PAL VS.

EDU, 164 SCRA 320 (1988)

Facts of the case:The disputed registration fees were imposed by the commissioner Elevate pursuant to
Section 8, RA 4136,the Land Transportation and Traffic Code.PAL as a corporation is engaged in the air
transportation business under the legislative franchise. Underits franchise, PAL is exempt from the
payment of taxes.In 1971 however, appellee Commissioner elevate issued a regulation requiring all tax
exempt entities, amongthem PAL to pay motor vehicle registration fees.Despite PAL s protest, appellee

refused to register the appellant s motor vehicles unless the amountsimposed were paid. PAL thus
paid, under protest, P19,529.75 as registration fees of its motor vehicles.After paying under protest, PAL
wrote to Commissioner Edu demanding a refund of the amounts paid,invoking Calalang vs. Lorenzo
where it was held that motor vehicle registration fees are in reality taxes from thepayment of which PAL
is exempt by virtue of its legislative franchise.Edu denied request for refund based on Republic v. Phil.
Rabbit Bus, that motor vehicle registration fees areregulatory and not revenue measures and, therefore,
do not come within the exemption granted to PAL under itsfranchise.PAL filed the complaint against LTC
Commissioner EDu and National Treasurer Carbonell.ISSUE: What is the nature of motor vehicle
registration fees? Are they taxes or regulatory fees?

RULING ON TAX VS. LICENSE AND REGULATORY FEE

SC ruled that motor vehicles registration fees are TAXES. Fees may be regarded as taxes even though
theyalso serve as instruments of regulation because taxation may be made as an implementation of the
State s policepower. But if the purpose is primarily REVENUE, or if revenue is atleast, one of the real
and substantial purposes,then the exaction is properly called a TAX.

RULING ON PURPOSES OF TAX, OBJECTIVE OF TAXATION: GENERAL, FISCAL REVENUE

The Legislative intent and purpose behind the law requiring owners of vehicles , to pay for
theirregistration is mainly to raise funds for the construction and maintenance of highways and, to a
much lesserdegree, pay for the operating expenses of the administering agency.It is possible for an
exaction to be both a tax and a regulation. License fees are charges, looked to as asource of revenue as
well as a means of regulation. The fees may be properly regarded as taxes eventhough theyalso serve as
an instrument of regulation. If the purpose is primarily revenue, or if revenue is atleast one of thereal
and substantial purposes, then the exaction is properly called a TAX.

RULING ON NON-DELEGABILITY OF THE POWER TO TAX

It is clear from the provisions of section 73 of Commonwealth Act 123 and section 61 of the
LandTransportation and Traffic Code that the legislative intent and purpose behind the law requiring
owners of vehicles
to pay for their registration is mainly to raise funds for the construction and maintenance of highways
and to amuch lesser degree, pay for the operating expenses of the administering agency.There is a valid
delegation to the Land Transportation Office. Simply put, if the exaction under RA 4136were merely a
regulatory fee, the imposition on RA 5448 need not be an additional tax. RA4136 also speaks of
other fees such as the special permit fees for certain types of motor vehicles (sec.10) and
additional fees forchange of registration (sec.11). These are not to be understood as taxes because such
fees are very minimal to berevenue-raising. Thus they are not mentioned by Sec. 59 (b) of the Code as
taxes like the motor vehicleregistration fee and chauffers license fee. Such fees are to go into the
expenditures of the Land TransportationCommission as provided for in the last proviso of Sec. 61.Motor
vehicle registration fees are at present exacted pursuant to the Land Transportation and TrafficCode are
actually taxes intended for additional revenues of government even if one-fifth or less of the
amountcollected is set aside for the operating expenses of the agency administering the program.