxes were paid by Fortune.26 It is the opinion of both the trial court and respondent Court of Appeals, that before Fortune and the other private respondents could be prosecuted for tax evasion under Sections 253 and 255of the Tax Code, the fact that the deficiency income, ad valorem and value-added taxes were due from Fortune for the year 1992 should first be established. Fortune received from the Commissioner of Internal Revenue the deficiency assessment notices in the total amount of P7,685,942,221.06 on August 24, 1993. However, under Section 229 of the Tax Code, the taxpayer has the right to move for reconsideration of the assessment issued by the Commissioner of Internal Revenue within thirty (30) days from receipt of the assessment; and if the motion for reconsideration is denied, it may appeal to the Court of Appeals within thirty (30) days from receipt of the Commissioners decision. Here, Fortune received the Commissioners assessment notice dated August 13, 1993 on August 24, 1993 asking for the payment of the deficiency taxes. Within thirty (30) days from receipt thereof, Fortune

moved for reconsideration. The Commissioner has not resolved the request for reconsideration up to the present. We share with the view of both the trial court and Court of Appeals that before the tax liabilities of Fortune are first finally determined, it cannot be correctly asserted that private respondents have wilfully attempted to evade or defeat the taxes sought to be collected from Fortune. In plain words, before one is prosecuted for wilful attempt to evade or defeat any tax under Sections 253 and 255 of the Tax Code, the fact that a tax is due must first be proved. Suppose the Commissioner eventually resolves Fortunes motion for reconsideration of the assessments by pronouncing that the taxpayer is not liable for any deficiency assessment, then, the criminal complaints filed against private respondents will have no leg to stand on. In view of the foregoing reasons, we cannot subscribe to the petitioners thesis citing, Ungad v. Cusi,27 that the lack of a final determination of Fortunes exact or correct tax liability is not a bar to criminal prosecution, and that while a precise computation and assessment is required for a civil action to collect tax deficiencies, the Tax Code does not require such computation and assessment prior to criminal prosecution. Reading Ungad carefully, the pronouncement therein that deficiency assessment is not necessary prior to prosecution is pointedly and deliberately qualified by the Court with following statement quoted from Guzik v. U.S.:28 The crime is complete when the violator has knowingly and wilfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. In plain words, for criminal prosecution to proceed before assessment, there must be a prima.facie showing of a wilful attempt to evade taxes. There was a wilful attempt to evade tax in Ungad because of the taxpayers failure to declare in his income tax return his income derived from banana saplings. In the mind of the trial court and the Court of Appeals, Fortunes situation is quite apart fa ctually since the registered wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale price, therefore, not fraudulent and unless and until the BIR has made a final determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the crucible of criminal prosecution. Herein lies a whale of difference between Ungad and the case at bar. This brings us to the erroneous disquisition that private respondents recourse to the trial court by way of special civil action of certiorari and prohibition was improper because: a) the proceedings before the state prosecutors (preliminary injunction) were far from terminated private respondents were merely subpoenaed and asked to submit counter affidavits, matters that they should have appealed to the Secretary of Justice; b) it is only after the submission of private respondents counter affidavits that the prosecutors will determine whether or not there is enough evidence to file in court criminal charges for fraudulent tax evasion against private respondents; and c) the proper procedure is to allow the prosecutors to conduct and finish the preliminary investigation and to render a resolution, after which the aggrieved party can appeal the resolution to the Secretary of Justice. We disagree. As a general rule, criminal prosecutions cannot be enjoined: However, there are recognized exceptions which, as summarized in Brocka v. Enrile29 are:

a. To afford adequate protection to the constitutional rights of the accused (Hernandez vs. Albano, et al., L-19272, January 25, 1967, 19 SCRA 95); b. When necessary for the orderly administration of justice or to avoid oppression or multiplicity of actions (Dimayuga, et al. vs. Fernandez, 43 Phil. 304; Hernandez vs. Albano, supra; Fortun vs. Labang, et al., L-38383, May 27, 1981, 104 SCRA 607); c. d. When there is a prejudicial question which is sub judice (De Leon vs. Mabanag, 70 Phil. 202); When the acts of the officer are without or in excess of authority (Planas vs. Gil, 67 Phil. 62);

Commissioner is not supported by any evidence to serve as adequate basis for the issuance of the subpoena to them and put them to their defense. Indeed, the purpose of a preliminary injunction is to secure the innocent against hasty, malicious and oppressive prosecution and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial and also to protect the state from useless and expensive trials.32 Thus, the pertinent provisions of Rule 112 of the Rules of Court state: SECTION. 3. Procedure. Except as provided for in Section 7 hereof, no complaint or information for an offense cognizable by the Regional Trial Court shall be filed without a preliminary investigation having been first conducted in the following manner: (a) The complaint shall state the known address of the respondent and be accompanied by affidavits of the complainant and his witnesses as well as other supporting documents, in such number of copies as there are respondents, plus two (2) copies for the official file. The said affidavits shall be sworn to before any fiscal, state prosecutor or government official authorized to administer oath, or, in their absence or unavailability, a notary public, who must certify that he personally examined the affiants and that he is satisfied that they voluntarily executed and understood their affidavits. (b) Within ten (10) days after the filing of the complaint, the investigating officer shall either dismiss the same if he finds no ground to continue with the inquiry, or issue a subpoena to the respondent, attaching thereto a copy of the complaint, affidavits and other supporting documents. Within ten (10) days from receipt thereof, the respondent shall submit counter-affidavits and other supporting documents. He shall have the right to examine all other evidence submitted by the complainant. (c) Such counter-affidavits and other supporting evidence submitted by the respondent shall also be sworn to and certified as prescribed in paragraph (a) hereof and copies thereof shall be furnished by him to the complainant. (d) If the respondent cannot be subpoenaed, or if subpoenaed, does not submit counteraffidavits within the ten (10) day period, the investigating officer shall base his resolution on the evidence presented by the complainant. (e) If the investigating officer believes that there are matters to be clarified, he may set a hearing to propound clarificatory questions to the parties or their witnesses, during which the parties shall be afforded an opportunity to be present but without the right to examine or cross-examine. If the parties so desire, they may submit questions to the investigating officer which the latter may propound to the parties or witnesses concerned. (f) Thereafter, the investigation shall be deemed concluded, and the investigating officer shall resolve the case within ten (10) days therefrom. Upon the evidence thus adduced, the investigating officer shall determine whether or not there is sufficient ground to hold the respondent for trial. As found by the Court of Appeals, there was obvious haste by which the subpoena was issued to private respondents, just the day after the complaint was filed, hence, without the investigating prosecutors being afforded material time to examine and study the voluminous documents appended

e. Where the prosecution is under an invalid law, ordinance or regulation (Young vs. Rafferty, 33 Phil. 556; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 389); f. When double jeopardy is clearly apparent (Sangalang vs. People and Alvendia, 109 Phil. 1140);

g. Where the court had no jurisdiction over the offense (Lopez vs. City Judge, L-25795, October 29, 1966, 18 SCRA 616); h. Where it is a case of persecution rather than prosecution (Rustia vs. Ocampo, CA-G.R. No. 4760, March 25, 1960); i. Where the charges are manifestly false and motivated by the lust for vengeance (Recto vs. Castelo, 18 L.J., cited in Rano vs. Alvenia, CA-G.R. No. 30720-R, October 8, 1962; Cf. Guingona, et al. vs. City Fiscal, L-60033, April 4, 1984, 128 SCRA 577); and j. When there is clearly no prima facie case against the accused and a motion to quash on that ground has been denied (Salonga vs. Pano, et al., L-59524, February 18, 1985, 134 SCRA 438). In issuing the questioned orders granting the issuance of a writ of preliminary injunction, the trial court believed that said orders were warranted to afford private respondents adequate protection of their constitutional rights, particularly in reference to presumption of innocence, due process and equal protection of the laws. The trial court also found merit in private respondents contention that preliminary injunction should be issued to avoid oppression and because the acts of the state prosecutors were without or in excess of authority and for the reason that there was a prejudicial question. Contrary to petitioners submission, preliminary investigation may be enjoined where exceptional circumstances so warrant. In Hernandez v. Albano30 and Fortun v. Labang,31 injunction was issued to enjoin a preliminary investigation. In the case at bar, private respondents filed a motion to dismiss the complaint against them before the prosecution and alternatively, to suspend the preliminary investigation on the grounds cited hereinbefore, one of which is that the complaint of the

to the complaint for them to determine if preliminary investigation should be conducted. The Court of Appeals further added that the precipitate haste in the issuance of the subpoena justified private respondents misgivings regarding the objectivity and neutrality of the prosecutors in the conduct of the preliminary investigation and so, the appellate court concluded, the grant of preliminary investigation by the trial court to afford adequate protection to private respondents constitutional rights and to avoid oppression does not constitute grave abuse of discretion amounting to lack of jurisdiction. The complaint filed by the Commissioner on Internal Revenue states itself that the primary evidence establishing the falsity of the declared taxable sales in 1992 in the amount of P 11,736,658,580.00 were the Daily Manufacturers Sworn Statements submitted by the taxpayer which would show that the total taxable sales in 1992 are in the amount of P 16,686,372,295.00. However, the Commissioner did not present the Daily Manufacturers Sworn Statements supposedly submitted to the BIR by the taxpayer, prompting private respondents to move for their production in order to verify the basis of petitioners computation. Still, the Commissioner failed to produce the declarations. In Borja v. Moreno,33 it was held that the act of the investigator in proceeding with the hearing without first acting on respondents motion to dismiss is a manifest disregard of the requirement of due process. Implicit in the opinion of the trial court and the Court of Appeals is that, if upon the examination of the complaint, it was clear that there was no ground to continue with the inquiry, the investigating prosecutor was duty bound to dismiss the case. On this point, the trial court stressed that the prosecutors conducting the preliminary investigation should have allowed the production of the Daily Manufacturers Sworn Statements submitted by Fortune without which there was no valid basis for the allegation that private respondents wilfully attempted to evade payment of the correct taxes. The prosecutors should also have produced the Daily Manufacturers Sworn Statements by other cigarette companies, as sought by private respondents, to show that these companies which had paid the ad valorem taxes on the same basis and in the same manner as Fortune were not similarly criminally charged. But the investigating prosecutors denied private respondents motion, thus, indicating that only Fortune was singled out for prosecution. The trial court and the Court of Appeals maintained that at that stage of the preliminary investigation, where the complaint and the accompanying affidavits and supporting documents did not show any violation of the Tax Code providing penal sanctions, the prosecutors should have dismissed the complaint outright because of total lack of evidence, instead of requiring private respondents to submit their counter affidavits under Section 3(b) of Rule 112. We believe that the trial court in issuing its questioned orders, which are interlocutory in nature, committed no grave abuse of discretion amounting to lack of jurisdiction. There are factual and legal bases for the assailed orders. On the other hand, the burden is upon the petitioners to demonstrate that the questioned orders constitute a whimsical and capricious exercise of judgment, which they have not. For certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari.34 Consequently, the Regional Trial Court acted correctly and judiciously, and as demanded by the facts and the law, in issuing the orders granting the writs of preliminary injunction, in denying petitioners motion to dismiss and in admitting the supplemental petitions. What petitioners should have done was to file

an answer to the petition filed in the trial court, proceed to the hearing and appeal the decision of the court if adverse to them. WHEREFORE, the instant petition is hereby DISMISSED. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-16704 March 17, 1962

VICTORIAS MILLING COMPANY, INC., petitioner-appellant, vs. SOCIAL SECURITY COMMISSION, respondent-appellee. Ross, Selph and Carrascoso for petitioner-appellant. Office of the Solicitor General and Ernesto T. Duran for respondent-appellee. BARRERA, J.: On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor: . Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for any one month. Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in effect protesting against the circular as contradictory to a previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions, and submitting, "In order to assist your System in arriving at a properinterpretation of the term 'compensation' for the purposes of" such computation, their observations on Republic Act 1161 and its amendment and on the general interpretation of the words "compensation", "remuneration" and "wages". Counsel further questioned the validity of the circular for lack of authority on the part of the Social Security

Commission to promulgate it without the approval of the President and for lack of publication in the Official Gazette. Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement of general policy or opinion as to how the law should be construed. Not satisfied with this ruling, petitioner comes to this Court on appeal. The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President such rules and regulations as may be necessary to carry out the provisions and purposes of this Act." There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law. (Davis,op. cit., p. 194.) . A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom (Davis, op. cit., 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts that finally determine what the law means. Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social Security Law defining the term "compensation" contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment, reads as follows: . (f) Compensation All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except (1) that part of the remuneration in excess of P500 received during the month; (2) bonuses, allowances or

overtime pay; and (3) dismissal and all other payments which the employer may make, although not legally required to do so. Republic Act No. 1792 changed the definition of "compensation" to: (f) Compensation All remuneration for employment include the cash value of any remuneration paid in any medium other than cash except that part of the remuneration in excess of P500.00 received during the month. It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion was deleted by the amendatory law. It thus became necessary for the Social Security Commission to interpret the effect of such deletion or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed. 1wph1.t The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does not support its contention that the circular in question is a rule or regulation. What was there said was merely that a regulation may be incorporated in the form of a circular. Such statement simply meant that the substance and not the form of a regulation is decisive in determining its nature. It does not lay down a general proposition of law that any circular, regardless of its substance and even if it is only interpretative, constitutes a rule or regulation which must be published in the Official Gazette before it could take effect. The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present case, because the penalty that may be incurred by employers and employees if they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161. We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the amendment of the law, they should include in determining the monthly compensation of their employees upon which the social security contributions should be based, and that such circular did not require presidential approval and publication in the Official Gazette for its effectivity. It hardly need be said that the Commission's interpretation of the amendment embodied in its Circular No. 22, is correct. The express elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's remuneration in pursuance of the amendatory law. It is true that in previous cases, this

Court has held that bonus is not demandable because it is not part of the wage, salary, or compensation of the employee. But the question in the instant case is not whether bonus is demandable or not as part of compensation, but whether, after the employer does, in fact, give or pay bonus to his employees, such bonuses shall be considered compensation under the Social Security Act after they have been received by the employees. While it is true that terms or words are to be interpreted in accordance with their well-accepted meaning in law, nevertheless, when such term or word is specifically defined in a particular law, such interpretation must be adopted in enforcing that particular law, for it can not be gainsaid that a particular phrase or term may have one meaning for one purpose and another meaning for some other purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in the original Act. By virtue of this express substantial change in the phraseology of the law, whatever prior executive or judicial construction may have been given to the phrase in question should give way to the clear mandate of the new law. IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against appellant. So ordered. FIRST DIVISION

of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of said contract, the parties extended the effectivity thereof on a monthly basis under same terms and condition.[4] Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage rate. Accordingly, respondent requested NFA for a corresponding upward adjustment in the monthly contract rate consisting of the increases in the daily minimum wage of the security guards as well as the corresponding raise in their overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed increases in Social Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin. NFA, however, granted the request only with respect to the increase in the daily wage by multiplying the amount of the mandated increase by 30 days and denied the same with respect to the adjustments in the other benefits and remunerations computed on the basis of the daily wage. Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National Wages and Productivity Commission. Despite the advisory[5] of said offices sustaining the claim of respondent that the increase mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments in the wage related benefits of respondents security guards. On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch 83, a case for recovery of sum of money against NFA. Docketed as Civil Case No. Q-01-43988, the complaint[6] sought reimbursement of the following amounts allegedly paid by respondent to the security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about by the effectivity of Wage Order Nos. RB 1-05 and RB CAR-04;[7] RB 1-06 and RB CAR-05;[8] RB 1-07 and RB CAR-06;[9] and P975,493.04 for additional cost and margin, plus interest. It also prayed for damages and litigation expenses.[10] In its answer with counterclaim,[11] NFA denied that respondent paid the security guards their wage related benefits and that it shouldered the additional costs and margin arising from the implementation of the wage orders. It admitted, however, that it heeded respondents request for adjustment only with respect to increase in the minimum wage and not with respect to the other wage related benefits. NFA argued that respondent cannot demand an adjustment on said salary related benefits because it is bound by their contract expressly limiting NFAs obligation to pay only the increment in the daily wage. At the pre-trial, the only issue raised was whether or not respondent is entitled to recover from NFA the wage related benefits of the security guards.[12] On September 19, 2002, the trial court rendered a decision[13] in favor of respondent holding that NFA is liable to pay the security guards wage related benefits pursuant to RA 6727, because the basis of the computation of said benefits, like overtime pay, holiday pay, SSS and Pag-ibig premium, is the increased minimum wage. It also found NFA liable for the consequential adjustments in administrative costs and margin. The trial court absolved defendant Juanito M. David having been impleaded in his official capacity as Regional Director of NFA Regional Office No. 1, San Juan, La Union. The dispositive portion thereof, reads:

[G.R. No. 163448. March 08, 2005]

NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional Director, NFA Regional Office No. 1, San Juan, La Union,petitioners, vs. MASADA SECURITY AGENCY, INC., represented by its Acting President & General Manager, COL. EDWIN S. ESPEJO (RET.),respondents. DECISION YNARES-SANTIAGO, J.: Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12, 2004 decision[1] of the Court of Appeals in CA-G.R. CV No. 76677, which dismissed the appeal filed by petitioner National Food Authority (NFA) and its April 30, 2004 resolution denying petitioners motion for reconsideration. The antecedent facts show that on September 17, 1996, respondent MASADA Security Agency, Inc., entered into a one year[2] contract[3] to provide security services to the various offices, warehouses and installations of NFA within the scope of the NFA Region I, comprised of the provinces

WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc., and against defendant National Food Authority ordering said defendant to make the corresponding adjustment in the contract price in accordance with the increment mandated under the various wage orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06, RBCAR-05, RBI-07 and RBCAR-06 and to pay plaintiff the amounts representing the adjustments in the wage-related benefits of the security guards and consequential increase in its administrative cost and margin upon presentment by plaintiff of the corresponding voucher claims. Plaintiffs claims for damages and attorneys fees and defendants counterclaim for damages are hereby DENIED. Defendant Juanito M. David is hereby absolved from any liability. SO ORDERED.[14] NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. The appellate court held that the proper recourse of NFA is to file a petition for review under Rule 45 with this Court, considering that the appeal raised a pure question of law. Nevertheless, it proceeded to discuss the merits of the case for purposes of academic discussion and eventually sustained the ruling of the trial court that NFA is under obligation to pay the administrative costs and margin and the wage related benefits of the respondents security guards.[15] On April 30, 2004, the Court of Appeals denied NFAs motion for reconsideration.[16] Hence, the instant petition. The issue for resolution is whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the minimum wage. At the outset, it should be noted that the proper remedy of NFA from the adverse decision of the trial court is a petition for review under Rule 45 directly with this Court because the issue involved a question of law. However, in the interest of justice we deem it wise to overlook the procedural technicalities if only to demonstrate that despite the procedural infirmity, the instant petition is impressed with merit.[17] RA 6727[18] (Wage Rationalization Act), which took effect on July 1, 1989,[19] declared it a policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth.[20] In line with its declared policy, RA 6727, created the National Wages and Productivity Commission (NWPC),[21] vested, inter alia, with the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or

industry levels;[22] and the Regional Tripartite Wages and Productivity Boards (RTWPB) which, among others, determine and fix the minimum wage rates applicable in their respective region, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC.[23] Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the daily minimum wage rates.[24] Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. Section 6 of RA 6727, however, expressly lodged said obligation to the principals or indirect employers in construction projects and establishments providing security, janitorial and similar services. Substantially the same provision is incorporated in the wage orders issued by the RTWPB.[25] Section 6 of RA 6727, provides: SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or client. (Emphasis supplied) NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour work day. The contention is meritorious. In construing the word wage in Section 6 of RA 6727, reference must be had to Section 4 (a) of the same Act. It states: SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers and employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day (Emphasis supplied) The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory minimum wage which is defined under the Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker.[26] The basis thereof under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or amount added to the remuneration of an employee for an 8-hour work. Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. [27] Since the increase in wage referred to in Section 6 pertains to the statutory minimum wage as defined herein, principals in service contracts cannot be made to pay the corresponding wage increase in the overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits

granted to workers. While basis of said remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the subject provision. The settled rule in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation. This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.[28] The presumption therefore is that lawmakers are well aware that the word wage as used in Section 6 means the statutory minimum wage. If their intention was to extend the obligation of principals in service contracts to the payment of the increment in the other benefits and remuneration of workers, it would have so expressly specified. In not so doing, the only logical conclusion is that the legislature intended to limit the additional obligation imposed on principals in service contracts to the payment of the increment in the statutory minimum wage. The general rule is that construction of a statute by an administrative agency charged with the task of interpreting or applying the same is entitled to great weight and respect. The Court, however, is not bound to apply said rule where such executive interpretation, is clearly erroneous, or when there is no ambiguity in the law interpreted, or when the language of the words used is clear and plain, as in the case at bar. Besides, administrative interpretations are at best advisory for it is the Court that finally determines what the law means.[29] Hence, the interpretation given by the labor agencies in the instant case which went as far as supplementing what is otherwise not stated in the law cannot bind this Court. It is not within the province of this Court to inquire into the wisdom of the law for indeed, we are bound by the words of the statute.[30] The law is applied as it is. At any rate, the interest of the employees will not be adversely affected if the obligation of principals under the subject provision will be limited to the increase in the statutory minimum wage. This is so because all remuneration and benefits other than the increased statutory minimum wage would be shouldered and paid by the employer or service contractor to the workers concerned. Thus, in the end, all allowances and benefits as computed under the increased rate mandated by RA 6727 and the wage orders will be received by the workers. Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service contractors. Under the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the prescribed wage rates, the service contractor shall be held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of the Labor Code provides: ART. 106. Contractor or Subcontractor. Whenever an employer enters into contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project. ART. 109. Solidary Liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the liability of the principal. So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage Rationalization Act is not violated. In the instant case, Article IV.4 of the service contract provides: IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the PADPAO rate, the AGENCY may negotiate for an adjustment in the contract price. Any adjustment shall be applicable only to the increment, based on published and circulated rates and not on mere certification.[31] In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states: 3. For purposes of wage adjustments, consider only the rate based on the wage Order issued by the Regional Tripartite Wage Productivity Board (RTWPB). Unless otherwise provided in the Wage Order issued by the RTWPB, the wage adjustment shall be limited to the increment in the legislated minimum wage;[32] The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.[33] Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent. The latters complaint for collection of remuneration and benefits other than the increased minimum wage rate, should therefore be dismissed for lack of cause of action.

The same goes for respondents claim for administrative cost and margin. Considering that respondent failed to establish a clear obligation on the part of NFA to pay the same as well as to substantiate the amount thereof with documentary evidence, the claim should be denied. WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004 resolution of the Court of Appeals which dismissed petitioner National Food Authoritys appeal and motion for reconsideration, respectively, in CA-G.R. CV No. 76677, are REVERSED and SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as Civil Case No. Q-01-43988, before the Regional Trial Court of Quezon, City, Branch 83, is ordered DISMISSED. SO ORDERED. SECOND DIVISION [G.R. No. 126999. August 30, 2000] SGMC REALTY CORPORATION, petitioner, vs. OFFICE OF THE PRESIDENT (OP), RIDGEVIEW REALTY CORPORATION, SM INVESTMENTS CORPORATION, MULTI-REALTY DEVELOPMENT CORP., HENRY SY SR., HENRY SY JR., HANS T. SY, MARY UY TY and VICTOR LIM, respondents. RESOLUTION

On June 18, 1996, public respondent, without delving into the merits of the case, rendered the assailed decision which reads: "IN VIEW OF THE FOREGOING, the appeal is hereby DISMISSED for being filed out of time. "SO ORDERED."[3] Petitioner seasonably filed a motion for reconsideration which was denied. Undaunted, petitioner filed the instant petition, alleging that public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: [I] IN HOLDING THAT THE PERIOD TO APPEAL FROM THE HOUSING AND LAND USE REGULATORY BOARD TO THE OFFICE OF THE PRESIDENT IS FIFTEEN (15) DAYS AND NOT THIRTY (30) DAYS AS MANDATED IN THE 1994 RULES OF PROCEDURE ADOPTED BY THE HOUSING AND LAND USE REGULATORY BOARD, AN ADMINISTRATIVE AGENCY UNDER THE SUPERVISION AND CONTROL OF PUBLIC RESPONDENT OFFICE OF THE PRESIDENT. [II]

QUISUMBING, J.: In this special civil action for certiorari, petitioner seeks to set aside the decision[1] of public respondent rendered on June 18, 1996, in OP Case No. 95-L-6333, and its order[2] dated October 1, 1996, denying the motion for reconsideration. The records disclose that on March 29, 1994, petitioner filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for breach of contract, violation of property rights and damages against private respondents. After the parties filed their pleadings and supporting documents, the arbiter rendered a decision dismissing petitioners complaint as well as private respondents counterclaim. Petitioner then filed a petition for review with the Board of Commissioners of the HLURB which, however, dismissed said petition. On October 23, 1995, petitioner received a copy of said decision of the Board of Commissioners. On November 20, 1995, petitioner filed an appeal with public respondent. After the parties filed their memorandum, they filed their respective draft decisions as ordered by public respondent. IN DISREGARDING THE 1994 RULES OF PROCEDURE OF THE HOUSING AND LAND USE REGULATORY BOARD WITHOUT DECLARING THE SAME ILLEGAL AND/OR INVALID, AND IN DISREGARDING THE WELL-ESTABLISHED DOCTRINE OF LIBERAL CONSTRUCTION OF THE ADMINISTRATIVE RULES OF PROCEDURE IN ORDER TO PROMOTE THEIR OBJECT AND TO ASSIST THE PARTIES IN CLAIMING JUST, SPEEDY AND INEXPENSIVE DETERMINATION OF THEIR RESPECTIVE CLAIMS AND DEFENSES.[4] The fundamental issue for resolution is whether or not public respondent committed grave abuse of discretion in ruling that the reglementary period within which to appeal the decision of HLURB to public respondent is fifteen days. Petitioner contends that the period of appeal from the HLURB to the Office of the President is thirty (30) days from receipt by the aggrieved party of the decision appealed from in accordance with Section 27 of the 1994 Rules of Procedure of HLURB and Section 1 of Administrative Order No. 18, series of 1987, of the Office of the President.

However, we find petitioners contention bereft of merit, because of its reliance on a literal reading of cited rules without correlating them to current laws as well as presidential decrees on the matter. Section 27 of the 1994 HLURB Rules of Procedure provides as follows: "Section 27. Appeal to the Office of the President. --- Any party may, upon notice to the Board and the other party, appeal the decision of the Board of Commissioners or its division to the Office of the President within thirty (30) days from receipt thereof pursuant to and in accordance with Administrative Order No. 18, of the Office of the President dated February 12, 1987. Decision of the President shall be final subject only to review by the Supreme Court on certiorari or on questions of law."[5] On the other hand, Administrative Order No. 18, series of 1987, issued by public respondent reads: "Section 1. Unless otherwise governed by special laws, an appeal to the Office of the President shall be taken within thirty (30) days from receipt by the aggrieved party of the decision/resolution/order complained of or appealed from."[6] As pointed out by public respondent, the aforecited administrative order allows aggrieved party to file its appeal with the Office of the President within thirty (30) days from receipt of the decision complained of. Nonetheless, such thirty-day period is subject to the qualification that there are no other statutory periods of appeal applicable. If there are special laws governing particular cases which provide for a shorter or longer reglementary period, the same shall prevail over the thirty-day period provided for in the administrative order. This is in line with the rule in statutory construction that an administrative rule or regulation, in order to be valid, must not contradict but conform to the provisions of the enabling law.[7] We note that indeed there are special laws that mandate a shorter period of fifteen (15) days within which to appeal a case to public respondent. First, Section 15 of Presidential Decree No. 957 provides that the decisions of the National Housing Authority (NHA) shall become final and executory after the lapse of fifteen (15) days from the date of receipt of the decision. Second, Section 2 of Presidential Decree No. 1344 states that decisions of the National Housing Authority shall become final and executory after the lapse of fifteen (15) days from the date of its receipt. The latter decree provides that the decisions of NHA is appealable only to the Office of the President. Further, we note that the regulatory functions of NHA relating to housing and land development has been transferred to Human Settlements Regulatory Commission, now known as HLURB.[8] Thus, said presidential issuances providing for a reglementary period of appeal of fifteen days apply

in this case. Accordingly, the period of appeal of thirty (30) days set forth in Section 27 of HLURB 1994 Rules of Procedure no longer holds true for being in conflict with the provisions of aforesaid presidential decrees. For it is axiomatic that administrative rules derive their validity from the statute that they are intended to implement. Any rule which is not consistent with statute itself is null and void.[9] In this case, petitioner received a copy of the decision of HLURB on October 23, 1995. Considering that the reglementary period to appeal is fifteen days, petitioner has only until November 7, 1995, to file its appeal. Unfortunately, petitioner filed its appeal with public respondent only on November 20, 1995 or twenty-eight days from receipt of the appealed decision, which is obviously filed out of time. As the appeal filed by petitioner was not taken within the reglementary period, the prescriptive period for perfecting an appeal continues to run. Consequently, the decision of the HLURB became final and executory upon the lapse of fifteen days from receipt of the decision. Hence, the decision became immutable; it can no longer be amended nor altered by public respondent. Accordingly, inasmuch as the timely perfection of an appeal is a jurisdictional requisite, public respondent has no more authority to entertain the petitioners appeal. Otherwise, any amendment or alteration made which substantially affects the final and executory judgment would be null and void for lack of jurisdiction.[10] Thus, in this case public respondent cannot be faulted of grave abuse of discretion in ruling that the period of appeal is fifteen days and in forthrightly dismissing petitioners appeal as the same was clearly filed out of time. Worth mentioning, just days prior to the promulgation of the assailed decision of public respondent, the HLURB adopted on June 10, 1996, its 1996 Rules of Procedure. Significantly, Section 2, Rule XVIII of said rules provides that any party may, upon notice to the HLURB and the other party, appeal a decision rendered by the Board of Commissioners en banc or by one of its divisions to the Office of the President within fifteen (15) calendar days from receipt thereof in accordance with P.D. 1344 and A.O. 18, series of 1987.[11] Apparently, the amendment was made pursuant to the pronouncements of public respondent in earlier cases[12] it decided that appeals to the Office of the President from the decision of HLURB should be filed within fifteen (15) days from receipt thereof. At present therefore, decisions rendered by HLURB is appealable to the Office of the President within fifteen (15) calendar days from receipt thereof. Finally, we find that the instant petition ought not to have been directly filed with this Court. For while we have concurrent jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, this concurrence is not to be taken as an unrestrained freedom of choice concerning the court to which application for the writ will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs.[13] A direct invocation of the Supreme

Courts original jurisdiction to issue these extraordinary writs is allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition.[14] WHEREFORE, the instant petition is DISMISSED for utter lack of merit. Costs against petitioner. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-49774 February 24, 1981 SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA PLANT), petitioner, vs. Hon. AMADO G. INCIONG, Deputy Minister of Labor and CAGAYAN COCA-COLA FREE WORKERS UNION,respondents.

difference of whatever earnings and the amount actually received as 13th month pay excluding overtime premium and emergency cost of living allowance. " Herein petitioner appealed from that Order to the Minister of Labor in whose behalf the Deputy Minister of Labor Amado G. Inciong issued an Order 4 dated June 7, 1978 affirming the Order of Regional Office No. X and dismissing the appeal for lack of merit. Petitioner's motion for reconsideration having been denied, it filed the instant petition. On February 14, 1979, this Court issued a Temporary Restraining Order 5 enjoining respondents from enforcing the Order dated December 19, 1978. The crux of the present controversy is whether or not in the computation of the 13th-month pay under Presidential Decree 851, payments for sick, vacation or maternity leaves, premium for work done on rest days and special holidays, including pay for regular holidays and night differentials should be considered. Public respondent's consistent stand on the matter since the effectivity of Presidential Decree 851 is that "payments for sick leave, vacation leave, and maternity benefits, as well as salaries paid to employees for work performed on rest days, special and regular holidays are included in the computation of the 13th-month pay. 6 On its part, private respondent cited innumerable past rulings, opinions and decisions rendered by then Acting Labor Secretary Amado G. Inciong to the effect that, "in computing the mandatory bonus, the basis is the total gross basic salary paid by the employer during the calendar year. Such gross basic salary includes: (1) regular salary or wage; (2) payments for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays: (4) holiday pay for worked or unworked regular holiday; and (5) emergency allowance if given in the form of a wage adjustment." 7 Petitioner, on the other hand, assails as erroneous the aforesaid order, ruling and opinions, vigorously contends that Presidential Decree 851 speaks only of basic salary as basis for the determination of the 13th-month pay; submits that payments for sick, vacation, or maternity leaves, night differential pay, as well as premium paid for work performed on rest days, special and regular holidays do not form part of the basic salary; and concludes that the inclusion of those payments in the computation of the 13th-month pay is clearly not sanctioned by Presidential Decree 851. The Court finds petitioner's contention meritorious. The provision in dispute is Section 1 of Presidential Decree 851 and provides: All employers are hereby required to pay all their employees receiving a basic salary of not more than Pl,000 a month, regardless of the nature of the employment, a 13th-month pay not later than December 24 of every year.

DE CASTRO, J.: Petition for certiorari and prohibition, with preliminary injunction to review the Order 1 dated December 19, 1978 rendered by the Deputy Minister of Labor in STF ROX Case No. 009-77 docketed as "Cagayan Coca-Cola Free Workers Union vs. Cagayan Coca-Cola Plant, San Miguel Corporation, " which denied herein petitioner's motion for reconsideration and ordered the immediate execution of a prior Order 2 dated June 7, 1978. On January 3, 1977, Cagayan Coca-Cola Free Workers Union, private respondent herein, filed a complaint against San Miguel Corporation (Cagayan Coca-Cola Plant), petitioner herein, alleging failure or refusal of the latter to include in the computation of 13th- month pay such items as sick, vacation or maternity leaves, premium for work done on rest days and special holidays, including pay for regular holidays and night differentials. An Order 3 dated February 15, 1977 was issued by Regional Office No. X where the complaint was filed requiring herein petitioner San Miguel Corporation (Cagayan Coca-Cola Plant) "to pay the

Section 2 of the Rules and Regulations for the implementation of Presidential Decree 851 provides: a) Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year b) Basic salary shall include all remunerations on earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing payments and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th-month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus. Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary: a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174; b) Profit sharing payments; c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of tile employee at the time of the promulgation of the Decree on December 16, 1975. Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th-month pay. The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and profit sharing payments indicate the intention to strip basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits.

Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay. While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exclude from the definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The Supplementary rules and Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic salary. The all-embracing phrase "earnings and other renumeration" which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves. Maternity premium for works performed on rest days and special holidays pays for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13th-month they, were not so excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of the 13th-month pay. Then the exclusionary provision would prove to be Idle and with no purpose. This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions: Art. 87. overtime work. Work may be performed beyond eight hours a day provided what the employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at least twenty-five (25%) percent thereof. It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary, for reason of which such is categorically excluded from the definition of basic salary under the Supplementary Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the same Code, paragraph c) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of the regular wage of the employee. It is likewise clear that prernium for special holiday which is at least 30% of the regular wage is an additional compensation other than and added to the regular wage or basic salary. For similar reason it shall not be considered in the computation of the 13th- month pay.

WHEREFORE, the Orders of the Deputy Labor Minister dated June 7, 1978 and December 19, 1978 are hereby set aside and a new one entered as above indicated. The Temporary Restraining Order issued by this Court on February 14, 1979 is hereby made permanent. No pronouncement as to costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19337 September 30, 1969

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 entry 48, 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 entry 243, 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. On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., 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. 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 amount the petitioner paid under protest. In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner 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. After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of the Commissioner of Customs. The petitioner imputes three errors to the Court of Tax Appeals, namely: 1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the failure of the petitioner to export the jute bags in question within the time required by the bonds.

ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents. Laurea, Laurea and Associates for petitioner. Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondents.

CASTRO, J.: This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of customs duties and special import tax, as well as the petitioner's alternative remedy to recover the said amount minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and Customs Code. The petitioner 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 declared under entry 48 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 and declared under entry 243 on February 8, 1957, likewise entered free of customs duties and special import tax upon the petitioner's

2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner of Customs to extend the period of one (1) year within which the jute bags should be exported. 3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the provisions of section 106, par. (b), of the Tariff and Customs Code. 1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one year provided for in section 23 of the Act. Section 23 reads: SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in the opinion of the collector of customs, of such a character as to be readily identifiable may be delivered to the importer thereof upon identification and the giving of a bond with sureties satisfactory to the collector of customs in an amount equal to double the estimated duties thereon, conditioned for the exportation thereof or payment of the corresponding duties thereon within one year from the date of importation, under such rules and regulations as the Insular Collector of Customs shall provide.1 To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and other containers are good for 12 months without extension," and paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of cylinders and other containers are not extendible." And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25, 1948 was issued, prescribing rules and regulations governing the importation, exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said administrative order provides: That importation of jute bags intended for use as containers of Philippine products for exportation to foreign countries shall be declared in a regular import entry supported by a surety bond in an amount equal to double the estimated duties, conditioned for the exportation or payment of the corresponding duties thereon within one year from the date of importation. It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff and 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. It was surely by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already adverted to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 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.41awphl.nt The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by the executive department or other agency charged with its administration or enforcement is entitled to consideration and the highest respect from the courts, and must be accorded appropriate weight in determining the meaning of the law, especially when the construction or interpretation is long continued and uniform or is contemporaneous with the first workings of the statute, or when the enactment of the statute was suggested by such agency.5 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. Implied legislative approval by failure to change a long-standing administrative construction is not essential to judicial respect for the construction but is an element which greatly increases the weight given such construction.6 The correctness of the interpretation given a statute by the agency charged with administering its provision is indicated where it appears that Congress, with full knowledge of the agency's interpretation, has made significant additions to the statute without amending it to depart from the agency's view.7 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.1awphl.nt 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; ... 8 If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to export the jute bags and, consequently, to a refund of the amount it had paid as customs duties. 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. The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute bags within the one-year period cannot be accorded credit, for several reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention of or reference to this argument of the petitioner, which can only be interpreted to mean that the court did not believe that the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to effectively prevent the exportation of the jute bags within the required one-year period. In point of fact nowhere in the record does the petitioner convincingly show that the so-called fortuitous events or force majeure referred to by it precluded the timely exportation of the jute bags. In the second place, assuming, arguendo, that the one-year period is extendible, the jute bags were not actually exported within the one-week extension the petitioner sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported within the period of one week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409, were actually exported only during the period from February 16 to May 24, 1958, long after the expiration of the one-week extension sought by the petitioner. Finally, it is clear from the record that the typhoons and floods which, according to the petitioner, helped render impossible the fulfillment of its obligation to export within the one-year period, assuming that they may be placed in the category of fortuitous events or force majeure, all occurred prior to the execution of the bonds in question, or prior to the commencement of the one-year period within which the petitioner was in law required to export the jute bags. 2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and Customs Code, which Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration following the word "containers" in the said statutes serves merely to give examples of containers and not to specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states, "containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the Tariff and Customs Code mentions "large containers," giving as examples "demijohn cylinders, drums, casks and other similar receptacles of metal, glass or other materials." (emphasis supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in Customs

Administrative Order 389 to circumscribe the scope of the word "container," any more than the statures sought to be implemented actually intended to do. 3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106 (b) of the Tariff and Customs Code, 11 which reads: SEC. 106. Drawbacks: ... b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof. Upon the exportation of articles manufactured or produced in the Philippines, including the packing, covering, putting up, marking or labeling thereof, either in whole or in part of imported materials, or from similar domestic materials of equal quantity and productive manufacturing quality and value, such question to be determined by the Collector of Customs, there shall be allowed a drawback equal in amount to the duties paid on the imported materials so used, or where similar domestic materials are used, to the duties paid on the equivalent imported similar materials, less one per cent thereof: Provided, That the exportation shall be made within three years after the importation of the foreign material used or constituting the basis for drawback ... . The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of importation. The contention is palpably devoid of merit. The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the containers mentioned therein as long as he exports them within one year from the date of acceptance of the import entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b), contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the amount paid, provided the articles mentioned therein are exported within three years from importation. It would seem then that the Government would forego collecting duties on the articles mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same shall be exported within the relatively short period of one year from the date of acceptance of the import entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported merchandise, thereby building up export trade and encouraging manufacture in the

country. 12But there is a difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the provisions of section 105(x), may not, after having failed to comply with the conditions imposed thereby, avoid the consequences of such failure by being allowed a drawback under section 106(b) of the same Act without having complied with the conditions of the latter section. For it is not to be supposed that the legislature had intended to defeat compliance with the terms of section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather courts should proceed on the theory that parts of a statute may be harmonized and reconciled with each other. A construction of a statute which creates an inconsistency should be avoided when a reasonable interpretation can be adopted which will not do violence to the plain words of the act and will carry out the intention of Congress. In the construction of statutes, the courts start with the assumption that the legislature intended to enact an effective law, and the legislature is not to be presumed to have done a vain thing in the enactment of a statute. Hence, it is a general principle, embodied in the maxim, "ut res magis valeat quam pereat," that the courts should, if reasonably possible to do so without violence to the spirit and language of an act, so interpret the statute to give it efficient operation and effect as a whole. An interpretation should, if possible, be avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or nugatory. 14 ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at petitioner's cost.