Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

COMMISSIONER OF CUSTOMS G.R. No. 179579

and the DISTRICT COLLECTOR
OF THE PORT OF SUBIC, Present:
Petitioners,
CARPIO, J., Chairperson,
BRION,
PEREZ,
- versus - SERENO, and
REYES, JJ.

Promulgated:
HYPERMIX FEEDS
CORPORATION, February 1, 2012
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
SERENO, J.:
Before us is a Petition for Review under Rule 45,[1] assailing the
Decision[2] and the Resolution[3] of the Court of Appeals (CA), which nullified the
Customs Memorandum Order (CMO) No. 27-2003[4] on the tariff classification of
wheat issued by petitioner Commissioner of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-
2003. Under the Memorandum, for tariff purposes, wheat was classified according
to the following: (1) importer or consignee; (2) country of origin; and (3) port of
discharge.[5] The regulation provided an exclusive list of corporations, ports of
discharge, commodity descriptions and countries of origin. Depending on these
factors, wheat would be classified either as food grade or feed grade. The
corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
 CMO 27-2003 further provided for the proper procedure for protest or
Valuation and Classification Review Committee (VCRC) cases. Under this
procedure, the release of the articles that were the subject of protest required the
importer to post a cash bond to cover the tariff differential.[6]
A month after the issuance of CMO 27-2003, on 19 December 2003,
respondent filed a Petition for Declaratory Relief[7] with the Regional Trial Court
(RTC) of Las Pias City. It anticipated the implementation of the regulation on its
imported and perishable Chinese milling wheat in transit from China.[8] Respondent
contended that CMO 27-2003 was issued without following the mandate of the
Revised Administrative Code on public participation, prior notice, and publication
or registration with the University of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to be a feed
grade supplier without the benefit of prior assessment and examination; thus, despite
having imported food grade wheat, it would be subjected to the 7% tariff upon the
arrival of the shipment, forcing them to pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of the
Constitution was violated when the regulation treated non-flour millers differently
from flour millers for no reason at all.
Lastly, respondent asserted that the retroactive application of the regulation
was confiscatory in nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO)
effective for twenty (20) days from notice.[9]
Petitioners thereafter filed a Motion to Dismiss.[10] They alleged that: (1) the
RTC did not have jurisdiction over the subject matter of the case, because respondent
was asking for a judicial determination of the classification of wheat; (2) an action
for declaratory relief was improper; (3) CMO 27-2003 was an internal administrative
rule and not legislative in nature; and (4) the claims of respondent were speculative
and premature, because the Bureau of Customs (BOC) had yet to examine
respondents products. They likewise opposed the application for a writ of
preliminary injunction on the ground that they had not inflicted any injury through
the issuance of the regulation; and that the action would be contrary to the rule that
administrative issuances are assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the
application for preliminary injunction and the Motion to Dismiss would just be
resolved together in the main case. Thus, on 10 March 2005, the RTC rendered its
Decision[11] without having to resolve the application for preliminary injunction and
the Motion to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and
the subject Customs Memorandum Order 27-2003 is declared INVALID and OF
NO FORCE AND EFFECT. Respondents Commissioner of Customs, the District
Collector of Subic or anyone acting in their behalf are to immediately cease and
desist from enforcing the said Customs Memorandum Order 27-2003.
SO ORDERED.[12]

The RTC held that it had jurisdiction over the subject matter, given that the
issue raised by respondent concerned the quasi-legislative powers of petitioners. It
likewise stated that a petition for declaratory relief was the proper remedy, and that
respondent was the proper party to file it. The court considered that respondent was
a regular importer, and that the latter would be subjected to the application of the
regulation in future transactions.
With regard to the validity of the regulation, the trial court found that
petitioners had not followed the basic requirements of hearing and publication in the
issuance of CMO 27-2003. It likewise held that petitioners had substituted the quasi-
judicial determination of the commodity by a quasi-legislative
predetermination.[13] The lower court pointed out that a classification based on
importers and ports of discharge were violative of the due process rights of
respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the
CA, raising the same allegations in defense of CMO 27-2003.[14] The appellate court,
however, dismissed the appeal. It held that, since the regulation affected substantial
rights of petitioners and other importers, petitioners should have observed the
requirements of notice, hearing and publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE
WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING
JURISPRUDENCE.
 II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT
THE TRIAL COURT HAS JURISDICTION OVER THE CASE.

The Petition has no merit.

We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. Any person interested under a deed, will, contract or
other written instrument, or whose rights are affected by a statute, executive order
or regulation, ordinance, or any other governmental regulation may, before breach
or violation thereof, bring an action in the appropriate Regional Trial Court to
determine any question of construction or validity arising, and for a declaration of
his rights or duties, thereunder.

The requirements of an action for declaratory relief are as follows: (1) there
must be a justiciable controversy; (2) the controversy must be between persons
whose interests are adverse; (3) the party seeking declaratory relief must have a legal
interest in the controversy; and (4) the issue involved must be ripe for judicial
determination.[15] We find that the Petition filed by respondent before the lower court
meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003
issued by petitioner Commissioner of Customs. In Smart Communications v.
NTC,[16] we held:

The determination of whether a specific rule or set of rules issued by an

administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of
judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in
the courts, including the regional trial courts. This is within the scope of
judicial power, which includes the authority of the courts to determine in an
appropriate action the validity of the acts of the political departments. Judicial
power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the
Government. (Emphasis supplied)

Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v.

Department of Finance Secretary,[17] we said:
 xxx [A] legislative rule is in the nature of subordinate legislation, designed
to implement a primary legislation by providing the details thereof. xxx

In addition such rule must be published. On the other hand, interpretative rules are
designed to provide guidelines to the law which the administrative agency is in
charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make
three inquiries: (i) whether the rule is within the delegated authority of the
administrative agency; (ii) whether it is reasonable; and (iii) whether it was
issued pursuant to proper procedure. But the court is not free to substitute its
judgment as to the desirability or wisdom of the rule for the legislative body, by its
delegation of administrative judgment, has committed those questions to
administrative judgments and not to judicial judgments. In the case of an
interpretative rule, the inquiry is not into the validity but into the correctness or
propriety of the rule. As a matter of power a court, when confronted with an
interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the
opposite extreme and substitute its judgment; or (iii) give some intermediate degree
of authoritative weight to the interpretative rule. (Emphasis supplied)

Second, the controversy is between two parties that have adverse interests.
Petitioners are summarily imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the
implementation of CMO 27-2003. Respondent has adequately shown that, as a
regular importer of wheat, on 14 August 2003, it has actually made shipments of
wheat from China to Subic. The shipment was set to arrive in December 2003. Upon
its arrival, it would be subjected to the conditions of CMO 27-2003. The regulation
calls for the imposition of different tariff rates, depending on the factors enumerated
therein. Thus, respondent alleged that it would be made to pay the 7% tariff applied
to feed grade wheat, instead of the 3% tariff on food grade wheat. In addition,
respondent would have to go through the procedure under CMO 27-2003, which
would undoubtedly toll its time and resources. The lower court correctly pointed out
as follows:
xxx As noted above, the fact that petitioner is precisely into the business of
importing wheat, each and every importation will be subjected to constant
disputes which will result into (sic) delays in the delivery, setting aside of funds
as cash bond required in the CMO as well as the resulting expenses thereof. It
is easy to see that business uncertainty will be a constant occurrence for
petitioner. That the sums involved are not minimal is shown by the discussions
during the hearings conducted as well as in the pleadings filed. It may be that
the petitioner can later on get a refund but such has been foreclosed because the
Collector of Customs and the Commissioner of Customs are bound by their own
CMO. Petitioner cannot get its refund with the said agency. We believe and so find
 that Petitioner has presented such a stake in the outcome of this controversy as to
vest it with standing to file this petition.[18] (Emphasis supplied)

Finally, the issue raised by respondent is ripe for judicial determination,

because litigation is inevitable[19] for the simple and uncontroverted reason that
respondent is not included in the enumeration of flour millers classified as food grade
wheat importers. Thus, as the trial court stated, it would have to file a protest case
each time it imports food grade wheat and be subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy
given the circumstances of the case.
Considering that the questioned regulation would affect the substantive rights
of respondent as explained above, it therefore follows that petitioners should have
applied the pertinent provisions of Book VII, Chapter 2 of the Revised
Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of the
Philippines Law Center three (3) certified copies of every rule adopted by it. Rules
in force on the date of effectivity of this Code which are not filed within three (3)
months from that date shall not thereafter be the bases of any sanction against any
party of persons.
xxx xxx xxx

Section 9. Public Participation. - (1) If not otherwise required by

law, an agency shall, as far as practicable, publish or circulate notices of
proposed rules and afford interested parties the opportunity to submit their
views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless
the proposed rates shall have been published in a newspaper of general
circulation at least two (2) weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be
observed.

When an administrative rule is merely interpretative in nature, its applicability

needs nothing further than its bare issuance, for it gives no real consequence more
than what the law itself has already prescribed. When, on the other hand, the
administrative rule goes beyond merely providing for the means that can facilitate
or render least cumbersome the implementation of the law but substantially increases
the burden of those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard, and thereafter to be duly informed, before that
new issuance is given the force and effect of law.[20]
Likewise, in Taada v. Tuvera,[21] we held:
The clear object of the above-quoted provision is to give the general
public adequate notice of the various laws which are to regulate their actions
and conduct as citizens. Without such notice and publication, there would be no
basis for the application of the maxim ignorantia legis non excusat. It would be
the height of injustice to punish or otherwise burden a citizen for the
transgression of a law of which he had no notice whatsoever, not even a
constructive one.

Perhaps at no time since the establishment of the Philippine Republic has

the publication of laws taken so vital significance that at this time when the people
have bestowed upon the President a power heretofore enjoyed solely by the
legislature. While the people are kept abreast by the mass media of the debates and
deliberations in the Batasan Pambansa and for the diligent ones, ready access to
the legislative records no such publicity accompanies the law-making process of
the President. Thus, without publication, the people have no means of knowing
what presidential decrees have actually been promulgated, much less a definite
way of informing themselves of the specific contents and texts of such decrees.
(Emphasis supplied)

Because petitioners failed to follow the requirements enumerated by the

Revised Administrative Code, the assailed regulation must be struck down.
Going now to the content of CMO 27-3003, we likewise hold that it is
unconstitutional for being violative of the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be
deprived of the same protection of laws enjoyed by other persons or other classes in
the same place in like circumstances. Thus, the guarantee of the equal protection of
laws is not violated if there is a reasonable classification. For a classification to be
reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is
germane to the purpose of the law; (3) it is not limited to existing conditions only;
and (4) it applies equally to all members of the same class.[22]
Unfortunately, CMO 27-2003 does not meet these requirements. We do not
see how the quality of wheat is affected by who imports it, where it is discharged, or
which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003
have imported food grade wheat, the product would still be declared as feed grade
wheat, a classification subjecting them to 7% tariff. On the other hand, even if the
importers listed under CMO 27-2003 have imported feed grade wheat, they would
only be made to pay 3% tariff, thus depriving the state of the taxes due. The
regulation, therefore, does not become disadvantageous to respondent only, but even
to the state.
It is also not clear how the regulation intends to monitor more closely wheat
importations and thus prevent their misclassification. A careful study of CMO 27-
2003 shows that it not only fails to achieve this end, but results in the opposite. The
application of the regulation forecloses the possibility that other corporations that
are excluded from the list import food grade wheat; at the same time, it creates an
assumption that those who meet the criteria do not import feed grade wheat. In the
first case, importers are unnecessarily burdened to prove the classification of their
wheat imports; while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the
regulation limited the customs officers duties mandated by Section 1403 of the Tariff
and Customs Law, as amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and
Appraise Imported Articles. The customs officer tasked to examine, classify, and
appraise imported articles shall determine whether the packages designated for
examination and their contents are in accordance with the declaration in the
entry, invoice and other pertinent documents and shall make return in such a
manner as to indicate whether the articles have been truly and correctly
declared in the entry as regard their quantity, measurement, weight, and tariff
classification and not imported contrary to law. He shall submit samples to the
laboratory for analysis when feasible to do so and when such analysis is necessary
for the proper classification, appraisal, and/or admission into the Philippines of
imported articles.
Likewise, the customs officer shall determine the unit of quantity in
which they are usually bought and sold, and appraise the imported articles in
accordance with Section 201 of this Code.
Failure on the part of the customs officer to comply with his duties shall
subject him to the penalties prescribed under Section 3604 of this Code.

The provision mandates that the customs officer must first assess and determine the
classification of the imported article before tariff may be imposed. Unfortunately,
CMO 23-2007 has already classified the article even before the customs officer had
the chance to examine it. In effect, petitioner Commissioner of Customs diminished
the powers granted by the Tariff and Customs Code with regard to wheat importation
when it no longer required the customs officers prior examination and assessment
of the proper classification of the wheat.
It is well-settled that rules and regulations, which are the product of a
delegated power to create new and additional legal provisions that have the effect of
law, should be within the scope of the statutory authority granted by the legislature
to the administrative agency. It is required that the regulation be germane to the
objects and purposes of the law; and that it be not in contradiction to, but in
conformity with, the standards prescribed by law.[23]
In summary, petitioners violated respondents right to due process in the
issuance of CMO 27-2003 when they failed to observe the requirements under the
Revised Administrative Code. Petitioners likewise violated respondents right to
equal protection of laws when they provided for an unreasonable classification in
the application of the regulation. Finally, petitioner Commissioner of Customs went
beyond his powers of delegated authority when the regulation limited the powers of
the customs officer to examine and assess imported articles.
WHEREFORE, in view of the foregoing, the Petition is DENIED.
SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

ARTURO D. BRION JOSE PORTUGAL PEREZ

Associate Justice Associate Justice
 BIENVENIDO L. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

RENATO C. CORONA
Chief Justice
[1]
Rollo, pp. 124-142.
[2]
Id. at 33-46.
[3]
Id. at 47.
[4]
Records, pp. 16-18.
[5]
SUBJECT: Tariff Classification of Wheat
In order to monitor more closely wheat importations and thus prevent their misclassification, the following
are hereby prescribed:
1. For tariff purposes, wheat shall be classified as follows:
1.1 Under HS 1001.9090 (Food Grade) when all the following elements are present:
1.1.1 the importer/consignee of the imported wheat is a flour miller as per attached list (Annex
A), which shall form as integral part of this Order
1.1.2 the wheat importation consists of any of those listed in Annex A according to the country
of origin indicated therein
1.1.3 the wheat importation is entered/unloaded in the Port of Discharge indicated opposite the
name of the flour miller, as per Annex A
1.2 Under HS 1001.9010 (Feed Grade)
1.2.1 When any or all of the elements prescribed under 1.1 above is not present.
1.2.2 All other wheat importations by non-flour millers, i.e., importers/consignees NOT listed
in Annex A
[6]
SUBJECT: Tariff Classification of Wheat
xxx xxx xxx
2. Any issue arising from this Order shall be resolved in an appropriate protest or VCRC case.
3. In case of a VCRC case, the following applies:
3.1 The shipment may qualify for Tentative Release upon payment of the taxes and duties as per
declaration and the posting of cash bond to cover the tariff differential.
3.2 The Tentative Release granted by the VCRC shall, prior to the release of the shipment from Customs
custody, be subject to representative. For this purpose, the District/Port Collector concerned shall
forward to the Office of the Commissioner the Tentative Release papers, together with all pertinent
shipping and supporting documents, including, but not limited to, contract of sale, phytosanitary
certificate and certificate of quality.
In the case of Outports, the required documents shall be faxed to the Office of the Commissioner of
Customs to any of these numbers: 527-1953/527-4573.
3.3 In resolving the classification issue, the VCRC shall consider the import/consignee, type/source of
wheat and port of discharge of the wheat importation, as indicated in Annex A, and require the
proofs/evidences (sic), including, but not limited to, proofs of sale or consumption of said wheat
importation, certificate of quality issued by manufacturing country and contract of sale.
3.4 Any VCRC decision adverse to the government shall be subject to automatic review by the
Commissioner of Customs.
[7]
Rollo pp. 158-168.
[8]
Records, p. 12.
[9]
Rollo, pp. 58-59.
[10]
Id. at 60-78.
[11]
Id. at 108-114; penned by Judge Romeo C. De Leon.
[12]
Id. at 114.
[13]
Id. at 112.
[14]
Id. at 117-122.
[15]
Tolentino v. Board of Accountancy, 90 Phil. 83 (1951).
[16]
456 Phil. 145 (2003).
[17]
G.R. No. 108524, 10 November 1994, 238 SCRA 63, 69-70.
[18]
Rollo, p. 112.
[19]
Office of the Ombudsman v. Ibay, 416 Phil. 659 (2001).
[20]
CIR v. Michel J. Lhuiller Pawnshop Inc., 453 Phil. 1043 (2003).
[21]
220 Phil. 422 (1985).
[22]
Philippine Rural Electric Cooperatives Association, Inc. v. DILG, 451 Phil. 683 (2003).
[23]
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles v. Home Development Mutual Fund, 389 Phil. 296
(2000).

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 166715 August 14, 2008

ABAKADA GURO PARTY LIST (formerly AASJS)1 OFFICERS/MEMBERS

SAMSON S. ALCANTARA, ED VINCENT S. ALBANO, ROMEO R.
ROBISO, RENE B. GOROSPE and EDWIN R. SANDOVAL, petitioners,
vs.
HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance,
HON. GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of
the Bureau of Internal Revenue, and HON. ALBERTO D. LINA, in his
Capacity as Commissioner of Bureau of Customs, respondents.

DECISION

CORONA, J.:

This petition for prohibition1 seeks to prevent respondents from implementing

and enforcing Republic Act (RA) 93352 (Attrition Act of 2005).

RA 9335 was enacted to optimize the revenue-generation capability and

collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs
(BOC). The law intends to encourage BIR and BOC officials and employees to
exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue
Performance Evaluation Board (Board).3 It covers all officials and employees
of the BIR and the BOC with at least six months of service, regardless of
employment status.4

The Fund is sourced from the collection of the BIR and the BOC in excess of
their revenue targets for the year, as determined by the Development Budget
and Coordinating Committee (DBCC). Any incentive or reward is taken from
the fund and allocated to the BIR and the BOC in proportion to their
contribution in the excess collection of the targeted amount of tax revenue.5

The Boards in the BIR and the BOC are composed of the Secretary of the
Department of Finance (DOF) or his/her Undersecretary, the Secretary of the
Department of Budget and Management (DBM) or his/her Undersecretary, the
Director General of the National Economic Development Authority (NEDA) or
his/her Deputy Director General, the Commissioners of the BIR and the BOC
or their Deputy Commissioners, two representatives from the rank-and-file
employees and a representative from the officials nominated by their
recognized organization.6

Each Board has the duty to (1) prescribe the rules and guidelines for the
allocation, distribution and release of the Fund; (2) set criteria and procedures
for removing from the service officials and employees whose revenue
collection falls short of the target; (3) terminate personnel in accordance with
the criteria adopted by the Board; (4) prescribe a system for performance
evaluation; (5) perform other functions, including the issuance of rules and
regulations and (6) submit an annual report to Congress.7

The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC)
were tasked to promulgate and issue the implementing rules and regulations
of RA 9335,8 to be approved by a Joint Congressional Oversight Committee
created for such purpose.9

Petitioners, invoking their right as taxpayers filed this petition challenging the
constitutionality of RA 9335, a tax reform legislation. They contend that, by
establishing a system of rewards and incentives, the law "transform[s] the
officials and employees of the BIR and the BOC into mercenaries and bounty
hunters" as they will do their best only in consideration of such rewards. Thus,
the system of rewards and incentives invites corruption and undermines the
constitutionally mandated duty of these officials and employees to serve the
people with utmost responsibility, integrity, loyalty and efficiency.

Petitioners also claim that limiting the scope of the system of rewards and
incentives only to officials and employees of the BIR and the BOC violates the
constitutional guarantee of equal protection. There is no valid basis for
classification or distinction as to why such a system should not apply to
officials and employees of all other government agencies.

In addition, petitioners assert that the law unduly delegates the power to fix
revenue targets to the President as it lacks a sufficient standard on that
matter. While Section 7(b) and (c) of RA 9335 provides that BIR and BOC
officials may be dismissed from the service if their revenue collections fall
short of the target by at least 7.5%, the law does not, however, fix the revenue
targets to be achieved. Instead, the fixing of revenue targets has been
delegated to the President without sufficient standards. It will therefore be
easy for the President to fix an unrealistic and unattainable target in order to
dismiss BIR or BOC personnel.

Finally, petitioners assail the creation of a congressional oversight committee

on the ground that it violates the doctrine of separation of powers. While the
legislative function is deemed accomplished and completed upon the
enactment and approval of the law, the creation of the congressional oversight
committee permits legislative participation in the implementation and
enforcement of the law.

In their comment, respondents, through the Office of the Solicitor General,

question the petition for being premature as there is no actual case or
controversy yet. Petitioners have not asserted any right or claim that will
necessitate the exercise of this Court’s jurisdiction. Nevertheless, respondents
acknowledge that public policy requires the resolution of the constitutional
issues involved in this case. They assert that the allegation that the reward
system will breed mercenaries is mere speculation and does not suffice to
invalidate the law. Seen in conjunction with the declared objective of RA 9335,
the law validly classifies the BIR and the BOC because the functions they
perform are distinct from those of the other government agencies and
instrumentalities. Moreover, the law provides a sufficient standard that will
guide the executive in the implementation of its provisions. Lastly, the creation
of the congressional oversight committee under the law enhances, rather than
violates, separation of powers. It ensures the fulfillment of the legislative policy
and serves as a check to any over-accumulation of power on the part of the
executive and the implementing agencies.

After a careful consideration of the conflicting contentions of the parties, the

Court finds that petitioners have failed to overcome the presumption of
constitutionality in favor of RA 9335, except as shall hereafter be discussed.

Actual Case And Ripeness

An actual case or controversy involves a conflict of legal rights, an assertion of

opposite legal claims susceptible of judicial adjudication.10 A closely related
requirement is ripeness, that is, the question must be ripe for adjudication.
And a constitutional question is ripe for adjudication when the governmental
act being challenged has a direct adverse effect on the individual challenging
it.11Thus, to be ripe for judicial adjudication, the petitioner must show a
personal stake in the outcome of the case or an injury to himself that can be
redressed by a favorable decision of the Court.12

In this case, aside from the general claim that the dispute has ripened into a
judicial controversy by the mere enactment of the law even without any further
overt act,13 petitioners fail either to assert any specific and concrete legal
claim or to demonstrate any direct adverse effect of the law on them. They are
unable to show a personal stake in the outcome of this case or an injury to
themselves. On this account, their petition is procedurally infirm.

This notwithstanding, public interest requires the resolution of the

constitutional issues raised by petitioners. The grave nature of their
allegations tends to cast a cloud on the presumption of constitutionality in
favor of the law. And where an action of the legislative branch is alleged to
have infringed the Constitution, it becomes not only the right but in fact the
duty of the judiciary to settle the dispute.14

Accountability of
Public Officers

Section 1, Article 11 of the Constitution states:

Sec. 1. Public office is a public trust. Public officers and employees must at all
times be accountable to the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency, act with patriotism, and justice, and lead
modest lives.

Public office is a public trust. It must be discharged by its holder not for his
own personal gain but for the benefit of the public for whom he holds it in trust.
By demanding accountability and service with responsibility, integrity, loyalty,
efficiency, patriotism and justice, all government officials and employees have
the duty to be responsive to the needs of the people they are called upon to
serve.

Public officers enjoy the presumption of regularity in the performance of their

duties. This presumption necessarily obtains in favor of BIR and BOC officials
and employees. RA 9335 operates on the basis thereof and reinforces it by
providing a system of rewards and sanctions for the purpose of encouraging
the officials and employees of the BIR and the BOC to exceed their revenue
targets and optimize their revenue-generation capability and collection.15
The presumption is disputable but proof to the contrary is required to rebut it.
It cannot be overturned by mere conjecture or denied in advance (as
petitioners would have the Court do) specially in this case where it is an
underlying principle to advance a declared public policy.

Petitioners’ claim that the implementation of RA 9335 will turn BIR and BOC
officials and employees into "bounty hunters and mercenaries" is not only
without any factual and legal basis; it is also purely speculative.

A law enacted by Congress enjoys the strong presumption of constitutionality.

To justify its nullification, there must be a clear and unequivocal breach of the
Constitution, not a doubtful and equivocal one.16 To invalidate RA 9335 based
on petitioners’ baseless supposition is an affront to the wisdom not only of the
legislature that passed it but also of the executive which approved it.

Public service is its own reward. Nevertheless, public officers may by law be
rewarded for exemplary and exceptional performance. A system of incentives
for exceeding the set expectations of a public office is not anathema to the
concept of public accountability. In fact, it recognizes and reinforces
dedication to duty, industry, efficiency and loyalty to public service of
deserving government personnel.

In United States v. Matthews,17 the U.S. Supreme Court validated a law which
awards to officers of the customs as well as other parties an amount not
exceeding one-half of the net proceeds of forfeitures in violation of the laws
against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme
Court said:

The offer of a portion of such penalties to the collectors is to stimulate and

reward their zeal and industry in detecting fraudulent attempts to evade
payment of duties and taxes.

In the same vein, employees of the BIR and the BOC may by law be entitled
to a reward when, as a consequence of their zeal in the enforcement of tax
and customs laws, they exceed their revenue targets. In addition, RA 9335
establishes safeguards to ensure that the reward will not be claimed if it will
be either the fruit of "bounty hunting or mercenary activity" or the product of
the irregular performance of official duties. One of these precautionary
measures is embodied in Section 8 of the law:

SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the
BOC. – The officials, examiners, and employees of the [BIR] and the [BOC]
who violate this Act or who are guilty of negligence, abuses or acts of
malfeasance or misfeasance or fail to exercise extraordinary diligence in the
performance of their duties shall be held liable for any loss or injury suffered
by any business establishment or taxpayer as a result of such violation,
negligence, abuse, malfeasance, misfeasance or failure to exercise
extraordinary diligence.

Equal Protection

Equality guaranteed under the equal protection clause is equality under the
same conditions and among persons similarly situated; it is equality among
equals, not similarity of treatment of persons who are classified based on
substantial differences in relation to the object to be accomplished.19When
things or persons are different in fact or circumstance, they may be treated in
law differently. In Victoriano v. Elizalde Rope Workers’ Union,20 this Court
declared:

The guaranty of equal protection of the laws is not a guaranty of equality in

the application of the laws upon all citizens of the [S]tate. It is not, therefore, a
requirement, in order to avoid the constitutional prohibition against inequality,
that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances
surrounding them. It guarantees equality, not identity of rights. The
Constitution does not require that things which are different in fact be
treated in law as though they were the same. The equal protection
clause does not forbid discrimination as to things that are different. It
does not prohibit legislation which is limited either in the object to which
it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows

classification. Classification in law, as in the other departments of knowledge
or practice, is the grouping of things in speculation or practice because they
agree with one another in certain particulars. A law is not invalid because of
simple inequality. The very idea of classification is that of inequality, so that it
goes without saying that the mere fact of inequality in no manner determines
the matter of constitutionality. All that is required of a valid classification is
that it be reasonable, which means that the classification should be
based on substantial distinctions which make for real differences, that it
must be germane to the purpose of the law; that it must not be limited to
existing conditions only; and that it must apply equally to each member
of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or
rational basis and is not palpably arbitrary.

In the exercise of its power to make classifications for the purpose of enacting
laws over matters within its jurisdiction, the state is recognized as enjoying a
wide range of discretion. It is not necessary that the classification be based on
scientific or marked differences of things or in their relation. Neither is it
necessary that the classification be made with mathematical nicety. Hence,
legislative classification may in many cases properly rest on narrow
distinctions, for the equal protection guaranty does not preclude the legislature
from recognizing degrees of evil or harm, and legislation is addressed to evils
as they may appear.21 (emphasis supplied)

The equal protection clause recognizes a valid classification, that is, a

classification that has a reasonable foundation or rational basis and not
arbitrary.22 With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and
the BOC.23 Since the subject of the law is the revenue- generation capability
and collection of the BIR and the BOC, the incentives and/or sanctions
provided in the law should logically pertain to the said agencies. Moreover, the
law concerns only the BIR and the BOC because they have the common
distinct primary function of generating revenues for the national government
through the collection of taxes, customs duties, fees and charges.

The BIR performs the following functions:

Sec. 18. The Bureau of Internal Revenue. – The Bureau of Internal Revenue,
which shall be headed by and subject to the supervision and control of the
Commissioner of Internal Revenue, who shall be appointed by the President
upon the recommendation of the Secretary [of the DOF], shall have the
following functions:

(1) Assess and collect all taxes, fees and charges and account for all
revenues collected;

(2) Exercise duly delegated police powers for the proper performance of its
functions and duties;

(3) Prevent and prosecute tax evasions and all other illegal economic
activities;
(4) Exercise supervision and control over its constituent and subordinate units;
and

(5) Perform such other functions as may be provided by law.24

xxx xxx xxx (emphasis supplied)

On the other hand, the BOC has the following functions:

Sec. 23. The Bureau of Customs. – The Bureau of Customs which shall be
headed and subject to the management and control of the Commissioner of
Customs, who shall be appointed by the President upon the recommendation
of the Secretary[of the DOF] and hereinafter referred to as Commissioner,
shall have the following functions:

(1) Collect custom duties, taxes and the corresponding fees, charges
and penalties;

(2) Account for all customs revenues collected;

(3) Exercise police authority for the enforcement of tariff and customs laws;

(4) Prevent and suppress smuggling, pilferage and all other economic frauds
within all ports of entry;

(5) Supervise and control exports, imports, foreign mails and the clearance of
vessels and aircrafts in all ports of entry;

(6) Administer all legal requirements that are appropriate;

(7) Prevent and prosecute smuggling and other illegal activities in all ports
under its jurisdiction;

(8) Exercise supervision and control over its constituent units;

(9) Perform such other functions as may be provided by law.25

xxx xxx xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally
perform the special function of being the instrumentalities through which the
State exercises one of its great inherent functions – taxation. Indubitably, such
substantial distinction is germane and intimately related to the purpose of the
law. Hence, the classification and treatment accorded to the BIR and the BOC
under RA 9335 fully satisfy the demands of equal protection.

Undue Delegation

Two tests determine the validity of delegation of legislative power: (1) the
completeness test and (2) the sufficient standard test. A law is complete when
it sets forth therein the policy to be executed, carried out or implemented by
the delegate.26 It lays down a sufficient standard when it provides adequate
guidelines or limitations in the law to map out the boundaries of the delegate’s
authority and prevent the delegation from running riot.27 To be sufficient, the
standard must specify the limits of the delegate’s authority, announce the
legislative policy and identify the conditions under which it is to be
implemented.28

RA 9335 adequately states the policy and standards to guide the President in
fixing revenue targets and the implementing agencies in carrying out the
provisions of the law. Section 2 spells out the policy of the law:

SEC. 2. Declaration of Policy. – It is the policy of the State to optimize the

revenue-generation capability and collection of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC) by providing for a system
of rewards and sanctions through the creation of a Rewards and Incentives
Fund and a Revenue Performance Evaluation Board in the above agencies
for the purpose of encouraging their officials and employees to exceed their
revenue targets.

Section 4 "canalized within banks that keep it from overflowing"29 the

delegated power to the President to fix revenue targets:

SEC. 4. Rewards and Incentives Fund. – A Rewards and Incentives Fund,

hereinafter referred to as the Fund, is hereby created, to be sourced from the
collection of the BIR and the BOC in excess of their respective revenue
targets of the year, as determined by the Development Budget and
Coordinating Committee (DBCC), in the following percentages:

Excess of Collection of the Percent (%) of the Excess Collection to

Excess the Revenue Targets Accrue to the Fund
30% or below – 15%
More than 30% – 15% of the first 30% plus 20% of the
remaining excess
The Fund shall be deemed automatically appropriated the year immediately
following the year when the revenue collection target was exceeded and shall
be released on the same fiscal year.

Revenue targets shall refer to the original estimated revenue collection

expected of the BIR and the BOC for a given fiscal year as stated in the
Budget of Expenditures and Sources of Financing (BESF) submitted by
the President to Congress. The BIR and the BOC shall submit to the DBCC
the distribution of the agencies’ revenue targets as allocated among its
revenue districts in the case of the BIR, and the collection districts in the case
of the BOC.

xxx xxx xxx (emphasis supplied)

Revenue targets are based on the original estimated revenue collection

expected respectively of the BIR and the BOC for a given fiscal year as
approved by the DBCC and stated in the BESF submitted by the President to
Congress.30 Thus, the determination of revenue targets does not rest solely
on the President as it also undergoes the scrutiny of the DBCC.

On the other hand, Section 7 specifies the limits of the Board’s authority and
identifies the conditions under which officials and employees whose revenue
collection falls short of the target by at least 7.5% may be removed from the
service:

SEC. 7. Powers and Functions of the Board. – The Board in the agency shall
have the following powers and functions:

xxx xxx xxx

(b) To set the criteria and procedures for removing from service officials
and employees whose revenue collection falls short of the target by at
least seven and a half percent (7.5%), with due consideration of all
relevant factors affecting the level of collection as provided in the rules
and regulations promulgated under this Act, subject to civil service laws,
rules and regulations and compliance with substantive and procedural
due process: Provided, That the following exemptions shall apply:

1. Where the district or area of responsibility is newly-created, not exceeding

two years in operation, as has no historical record of collection performance
that can be used as basis for evaluation; and
2. Where the revenue or customs official or employee is a recent transferee in
the middle of the period under consideration unless the transfer was due to
nonperformance of revenue targets or potential nonperformance of revenue
targets: Provided, however, That when the district or area of responsibility
covered by revenue or customs officials or employees has suffered from
economic difficulties brought about by natural calamities or force majeure or
economic causes as may be determined by the Board, termination shall be
considered only after careful and proper review by the Board.

(c) To terminate personnel in accordance with the criteria adopted in the

preceding paragraph: Provided, That such decision shall be immediately
executory: Provided, further, That the application of the criteria for the
separation of an official or employee from service under this Act shall be
without prejudice to the application of other relevant laws on
accountability of public officers and employees, such as the Code of
Conduct and Ethical Standards of Public Officers and Employees and
the Anti-Graft and Corrupt Practices Act;

xxx xxx xxx (emphasis supplied)

Clearly, RA 9335 in no way violates the security of tenure of officials and

employees of the BIR and the BOC. The guarantee of security of tenure only
means that an employee cannot be dismissed from the service for causes
other than those provided by law and only after due process is accorded the
employee.31 In the case of RA 9335, it lays down a reasonable yardstick for
removal (when the revenue collection falls short of the target by at least 7.5%)
with due consideration of all relevant factors affecting the level of collection.
This standard is analogous to inefficiency and incompetence in the
performance of official duties, a ground for disciplinary action under civil
service laws.32 The action for removal is also subject to civil service laws,
rules and regulations and compliance with substantive and procedural due
process.

At any rate, this Court has recognized the following as sufficient standards:
"public interest," "justice and equity," "public convenience and welfare" and
"simplicity, economy and welfare."33 In this case, the declared policy of
optimization of the revenue-generation capability and collection of the BIR and
the BOC is infused with public interest.

Separation Of Powers

Section 12 of RA 9335 provides:

SEC. 12. Joint Congressional Oversight Committee. – There is hereby
created a Joint Congressional Oversight Committee composed of seven
Members from the Senate and seven Members from the House of
Representatives. The Members from the Senate shall be appointed by the
Senate President, with at least two senators representing the minority. The
Members from the House of Representatives shall be appointed by the
Speaker with at least two members representing the minority. After the
Oversight Committee will have approved the implementing rules and
regulations (IRR) it shall thereafter become functus officio and therefore cease
to exist.

The Joint Congressional Oversight Committee in RA 9335 was created for the
purpose of approving the implementing rules and regulations (IRR) formulated
by the DOF, DBM, NEDA, BIR, BOC and CSC. On May 22, 2006, it approved
the said IRR. From then on, it became functus officio and ceased to exist.
Hence, the issue of its alleged encroachment on the executive function of
implementing and enforcing the law may be considered moot and academic.

This notwithstanding, this might be as good a time as any for the Court to
confront the issue of the constitutionality of the Joint Congressional Oversight
Committee created under RA 9335 (or other similar laws for that matter).

The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the
concept of congressional oversight in Macalintal v. Commission on
Elections34 is illuminating:

Concept and bases of congressional oversight

Broadly defined, the power of oversight embraces all activities

undertaken by Congress to enhance its understanding of and influence
over the implementation of legislation it has enacted. Clearly, oversight
concerns post-enactment measures undertaken by Congress: (a) to
monitor bureaucratic compliance with program objectives, (b) to
determine whether agencies are properly administered, (c) to eliminate
executive waste and dishonesty, (d) to prevent executive usurpation of
legislative authority, and (d) to assess executive conformity with the
congressional perception of public interest.

The power of oversight has been held to be intrinsic in the grant of legislative
power itself and integral to the checks and balances inherent in a democratic
system of government. x x x x x x x x x
Over the years, Congress has invoked its oversight power with increased
frequency to check the perceived "exponential accumulation of power" by the
executive branch. By the beginning of the 20th century, Congress has
delegated an enormous amount of legislative authority to the executive branch
and the administrative agencies. Congress, thus, uses its oversight power to
make sure that the administrative agencies perform their functions within the
authority delegated to them. x x x x x x x x x

Categories of congressional oversight functions

The acts done by Congress purportedly in the exercise of its oversight powers
may be divided into three categories,
namely: scrutiny, investigation and supervision.

a. Scrutiny

Congressional scrutiny implies a lesser intensity and continuity of attention to

administrative operations. Its primary purpose is to determine economy and
efficiency of the operation of government activities. In the exercise of
legislative scrutiny, Congress may request information and report from the
other branches of government. It can give recommendations or pass
resolutions for consideration of the agency involved.

xxx xxx xxx

b. Congressional investigation

While congressional scrutiny is regarded as a passive process of looking at

the facts that are readily available, congressional investigation involves a
more intense digging of facts. The power of Congress to conduct investigation
is recognized by the 1987 Constitution under section 21, Article VI,
xxx xxx xxx

c. Legislative supervision

The third and most encompassing form by which Congress exercises its
oversight power is thru legislative supervision. "Supervision" connotes a
continuing and informed awareness on the part of a congressional committee
regarding executive operations in a given administrative area. While both
congressional scrutiny and investigation involve inquiry into past executive
branch actions in order to influence future executive branch
performance, congressional supervision allows Congress to scrutinize the
exercise of delegated law-making authority, and permits Congress to retain
part of that delegated authority.

Congress exercises supervision over the executive agencies through its veto
power. It typically utilizes veto provisions when granting the President or an
executive agency the power to promulgate regulations with the force of law.
These provisions require the President or an agency to present the proposed
regulations to Congress, which retains a "right" to approve or disapprove any
regulation before it takes effect. Such legislative veto provisions usually
provide that a proposed regulation will become a law after the expiration of a
certain period of time, only if Congress does not affirmatively disapprove of
the regulation in the meantime. Less frequently, the statute provides that a
proposed regulation will become law if Congress affirmatively approves it.

Supporters of legislative veto stress that it is necessary to maintain the

balance of power between the legislative and the executive branches of
government as it offers lawmakers a way to delegate vast power to the
executive branch or to independent agencies while retaining the option to
cancel particular exercise of such power without having to pass new
legislation or to repeal existing law. They contend that this arrangement
promotes democratic accountability as it provides legislative check on the
activities of unelected administrative agencies. One proponent thus explains:

It is too late to debate the merits of this delegation policy: the policy is too
deeply embedded in our law and practice. It suffices to say that the
complexities of modern government have often led Congress-whether by
actual or perceived necessity- to legislate by declaring broad policy goals and
general statutory standards, leaving the choice of policy options to the
discretion of an executive officer. Congress articulates legislative aims, but
leaves their implementation to the judgment of parties who may or may not
have participated in or agreed with the development of those aims.
Consequently, absent safeguards, in many instances the reverse of our
constitutional scheme could be effected: Congress proposes, the Executive
disposes. One safeguard, of course, is the legislative power to enact new
legislation or to change existing law. But without some means of overseeing
post enactment activities of the executive branch, Congress would be unable
to determine whether its policies have been implemented in accordance with
legislative intent and thus whether legislative intervention is appropriate.

Its opponents, however, criticize the legislative veto as undue encroachment

upon the executive prerogatives. They urge that any post-enactment
measures undertaken by the legislative branch should be limited to
scrutiny and investigation; any measure beyond that would undermine
the separation of powers guaranteed by the Constitution. They contend
that legislative veto constitutes an impermissible evasion of the President’s
veto authority and intrusion into the powers vested in the executive or judicial
branches of government. Proponents counter that legislative veto enhances
separation of powers as it prevents the executive branch and independent
agencies from accumulating too much power. They submit that reporting
requirements and congressional committee investigations allow Congress to
scrutinize only the exercise of delegated law-making authority. They do not
allow Congress to review executive proposals before they take effect and they
do not afford the opportunity for ongoing and binding expressions of
congressional intent. In contrast, legislative veto permits Congress to
participate prospectively in the approval or disapproval of "subordinate law" or
those enacted by the executive branch pursuant to a delegation of authority
by Congress. They further argue that legislative veto "is a necessary response
by Congress to the accretion of policy control by forces outside its chambers."
In an era of delegated authority, they point out that legislative veto "is the most
efficient means Congress has yet devised to retain control over the evolution
and implementation of its policy as declared by statute."

In Immigration and Naturalization Service v. Chadha, the U.S. Supreme

Court resolved the validity of legislative veto provisions. The case arose
from the order of the immigration judge suspending the deportation of Chadha
pursuant to § 244(c)(1) of the Immigration and Nationality Act. The United
States House of Representatives passed a resolution vetoing the suspension
pursuant to § 244(c)(2) authorizing either House of Congress, by resolution, to
invalidate the decision of the executive branch to allow a particular deportable
alien to remain in the United States. The immigration judge reopened the
deportation proceedings to implement the House order and the alien was
ordered deported. The Board of Immigration Appeals dismissed the alien’s
appeal, holding that it had no power to declare unconstitutional an act of
Congress. The United States Court of Appeals for Ninth Circuit held that the
House was without constitutional authority to order the alien’s deportation and
that § 244(c)(2) violated the constitutional doctrine on separation of powers.

On appeal, the U.S. Supreme Court declared § 244(c)(2) unconstitutional. But

the Court shied away from the issue of separation of powers and instead
held that the provision violates the presentment clause and bicameralism. It
held that the one-house veto was essentially legislative in purpose and effect.
As such, it is subject to the procedures set out in Article I of the Constitution
requiring the passage by a majority of both Houses and presentment to the
President. x x x x x x x x x

Two weeks after the Chadha decision, the Court upheld, in memorandum
decision, two lower court decisions invalidating the legislative veto provisions
in the Natural Gas Policy Act of 1978 and the Federal Trade Commission
Improvement Act of 1980. Following this precedence, lower courts invalidated
statutes containing legislative veto provisions although some of these
provisions required the approval of both Houses of Congress and thus met the
bicameralism requirement of Article I. Indeed, some of these veto provisions
were not even exercised.35(emphasis supplied)

In Macalintal, given the concept and configuration of the power of

congressional oversight and considering the nature and powers of a
constitutional body like the Commission on Elections, the Court struck down
the provision in RA 9189 (The Overseas Absentee Voting Act of 2003)
creating a Joint Congressional Committee. The committee was tasked not
only to monitor and evaluate the implementation of the said law but also to
review, revise, amend and approve the IRR promulgated by the Commission
on Elections. The Court held that these functions infringed on the
constitutional independence of the Commission on Elections.36

With this backdrop, it is clear that congressional oversight is not

unconstitutional per se, meaning, it neither necessarily constitutes an
encroachment on the executive power to implement laws nor undermines the
constitutional separation of powers. Rather, it is integral to the checks and
balances inherent in a democratic system of government. It may in fact even
enhance the separation of powers as it prevents the over-accumulation of
power in the executive branch.

However, to forestall the danger of congressional encroachment "beyond the

legislative sphere," the Constitution imposes two basic and related constraints
on Congress.37 It may not vest itself, any of its committees or its members
with either executive or judicial power.38 And, when it exercises its legislative
power, it must follow the "single, finely wrought and exhaustively considered,
procedures" specified under the Constitution,39 including the procedure for
enactment of laws and presentment.

Thus, any post-enactment congressional measure such as this should be

limited to scrutiny and investigation. In particular, congressional oversight
must be confined to the following:
(1) scrutiny based primarily on Congress’ power of appropriation and the
budget hearings conducted in connection with it, its power to ask heads of
departments to appear before and be heard by either of its Houses on any
matter pertaining to their departments and its power of confirmation40 and

(2) investigation and monitoring41 of the implementation of laws pursuant to

the power of Congress to conduct inquiries in aid of legislation.42

Any action or step beyond that will undermine the separation of powers
guaranteed by the Constitution. Legislative vetoes fall in this class.

Legislative veto is a statutory provision requiring the President or an

administrative agency to present the proposed implementing rules and
regulations of a law to Congress which, by itself or through a committee
formed by it, retains a "right" or "power" to approve or disapprove such
regulations before they take effect. As such, a legislative veto in the form of a
congressional oversight committee is in the form of an inward-turning
delegation designed to attach a congressional leash (other than through
scrutiny and investigation) to an agency to which Congress has by law initially
delegated broad powers.43 It radically changes the design or structure of the
Constitution’s diagram of power as it entrusts to Congress a direct role in
enforcing, applying or implementing its own laws.44

Congress has two options when enacting legislation to define national policy
within the broad horizons of its legislative competence.45 It can itself formulate
the details or it can assign to the executive branch the responsibility for
making necessary managerial decisions in conformity with those
standards.46 In the latter case, the law must be complete in all its essential
terms and conditions when it leaves the hands of the legislature.47 Thus, what
is left for the executive branch or the concerned administrative agency when it
formulates rules and regulations implementing the law is to fill up details
(supplementary rule-making) or ascertain facts necessary to bring the law into
actual operation (contingent rule-making).48

Administrative regulations enacted by administrative agencies to implement

and interpret the law which they are entrusted to enforce have the force of law
and are entitled to respect.49 Such rules and regulations partake of the nature
of a statute50 and are just as binding as if they have been written in the statute
itself. As such, they have the force and effect of law and enjoy the
presumption of constitutionality and legality until they are set aside with finality
in an appropriate case by a competent court.51 Congress, in the guise of
assuming the role of an overseer, may not pass upon their legality by
subjecting them to its stamp of approval without disturbing the calculated
balance of powers established by the Constitution. In exercising discretion to
approve or disapprove the IRR based on a determination of whether or not
they conformed with the provisions of RA 9335, Congress arrogated judicial
power unto itself, a power exclusively vested in this Court by the Constitution.

Considered Opinion of
Mr. Justice Dante O. Tinga

Moreover, the requirement that the implementing rules of a law be subjected

to approval by Congress as a condition for their effectivity violates the cardinal
constitutional principles of bicameralism and the rule on presentment.52

Section 1, Article VI of the Constitution states:

Section 1. The legislative power shall be vested in the Congress of the

Philippines which shall consist of a Senate and a House of
Representatives, except to the extent reserved to the people by the provision
on initiative and referendum. (emphasis supplied)

Legislative power (or the power to propose, enact, amend and repeal
laws)53 is vested in Congress which consists of two chambers, the Senate and
the House of Representatives. A valid exercise of legislative power requires
the act of both chambers. Corrollarily, it can be exercised neither solely by
one of the two chambers nor by a committee of either or both chambers.
Thus, assuming the validity of a legislative veto, both a single-chamber
legislative veto and a congressional committee legislative veto are invalid.

Additionally, Section 27(1), Article VI of the Constitution provides:

Section 27. (1) Every bill passed by the Congress shall, before it
becomes a law, be presented to the President. If he approves the same, he
shall sign it, otherwise, he shall veto it and return the same with his objections
to the House where it originated, which shall enter the objections at large in its
Journal and proceed to reconsider it. If, after such reconsideration, two-thirds
of all the Members of such House shall agree to pass the bill, it shall be sent,
together with the objections, to the other House by which it shall likewise be
reconsidered, and if approved by two-thirds of all the Members of that House,
it shall become a law. In all such cases, the votes of each House shall be
determined by yeas or nays, and the names of the members voting for or
against shall be entered in its Journal. The President shall communicate his
veto of any bill to the House where it originated within thirty days after the date
of receipt thereof; otherwise, it shall become a law as if he had signed it.
(emphasis supplied)

Every bill passed by Congress must be presented to the President for

approval or veto. In the absence of presentment to the President, no bill
passed by Congress can become a law. In this sense, law-making under the
Constitution is a joint act of the Legislature and of the Executive. Assuming
that legislative veto is a valid legislative act with the force of law, it cannot take
effect without such presentment even if approved by both chambers of
Congress.

In sum, two steps are required before a bill becomes a law. First, it must be
approved by both Houses of Congress.54 Second, it must be presented to and
approved by the President.55 As summarized by Justice Isagani Cruz56 and Fr.
Joaquin G. Bernas, S.J.57, the following is the procedure for the approval of
bills:

A bill is introduced by any member of the House of Representatives or the

Senate except for some measures that must originate only in the former
chamber.

The first reading involves only a reading of the number and title of the
measure and its referral by the Senate President or the Speaker to the proper
committee for study.

The bill may be "killed" in the committee or it may be recommended for

approval, with or without amendments, sometimes after public hearings are
first held thereon. If there are other bills of the same nature or purpose, they
may all be consolidated into one bill under common authorship or as a
committee bill.

Once reported out, the bill shall be calendared for second reading. It is at this
stage that the bill is read in its entirety, scrutinized, debated upon and
amended when desired. The second reading is the most important stage in
the passage of a bill.

The bill as approved on second reading is printed in its final form and copies
thereof are distributed at least three days before the third reading. On the third
reading, the members merely register their votes and explain them if they are
allowed by the rules. No further debate is allowed.
Once the bill passes third reading, it is sent to the other chamber, where it will
also undergo the three readings. If there are differences between the versions
approved by the two chambers, a conference committee58 representing both
Houses will draft a compromise measure that if ratified by the Senate and the
House of Representatives will then be submitted to the President for his
consideration.

The bill is enrolled when printed as finally approved by the Congress,

thereafter authenticated with the signatures of the Senate President, the
Speaker, and the Secretaries of their respective chambers…59

The President’s role in law-making.

The final step is submission to the President for approval. Once approved, it
takes effect as law after the required publication.60

Where Congress delegates the formulation of rules to implement the law it

has enacted pursuant to sufficient standards established in the said law, the
law must be complete in all its essential terms and conditions when it leaves
the hands of the legislature. And it may be deemed to have left the hands of
the legislature when it becomes effective because it is only upon effectivity of
the statute that legal rights and obligations become available to those entitled
by the language of the statute. Subject to the indispensable requisite of
publication under the due process clause,61 the determination as to when a
law takes effect is wholly the prerogative of Congress.62 As such, it is only
upon its effectivity that a law may be executed and the executive branch
acquires the duties and powers to execute the said law. Before that point, the
role of the executive branch, particularly of the President, is limited to
approving or vetoing the law.63

From the moment the law becomes effective, any provision of law that
empowers Congress or any of its members to play any role in the
implementation or enforcement of the law violates the principle of separation
of powers and is thus unconstitutional. Under this principle, a provision that
requires Congress or its members to approve the implementing rules of a law
after it has already taken effect shall be unconstitutional, as is a provision that
allows Congress or its members to overturn any directive or ruling made by
the members of the executive branch charged with the implementation of the
law.

Following this rationale, Section 12 of RA 9335 should be struck down as

unconstitutional. While there may be similar provisions of other laws that may
be invalidated for failure to pass this standard, the Court refrains from
invalidating them wholesale but will do so at the proper time when an
appropriate case assailing those provisions is brought before us.64

The next question to be resolved is: what is the effect of the unconstitutionality
of Section 12 of RA 9335 on the other provisions of the law? Will it render the
entire law unconstitutional? No.

Section 13 of RA 9335 provides:

SEC. 13. Separability Clause. – If any provision of this Act is declared invalid
by a competent court, the remainder of this Act or any provision not affected
by such declaration of invalidity shall remain in force and effect.

In Tatad v. Secretary of the Department of Energy,65 the Court laid down the
following rules:

The general rule is that where part of a statute is void as repugnant to the
Constitution, while another part is valid, the valid portion, if separable from the
invalid, may stand and be enforced. The presence of a separability clause in a
statute creates the presumption that the legislature intended separability,
rather than complete nullity of the statute. To justify this result, the valid
portion must be so far independent of the invalid portion that it is fair to
presume that the legislature would have enacted it by itself if it had supposed
that it could not constitutionally enact the other. Enough must remain to make
a complete, intelligible and valid statute, which carries out the legislative
intent. x x x

The exception to the general rule is that when the parts of a statute are so
mutually dependent and connected, as conditions, considerations,
inducements, or compensations for each other, as to warrant a belief that the
legislature intended them as a whole, the nullity of one part will vitiate the rest.
In making the parts of the statute dependent, conditional, or connected with
one another, the legislature intended the statute to be carried out as a whole
and would not have enacted it if one part is void, in which case if some parts
are unconstitutional, all the other provisions thus dependent, conditional, or
connected must fall with them.

The separability clause of RA 9335 reveals the intention of the legislature to

isolate and detach any invalid provision from the other provisions so that the
latter may continue in force and effect. The valid portions can stand
independently of the invalid section. Without Section 12, the remaining
provisions still constitute a complete, intelligible and valid law which carries
out the legislative intent to optimize the revenue-generation capability and
collection of the BIR and the BOC by providing for a system of rewards and
sanctions through the Rewards and Incentives Fund and a Revenue
Performance Evaluation Board.

To be effective, administrative rules and regulations must be published in full if

their purpose is to enforce or implement existing law pursuant to a valid
delegation. The IRR of RA 9335 were published on May 30, 2006 in two
newspapers of general circulation66 and became effective 15 days
thereafter.67 Until and unless the contrary is shown, the IRR are presumed
valid and effective even without the approval of the Joint Congressional
Oversight Committee.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of

RA 9335 creating a Joint Congressional Oversight Committee to approve the
implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The
constitutionality of the remaining provisions of RA 9335 is UPHELD. Pursuant
to Section 13 of RA 9335, the rest of the provisions remain in force and effect.

SO ORDERED.

Puno, C.J., Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona,

Carpio-Morales, Azcuna, Tinga, Chico-Nazario, Velasco, Jr., Nachura, Reyes,
Leonardo-de-Castro, Brion, JJ., concur.

Footnotes

* Advocates and Adherents of Social Justice for School Teachers and Allied
Workers.
1
Under Rule 65 of the Rules of Court.
2
An Act to Improve Revenue Collection Performance of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC) Through the Creation of a
Rewards and Incentives Fund and of a Revenue Performance Evaluation
Board and for Other Purposes.
3
Section 2, RA 9335.
4
Section 3, id.
5
Section 4, id.
6
Section 6, id.
7
Section 7, id.
8
Section 11, id.
9
Section 12, id.
10
Cruz, Isagani, Philippine Constitutional Law, 1995 edition, p. 23.
11
Bernas, Joaquin, The 1987 Constitution of the Republic of the Philippines: A
Commentary, 1996 edition, pp. 848-849.
12
Cruz v. Secretary of Environment and Natural Resources, 400 Phil. 904
(2000). (Vitug, J., separate opinion)
13
See La Bugal-B’Laan Tribal Association, Inc. v. Ramos, G.R. No. 127882,
01 December 2004, 445 SCRA 1.
14
Tañada v. Angara, 338 Phil. 546 (1997).
15
Section 2, id.
16
Central Bank Employees Association, Inc. v. Bangko Sentral ng
Pilipinas, G.R. No. 148208, 15 December 2004, 446 SCRA 299.
17
173 U.S. 381 (1899).
18
74 U.S. 166 (1868).
19
Black’s Law Dictionary, Special De Luxe 5th Edition, West, p. 481.
20
158 Phil. 60 (1974).
21
Id. Citations omitted.
22
Ambros v. Commission on Audit, G.R. No. 159700, 30 June 2005, 462
SCRA 572.
23
Section 2, RA 9335.
24
Section 18, Chapter 4, Title II, Book IV, Administrative Code of 1987.
25
Section 23, id.
26
Pelaez v. Auditor General, 122 Phil. 965 (1965).
27
Eastern Shipping Lines, Inc. v. POEA, G.R. No. L-76633, 18 October 1988,
166 SCRA 533.
28
Cruz, Isagani, Philippine Political Law, 1991 edition, p. 97.
29
Panama Refining Co. v. Ryan, 293 U.S. 388 (1935), (Cardozo, J.,
dissenting).
30
Section 5, Rule II, Implementing Rules and Regulations of RA 9335.
31
De Guzman, Jr. v. Commission on Elections, 391 Phil. 70 (2000).
32
See Section 46(b)(8), Chapter 6, Title I, Subtitle A, Book V, Administrative
Code of 1987.
33
Equi-Asia Placement, Inc. v. Department of Foreign Affairs, G.R. No.
152214, 19 September 2006, 502 SCRA 295.
34
453 Phil. 586 (2003). Mr. Justice (now Chief Justice) Puno’s separate
opinion was adopted as part of the ponencia in this case insofar as it related
to the creation of and the powers given to the Joint Congressional Oversight
Committee.
35
Id. (italics in the original)
36
Id.
37
Metropolitan Washington Airports Authority v. Citizens for the Abatement of
Aircraft Noise, 501 U.S. 252 (1991).
38
Id.
39
Id.
40
See Mr. Justice (now Chief Justice) Puno’s separate opinion in Macalintal.
41
E.g., by requiring the regular submission of reports.
42
See Mr. Justice (now Chief Justice) Puno’s separate opinion in Macalintal.
43
See Tribe, Lawrence, I American Constitutional Law 131 (2000).
44
Id.
45
Id. at 141.
46
Metropolitan Washington Airports Authority v. Citizens for the Abatement of
Airport Noise, supra.
47
Edu v. Ericta, 146 Phil. 469 (1970).
48
Bernas, Joaquin, The 1987 Constitution of the Republic of the Philippines: A
Commentary, 2003 edition, p. 664 citing Wayman v. Southward, 10 Wheat 1
(1852) and The Brig Aurora, 7 Cr. 382 (1813)).
49
Eslao v. Commission on Audit, G.R. No. 108310, 01 September 1994, 236
SCRA 161; Sierra Madre Trust v. Secretary of Agriculture and Natural
Resources, 206 Phil. 310 (1983).
50
People v. Maceren, 169 Phil. 437 (1977).
51
See Eslao v. Commission on Audit, supra.
52
It is also for these reasons that the United States Supreme Court struck
down legislative vetoes as unconstitutional in Immigration and Naturalization
Service v. Chadha (462 U.S. 919 [1983]).
53
Nachura, Antonio B., Outline Reviewer in Political Law, 2006 edition, p. 236.
54
Section 26, Article VI of the Constitution provides:

Section 26. (1) Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.
(2) No bill passed by either House shall become a law unless it has passed
three readings on separate days, and printed copies thereof in its final form
have been distributed to its Members three days before its passage, except
when the President certifies to the necessity of its immediate enactment to
meet a public calamity or emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote thereon shall be taken
immediately thereafter, and the yeas and nays entered in the Journal.
55
See Bernas, supra note 48, p. 762.
56
Philippine Political Law, 2002 edition, Central Lawbook Publishing Co., Inc.,
pp. 152-153.
57
The Philippine Constitution for Ladies, Gentlemen And Others, 2007 edition,
Rex Bookstore, Inc., pp. 118-119.
58
The conference committee consists of members nominated by both
Houses. The task of the conference committee, however, is not strictly limited
to reconciling differences. Jurisprudence also allows the committee to insert
new provision[s] not found in either original provided these are germane to the
subject of the bill. Next, the reconciled version must be presented to both
Houses for ratification. (Id.)
59
Supra note 56.
60
Supra note 57.
61
See Section 1, Article III of the Constitution. In Tañada v. Tuvera (230 Phil.
528), the Court also cited Section 6, Article III which recognizes "the right of
the people to information on matters of public concern."
62
As much is recognized in Article 2 of the Civil Code which states that "Laws
shall take effect after fifteen days following the completion of their publication
either in the Official Gazette, or in a newspaper of general circulation in the
Philippines, unless it is otherwise provided." Tañada recognized that "unless it
is otherwise provided" referred to the date of effectivity. Simply put, a law
which is silent as to its effectivity date takes effect fifteen days following
publication, though there is no impediment for Congress to provide for a
different effectivity date.
63
It has been suggested by Mr. Justice Antonio T. Carpio that Section 12 of
RA 9335 is likewise unconstitutional because it violates the principle of
separation of powers, particularly with respect to the executive and the
legislative branches. Implicit in this claim is the proposition that the ability of
the President to promulgate implementing rules to legislation is inherent in the
executive branch.

There has long been a trend towards the delegation of powers, especially of
legislative powers, even if not expressly permitted by the Constitution. (I.
Cortes, Administrative Law, at 12-13.) Delegation of legislative powers is
permissible unless the delegation amounts to a surrender or abdication of
powers. (Id.) Recent instances of delegated legislative powers upheld by the
Court include the power of the Departments of Justice and Health to
promulgate rules and regulations on lethal injection (Echegaray v. Secretary
of Justice, 358 Phil. 410 [1998]); the power of the Secretary of Health to
phase out blood banks (Beltran v. Secretary of Health, G.R. No. 133640,
133661, & 139147, 25 November 2005, 476 SCRA 168); and the power of the
Departments of Finance and Labor to promulgate Implementing Rules to the
Migrant Workers and Overseas Filipinos Act. (Equi-Asia Placement v.DFA,
G.R. No. 152214, 19 September 2006, 502 SCRA 295.)

The delegation to the executive branch of the power to formulate and enact
implementing rules falls within the class of permissible delegation of legislative
powers. Most recently, in Executive Secretary v. Southwing Heavy
Industries (G.R. Nos. 164171, 164172 &168741, 20 February 2006, 482
SCRA 673), we characterized such delegation as "confer[ring] upon the
President quasi-legislative power which may be defined as the authority
delegated by the law-making body to the administrative body to adopt
rules and regulations intended to carry out the provisions of the law and
implement legislative policy." (Id., at 686, citing Cruz, Philippine Administrative
Law, 2003 Edition, at 24.) Law book authors are likewise virtually unanimous
that the power of the executive branch to promulgate implementing rules
arises from legislative delegation. Justice Nachura defines the nature of the
rule-making power of administrative bodies in the executive branch as "the
exercise of delegated legislative power, involving no discretion as to what
the law shall be, but merely the authority to fix the details in the execution or
enforcement of a policy set out in the law itself." (A.E. Nachura, Outline
Reviewer in Political Law [2000 ed.], at 272.) He further explains that rules
and regulations that "fix the details in the execution and enforcement of a
policy set out in the law" are called "supplementary or detailed legislation".
(Id., at 273.) Other commentators such as Fr. Bernas (Bernas, supra note 48,
at 611), De Leon and De Leon (H. De Leon & H. De Leon, Jr., Administrative
Law: Text and Cases (1998 ed), at 79-80; citing 1 Am. Jur. 2d 891) and
Carlos Cruz (C. Cruz, Philippine Administrative Law (1998 ed), at 19-20, 22,
23) have similar views.

The Congress may delegate the power to craft implementing rules to the
President in his capacity as the head of the executive branch, which is tasked
under the Constitution to execute the law. In effecting this delegation, and as
with any other delegation of legislative powers, Congress may impose
conditions or limitations which the executive branch is bound to observe. A
usual example is the designation by Congress of which particular members of
the executive branch should participate in the drafting of the implementing
rules. This set-up does not offend the separation of powers between the
branches as it is sanctioned by the delegation principle.

Apart from whatever rule-making power that Congress may delegate to the
President, the latter has inherent ordinance powers covering the executive
branch as part of the power of executive control ("The President shall have
control of all the executive departments, bureaus and offices…" Section 17,
Article VII, Constitution.). By its nature, this ordinance power does not require
or entail delegation from Congress. Such faculty must be distinguished from
the authority to issue implementing rules to legislation which does not inhere
in the presidency but instead, as explained earlier, is delegated by Congress.

The marked distinction between the President’s power to issue intrabranch

orders and instructions or internal rules for the executive branch, on one hand,
and the President’s authority by virtue of legislative delegation to issue
implementing rules to legislation, on the other, is embodied in the rules on
publication, as explained in Tañada v. Tuvera (G.R. No. L-63915, 29
December 1986, 146 SCRA 446). The Court held therein that internal
regulations applicable to members of the executive branch, "that is, regulating
only the personnel of the administrative agency and not the public, need not
be published. Neither is publication required of the so-called letters of
instructions issued by administrative superiors concerning the rules or
guidelines to be followed by their subordinates in the performance of their
duties." (Id., at 454) The dispensation with publication in such instances is
rooted in the very nature of the issuances, i.e., they are not binding on the
public. They neither create rights nor impose obligations which are
enforceable in court. Since they are issued pursuant to the power of executive
control, and are directed only at members of the executive branch, there is no
constitutional need for their publication.

However, when the presidential issuance does create rights and obligations
affecting the public at large, as implementing rules certainly do, then
publication is mandatory. In explaining why this is so, the Court went as far as
to note that such rules and regulations are designed "to enforce or implement
existing law pursuant to a valid delegation." (Id., at 254.) The Court would
not have spoken of "valid delegation" if indeed the power to issue such
rules was inherent in the presidency. Moreover, the creation of legal rights
and obligations is legislative in character, and the President in whom
legislative power does not reside cannot confer legal rights or impose
obligations on the people absent the proper empowering statute. Thus, any
presidential issuance which purports to bear such legal effect on the public,
such as implementing rules to legislation, can only emanate from a legislative
delegation to the President.

The prevalent practice in the Office of the President is to issue orders or

instructions to officials of the executive branch regarding the enforcement or
carrying out of the law. This practice is valid conformably with the President’s
power of executive control. The faculty to issue such orders or instructions is
distinct from the power to promulgate implementing rules to legislation. The
latter originates from a different legal foundation – the delegation of legislative
power to the President.

Justice Carpio cites an unconventional interpretation of the ordinance power

of the President, particularly the power to issue executive orders, as set forth
in the Administrative Code of 1987. Yet, by practice, implementing rules are
never contained in executive orders. They are, instead, contained in a
segregate promulgation, usually entitled "Implementing Rules and
Regulations," which derives not from the Administrative Code, but rather from
the specific grants in the legislation itself sought to be implemented.

His position does not find textual support in the Administrative Code itself.
Section 2, Chapter 2, Title 1, Book III of the Code, which defines "Executive
orders" as "[a]cts of the President providing for rules of a general or
permanent character in the implementation or execution of constitutional
or statutory powers". Executive orders are not the vehicles for rules of a
general or permanent character in the implementation or execution of laws.
They are the vehicle for rules of a general or permanent character in
the implementation or execution of the constitutional or statutory
powers of the President himself. Since by definition, the statutory powers of
the President consist of a specific delegation by Congress, it necessarily
follows that the faculty to issue executive orders to implement such delegated
authority emanates not from any inherent executive power but from the
authority delegated by Congress.
It is not correct, as Justice Carpio posits, that without implementing rules,
legislation cannot be faithfully executed by the executive branch. Many of our
key laws, including the Civil Code, the Revised Penal Code, the Corporation
Code, the Land Registration Act and the Property Registration Decree, do not
have Implementing Rules. It has never been suggested that the enforcement
of these laws is unavailing, or that the absence of implementing rules to these
laws indicates insufficient statutory details that should preclude their
enforcement. (See DBM v.Kolonwel Trading, G.R. Nos. 175608, 175616 &
175659, 8 June 2007, 524 SCRA 591, 603.)

In rejecting the theory that the power to craft implementing rules is executive
in character and reaffirming instead that such power arises from a legislative
grant, the Court asserts that Congress retains the power to impose statutory
conditions in the drafting of implementing rules, provided that such conditions
do not take on the character of a legislative veto. Congress can designate
which officers or entities should participate in the drafting of implementing
rules. It may impose statutory restraints on the participants in the drafting of
implementing rules, and the President is obliged to observe such restraints on
the executive officials, even if he thinks they are unnecessary or foolhardy.
The unconstitutional nature of the legislative veto does not however bar
Congress from imposing conditions which the President must comply with in
the execution of the law. After all, the President has the constitutional duty to
faithfully execute the laws.
64
This stance is called for by judicial restraint as well as the presumption of
constitutionality accorded to laws enacted by Congress, a co-equal branch. It
is also finds support in Pelaez v. Auditor General (122 Phil. 965 [1965]).
65
346 Phil. 321 (1997). Emphasis in the original.
66
In particular, the Philippine Star and the Manila Standard.
67
Section 36, IRR of RA 9335.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-4376 May 22, 1953

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,

vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY
MAYOR, all of the City of Manila, respondents-appellees.

Teotimo A. Roja for appellants.

City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serrano for appellees.

BAUTISTA ANGELO, J.:

This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the
Municipal Board of the City of Manila on March 24, 1950.

The Association of Customs Brokers, Inc., which is composed of all brokers and public service
operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said
association, also a public service operator of the trucks in said City, challenge the validity of said
ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license tax
which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance offends
against the rule of uniformity of taxation; and (3) it constitutes double taxation.

The respondents, represented by the city fiscal, contend on their part that the challenged ordinance
imposes a property tax which is within the power of the City of Manila to impose under its Revised
Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question does not violate the
rule of uniformity of taxation, nor does it constitute double taxation.

The issues having been joined, the Court of First Instance of Manila sustained the validity of the
ordinance and dismissed the petition. Hence this appeal.

The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority
conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board
the power "to tax motor and other vehicles operating within the City of Manila the provisions of any
existing law to the contrary notwithstanding." It is contended that this power is broad enough to
confer upon the City of Manila the power to enact an ordinance imposing the property tax on motor
vehicles operating within the city limits.

In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the
Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power of the municipal
corporation to impose tax on motor vehicles operating in any highway in the Philippines. The
pertinent provisions are contained in section 70 (b) which provide in part:

No further fees than those fixed in this Act shall be exacted or demanded by any public
highway, bridge or ferry, or for the exercise of the profession of chauffeur, or for the
operation of any motor vehicle by the owner thereof: Provided, however, That nothing in this
Act shall be construed to exempt any motor vehicle from the payment of any lawful and
equitable insular, local or municipal property tax imposed thereupon. . . .

Note that under the above section no fees may be exacted or demanded for the operation of any
motor vehicle other than those therein provided, the only exception being that which refers to the
property tax which may be imposed by a municipal corporation. This provision is all-inclusive in that
sense that it applies to all motor vehicles. In this sense, this provision should be construed as limiting
the broad grant of power conferred upon the City of Manila by its Charter to impose taxes. When
section 18 of said Charter provides that the City of Manila can impose a tax on motor vehicles
operating within its limit, it can only refers to property tax as a different interpretation would make it
repugnant to the Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance Levying a
Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it
provides that the tax should be 1 per cent ad valorem per annum. It also provides that the proceeds
of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be expended
exclusively for the repair, maintenance and improvement of its streets and bridges." Considering the
wording used in the ordinance in the light in the purpose for which the tax is created, can we
consider the tax thus imposed as property tax, as claimed by respondents?

While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities,
the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered
from the context show that it is in effect an excise or a license tax. Thus, it has been held that "If a
tax is in its nature an excise, it does not become a property tax because it is proportioned in amount
to the value of the property used in connection with the occupation, privilege or act which is taxed.
Every excise necessarily must finally fall upon and be paid by property and so may be indirectly a
tax upon property; but if it is really imposed upon the performance of an act, enjoyment of a
privilege, or the engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It
has also been held that

The character of the tax as a property tax or a license or occupation tax must be determined
by its incidents, and from the natural and legal effect of the language employed in the act or
ordinance, and not by the name by which it is described, or by the mode adopted in fixing its
amount. If it is clearly a property tax, it will be so regarded, even though nominally and in
form it is a license or occupation tax; and, on the other hand, if the tax is levied upon persons
on account of their business, it will be construed as a license or occupation tax, even though
it is graduated according to the property used in such business, or on the gross receipts of
the business. (37 C.J., 172)

The ordinance in question falls under the foregoing rules. While it refers to property tax and it is
fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles operating
within the City of Manila with the main purpose of raising funds to be expended exclusively for the
repair, maintenance and improvement of the streets and bridges in said city. This is precisely what
the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason that, under said Act,
municipal corporation already participate in the distribution of the proceeds that are raised for the
same purpose of repairing, maintaining and improving bridges and public highway (section 73 of the
Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees for
the same purpose. It is for this reason that we believe that the ordinance in question merely imposes
a license fee although under the cloak of an ad valorem tax to circumvent the prohibition above
adverted to.

It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our
Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating within the City
of Manila. It does not distinguish between a motor vehicle for hire and one which is purely for private
use. Neither does it distinguish between a motor vehicle registered in the City of Manila and one
registered in another place but occasionally comes to Manila and uses its streets and public
highways. The distinction is important if we note that the ordinance intends to burden with the tax
only those registered in the City of Manila as may be inferred from the word "operating" used therein.
The word "operating" denotes a connotation which is akin to a registration, for under the Motor
Vehicle Law no motor vehicle can be operated without previous payment of the registration fees.
There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a
temporary stay or for short errands, and it cannot be denied that they contribute in no small degree
to the deterioration of the streets and public highway. The fact that they are benefited by their use
they should also be made to share the corresponding burden. And yet such is not the case. This is
an inequality which we find in the ordinance, and which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.

Paras, C.J., Bengzon and Tuason, JJ., concur.

Montemayor, Reyes, Jugo and Labrador, JJ., concur in the result.

Separate Opinions

FERIA, J., concurring:

I concur on the ground that it is a license tax.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-6093 February 24, 1954

THE SHELL CO. OF P.I., LTD., plaintiff-appellant,

vs.
E. E. VAÑO, as Municipal Treasurer of the Municipality of Cordova, Province of
Cebu, defendant-appellee.

C.J. Johnston and A.P. Deen for appellant.

Provincial Fiscal Jose C. Borromeo and Assistant Provincial Fiscal Ananias V. Maribao for appellee.

PADILLA, J.:

The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10,
series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the privilege
of installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for local deposits
in drums of combustible and inflammable materials and an annual tax of P200 for tin can factories;
and No. 11, series of 1948, which imposes an annual tax of P150 on tin can factories having a
maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a foreign corporation, filed
suit for the refund of the taxes paid by it, on the ground that the ordinances imposing such taxes
are ultra vires. The defendant denies that they are so. The controversy was submitted for judgment
upon stipulation of facts which reads as follows:

Come now the parties in the above-entitled case by their undersigned attorneys and hereby
agree to the following stipulation of facts:

1. That the parties admit the allegations contained in Paragraph 1 of the Amended Complaint
referring to residence, personality, and capacity of the parties except the fact that E.E. Vaño
is now replaced by F.A. Corbo as Municipal Treasurer of Cordova, Cebu;
 2. That the parties admit the allegations contained in paragraph 2 of the Amended
Complaint. Official Receipts Nos. A-1280606, A-37607422, A-3769852 and A-21030388 are
herein marked as Exhibits A, B, C, and D, respectively for the plaintiff;

3. That the parties admit that payments made under Exhibits B, C, and D were all under
protest and plaintiff admits that Exhibit A was not paid under protest;

4. That the parties admit that Official Receipt No. A-1280606 for P40 and Official Receipt No.
A-3760742 for P200 were collected by the defendant by virtue of Ordinance No. 9, (Secs. E-
4 and E-6, respectively) under Resolution No. 31, series of 1947, enacted December 15,
1947, approved by the Provincial Board of Cebu in its Resolution No. 644, series of 1948.
Copy of said Ordinance No. 9, series of 1947, is herein marked as Exhibit "E" for the plaintiff,
and as Exhibit "I" for the defendant;

5. That the parties admit that Official Receipt No. A-3760852 for P150 was paid for taxes
imposed on Installation Managers, collected by the defendant by virtue of Ordinance No. 10
(section 3, E-12) under Resolution No. 38, series of 1946, approved by the Provincial Board
of Cebu in its Resolution No. 1070, series of 1946. Copy of .said Ordinance No. 10, series of
1946 is marked as Exhibit "F" for the plaintiff and as Exhibit "2" for the defendant;

6. That the parties admit that Official Receipt No. A-21030388 for P5,450 was paid by
plaintiff and that said amount was collected by defendant by virtue of Ordinance No. 11,
series of 1948 (under Resolution No. 46) enacted August 31, 1948 and approved by the
Provincial Board of Cebu in its Resolution No. 115, series of 1949, and same was approved
by the Honorable Secretary of Finance under the provisions of section 4 of Commonwealth
Act No. 472. Copy of said Ordinance No. 11, series of 1948 is herein marked as Exhibit "G"
for the plaintiff, and Exhibit "3" for the defendant. Copy of the approval of the Honorable
Secretary of Finance of the same Ordinance is herein marked as Exhibit "4" for the
defendant.

Wherefore, aside from oral evidence which may be offered by the parties and other points
not covered by this stipulation, this case is hereby submitted upon the foregoing agreed facts
and record of evidence.

Cebu City, Philippines, January 20, 1950.

THE SHELL CO. OF P.I. LTD. C.D. JOHNSTON & A.P. DEEN
(Sgd.) L. DE BLECHYNDEN (Sgd.) A.P. DEEN
Plaintiff Attys. for the plaintiff

THE MUNICIPALITY OF CORDOVA (Sgd.) JOSE C. BORROMEO

(Sgd.) F.A. CORBO Provincial Fiscal
Defendant Attorney for the defendant

(Record on Appeal, pp. 15-18.)

The parties reserved the right to introduce parole evidence but no such evidence was submitted by
either party. From the judgment holding the ordinances valid and dismissing the complaint the
plaintiff has appealed.
It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local
deposit in drums of combustible and inflammable materials," and of P200 "for tin factory" was
adopted under and pursuant to section 2244 of the Revised Administrative Code, which provides
that the municipal council in the exercise of the regulative authority may require any person engaged
in any business or occupation, such as "storing combustible or explosive materials" or "the
conducting of any other business of an unwholesome, obnoxious, offensive, or dangerous
character," to obtain a permit for which a reasonable fee, in no case to exceed P10 per annum, may
be charged, the annual tax of P40 and P200 are unauthorized and illegal. The permit and the fee
referred to may be required and charged by the Municipal Council of Cordova in the exercise of its
regulative authority, whereas the ordinance which imposes the taxes in question was adopted under
and pursuant to the provisions of Commonwealth Act No. 472, which authorizes municipal councils
and municipal district councils "to impose license taxes upon persons engaged in any occupation or
business, or exercising privileges in the municipality or municipal district, by requiring them to secure
licenses at rates fixed by the municipal council or municipal district council," which shall be just and
uniform but not "percentage taxes and taxes on specified articles." Likewise, Ordinance No. 10,
series of 1946, which imposes an annual tax of P150 on "installation manager" comes under the
provisions of Commonwealth Act No. 472. But it is claimed that "installation manager" is a
designation made by the plaintiff and such designation cannot be deemed to be a "calling" as
defined in section 178 of the National Internal Revenue Code (Com. Act No. 466), and that the
installation manager employed by the plaintiff is a salaried employee which may not be taxed by the
municipal council under the provisions of Commonwealth Act No. 472. This contention is without
merit, because even if the installation manager is a salaried employee of the plaintiff, still it is an
occupation "and one occupation or line of business does not become exempt by being conducted
with some other occupation or business for which such tax has been paid'1 and the occupation tax
must be paid "by each individual engaged in a calling subject thereto."2 And pursuant to section 179
of the National Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any
person from any tax, . . . provided by law or ordinance in places where such . . . occupation in . . .
regulated by municipal law, nor shall the payment of any such tax be held to prohibit any municipality
from placing a tax upon the same . . . occupation, for local purposes, where the imposition of such
tax is authorized by law." It is true that, according to the stipulation of facts, Ordinance No. 10, series
of 1946, was approved by the Provincial Board of Cebu in its Resolution No. 1070, series of 1946,
and that it does not appear that it was approved by the Department of Finance, as provided for and
required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of municipal tax being in
excess of P50 per annum. But at this point on the approval of the Department of Finance was not
raised in the court below, it cannot be raised for the first time on appeal. The issue joined by the
parties in their pleadings and the point raised by the plaintiff is that the municipal council was not
empowered to adopt the ordinance and not that it was not approved by the Department of Finance.
The fact that it was not stated in the stipulation of facts justifies the presumption that the ordinance
was approved in accordance with law.

The contention that the ordinance is discriminatory and hostile because there is no other person in
the locality who exercises such "designation" or occupation is also without merit, because the fact
that there is no other person in the locality who exercises such a "designation" or calling does not
make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any person
or firm who exercises such calling or occupation named or designated as "installation manager."

Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can factories
having a maximum annual output capacity of 30,000 tin cans which, according to the stipulation of
facts, was approved by the Provincial Board of Cebu and the Department of Finance, is valid and
lawful, because it is neither a percentage tax nor one on specified articles which are the only
exceptions provided in section 1, Commonwealth Act No. 472. Neither does it fall under any of the
prohibitions provided for in section 3 of the same Act. Specific taxes enumerated in the National
Internal Revenue Code are those that are imposed upon "things manufactured or produced in the
Philippines for domestic sale or consumption" and upon "things imported from the United States and
foreign countries," such as distilled spirits, domestic denatured alcohol, fermented liquors, products
of tobacco, cigars and cigarettes, matches, mechanical lighters, firecrackers, skimmed milk,
manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing
cards, sacharine.3 And it is not a percentage tax because it is tax on business and the maximum
annual output capacity is not a percentage, because it is not a share or a tax based on the amount
of the proceeds realized out of the sale of the tin cans manufactured therein but on the business of
manufacturing tin cans having a maximum annual output capacity of 30,000 tin cans.

In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, the real party in interest is not the municipal treasurer but the municipality concerned that
is empowered to sue and be sued.4

The judgment appealed from is hereby affirmed, with costs against the appellant.

Paras, C.J., Pablo, Bengzon, Montemayor, Reyes, Jugo, Bautista Angelo, Labrador, Concepcion
and Diokno, JJ.,concur.

Footnotes

1 Section 178, National Internal Revenue Code (Com. Act. No. 466).

2 Supra.

3 Section 178, National Internal Revenue Code (Com. Act No. 466).

4 Tan vs. De la Fuente et al., 90 Phil., 519.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 81311 June 30, 1988

KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC.,

HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C.
VILLANUEVA, petitioners,
vs.
HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent.

G.R. No. 81820 June 30, 1988

KILUSANG MAYO UNO LABOR CENTER (KMU), its officers and affiliated labor federations
and alliances, petitioners,
vs.
THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, THE COMMISSIONER OF
INTERNAL REVENUE, and SECRETARY OF BUDGET, respondents.

G.R. No. 81921 June 30, 1988

INTEGRATED CUSTOMS BROKERS ASSOCIATION OF THE PHILIPPINES and JESUS B.

BANAL, petitioners,
vs.
The HON. COMMISSIONER, BUREAU OF INTERNAL REVENUE, respondent.

G.R. No. 82152 June 30, 1988

RICARDO C. VALMONTE, petitioner,

vs.
THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF INTERNAL
REVENUE and SECRETARY OF BUDGET, respondent.

Franklin S. Farolan for petitioner Kapatiran in G.R. No. 81311.

Jaime C. Opinion for individual petitioners in G.R. No. 81311.

Banzuela, Flores, Miralles, Rañeses, Sy, Taquio and Associates for petitioners in G.R. No 81820.

Union of Lawyers and Advocates for Peoples Right collaborating counsel for petitioners in G.R. No
81820.

Jose C. Leabres and Joselito R. Enriquez for petitioners in G.R. No. 81921.

PADILLA, J.:

These four (4) petitions, which have been consolidated because of the similarity of the main issues involved therein, seek to nullify Executive
Order No. 273 (EO 273, for short), issued by the President of the Philippines on 25 July 1987, to take effect on 1 January 1988, and which
amended certain sections of the National Internal Revenue Code and adopted the value-added tax (VAT, for short), for being unconstitutional
in that its enactment is not alledgedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates
the due process and equal protection clauses and other provisions of the 1987 Constitution.

The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have
failed to show justification for the exercise of its judicial powers, viz. (1) the existence of an
appropriate case; (2) an interest, personal and substantial, of the party raising the constitutional
questions; (3) the constitutional question should be raised at the earliest opportunity; and (4) the
question of constitutionality is directly and necessarily involved in a justiciable controversy and its
resolution is essential to the protection of the rights of the parties. According to the Solicitor General,
only the third requisite — that the constitutional question should be raised at the earliest opportunity
— has been complied with. He also questions the legal standing of the petitioners who, he contends,
are merely asking for an advisory opinion from the Court, there being no justiciable controversy for
resolution.

Objections to taxpayers' suit for lack of sufficient personality standing, or interest are, however, in the
main procedural matters. Considering the importance to the public of the cases at bar, and in
keeping with the Court's duty, under the 1987 Constitution, to determine wether or not the other
branches of government have kept themselves within the limits of the Constitution and the laws and
that they have not abused the discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of these petitions.

But, before resolving the issues raised, a brief look into the tax law in question is in order.

The VAT is a tax levied on a wide range of goods and services. It is a tax on the value, added by
every seller, with aggregate gross annual sales of articles and/or services, exceeding P200,00.00, to
his purchase of goods and services, unless exempt. VAT is computed at the rate of 0% or 10% of
the gross selling price of goods or gross receipts realized from the sale of services.

The VAT is said to have eliminated privilege taxes, multiple rated sales tax on manufacturers and
producers, advance sales tax, and compensating tax on importations. The framers of EO 273 that it
is principally aimed to rationalize the system of taxing goods and services; simplify tax
administration; and make the tax system more equitable, to enable the country to attain economic
recovery.

The VAT is not entirely new. It was already in force, in a modified form, before EO 273 was issued.
As pointed out by the Solicitor General, the Philippine sales tax system, prior to the issuance of EO
273, was essentially a single stage value added tax system computed under the "cost subtraction
method" or "cost deduction method" and was imposed only on original sale, barter or exchange of
articles by manufacturers, producers, or importers. Subsequent sales of such articles were not
subject to sales tax. However, with the issuance of PD 1991 on 31 October 1985, a 3% tax was
imposed on a second sale, which was reduced to 1.5% upon the issuance of PD 2006 on 31
December 1985, to take effect 1 January 1986. Reduced sales taxes were imposed not only on the
second sale, but on every subsequent sale, as well. EO 273 merely increased the VAT on every
sale to 10%, unless zero-rated or exempt.

Petitioners first contend that EO 273 is unconstitutional on the Ground that the President had no
authority to issue EO 273 on 25 July 1987.

The contention is without merit.

It should be recalled that under Proclamation No. 3, which decreed a Provisional Constitution, sole
legislative authority was vested upon the President. Art. II, sec. 1 of the Provisional Constitution
states:

Sec. 1. Until a legislature is elected and convened under a new Constitution, the
President shall continue to exercise legislative powers.

On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution for the
Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article
XVIII, sec. 6 of said Constitution, hereafter referred to as the 1987 Constitution, provides:

Sec. 6. The incumbent President shall continue to exercise legislative powers until
the first Congress is convened.

It should be noted that, under both the Provisional and the 1987 Constitutions, the President is
vested with legislative powers until a legislature under a new Constitution is convened. The first
Congress, created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence,
the enactment of EO 273 on 25 July 1987, two (2) days before Congress convened on 27 July 1987,
was within the President's constitutional power and authority to legislate.

Petitioner Valmonte claims, additionally, that Congress was really convened on 30 June 1987 (not
27 July 1987). He contends that the word "convene" is synonymous with "the date when the elected
members of Congress assumed office."

The contention is without merit. The word "convene" which has been interpreted to mean "to call
together, cause to assemble, or convoke," 1 is clearly different from assumption of office by
the individual members of Congress or their taking the oath of office. As an example, we call to mind
the interim National Assembly created under the 1973 Constitution, which had not been "convened"
but some members of the body, more particularly the delegates to the 1971 Constitutional
Convention who had opted to serve therein by voting affirmatively for the approval of said
Constitution, had taken their oath of office.

To uphold the submission of petitioner Valmonte would stretch the definition of the word "convene" a
bit too far. It would also defeat the purpose of the framers of the 1987 Constitutional and render
meaningless some other provisions of said Constitution. For example, the provisions of Art. VI, sec.
15, requiring Congress to convene once every year on the fourth Monday of July for its regular
session would be a contrariety, since Congress would already be deemed to be in session after the
individual members have taken their oath of office. A portion of the provisions of Art. VII, sec. 10,
requiring Congress to convene for the purpose of enacting a law calling for a special election to elect
a President and Vice-President in case a vacancy occurs in said offices, would also be a surplusage.
The portion of Art. VII, sec. 11, third paragraph, requiring Congress to convene, if not in session, to
decide a conflict between the President and the Cabinet as to whether or not the President and the
Cabinet as to whether or not the President can re-assume the powers and duties of his office, would
also be redundant. The same is true with the portion of Art. VII, sec. 18, which requires Congress to
convene within twenty-four (24) hours following the declaration of martial law or the suspension of
the privilage of the writ of habeas corpus.

The 1987 Constitution mentions a specific date when the President loses her power to legislate. If
the framers of said Constitution had intended to terminate the exercise of legislative powers by the
President at the beginning of the term of office of the members of Congress, they should have so
stated (but did not) in clear and unequivocal terms. The Court has not power to re-write the
Constitution and give it a meaning different from that intended.

The Court also finds no merit in the petitioners' claim that EO 273 was issued by the President in
grave abuse of discretion amounting to lack or excess of jurisdiction. "Grave abuse of discretion" has
been defined, as follows:

Grave abuse of discretion" implies such capricious and whimsical exercise of

judgment as is equivalent to lack of jurisdiction (Abad Santos vs. Province of Tarlac,
38 Off. Gaz. 834), or, in other words, where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and it must be so patent
and gross as to amount 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. (Tavera-Luna, Inc.
vs. Nable, 38 Off. Gaz. 62). 2

Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an
arbitrary or despotic manner by reason of passion or personal hostility. It appears that a
comprehensive study of the VAT had been extensively discussed by this framers and other
government agencies involved in its implementation, even under the past administration. As the
Solicitor General correctly sated. "The signing of E.O. 273 was merely the last stage in the exercise
of her legislative powers. The legislative process started long before the signing when the data were
gathered, proposals were weighed and the final wordings of the measure were drafted, revised and
finalized. Certainly, it cannot be said that the President made a jump, so to speak, on the Congress,
two days before it convened." 3

Next, the petitioners claim that EO 273 is oppressive, discriminatory, unjust and regressive, in
violation of the provisions of Art. VI, sec. 28(1) of the 1987 Constitution, which states:

Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation.

The petitioners" assertions in this regard are not supported by facts and circumstances to warrant
their conclusions. They have failed to adequately show that the VAT is oppressive, discriminatory or
unjust. Petitioners merely rely upon newspaper articles which are actually hearsay and have
evidentiary value. To justify the nullification of a law. there must be a clear and unequivocal breach
of the Constitution, not a doubtful and argumentative implication. 4

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. The court,
in City of Baguio vs. De Leon, 5 said:

... In Philippine Trust Company v. Yatco (69 Phil. 420), Justice Laurel, speaking for
the Court, stated: "A tax is considered uniform when it operates with the same force
and effect in every place where the subject may be found."

There was no occasion in that case to consider the possible effect on such a
constitutional requirement where there is a classification. The opportunity came in
Eastern Theatrical Co. v. Alfonso (83 Phil. 852, 862). Thus: "Equality and uniformity
in taxation means that all taxable articles or kinds of property of the same class shall
be taxed at the same rate. The taxing power has the authority to make reasonable
and natural classifications for purposes of taxation; . . ." About two years later,
Justice Tuason, speaking for this Court in Manila Race Horses Trainers Assn. v. de
la Fuente (88 Phil. 60, 65) incorporated the above excerpt in his opinion and
continued; "Taking everything into account, the differentiation against which the
plaintiffs complain conforms to the practical dictates of justice and equity and is not
discriminatory within the meaning of the Constitution."

To satisfy this requirement then, all that is needed as held in another case decided
two years later, (Uy Matias v. City of Cebu, 93 Phil. 300) is that the statute or
ordinance in question "applies equally to all persons, firms and corporations placed in
similar situation." This Court is on record as accepting the view in a leading American
case (Carmichael v. Southern Coal and Coke Co., 301 US 495) that "inequalities
which result from a singling out of one particular class for taxation or exemption
infringe no constitutional limitation." (Lutz v. Araneta, 98 Phil. 148, 153).

The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public,
which are not exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons
engage in business with an aggregate gross annual sales exceeding P200,000.00. Small
corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax
are sales of farm and marine products, spared as they are from the incidence of the VAT, are
expected to be relatively lower and within the reach of the general public. 6

The Court likewise finds no merit in the contention of the petitioner Integrated Customs Brokers
Association of the Philippines that EO 273, more particularly the new Sec. 103 (r) of the National
Internal Revenue Code, unduly discriminates against customs brokers. The contested provision
states:

Sec. 103. Exempt transactions. — The following shall be exempt from the value-
added tax:

xxx xxx xxx

(r) Service performed in the exercise of profession or calling (except customs

brokers) subject to the occupation tax under the Local Tax Code, and professional
services performed by registered general professional partnerships;

The phrase "except customs brokers" is not meant to discriminate against customs brokers. It was
inserted in Sec. 103(r) to complement the provisions of Sec. 102 of the Code, which makes the
services of customs brokers subject to the payment of the VAT and to distinguish customs brokers
from other professionals who are subject to the payment of an occupation tax under the Local Tax
Code. Pertinent provisions of Sec. 102 read:

Sec. 102. Value-added tax on sale of services. — There shall be levied, assessed
and collected, a value-added tax equivalent to 10% percent of gross receipts derived
by any person engaged in the sale of services. The phrase sale of services" means
the performance of all kinds of services for others for a fee, remuneration or
consideration, including those performed or rendered by construction and service
contractors; stock, real estate, commercial, customs and immigration brokers;
lessors of personal property; lessors or distributors of cinematographic films; persons
engaged in milling, processing, manufacturing or repacking goods for others; and
similar services regardless of whether or not the performance thereof call for the
exercise or use of the physical or mental faculties: ...

With the insertion of the clarificatory phrase "except customs brokers" in Sec. 103(r), a potential
conflict between the two sections, (Secs. 102 and 103), insofar as customs brokers are concerned,
is averted.

At any rate, the distinction of the customs brokers from the other professionals who are subject to
occupation tax under the Local Tax Code is based upon material differences, in that the activities of
customs brokers (like those of stock, real estate and immigration brokers) partake more of a
business, rather than a profession and were thus subjected to the percentage tax under Sec. 174 of
the National Internal Revenue Code prior to its amendment by EO 273. EO 273 abolished the
percentage tax and replaced it with the VAT. If the petitioner Association did not protest the
classification of customs brokers then, the Court sees no reason why it should protest now.

The Court takes note that EO 273 has been in effect for more than five (5) months now, so that the
fears expressed by the petitioners that the adoption of the VAT will trigger skyrocketing of prices of
basic commodities and services, as well as mass actions and demonstrations against the VAT
should by now be evident. The fact that nothing of the sort has happened shows that the fears and
apprehensions of the petitioners appear to be more imagined than real. It would seem that the VAT
is not as bad as we are made to believe.
In any event, if petitioners seriously believe that the adoption and continued application of the VAT
are prejudicial to the general welfare or the interests of the majority of the people, they should seek
recourse and relief from the political branches of the government. The Court, following the time-
honored doctrine of separation of powers, cannot substitute its judgment for that of the President as
to the wisdom, justice and advisability of the adoption of the VAT. The Court can only look into and
determine whether or not EO 273 was enacted and made effective as law, in the manner required
by, and consistent with, the Constitution, and to make sure that it was not issued in grave abuse of
discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no reason to
impede its application or continued implementation.

WHEREFORE, the petitions are DISMISSED. Without pronouncement as to costs.

SO ORDERED.

Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento,
Cortes and Griño-Aquino, JJ., concur.

Gutierrez, Jr. and Medialdea, JJ., are on leave.

Footnotes

1 Application of Lamb, 169 A2d 822, 830, 67 N.J. Super. 29, affd. 170 A2d 34, 34
n.J. 448, citing 18 C.J.S. Convene p. 37.

2 Alafriz vs. Nable, 72 Phil. 278, 280.

3 Comment on petition, G.R. No. 82152, p. 18.

4 Peralta vs. Comelec, L-47771 and others, March 11, 1978, 82 SCRA 30, 55.

5 134 Phil. 912, 919-920.

6 EO 273 enumerates in its sec. 102 zero-rated sales and in its sec. 103 transactions
exempt from the VAT.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 109289 October 3, 1994

RUFINO R. TAN, petitioner,

vs.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF FINANCE & JOSE U. ONG, as
COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 109446 October 3, 1994

CARAG, CABALLES, JAMORA AND SOMERA LAW OFFICES, CARLO A. CARAG,

MANUELITO O. CABALLES, ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA,
JR., petitioners,
vs.
RAMON R. DEL ROSARIO, in his capacity as SECRETARY OF FINANCE and JOSE U. ONG, in
his capacity as COMMISSIONER OF INTERNAL REVENUE, respondents.

Rufino R. Tan for and in his own behalf.

Carag, Caballes, Jamora & Zomera Law Offices for petitioners in G.R. 109446.

VITUG, J.:

These two consolidated special civil actions for prohibition challenge, in G.R. No. 109289, the
constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income
Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and,
in
G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public
respondents pursuant to said law.

Petitioners claim to be taxpayers adversely affected by the continued implementation of the

amendatory legislation.

In G.R. No. 109289, it is asserted that the enactment of Republic Act

No. 7496 violates the following provisions of the Constitution:

Article VI, Section 26(1) — Every bill passed by the Congress shall embrace only
one subject which shall be expressed in the title thereof.

Article VI, Section 28(1) — The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.

Article III, Section 1 — No person shall be deprived of . . . property without due

process of law, nor shall any person be denied the equal protection of the laws.

In G.R. No. 109446, petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that
public respondents have exceeded their rule-making authority in applying SNIT to general
professional partnerships.

The Solicitor General espouses the position taken by public respondents.

The Court has given due course to both petitions. The parties, in compliance with the Court's
directive, have filed their respective memoranda.
G.R. No. 109289

Petitioner contends that the title of House Bill No. 34314, progenitor of Republic Act No. 7496, is a
misnomer or, at least, deficient for being merely entitled, "Simplified Net Income Taxation Scheme
for the Self-Employed
and Professionals Engaged in the Practice of their Profession" (Petition in G.R. No. 109289).

The full text of the title actually reads:

An Act Adopting the Simplified Net Income Taxation Scheme For The Self-Employed
and Professionals Engaged In The Practice of Their Profession, Amending Sections
21 and 29 of the National Internal Revenue Code, as Amended.

The pertinent provisions of Sections 21 and 29, so referred to, of the National Internal Revenue
Code, as now amended, provide:

Sec. 21. Tax on citizens or residents. —

xxx xxx xxx

(f) Simplified Net Income Tax for the Self-Employed and/or Professionals Engaged in
the Practice of Profession. — A tax is hereby imposed upon the taxable net income
as determined in Section 27 received during each taxable year from all sources,
other than income covered by paragraphs (b), (c), (d) and (e) of this section by every
individual whether
a citizen of the Philippines or an alien residing in the Philippines who is self-
employed or practices his profession herein, determined in accordance with the
following schedule:

Not over P10,000 3%

Over P10,000 P300 + 9%

but not over P30,000 of excess over P10,000

Over P30,000 P2,100 + 15%

but not over P120,00 of excess over P30,000

Over P120,000 P15,600 + 20%

but not over P350,000 of excess over P120,000

Over P350,000 P61,600 + 30%

of excess over P350,000

Sec. 29. Deductions from gross income. — In computing taxable income subject to
tax under Sections 21(a), 24(a), (b) and (c); and 25 (a)(1), there shall be allowed as
deductions the items specified in paragraphs (a) to (i) of this
section: Provided, however, That in computing taxable income subject to tax under
Section 21 (f) in the case of individuals engaged in business or practice of
profession, only the following direct costs shall be allowed as deductions:

(a) Raw materials, supplies and direct labor;

 (b) Salaries of employees directly engaged in activities in the course of or pursuant to
the business or practice of their profession;

(c) Telecommunications, electricity, fuel, light and water;

(d) Business rentals;

(e) Depreciation;

(f) Contributions made to the Government and accredited relief organizations for the
rehabilitation of calamity stricken areas declared by the President; and

(g) Interest paid or accrued within a taxable year on loans contracted from accredited
financial institutions which must be proven to have been incurred in connection with
the conduct of a taxpayer's profession, trade or business.

For individuals whose cost of goods sold and direct costs are difficult to determine, a
maximum of forty per cent (40%) of their gross receipts shall be allowed as
deductions to answer for business or professional expenses as the case may be.

On the basis of the above language of the law, it would be difficult to accept petitioner's view that the
amendatory law should be considered as having now adopted a gross income, instead of as having
still retained the net income, taxation scheme. The allowance for deductible items, it is true, may
have significantly been reduced by the questioned law in comparison with that which has prevailed
prior to the amendment; limiting, however, allowable deductions from gross income is neither
discordant with, nor opposed to, the net income tax concept. The fact of the matter is still that
various deductions, which are by no means inconsequential, continue to be well provided under the
new law.

Article VI, Section 26(1), of the Constitution has been envisioned so as (a) to prevent log-rolling
legislation intended to unite the members of the legislature who favor any one of unrelated subjects
in support of the whole act, (b) to avoid surprises or even fraud upon the legislature, and (c) to fairly
apprise the people, through such publications of its proceedings as are usually made, of the subjects
of legislation.1 The above objectives of the fundamental law appear to us to have been sufficiently
met. Anything else would be to require a virtual compendium of the law which could not have been
the intendment of the constitutional mandate.

Petitioner intimates that Republic Act No. 7496 desecrates the constitutional requirement that
taxation "shall be uniform and equitable" in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it imposes the tax on corporations and
partnerships. The contention clearly forgets, however, that such a system of income taxation has
long been the prevailing rule even prior to Republic Act No. 7496.

Uniformity of taxation, like the kindred concept of equal protection, merely requires that all subjects
or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities (Juan
Luna Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend classification as long as:
(1) the standards that are used therefor are substantial and not arbitrary, (2) the categorization is
germane to achieve the legislative purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification applies equally well to all those belonging to
the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs. PAGCOR, 197 SCRA 52).
What may instead be perceived to be apparent from the amendatory law is the legislative intent to
increasingly shift the income tax system towards the schedular approach2 in the income taxation of
individual taxpayers and to maintain, by and large, the present global treatment3 on taxable
corporations. We certainly do not view this classification to be arbitrary and inappropriate.

Petitioner gives a fairly extensive discussion on the merits of the law, illustrating, in the process,
what he believes to be an imbalance between the tax liabilities of those covered by the amendatory
law and those who are not. With the legislature primarily lies the discretion to determine the nature
(kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This court
cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative
judgment. Of course, where a tax measure becomes so unconscionable and unjust as to amount to
confiscation of property, courts will not hesitate to strike it down, for, despite all its plenitude, the
power to tax cannot override constitutional proscriptions. This stage, however, has not been
demonstrated to have been reached within any appreciable distance in this controversy before us.

Having arrived at this conclusion, the plea of petitioner to have the law declared unconstitutional for
being violative of due process must perforce fail. The due process clause may correctly be invoked
only when there is a clear contravention of inherent or constitutional limitations in the exercise of the
tax power. No such transgression is so evident to us.

G.R. No. 109446

The several propositions advanced by petitioners revolve around the question of whether or not
public respondents have exceeded their authority in promulgating Section 6, Revenue Regulations
No. 2-93, to carry out Republic Act No. 7496.

The questioned regulation reads:

Sec. 6. General Professional Partnership — The general professional partnership

(GPP) and the partners comprising the GPP are covered by R. A. No. 7496. Thus, in
determining the net profit of the partnership, only the direct costs mentioned in said
law are to be deducted from partnership income. Also, the expenses paid or incurred
by partners in their individual capacities in the practice of their profession which are
not reimbursed or paid by the partnership but are not considered as direct cost, are
not deductible from his gross income.

The real objection of petitioners is focused on the administrative interpretation of public respondents
that would apply SNIT to partners in general professional partnerships. Petitioners cite the pertinent
deliberations in Congress during its enactment of Republic Act No. 7496, also quoted by the
Honorable Hernando B. Perez, minority floor leader of the House of Representatives, in the latter's
privilege speech by way of commenting on the questioned implementing regulation of public
respondents following the effectivity of the law, thusly:

MR. ALBANO, Now Mr. Speaker, I would like to get the correct
impression of this bill. Do we speak here of individuals who are
earning, I mean, who earn through business enterprises and
therefore, should file an income tax return?

MR. PEREZ. That is correct, Mr. Speaker. This does not apply to
corporations. It applies only to individuals.

(See Deliberations on H. B. No. 34314, August 6, 1991, 6:15 P.M.; Emphasis ours).
 Other deliberations support this position, to wit:

MR. ABAYA . . . Now, Mr. Speaker, did I hear the Gentleman from
Batangas say that this bill is intended to increase collections as far as
individuals are concerned and to make collection of taxes equitable?

MR. PEREZ. That is correct, Mr. Speaker.

(Id. at 6:40 P.M.; Emphasis ours).

In fact, in the sponsorship speech of Senator Mamintal Tamano on the Senate

version of the SNITS, it is categorically stated, thus:

This bill, Mr. President, is not applicable to business corporations or

to partnerships; it is only with respect to individuals and professionals.
(Emphasis ours)

The Court, first of all, should like to correct the apparent misconception that general professional
partnerships are subject to the payment of income tax or that there is a difference in the tax
treatment between individuals engaged in business or in the practice of their respective professions
and partners in general professional partnerships. The fact of the matter is that a general
professional partnership, unlike an ordinary business partnership (which is treated as a corporation
for income tax purposes and so subject to the corporate income tax), is not itself an income
taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but
on the partners themselves in their individual capacity computed on their distributive shares of
partnership profits. Section 23 of the Tax Code, which has not been amended at all by Republic Act
7496, is explicit:

Sec. 23. Tax liability of members of general professional partnerships. — (a) Persons
exercising a common profession in general partnership shall be liable for income tax
only in their individual capacity, and the share in the net profits of the general
professional partnership to which any taxable partner would be entitled whether
distributed or otherwise, shall be returned for taxation and the tax paid in accordance
with the provisions of this Title.

(b) In determining his distributive share in the net income of the partnership, each
partner —

(1) Shall take into account separately his distributive share of the
partnership's income, gain, loss, deduction, or credit to the extent
provided by the pertinent provisions of this Code, and

(2) Shall be deemed to have elected the itemized deductions, unless

he declares his distributive share of the gross income undiminished
by his share of the deductions.

There is, then and now, no distinction in income tax liability between a person who practices his
profession alone or individually and one who does it through partnership (whether registered or not)
with others in the exercise of a common profession. Indeed, outside of the gross compensation
income tax and the final tax on passive investment income, under the present income tax system all
individuals deriving income from any source whatsoever are treated in almost invariably the same
manner and under a common set of rules.

We can well appreciate the concern taken by petitioners if perhaps we were to consider Republic Act
No. 7496 as an entirely independent, not merely as an amendatory, piece of legislation. The view
can easily become myopic, however, when the law is understood, as it should be, as only forming
part of, and subject to, the whole income tax concept and precepts long obtaining under the National
Internal Revenue Code. To elaborate a little, the phrase "income taxpayers" is an all embracing term
used in the Tax Code, and it practically covers all persons who derive taxable income. The law, in
levying the tax, adopts the most comprehensive tax situs of nationality and residence of the taxpayer
(that renders citizens, regardless of residence, and resident aliens subject to income tax liability on
their income from all sources) and of the generally accepted and internationally recognized income
taxable base (that can subject non-resident aliens and foreign corporations to income tax on their
income from Philippine sources). In the process, the Code classifies taxpayers into four main
groups, namely: (1) Individuals, (2) Corporations, (3) Estates under Judicial Settlement and (4)
Irrevocable Trusts (irrevocable both as to corpus and as to income).

Partnerships are, under the Code, either "taxable partnerships" or "exempt partnerships." Ordinarily,
partnerships, no matter how created or organized, are subject to income tax (and thus alluded to as
"taxable partnerships") which, for purposes of the above categorization, are by law assimilated to be
within the context of, and so legally contemplated as, corporations. Except for few variances, such
as in the application of the "constructive receipt rule" in the derivation of income, the income tax
approach is alike to both juridical persons. Obviously, SNIT is not intended or envisioned, as so
correctly pointed out in the discussions in Congress during its deliberations on Republic Act 7496,
aforequoted, to cover corporations and partnerships which are independently subject to the payment
of income tax.

"Exempt partnerships," upon the other hand, are not similarly identified as corporations nor even
considered as independent taxable entities for income tax purposes. A
general professional partnership is such an example.4 Here, the partners themselves, not the
partnership (although it is still obligated to file an income tax return [mainly for administration and
data]), are liable for the payment of income tax in their individual capacity computed on their
respective and distributive shares of profits. In the determination of the tax liability, a partner does so
as an individual, and there is no choice on the matter. In fine, under the Tax Code on income
taxation, the general professional partnership is deemed to be no more than a mere mechanism or a
flow-through entity in the generation of income by, and the ultimate distribution of such income to,
respectively, each of the individual partners.

Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing
rule as now so modified by Republic Act
No. 7496 on basically the extent of allowable deductions applicable to all individual income
taxpayers on their non-compensation income. There is no evident intention of the law, either before
or after the amendatory legislation, to place in an unequal footing or in significant variance the
income tax treatment of professionals who practice their respective professions individually and of
those who do it through a general professional partnership.

WHEREFORE, the petitions are DISMISSED. No special pronouncement on costs.

SO ORDERED.

Narvasa, C.J., Cruz, Feliciano, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Kapunan and Mendoza, JJ., concur.
Padilla and Bidin, JJ., are on leave.

#Footnotes

1 Justice Isagani A. Cruz on Philippine Political Law 1993 edition, pp. 146-147, citing
with approval Cooley on Constitutional Limitations.

2 A system employed where the income tax treatment varies and made to depend on
the kind or category of taxable income of the taxpayer.

3 A system where the tax treatment views indifferently the tax base and generally
treats in common all categories of taxable income of the taxpayer.

4 A general professional partnership, in this context, must be formed for the sole
purpose of exercising a common profession, no part of the income of which is
derived from its engaging in any trade business; otherwise, it is subject to tax as an
ordinary business partnership or, which is to say, as a corporation and thereby
subject to the corporate income tax. The only other exempt partnership is a joint
venture for undertaking construction projects or engaging in petroleum operations
pursuant to an operating agreement under a service contract with the government
(see Sections 20, 23 and 24, National Internal Revenue Code).

G.R. No. L-75697

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION,
CITY MAYOR and CITY TREASURER OF MANILA, respondents.

Nelson Y. Ng for petitioner.

The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.:

This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on
behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential
Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The
Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days
after completion of its publication in the Official Gazette.

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:
 SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette,
ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to sales tax.

On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers,
Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers
Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and that their "survival and very existence is
threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to
file their Comment in Intervention.

The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows:

1. WHEREAS, the proliferation and unregulated circulation of videograms including, among

others, videotapes, discs, cassettes or any technical improvement or variation thereof, have
greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp
decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the
collection of sales, contractor's specific, amusement and other taxes, thereby resulting in
substantial losses estimated at P450 Million annually in government revenues;

2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum
from rentals, sales and disposition of videograms, and such earnings have not been
subjected to tax, thereby depriving the Government of approximately P180 Million in taxes
each year;

3. WHEREAS, the unregulated activities of videogram establishments have also affected the
viability of the movie industry, particularly the more than 1,200 movie houses and theaters
throughout the country, and occasioned industry-wide displacement and unemployment due
to the shutdown of numerous moviehouses and theaters;

4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the

Government to create an environment conducive to growth and development of all business
industries, including the movie industry which has an accumulated investment of about P3
Billion;

5. WHEREAS, proper taxation of the activities of videogram establishments will not only
alleviate the dire financial condition of the movie industry upon which more than 75,000
families and 500,000 workers depend for their livelihood, but also provide an additional
source of revenue for the Government, and at the same time rationalize the heretofore
uncontrolled distribution of videograms;

6. WHEREAS, the rampant and unregulated showing of obscene videogram features

constitutes a clear and present danger to the moral and spiritual well-being of the youth, and
impairs the mandate of the Constitution for the State to support the rearing of the youth for
civic efficiency and the development of moral character and promote their physical,
intellectual, and social well-being;

7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb
these blatant malpractices which have flaunted our censorship and copyright laws;
 8. WHEREAS, in the face of these grave emergencies corroding the moral values of the
people and betraying the national economic recovery program, bold emergency measures
must be adopted with dispatch; ... (Numbering of paragraphs supplied).

Petitioner's attack on the constitutionality of the DECREE rests on the following grounds:

1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local
government is a RIDER and the same is not germane to the subject matter thereof;

2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the Constitution;

3. There is no factual nor legal basis for the exercise by the President of the vast powers
conferred upon him by Amendment No. 6;

4. There is undue delegation of power and authority;

5. The Decree is an ex-post facto law; and

6. There is over regulation of the video industry as if it were a nuisance, which it is not.

We shall consider the foregoing objections in seriatim.

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The requirement is satisfied if all
the parts of the statute are related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject and title. 2An act having a
single general subject, indicated in the title, may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of carrying
out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill
should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be
given practical rather than technical construction. 5

Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a
rider is without merit. That section reads, inter alia:

Section 10. Tax on Sale, Lease or Disposition of Videograms. — Notwithstanding any

provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the
purchase price or rental rate, as the case may be, for every sale, lease or disposition of a
videogram containing a reproduction of any motion picture or audiovisual program. Fifty
percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other
fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED,
That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the
Metropolitan Manila Commission.

xxx xxx xxx

The foregoing provision is allied and germane to, and is reasonably necessary for the
accomplishment of, the general object of the DECREE, which is the regulation of the video industry
through the Videogram Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one
of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose
of the DECREE to include taxation of the video industry in order to regulate and rationalize the
heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those
preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE,
which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the
purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to
express all those objectives in the title or that the latter be an index to the body of the DECREE. 7

2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive,
confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not
cease to be valid merely because it regulates, discourages, or even definitely deters the activities
taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest
in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its
constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10

The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by
the realization that earnings of videogram establishments of around P600 million per annum have
not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is
an end-user tax, imposed on retailers for every videogram they make available for public viewing. It
is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-
owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus
shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all
videogram operators.

The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for
regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of
intellectual property rights, and the proliferation of pornographic video tapes. And while it was also
an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

The public purpose of a tax may legally exist even if the motive which impelled the legislature
to impose the tax was to favor one industry over another. 11

It is inherent in the power to tax that a state be free to select the subjects of taxation, and it
has been repeatedly held that "inequities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional limitation". 12 Taxation has been
made the implement of the state's police power.13

At bottom, the rate of tax is a matter better addressed to the taxing legislature.

3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by
the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in
the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to
act adequately on any matter for any reason that in his judgment requires immediate action, he may,
in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which
shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the exercise of legislative power under the said
Amendment still pends resolution in several other cases, we reserve resolution of the question
raised at the proper time.

4. Neither can it be successfully argued that the DECREE contains an undue delegation of
legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the
direct assistance of other agencies and units of the government and deputize, for a fixed and limited
period, the heads or personnel of such agencies and units to perform enforcement functions for the
Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion
as to its execution, enforcement, and implementation. "The true distinction is between the delegation
of power to make the law, which necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution to be exercised under and in pursuance of the
law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very
language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and
limited period" with the deputized agencies concerned being "subject to the direction and control of
the BOARD." That the grant of such authority might be the source of graft and corruption would not
stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will
not be without adequate remedy in law.

5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other
categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or
different testimony than the law required at the time of the commission of the offense." It is
petitioner's position that Section 15 of the DECREE in providing that:

All videogram establishments in the Philippines are hereby given a period of forty-five (45)
days after the effectivity of this Decree within which to register with and secure a permit from
the BOARD to engage in the videogram business and to register with the BOARD all their
inventories of videograms, including videotapes, discs, cassettes or other technical
improvements or variations thereof, before they could be sold, leased, or otherwise disposed
of. Thereafter any videogram found in the possession of any person engaged in the
videogram business without the required proof of registration by the BOARD, shall be prima
facie evidence of violation of the Decree, whether the possession of such videogram be for
private showing and/or public exhibition.

raises immediately a prima facie evidence of violation of the DECREE when the required proof of
registration of any videogram cannot be presented and thus partakes of the nature of an ex post
facto law.

The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et
al. 15

... it is now well settled that "there is no constitutional objection to the passage of a law
providing that the presumption of innocence may be overcome by a contrary presumption
founded upon the experience of human conduct, and enacting what evidence shall be
sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856
[1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL
LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been
proved that they shall be prima facie evidence of the existence of the guilt of the accused
 and shift the burden of proof provided there be a rational connection between the facts
proved and the ultimate facts presumed so that the inference of the one from proof of the
others is not unreasonable and arbitrary because of lack of connection between the two in
common experience". 16

Applied to the challenged provision, there is no question that there is a rational connection between
the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the
DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in
character.

6. We do not share petitioner's fears that the video industry is being over-regulated and being eased
out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation
was apparent. While the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair
competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought
about by the availability of unclassified and unreviewed video tapes containing pornographic films
and films with brutally violent sequences; and losses in government revenues due to the drop in
theatrical attendance, not to mention the fact that the activities of video establishments are virtually
untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in
business. 17

The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video
industry. On the contrary, video establishments are seen to have proliferated in many places
notwithstanding the 30% tax imposed.

In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of
the DECREE. These considerations, however, are primarily and exclusively a matter of legislative
concern.

Only congressional power or competence, not the wisdom of the action taken, may be the
basis for declaring a statute invalid. This is as it ought to be. The principle of separation of
powers has in the main wisely allocated the respective authority of each department and
confined its jurisdiction to such a sphere. There would then be intrusion not allowable under
the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would
substitute its own. If there be adherence to the rule of law, as there ought to be, the last
offender should be courts of justice, to which rightly litigants submit their controversy
precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack
on the validity of the challenged provision likewise insofar as there may be objections, even if
valid and cogent on its wisdom cannot be sustained. 18

In fine, petitioner has not overcome the presumption of validity which attaches to a challenged
statute. We find no clear violation of the Constitution which would justify us in pronouncing
Presidential Decree No. 1987 as unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed.

No costs.

SO ORDERED.
Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.

Footnotes

1
Section 19[1], Article VIII, 1973 Constitution; Section 26[l] Article VI, 1987 Constitution.

2
Sumulong vs. COMELEC, No. 48609, October 10, 1941, 73 Phil. 288; Cordero vs. Hon.
Jose Cabatuando, et al., L-14542, Oct. 31, 1962,6 SCRA 418.

3
Public Service Co., Recktenwald, 290 III. 314, 8 ALR 466, 470.

4
Government vs. Hongkong & Shanghai Banking Corporation, No. 44257, November 22,
1938, 66 Phil. 483; Cordero vs. Cabatuando, et al., supra.

5
Sumulong vs. Commission on Elections, supra.

6
United States vs. Sanchez, 340 U.S. 42, 44, 1950, cited in Bernas, Philippines
Constitutional Law, p. 594.

7
People vs. Carlos, L-239, June 30, 1947, 78 Phil. 535.

8
U.S. vs. Sanchez, supra.

9
II Cooley, A Treatise on the Constitutional Limitations, p. 986.

10
ibid., p. 987.

11
Magnano Co. vs. Hamilton, 292, U.S. 40.

Lutz vs. Araneta, L-7859, December 22, 1955, 98 Phil. 148, citing Carmichael vs. Southern
12

Coal and Coke Co., 301 U.S. 495, 81 L. Ed. 1245.

13
ibid., citing Great Atl. and Pacific Tea Co. vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S.
vs. Butler, 297 U.S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4 Wheat, 316,4 L. Ed. 579.

14
Cincinnati, W & Z.R. Co. vs. Clinton County Comrs (1852) 1 Ohio St. 88.

15
G. R. No. L-40195, May 29, 1987.

ibid., citing People vs. Mingoa, supra, See also U.S. vs. Luling No. 11162, August 12,
16

1916,34 Phil. 725.

17
Solicitor General's Comments, p. 102, Rollo.

18
Morfe vs. Mutuc, L-20387, January 31, 1968, 22 SCRA 424, 450-451.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23794 February 17, 1968

ORMOC SUGAR COMPANY, INC., plaintiff-appellant,

vs.
THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON.
ESTEBAN C. CONEJOS as Mayor of Ormoc City and ORMOC CITY, defendants-appellees.

Ponce Enrile, Siguion Reyna, Montecillo & Belo and Teehankee, Carreon & Tañada for plaintiff-
appellant.
Ramon O. de Veyra for defendants-appellees.

BENGZON, J.P., J.:

On January 29, 1964, the Municipal Board of Ormoc City passed 1 Ordinance No. 4, Series of
1964, imposing "on any and all productions of centrifugal sugar milled at the Ormoc Sugar
Company, Inc., in Ormoc City a municipal tax equivalent to one per centum (1%) per export sale to
the United States of America and other foreign countries." 2

Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. on March
20, 1964 for P7,087.50 and on April 20, 1964 for P5,000, or a total of P12,087.50.

On June 1, 1964, Ormoc Sugar Company, Inc. filed before the Court of First Instance of Leyte,
with service of a copy upon the Solicitor General, a complaint 3 against the City of Ormoc as well as
its Treasurer, Municipal Board and Mayor, alleging that the afore-stated ordinance is unconstitutional
for being violative of the equal protection clause (Sec. 1[1], Art. III, Constitution) and the rule of
uniformity of taxation (Sec. 22[1]), Art. VI, Constitution), aside from being an export tax forbidden
under Section 2287 of the Revised Administrative Code. It further alleged that the tax is neither a
production nor a license tax which Ormoc City under Section 15-kk of its charter and under Section 2
of Republic Act 2264, otherwise known as the Local Autonomy Act, is authorized to impose; and that
the tax amounts to a customs duty, fee or charge in violation of paragraph 1 of Section 2 of Republic
Act 2264 because the tax is on both the sale and export of sugar.

Answering, the defendants asserted that the tax ordinance was within defendant city's power
to enact under the Local Autonomy Act and that the same did not violate the afore-cited
constitutional limitations. After pre-trial and submission of the case on memoranda, the Court of First
Instance, on August 6, 1964, rendered a decision that upheld the constitutionality of the ordinance
and declared the taxing power of defendant chartered city broadened by the Local Autonomy Act to
include all other forms of taxes, licenses or fees not excluded in its charter.

Appeal therefrom was directly taken to Us by plaintiff Ormoc Sugar Company, Inc. Appellant
alleges the same statutory and constitutional violations in the aforesaid taxing ordinance mentioned
earlier.

Section 1 of the ordinance states: "There shall be paid to the City Treasurer on any and all
productions of centrifugal sugar milled at the Ormoc Sugar Company, Incorporated, in Ormoc City, a
municipal tax equivalent to one per centum (1%) per export sale to the United States of America and
other foreign countries." Though referred to as a tax on the export of centrifugal sugar produced at
Ormoc Sugar Company, Inc. For production of sugar alone is not taxable; the only time the tax
applies is when the sugar produced is exported.

Appellant questions the authority of the defendant Municipal Board to levy such an export tax,
in view of Section 2287 of the Revised Administrative Code which denies from municipal councils
the power to impose an export tax. Section 2287 in part states: "It shall not be in the power of the
municipal council to impose a tax in any form whatever, upon goods and merchandise carried into
the municipality, or out of the same, and any attempt to impose an import or export tax upon such
goods in the guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be
void."

Subsequently, however, Section 2 of Republic Act 2264 effective June 19, 1959, gave
chartered cities, municipalities and municipal districts authority to levy for public purposes just and
uniform taxes, licenses or fees. Anent the inconsistency between Section 2287 of the Revised
Administrative Code and Section 2 of Republic Act 2264, this Court, in Nin Bay Mining Co. v.
Municipality of Roxas 4 held the former to have been repealed by the latter. And expressing Our
awareness of the transcendental effects that municipal export or import taxes or licenses will have
on the national economy, due to Section 2 of Republic Act 2264, We stated that there was no other
alternative until Congress acts to provide remedial measures to forestall any unfavorable results.

The point remains to be determined, however, whether constitutional limits on the power of
taxation, specifically the equal protection clause and rule of uniformity of taxation, were infringed.

The Constitution in the bill of rights provides: ". . . nor shall any person be denied the equal
protection of the laws." (Sec. 1 [1], Art. III) In Felwa vs. Salas, 5 We ruled that the equal protection
clause applies only to persons or things identically situated and does not bar a reasonable
classification of the subject of legislation, and a classification is reasonable where (1) it is based on
substantial distinctions which make real differences; (2) these are germane to the purpose of the
law; (3) the classification applies not only to present conditions but also to future conditions which
are substantially identical to those of the present; (4) the classification applies only to those who
belong to the same class.

A perusal of the requisites instantly shows that the questioned ordinance does not meet them,
for it taxes only centrifugal sugar produced and exported by the Ormoc Sugar Company, Inc. and
none other. At the time of the taxing ordinance's enactment, Ormoc Sugar Company, Inc., it is true,
was the only sugar central in the city of Ormoc. Still, the classification, to be reasonable, should be in
terms applicable to future conditions as well. The taxing ordinance should not be singular and
exclusive as to exclude any subsequently established sugar central, of the same class as plaintiff,
for the coverage of the tax. As it is now, even if later a similar company is set up, it cannot be subject
to the tax because the ordinance expressly points only to Ormoc City Sugar Company, Inc. as the
entity to be levied upon.

Appellant, however, is not entitled to interest; on the refund because the taxes were not
arbitrarily collected (Collector of Internal Revenue v. Binalbagan). 6 At the time of collection, the
ordinance provided a sufficient basis to preclude arbitrariness, the same being then presumed
constitutional until declared otherwise.

WHEREFORE, the decision appealed from is hereby reversed, the challenged ordinance is
declared unconstitutional and the defendants-appellees are hereby ordered to refund the
P12,087.50 plaintiff-appellant paid under protest. No costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and
Fernando, JJ., concur. 1äw phï1.ñët

Footnotes

1 Resolution No. 30, Series of 1964.

2 Section 1, emphasis supplied.

3An action for declaratory judgment was also filed on May 23, 1964 (Civil Case No. 665-0)
but this and the present case were tried jointly.

4 L-20125, July 20, 1965.

5 L-26511, Oct. 29, 1966.

6 L-12752, Jan. 30, 1965.

EN BANC

[G.R. No. 143076. June 10, 2003]

PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION, INC.

(PHILRECA); AGUSAN DEL NORTE ELECTRIC COOPERATIVE,
INC. (ANECO); ILOILO I ELECTRIC COOPERATIVE, INC. (ILECO
I); and ISABELA I ELECTRIC COOPERATIVE, INC. (ISELCO
I), petitioners, vs. THE SECRETARY, DEPARTMENT OF
INTERIOR AND LOCAL GOVERNMENT, and THE
SECRETARY, DEPARTMENT OF FINANCE, respondents.

DECISION
PUNO, J.:

This is a petition for Prohibition under Rule 65 of the Rules of Court with prayer for
the issuance of a temporary restraining order seeking to annul as unconstitutional
sections 193 and 234 of R.A. No. 7160 otherwise known as the Local Government Code.
On May 23, 2000, a class suit was filed by petitioners in their own behalf and in behalf
of other electric cooperatives organized and existing under P.D. No. 269 who are
members of petitioner Philippine Rural Electric Cooperatives Association, Inc.
(PHILRECA). Petitioner PHILRECA is an association of 119 electric cooperatives
throughout the country. Petitioners Agusan del Norte Electric Cooperative, Inc. (ANECO),
Iloilo I Electric Cooperative, Inc. (ILECO I) and Isabela I Electric Cooperative, Inc.
(ISELCO I) are non-stock, non-profit electric cooperatives organized and existing under
P.D. No. 269, as amended, and registered with the National Electrification Administration
(NEA).
Under P.D. No. 269, as amended, or the National Electrification Administration
Decree, it is the declared policy of the State to provide the total electrification of the
Philippines on an area coverage basis the same being vital to the people and the sound
development of the nation.[1] Pursuant to this policy, P.D. No. 269 aims to promote,
encourage and assist all public service entities engaged in supplying electric service,
particularly electric cooperatives by giving every tenable support and assistance to the
electric cooperatives coming within the purview of the law. [2] Accordingly, Section 39 of
P.D. No. 269 provides for the following tax incentives to electric cooperatives:

SECTION 39. Assistance to Cooperatives; Exemption from Taxes, Imposts, Duties,

Fees; Assistance from the National Power Corporation. Pursuant to the national
policy declared in Section 2, the Congress hereby finds and declares that the following
assistance to cooperative is necessary and appropriate:

(a) Provided that it operates in conformity with the purposes and provisions of this
Decree, cooperatives (1) shall be permanently exempt from paying income taxes,
and (2) for a period ending on December 31 of the thirtieth full calendar year after the
date of a cooperative's organization or conversion hereunder, or until it shall become
completely free of indebtedness incurred by borrowing, whichever event first
occurs, shall be exempt from the payment (a) of all National Government, local
government and municipal taxes and fees, including franchise, filing,
recordation, license or permit fees or taxes and any fees, charges, or costs
involved in any court or administrative proceeding in which it may be a
party, and (b) of all duties or imposts on foreign goods acquired for its
operations, the period of such exemption for a new cooperative formed by
consolidation, as provided for in Section 29, to begin from as of the date of the
beginning of such period for the constituent consolidating cooperative which was
most recently organized or converted under this Decree: Provided, That the Board of
Administrators shall, after consultation with the Bureau of Internal Revenue,
promulgate rules and regulations for the proper implementation of the tax exemptions
provided for in this Decree.

.[3]
From 1971 to 1978, in order to finance the electrification projects envisioned by P.D.
No. 269, as amended, the Philippine Government, acting through the National Economic
Council (now National Economic Development Authority) and the NEA, entered into six
(6) loan agreements with the government of the United States of America through the
United States Agency for International Development (USAID) with electric cooperatives,
including petitioners ANECO, ILECO I and ISELCO I, as beneficiaries. The six (6) loan
agreements involved a total amount of approximately US$86,000,000.00. These loan
agreements are existing until today.
The loan agreements contain similarly worded provisions on the tax application of the
loan and any property or commodity acquired through the proceeds of the loan. Thus,
Section 6.5 of A.I.D. Loan No. 492-H-027 dated November 15, 1971 provides:

Section 6.5. Taxes and Duties. The Borrower covenants and agrees that this Loan
Agreement and the Loan provided for herein shall be free from, and the Principal and
interest shall be paid to A.I.D. without deduction for and free from, any taxation or
fees imposed under any laws or decrees in effect within the Republic of the
Philippines or any such taxes or fees so imposed or payable shall be reimbursed by the
Borrower with funds other than those provided under the Loan. To the extent that (a)
any contractor, including any consulting firm, any personnel of such contractor
financed hereunder, and any property or transactions relating to such contracts and (b)
any commodity procurement transactions financed hereunder, are not exempt from
identifiable taxes, tariffs, duties and other levies imposed under laws in effect in the
country of the Borrower, the Borrower and/or Beneficiary shall pay or reimburse the
same with funds other than those provided under the Loan. [4]

Petitioners contend that pursuant to the provisions of P.D. No. 269, as amended, and
the above-mentioned provision in the loan agreements, they are exempt from payment of
local taxes, including payment of real property tax. With the passage of the Local
Government Code, however, they allege that their tax exemptions have been invalidly
withdrawn. In particular, petitioners assail Sections 193 and 234 of the Local Government
Code on the ground that the said provisions discriminate against them, in violation of the
equal protection clause. Further, they submit that the said provisions are unconstitutional
because they impair the obligation of contracts between the Philippine Government and
the United States Government.
On July 25, 2000 we issued a Temporary Restraining Order.[5]
We note that the instant action was filed directly to this Court, in disregard of the rule
on hierarchy of courts. However, we opt to take primary jurisdiction over the present
petition and decide the same on its merits in view of the significant constitutional issues
raised by the parties dealing with the tax treatment of cooperatives under existing laws
and in the interest of speedy justice and prompt disposition of the matter.
I
There is No Violation of the Equal Protection Clause
The pertinent parts of Sections 193 and 234 of the Local Government Code provide:

Section 193. Withdrawal of Tax Exemption Privileges.Unless otherwise provided in

this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned and controlled
corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code.

Section 234. Exemptions from real property tax.The following are exempted from
payment of the real property tax:

(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and

Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons whether natural or juridical,
including all government-owned and controlled corporations are hereby withdrawn
upon effectivity of this Code. [6]

Petitioners argue that the above provisions of the Local Government Code are
unconstitutional for violating the equal protection clause. Allegedly, said provisions unduly
discriminate against petitioners who are duly registered cooperatives under P.D. No. 269,
as amended, and not under R.A. No. 6938 or the Cooperative Code of the Philippines.
They stress that cooperatives registered under R.A. No. 6938 are singled out for tax
exemption privileges under the Local Government Code. They maintain that electric
cooperatives registered with the NEA under P.D. No. 269, as amended, and electric
cooperatives registered with the Cooperative Development Authority (CDA) under R.A.
No. 6938 are similarly situated for the following reasons: a) petitioners are registered with
the NEA which is a government agency like the CDA; b) petitioners, like CDA-registered
cooperatives, operate for service to their member-consumers; and c) prior to the
enactment of the Local Government Code, petitioners, like CDA-registered cooperatives,
were already tax-exempt.[7]Thus, petitioners contend that to grant tax exemptions from
local government taxes, including real property tax under Sections 193 and 234 of the
Local Government Code only to registered cooperatives under R.A. No. 6938 is a
violation of the equal protection clause.
We are not persuaded. The equal protection clause under the Constitution means
that no person or class of persons shall be deprived of the same protection of laws which
is enjoyed by other persons or other classes in the same place and in like
circumstances.[8] Thus, the guaranty of the equal protection of the laws is not violated by
a law based on reasonable classification. Classification, to be reasonable, must (1) rest
on substantial distinctions; (2) be germane to the purposes of the law; (3) not be limited
to existing conditions only; and (4) apply equally to all members of the same class. [9]
We hold that there is reasonable classification under the Local Government Code to
justify the different tax treatment between electric cooperatives covered by P.D. No. 269,
as amended, and electric cooperatives under R.A. No. 6938.
First, substantial distinctions exist between cooperatives under P.D. No. 269, as
amended, and cooperatives under R.A. No. 6938. These distinctions are manifest in at
least two material respects which go into the nature of cooperatives envisioned by R.A.
No. 6938 and which characteristics are not present in the type of cooperative associations
created under P.D. No. 269, as amended.

a. Capital Contributions by Members

A cooperative under R.A. No. 6938 is defined as:

[A] duly registered association of persons with a common bond of interest,

who have voluntarily joined together to achieve a lawful common or social
economic end, making equitable contributions to the capital required and
accepting a fair share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principles. [10]

The above definition provides for the following elements of a cooperative: a)

association of persons; b) common bond of interest; c) voluntary association; d) lawful
common social or economic end; e) capital contributions; f) fair share of risks and benefits;
g) adherence to cooperative values; and g) registration with the appropriate government
authority.[11]
The importance of capital contributions by members of a cooperative under R.A. No.
6938 was emphasized during the Senate deliberations as one of the key factors which
distinguished electric cooperatives under P.D. No. 269, as amended, from electric
cooperatives under the Cooperative Code. Thus:

Senator Osmea. Will this Code, Mr. President, cover electric cooperatives as they
exist in the country today and are administered by the National Electrification
Administration?

Senator Aquino. That cannot be answered with a simple yes or no, Mr. President.
The answer will depend on what provisions we will eventually come up with. Electric
cooperatives as they exist today would not fall under the term cooperative as
used in this bill because the concept of a cooperative is that which adheres and
practices certain cooperative principles. .

.
Senator Aquino. To begin with, one of the most important requirements, Mr.
President, is the principle where members bind themselves to help themselves. It
is because of their collectivity that they can have some economic benefits. In this
particular case [cooperatives under P.D. No. 269], the government is the one that
funds these so-called electric cooperatives.

Senator Aquino. That is why in Article III we have the following definition:

A cooperative is an association of persons with a common bond of interest who have

voluntarily joined together to achieve a common social or economic end, making
equitable contributions to the capital required.

In this particular case [cooperatives under P.D. No. 269], Mr. President, the
members do not make substantial contribution to the capital required. It is the
government that puts in the capital, in most cases.

Senator Osmea. Under line 6, Mr. President, making equitable contributions to the
capital required would exclude electric cooperatives [under P.D. No. 269]. Because
the membership does not make equitable contributions.

Senator Aquino. Yes, Mr. President. This is precisely what I mean, that electric
cooperatives [under P.D. No. 269] do not qualify in the spirit of cooperatives. That is
the reason why they should be eventually assessed whether they intend to comply
with the cooperatives or not. Because, if after giving them a second time, they do not
comply, then, they should not be classified as cooperatives.

Senator Osmea. Mr. President, the measure of their qualifying as a cooperative

would be the requirement that a member of the electric cooperative must
contribute a pro rata share of the capital of the cooperative in cash to be a
cooperative. [12]

Nowhere in P.D. No. 269, as amended, does it require cooperatives to make

equitable contributions to capital. Petitioners themselves admit that to qualify as a
member of an electric cooperative under P.D. No. 269, only the payment of a P5.00
membership fee is required which is even refundable the moment the member is no
longer interested in getting electric service from the cooperative or will transfer to another
place outside the area covered by the cooperative.[13]However, under the Cooperative
Code, the articles of cooperation of a cooperative applying for registration must be
accompanied with the bonds of the accountable officers and a sworn statement of the
treasurer elected by the subscribers showing that at least twenty-five per cent (25%) of
the authorized share capital has been subscribed and at least twenty-five per cent (25%)
of the total subscription has been paid and in no case shall the paid-up share capital be
less than Two thousand pesos (P2,000.00).[14]
b. Extent of Government Control over Cooperatives
Another principle adhered to by the Cooperative Code is the principle of
subsidiarity. Pursuant to this principle, the government may only engage in development
activities where cooperatives do not posses the capability nor the resources to do so and
only upon the request of such cooperatives.[15] Thus, Article 2 of the Cooperative Code
provides:

Art. 2. Declaration of Policy. It is the declared policy of the State to foster the creation
and growth of cooperatives as a practical vehicle for prompting self-reliance and
harnessing people power towards the attainment of economic development and social
justice. The State shall encourage the private sector to undertake the actual formation
and organization to cooperatives and shall create an atmosphere that is conducive to
the growth and development of these cooperatives.

Towards this end, the Government and all its branches, subdivisions, instrumentalities
and agencies shall ensure the provision of technical guidance, financial assistance and
other services to enable said cooperatives to develop into viable and responsive
economic enterprises and thereby bring about a strong cooperative movement that is
free from any conditions that might infringe upon the autonomy or organizational
integrity of cooperatives.

Further, the State recognizes the principle of subsidiarity under which the
cooperative sector will initiate and regulate within its own ranks the promotion
and organization, training and research, audit and support services relating to
cooperatives with government assistance where necessary. [16]

Accordingly, under the charter of the CDA, or the primary government agency tasked
to promote and regulate the institutional development of cooperatives, it is the declared
policy of the State that:

[g]overnment assistance to cooperatives shall be free from any restriction and

conditionality that may in any manner infringe upon the objectives and character of
cooperatives as provided in this Act. The State shall, except as provided in this Act,
maintain the policy of noninterference in the management and operation of
cooperatives. [17]

In contrast, P.D. No. 269, as amended by P.D. No. 1645, is replete with provisions
which grant the NEA, upon the happening of certain events, the power to control and take
over the management and operations of cooperatives registered under it. Thus:
 a) the NEA Administrator has the power to designate, subject to the confirmation of
the Board of Administrators, an Acting General Manager and/or Project Supervisor
for a cooperative where vacancies in the said positions occur and/or when the
interest of the cooperative or the program so requires, and to prescribe the
functions of the said Acting General Manager and/or Project Supervisor, which
powers shall not be nullified, altered or diminished by any policy or
resolution of the Board of Directors of the cooperative concerned;[18]
b) the NEA is given the power of supervision and control over electric cooperatives
and pursuant to such powers, NEA may issue orders, rules and regulations motu
propio or upon petition of third parties to conduct referenda and other similar
actions in all matters affecting electric cooperatives;[19]
c) No cooperative shall borrow money from any source without the approval of the
Board of Administrators of the NEA;[20] and
d) The management of a cooperative shall be vested in its Board, subject to the
supervision and control of NEA which shall have the right to be represented and
to participate in all Board meetings and deliberations and to approve all policies
and resolutions.[21]
The extent of government control over electric cooperatives covered by P.D. No. 269,
as amended, is largely a function of the role of the NEA as a primary source of funds of
these electric cooperatives. It is crystal clear that NEA incurred loans from various
sources to finance the development and operations of the electric
cooperatives. Consequently, amendments to P.D. No. 269 were primarily geared to
expand the powers of the NEA over the electric cooperatives to ensure that loans granted
to them would be repaid to the government. In contrast, cooperatives under R.A. No. 6938
are envisioned to be self-sufficient and independent organizations with minimal
government intervention or regulation.
To be sure, the transitory provisions of R.A. No. 6938 are indicative of the recognition
by Congress of the fundamental distinctions between electric cooperatives organized
under P.D No. 269, as amended, and cooperatives under the new Cooperative Code.
Article 128 of the Cooperative Code provides that all cooperatives registered under
previous laws shall be deemed registered with the CDA upon submission of certain
requirements within one year. However, cooperatives created under P.D. No. 269, as
amended, are given three years within which to qualify and register with the CDA, after
which, provisions of P.D. No. 1645 which expand the powers of the NEA over electric
cooperatives, would no longer apply.[22]
Second, the classification of tax-exempt entities in the Local Government Code is
germane to the purpose of the law. The Constitutional mandate that every local
government unit shall enjoy local autonomy, does not mean that the exercise of power by
local governments is beyond regulation by Congress. Thus, while each government unit
is granted the power to create its own sources of revenue, Congress, in light of its broad
power to tax, has the discretion to determine the extent of the taxing powers of local
government units consistent with the policy of local autonomy.[23]
 Section 193 of the Local Government Code is indicative of the legislative intent to
vest broad taxing powers upon local government units and to limit exemptions from local
taxation to entities specifically provided therein. Section 193 provides:

Section 193. Withdrawal of Tax Exemption Privileges.Unless otherwise provided in

this Code, tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned and controlled
corporations, except local water districts, cooperatives duly registered under R.A.
No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby
withdrawn upon the effectivity of this Code. [24]

The above provision effectively withdraws exemptions from local taxation enjoyed by
various entities and organizations upon effectivity of the Local Government Code except
for a) local water districts; b) cooperatives duly registered under R.A. No. 6938; and
c) non-stock and non-profit hospitals and educational institutions. Further, with
respect to real property taxes, the Local Government Code again specifically enumerates
entities which are exempt therefrom and withdraws exemptions enjoyed by all other
entities upon the effectivity of the code. Thus, Section 234 provides:

SEC. 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:

(a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof had been granted for
consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,

mosques, nonprofit or religious cemeteries and all lands, buildings and improvements
actually, directly, and exclusively used for religious, charitable or educational
purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by
local water districts and government-owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for
under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by, all persons, whether natural or
juridical, including all government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code. [25]

In Mactan Cebu International Airport Authority v. Marcos,[26] this Court held that
the limited and restrictive nature of the tax exemption privileges under the Local
Government Code is consistent with the State policy to ensure autonomy of local
governments and the objective of the Local Government Code to grant genuine and
meaningful autonomy to enable local government units to attain their fullest development
as self-reliant communities and make them effective partners in the attainment of national
goals. The obvious intention of the law is to broaden the tax base of local government
units to assure them of substantial sources of revenue.
While we understand petitioners predicament brought about by the withdrawal of their
local tax exemption privileges under the Local Government Code, it is not the province of
this Court to go into the wisdom of legislative enactments. Courts can only interpret laws.
The principle of separation of powers prevents them from re-inventing the laws.
Finally, Sections 193 and 234 of the Local Government Code permit reasonable
classification as these exemptions are not limited to existing conditions and apply equally
to all members of the same class. Exemptions from local taxation, including real property
tax, are granted to all cooperatives covered by R.A. No. 6938 and such exemptions exist
for as long as the Local Government Code and the provisions therein on local taxation
remain good law.
II
There is No Violation of the Non-Impairment Clause
It is ingrained in jurisprudence that the constitutional prohibition on the impairment of
the obligation of contracts does not prohibit every change in existing laws. To fall within
the prohibition, the change must not only impair the obligation of the existing contract, but
the impairment must be substantial.[27]What constitutes substantial impairment was
explained by this Court in Clemons v. Nolting:[28]

A law which changes the terms of a legal contract between parties, either in the time
or mode of performance, or imposes new conditions, or dispenses with those
expressed, or authorizes for its satisfaction something different from that provided in
its terms, is law which impairs the obligation of a contract and is therefore null and
void.

Moreover, to constitute impairment, the law must affect a change in the rights of the
parties with reference to each other and not with respect to non-parties.[29]
Petitioners insist that Sections 193 and 234 of the Local Government Code impair the
obligations imposed under the six (6) loan agreements executed by the NEA as borrower
and USAID as lender. All six agreements contain similarly worded provisions on the tax
treatment of the proceeds of the loan and properties and commodities acquired through
the loan. Thus:
Section 6.5. Taxes and Duties. The Borrower covenants and agrees that this Loan
Agreement and the Loan provided for herein shall be free from, and the Principal
and interest shall be paid to A.I.D. without deduction for and free from, any
taxation or fees imposed under any laws or decrees in effect within the Republic of
the Philippines or any such taxes or fees so imposed or payable shall be reimbursed by
the Borrower with funds other than those provided under the Loan. To the extent that
(a) any contractor, including any consulting firm, any personnel of such
contractor financed hereunder, and any property or transactions relating to such
contracts and (b) any commodity procurement transactions financed hereunder,
are not exempt from identifiable taxes, tariffs, duties and other levies imposed
under laws in effect in the country of the Borrower, the Borrower and/or
Beneficiary shall pay or reimburse the same with funds other than those
provided under the Loan. [30]

Petitioners contend that the withdrawal by the Local Government Code of the tax
exemptions of cooperatives under P.D. No. 269, as amended, is an impairment of the tax
exemptions provided under the loan agreements. Petitioners argue that as beneficiaries
of the loan proceeds, pursuant to the above provision, [a]ll the assets of petitioners, such
as lands, buildings, distribution lines acquired through the proceeds of the Loan
Agreements are tax exempt.[31]
We hold otherwise.
A plain reading of the provision quoted above readily shows that it does not grant any
tax exemption in favor of the borrower or the beneficiary either on the proceeds of the
loan itself or the properties acquired through the said loan. It simply states that the loan
proceeds and the principal and interest of the loan, upon repayment by the borrower, shall
be without deduction of any tax or fee that may be payable under Philippine law as
such tax or fee will be absorbed by the borrower with funds other than the loan
proceeds. Further, the provision states that with respect to any payment made by the
borrower to (1) any contractor or any personnel of such contractor or any property
transaction and (2) any commodity transaction using the proceeds of the loan, the tax to
be paid, if any, on such transactions shall be absorbed by the borrower and/or
beneficiary through funds other than the loan proceeds.
Beyond doubt, the import of the tax provision in the loan agreements cited by
petitioners is twofold: (1) the borrower is entitled to receive from and is obliged to pay the
lender the principal amount of the loan and the interest thereon in full, without any
deduction of the tax component thereof imposed under applicable Philippine law
and any tax imposed shall be paid by the borrower with funds other than the loan
proceeds and (2) with respect to payments made to any contractor, its personnel or any
property or commodity transaction entered into pursuant to the loan agreement and with
the use of the proceeds thereof, taxes payable under the said transactions shall be paid
by the borrower and/or beneficiary with the use of funds other than the loan
proceeds. The quoted provision does not purport to grant any tax exemption in favor of
any party to the contract, including the beneficiaries thereof. The provisions simply shift
the tax burden, if any, on the transactions under the loan agreements to the borrower
and/or beneficiary of the loan. Thus, the withdrawal by the Local Government Code under
Sections 193 and 234 of the tax exemptions previously enjoyed by petitioners does not
impair the obligation of the borrower, the lender or the beneficiary under the loan
agreements as in fact, no tax exemption is granted therein.
III

Conclusion

Petitioners lament the difficulties they face in complying with the implementing rules
and regulations issued by the CDA for the conversion of electric cooperatives under P.D.
No. 269, as amended, to cooperatives under R.A. No. 6938. They allege that because of
the cumbersome legal and technical requirements imposed by the Omnibus Rules and
Regulations on the Registration of Electric Cooperatives under R.A. No. 6938, petitioners
cannot register and convert as stock cooperatives under the Cooperative Code.[32]
The Court understands the plight of the petitioners. Their remedy, however, is not
judicial. Striking down Sections 193 and 234 of the Local Government Code as
unconstitutional or declaring them inapplicable to petitioners is not the proper course of
action for them to obtain their previous tax exemptions. The language of the law and the
intention of its framers are clear and unequivocal and courts have no other duty except
to uphold the law. The task to re-examine the rules and guidelines on the conversion of
electric cooperatives to cooperatives under R.A. No. 6938 and provide every assistance
available to them should be addressed by the proper authorities of government. This is
necessary to encourage the growth and viability of cooperatives as instruments of social
justice and economic development.
WHEREFORE, the instant petition is DENIED and the temporary restraining order
heretofore issued is LIFTED.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Panganiban, Quisumbing, Ynares-Santiago,
Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo,
Sr., and Azcuna, JJ., concur.

[1]
Section 2, P.D. No. 269.
[2]
Id.
[3]
Emphasis supplied.
[4]
Rollo, p. 38.
[5]
Id. at 262.
[6]
Emphasis supplied.
[7]
Rollo, p. 11.
[8]
Tolentino v. Board of Accountancy, G.R. No. L-3062, September 28, 1951, 90 Phil 83, 90.
[9]
People v. Cayat, G.R. No. 45987, May 5, 1939, 68 Phil 12, 18.
[10]
Art. 3, R.A. No. 6938. Emphasis supplied.
[11]
M. F. VERZOSA, THE PHILIPPINE COOPERATIVE LAW, ANNOTATED: 28-30 (1991).
[12]
Record of the Senate, Third Regular Session 1989, Vol. 1, No. 13, pp. 378-379.
[13]
Rollo, p. 377.
[14]
Art. 14 (5), R.A. No. 6938.
[15]
Supra, note 11 at 27.
[16]
Emphasis supplied.
[17]
Art. 2, R.A. No. 6939 or An Act Creating the Cooperative Development Authority to Promote the Viability
and Growth of Cooperatives as Instruments of Equity, Social Justice and Economic Development,
defining its Powers, Functions and Responsibilities, Rationalizing Government Policies and
Agencies with Cooperative Functions, Supporting Cooperative Development, Transferring the
Registration and Regulation Functions of Existing Government Agencies on Cooperatives as such
and Consolidating the same with the Authority, Appropriating Funds Therefor, and for other
Purposes. Emphasis supplied.
[18]
Section 5 (a) (6), P.D. No. 269, as amended by P.D. No. 1645.
[19]
Section 10, P.D. No. 269, as amended by P.D. No. 1645.
[20]
Id.
[21]
Section 24, P.D. No. 269, as amended by P.D. No. 1645.
[22]
Art. 128. Transitory Provisions. All cooperatives registered under Presidential Decree Nos. 175 and 775
and Executive Order No. 898, and all other laws shall be deemed registered with the Cooperative
Development Authority: Provided, however, That they shall submit to the nearest Cooperative
Development Authority office their certificate of registration, copies of the articles of cooperation
and bylaws and their latest duly audited financial statements within one (1) year from the effectivity
of this Act, otherwise their registration shall be cancelled: Provided, further, That cooperatives
created under Presidential Decree No. 269, as amended by Presidential Decree No. 1645, shall
be given three (3) years within which to qualify and register with the Authority: Provided, finally,
That after these cooperatives shall have qualified and registered, the provisions of Sections 3 and
5 of Presidential Decree No. 1645 shall no longer be applicable to said cooperatives.
[23]
Art. X, Sections 2, 3 and 5, 1987 Constitution.
[24]
Emphasis supplied.
[25]
Emphasis supplied.
[26]
G.R. No. 120082, September 11, 1996, 261 SCRA 667, 690.
[27]
Gaspar v. Molina, G.R. No. 2206, November 2, 1905, 5 Phil 197, 202-203.
[28]
G.R. No. 17959, January 24, 1922, 42 Phil 702, 717.
[29]
BERNAS, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A
COMMENTARY 390 (1996).
[30]
A.I.D. Loan No. 492-H-027 dated November 15, 1971. Rollo, p. 38. Emphasis supplied.
[31]
Rollo, p. 12.
[32]
Id. at 375-376.

THIRD DIVISION

JUDY ANNE L. SANTOS, G.R. No. 173176

Petitioner,
Present:

YNARES-SANTIAGO, J.
Chairperson,
- versus- AUSTRIA-MARTINEZ,
CORONA,*
CHICO-NAZARIO, and
REYES, JJ.

PEOPLE OF Promulgated:
THE PHILIPPINES and
BUREAU OF INTERNAL
August 26, 2008
REVENUE,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of

the Revised Rules of Court filed by petitioner Judy Anne L. Santos (Santos) seeking
the reversal and setting aside of the Resolution,[2] dated 19 June 2006, of the Court
of Tax Appeals (CTA) en banc in C.T.A. EB. CRIM. No. 001 which denied
petitioners Motion for Extension of Time to File Petition for Review. Petitioner
intended to file the Petition for Review with the CTA en banc to appeal the
Resolutions dated 23 February 2006[3]and 11 May 2006[4] of the CTA First Division
in C.T.A. Crim. Case No. 0-012 denying, respectively, her Motion to Quash the
Information filed against her for violation of Section 255, in relation to Sections 254
and 248(B) of the National Internal Revenue Code (NIRC), as amended; and her
Motion for Reconsideration.

There is no controversy as to the facts that gave rise to the present Petition.

On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner

Guillermo L. Parayno, Jr. wrote to the Department of Justice (DOJ) Secretary Raul
M. Gonzales a letter[5] regarding the possible filing of criminal charges against
petitioner. BIR Commissioner Parayno began his letter with the following
statement:

I have the honor to refer to you for preliminary investigation and filing of
an information in court if evidence so warrants, the herein attached Joint Affidavit
of RODERICK C. ABAD, STIMSON P. CUREG, VILMA V. CARONAN,
RHODORA L. DELOS REYES under Group Supervisor TEODORA V.
PURINO, of the National Investigation Division, BIR National Office Building,
BIR Road, Diliman, Quezon City, recommending the criminal prosecution of MS.
JUDY ANNE LUMAGUI SANTOS for substantial underdeclarationof
income, which constitutes as prima facie evidence of false or fraudulent
return under Section 248(B) of the NIRC and punishable under Sections 254 and
255 of the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the

investigating BIR officers that petitioner, in her Annual Income Tax Return for
taxable year 2002 filed with the BIR, declared an income of P8,033,332.70 derived
from her talent fees solely from ABS-CBN; initial documents gathered from the BIR
offices and those given by petitioners accountant and third parties, however,
confirmed that petitioner received in 2002 income in the amount of at
least P14,796,234.70, not only from ABS-CBN, but also from other sources, such as
movies and product endorsements; the estimated tax liability arising from
petitioners underdeclaration amounted to P1,718,925.52, including incremental
penalties; the non-declaration by petitioner of an amount equivalent to at least
84.18% of the income declared in her return was considered a
substantial underdeclaration of income, which constituted prima facieevidence of
false or fraudulent return under Section 248(B)[6] of the NIRC, as amended; and
petitioners failure to account as part of her income the professional fees she received
from sources other than ABS-CBN and her underdeclaration of the income she
received from ABS-CBN amounted to manifest violations of Sections 254[7] and
255,[8] as well as Section 248(B) of the NIRC, as amended.

After an exchange of affidavits and other pleadings by the parties, Prosecution

Attorney Olivia Laroza-Torrevillas issued a Resolution[9] dated 21 October
2005 finding probable cause and recommending the filing of a criminal information
against petitioner for violation of Section 255 in relation to Sections 254 and 248(B)
of the NIRC, as amended. The said Resolution was approved by Chief State
Prosecutor Jovencito R. Zuno.

Pursuant to the 21 October 2005 DOJ Resolution, an Information[10]for

violation of Section 255 in relation to Sections 254 and 248(B) of the NIRC, as
amended, was filed with the CTA on 3 November 2005 and docketed as
C.T.A. Crim. Case No. 0-012. However, the CTA First Division, after noting several
discrepancies in the Information filed, required the State Prosecutor to clarify and
explain the same, and to submit the original copies of the parties affidavits,
memoranda, and all other evidence on record.[11]

Consequently, Prosecution Attorney Torrevillas, on behalf of respondent

People, submitted on 1 December 2005 a Compliance with Ex Parte Motion to
Admit Attached Information.[12] Prosecution Attorney Torrevillas moved that the
documents submitted be admitted as part of the record of the case and the first
Information be substituted by the attached second Information. The second
Information[13] addressed the discrepancies noted by the CTA in the first
Information, by now reading thus:

The undersigned Prosecution Attorney of the Department of Justice hereby

accuses JUDY ANNE SANTOS y Lumagui of the offense of violation of Section
255, of Republic Act No. 8424, otherwise known as the Tax Reform Act of 1997,
as amended, committed as follows:
 That on or about the 15th day of April, 2003, at Quezon City,
Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused did then and there, willfully, unlawfully, and
feloniously file a false and fraudulent income tax return for taxable
year 2002 by indicating therein a gross income of P8,033,332.70
when in truth and in fact her correct income for taxable year 2002
is P16,396,234.70 or a gross underdeclaration/difference
of P8,362,902 resulting to an income tax deficiency
of P1,395,116.24 excluding interest and penalties thereon
of P1,319,500.94 or a total income tax deficiency of P2,714,617.18
to the damage and prejudice of the government of the same
amount.[]

In a Resolution[14] dated 8 December 2005, the CTA First Division granted the
Peoples Ex Parte Motion and admitted the second Information.

The CTA First Division then issued on 9 December 2005 a warrant for the
arrest of petitioner.[15] The tax court lifted and recalled the warrant of arrest on 21
December 2005 after petitioner voluntarily appeared and submitted herself to its
jurisdiction and filed the required bail bond in the amount of P20,000.00.[16]

On 10 January 2006, petitioner filed with the CTA First Division a Motion to
Quash[17] the Information filed in C.T.A. Crim. Case No. 0-012 on the following
grounds:

1. The facts alleged in the INFORMATION do not constitute an offense;

2. The officer who filed the information had no authority to do so;

3. The Honorable Court of Tax Appeals has no jurisdiction over the subject
matter of the case; and

4. The information is void ab initio, being violative of due process, and the
equal protection of the laws.

In a Resolution[18] dated 23 February 2006, the CTA First Division denied

petitioners Motion to Quash and accordingly scheduled her arraignment on 2 March
2006 at 9:00 a.m. Petitioner filed a Motion for Reconsideration and/or
Reinvestigation,[19] which was again denied by the CTA First Division in a
Resolution[20] dated 11 May 2006.

Petitioner received a copy of the 11 May 2006 Resolution of the CTA First
Division on 17 May 2006. On 1 June 2006, petitioner filed with the CTA en banc a
Motion for Extension of Time to File Petition for Review, docketed as C.T.A. EB.
CRIM. No. 001. She filed her Petition for Review with the CTA en banc on 16 June
2006. However, in its Resolution[21]dated 19 June 2006, the CTA en banc denied
petitioners Motion for Extension of Time to File Petition for Review, ratiocinating
that:

In the case before Us, the petitioner is asking for an extension of time to file
her Petition for Review to appeal the denial of her motion to quash in C.T.A. Crim.
Case No. 0-012. As stated above, a resolution denying a motion to quash is not a
proper subject of an appeal to the Court En Banc under Section 11 of R.A. No. 9282
because a ruling denying a motion to quash is only an interlocutory order, as such,
it cannot be made the subject of an appeal pursuant to said law and the Rules of
Court. Section 1 of Rule 41 of the Rules of Court provides that no appeal may be
taken from an interlocutory order and Section 1 (i) of Rule 50 provides for the
dismissal of an appeal on the ground that the order or judgment appealed from is
not appealable. Time and again, the Supreme Court had ruled that the remedy of
the accused in case of denial of a motion to quash is for the accused to enter a plea,
go to trial and after an adverse decision is rendered, to appeal therefrom in the
manner authorized by law.

Since a denial of a Motion to Quash is not appealable, granting petitioners

Motion for Extension of Time to File Petition for Review will only be an exercise
in futility considering that the dismissal of the Petition for Review that will be filed
by way of appeal is mandated both by law and jurisprudence.[22]

Ultimately, the CTA en banc decreed:

WHEREFORE, premises considered, petitioners Motion for Extension of

Time to File Petition for Review filed on June 1, 2006 is hereby DENIED for lack
of merit.[23]

Now comes petitioner before this Court raising the sole issue of:
 WHETHER A RESOLUTION OF A CTA DIVISION DENYING A MOTION TO
QUASH IS A PROPER SUBJECT OF AN APPEAL TO THE CTA EN
BANC UNDER SECTION 11 OF REPUBLIC ACT NO.9282, AMENDING
SECTION 18 OF REPUBLIC ACT NO. 1125.[24]

Section 18 of Republic Act No. 1125,[25] as amended by Republic Act No.

9282,[26] provides:

SEC. 18. Appeal to the Court of Tax Appeals En Banc. No civil proceedings
involving matters arising under the National Internal Revenue Code, the Tariff and
Customs Code or the Local Government Code shall be maintained, except as herein
provided, until and unless an appeal has been previously filed with the CTA and
disposed of in accordance with the provisions of this Act.

A party adversely affected by a resolution of a Division of the CTA on a

motion for reconsideration or new trial, may file a petition for review with the
CTA en banc.
Petitioners primary argument is that a resolution of a CTA Division denying
a motion to quash is a proper subject of an appeal to the CTA en banc under Section
18 of Republic Act No. 1125, as amended, because the law does not say that only a
resolution that constitutes a final disposition of a case may be appealed to the
CTA en banc. If the interpretation of the law by the CTA en banc prevails, a
procedural void is created leaving the parties, such as petitioner, without any remedy
involving erroneous resolutions of a CTA Division.

The Court finds no merit in the petitioners assertion.

The petition for review under Section 18 of

Republic Act No. 1125, as amended, may be
new to the CTA, but it is actually a mode of
appeal long available in courts of general
jurisdiction.

Petitioner is invoking a very narrow and literal reading of Section 18 of

Republic Act No. 1125, as amended.
 Indeed, the filing of a petition for review with the CTA en banc from a
decision, resolution, or order of a CTA Division is a remedy newly made available
in proceedings before the CTA, necessarily adopted to conform to and address the
changes in the CTA.

There was no need for such rule under Republic Act No. 1125, prior to its
amendment, since the CTA then was composed only of one Presiding Judge and two
Associate Judges.[27] Any two Judges constituted a quorum and the concurrence of
two Judges was necessary to promulgate any decision thereof.[28]

The amendments introduced by Republic Act No. 9282 to Republic Act No.
1125 elevated the rank of the CTA to a collegiate court, with the same rank as the
Court of Appeals, and increased the number of its members to one Presiding Justice
and five Associate Justices.[29] The CTA is now allowed to sit en banc or in two
Divisions with each Division consisting of three Justices. Four Justices shall
constitute a quorum for sessions en banc, and the affirmative votes of four members
of the Court en banc are necessary for the rendition of a decision or resolution; while
two Justices shall constitute a quorum for sessions of a Division and the affirmative
votes of two members of the Division shall be necessary for the rendition of a
decision or resolution.[30]

In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court delineated
the jurisdiction of the CTA en banc[31] and in Divisions.[32]Section 2, Rule 4 of the
Revised CTA Rules recognizes the exclusive appellate jurisdiction of the CTA en
banc to review by appeal the following decisions, resolutions, or orders of the CTA
Division:

SEC. 2. Cases within the jurisdiction of the Court en banc. The Court en
banc shall exercise exclusive appellate jurisdiction to review by appeal the
following:
 (a) Decisions or resolutions on motions for reconsideration or new trial of
the Court in Divisions in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies Bureau of Internal Revenue,

Bureau of Customs, Department of Finance, Department of Trade and
Industry, Department of Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of
their original jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the
exercise of their original jurisdiction involving final
and executory assessments for taxes, fees, charges and penalties, where
the principal amount of taxes and penalties claimed is less than one
million pesos;

xxxx

(f) Decisions, resolutions or orders on motions for reconsideration or new

trial of the Court in Division in the exercise of its exclusive original jurisdiction
over cases involving criminal offenses arising from violations of the National
Internal Revenue Code or the Tariff and Customs Code and other laws administered
by the Bureau of Internal Revenue or Bureau of Customs.

(g) Decisions, resolutions or order on motions for reconsideration or new

trial of the Court in Division in the exercise of its exclusive appellate jurisdiction
over criminal offenses mentioned in the preceding subparagraph; x x x.

Although the filing of a petition for review with the CTA en bancfrom a
decision, resolution, or order of the CTA Division, was newly made available to the
CTA, such mode of appeal has long been available in Philippine courts of general
jurisdiction. Hence, the Revised CTA Rules no longer elaborated on it but merely
referred to existing rules of procedure on petitions for review and appeals, to wit:

RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS

SEC. 1. Applicability of the Rules of the Court of Appeals. The procedure

in the Court en banc or in Divisions in original and in appealed cases shall be the
same as those in petitions for review and appeals before the Court of
Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46 of the
Rules of Court, except as otherwise provided for in these Rules.
 RULE 8
PROCEDURE IN CIVIL CASES

xxxx
SEC. 4. Where to appeal; mode of appeal.
xxxx

(b) An appeal from a decision or resolution of the Court in Division on a

motion for reconsideration or new trial shall be taken to the Court by petition for
review as provided in Rule 43 of the Rules of Court. The Court en banc shall act
on the appeal.

xxxx

RULE 9
PROCEDURE IN CRIMINAL CASES

SEC. 1. Review of cases in the Court. The review of criminal cases in the
Court en banc or in Division shall be governed by the applicable provisions of Rule
124 of the Rules of Court.

xxxx

SEC. 9. Appeal; period to appeal.

xxxx

(b) An appeal to the Court en banc in criminal cases decided by the Court
in Division shall be taken by filing a petition for review as provided in Rule 43 of
the Rules of Court within fifteen days from receipt of a copy of the decision or
resolution appealed from. The Court may, for good cause, extend the time for filing
of the petition for review for an additional period not exceeding fifteen
days. (Emphasis ours.)

Given the foregoing, the petition for review to be filed with the CTA en
banc as the mode for appealing a decision, resolution, or order of the CTA Division,
under Section 18 of Republic Act No. 1125, as amended, is not a totally new remedy,
unique to the CTA, with a special application or use therein. To the contrary, the
CTA merely adopts the procedure for petitions for review and appeals long
established and practiced in other Philippine courts. Accordingly, doctrines,
principles, rules, and precedents laid down in jurisprudence by this Court as regards
petitions for review and appeals in courts of general jurisdiction should likewise bind
the CTA, and it cannot depart therefrom.

General rule: The denial of a motion to

quash is an interlocutory order which is not
the proper subject of an appeal or a petition
for certiorari.

According to Section 1, Rule 41 of the Revised Rules of Court, governing

appeals from the Regional Trial Courts (RTCs) to the Court of Appeals, an appeal
may be taken only from a judgment or final order that completely disposes of the
case or of a matter therein when declared by the Rules to be appealable. Said
provision, thus, explicitly states that no appeal may be taken from an interlocutory
order.[33]

The Court distinguishes final judgments and orders from interlocutory orders
in this wise:
Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nlyfinal
judgments or orders shall be subject to appeal." Interlocutory or incidental
judgments or orders do not stay the progress of an action nor are they subject of
appeal "until final judgment or order is rendered for one party or the other." The
test to determine whether an order or judgment is interlocutory or final is this:
"Does it leave something to be done in the trial court with respect to the merits of
the case? If it does, it is interlocutory; if it does not, it is final. A court order is final
in character if it puts an end to the particular matter resolved or settles definitely
the matter therein disposed of, such that no further questions can come before the
court except the execution of the order. The term "final" judgment or order signifies
a judgment or an order which disposes of the cause as to all the parties, reserving
no further questions or directions for future determination. The order or judgment
may validly refer to the entire controversy or to some definite and separate branch
thereof. "In the absence of a statutory definition, a final judgment, order or decree
has been held to be x x x one that finally disposes of, adjudicates, or determines the
rights, or some right or rights of the parties, either on the entire controversy or on
some definite and separate branch thereof, and which concludes them until it is
reversed or set aside." The central point to consider is, therefore, the effects of the
order on the rights of the parties. A court order, on the other hand, is merely
interlocutory in character if it is provisional and leaves substantial proceeding to be
 had in connection with its subject. The word "interlocutory" refers to "something
intervening between the commencement and the end of a suit which decides some
point or matter but is not a final decision of the whole controversy."[34]

In other words, after a final order or judgment, the court should have nothing
more to do in respect of the relative rights of the parties to the case. Conversely, an
order that does not finally dispose of the case and does not end the Court's task of
adjudicating the parties' contentions in determining their rights and liabilities as
regards each other, but obviously indicates that other things remain to be done by
the Court, is interlocutory.[35]

The rationale for barring the appeal of an interlocutory order was extensively
discussed in Matute v. Court of Appeals,[36] thus:

It is settled that an "interlocutory order or decree made in the progress of a case is

always under the control of the court until the final decision of the suit, and may be
modified or rescinded upon sufficient grounds shown at any time before final
judgment . . ." Of similar import is the ruling of this Court declaring that "it is
rudimentary that such (interlocutory) orders are subject to change in the discretion
of the court." Moreover, one of the inherent powers of the court is "To amend and
control its process and orders so as to make them conformable to law and justice. In
the language of Chief Justice Moran, paraphrasing the ruling in Veluz vs. Justice of
the Peace of Sariaya, since judges are human, susceptible to mistakes, and are
bound to administer justice in accordance with law, they are given the inherent
power of amending their orders or judgments so as to make them conformable to
law and justice, and they can do so before they lose their jurisdiction of the case,
that is before the time to appeal has expired and no appeal has been perfected. And
in the abovecited Veluz case, this Court held that If the trial court should discover
or be convinced that it had committed an error in its judgment, or had done an
injustice, before the same has become final, it may, upon its own motion or upon a
motion of the parties, correct such error in order to do justice between the parties. .
. . It would seem to be the very height of absurdity to prohibit a trial judge from
correcting an error, mistake, or injustice which is called to his attention before he
has lost control of his judgment. Corollarily, it has also been held that a judge of
first instance is not legally prevented from revoking the interlocutory order of
another judge in the very litigation subsequently assigned to him for judicial action.
 Another recognized reason of the law in permitting appeal only from a final
order or judgment, and not from an interlocutory or incidental one, is to avoid
multiplicity of appeals in a single action, which must necessarily suspend the hearing
and decision on the merits of the case during the pendency of the appeal. If such
appeal were allowed, the trial on the merits of the case would necessarily be delayed
for a considerable length of time, and compel the adverse party to incur unnecessary
expenses, for one of the parties may interpose as many appeals as incidental
questions may be raised by him, and interlocutory orders rendered or issued by the
lower court.[37]

There is no dispute that a court order denying a motion to quash is

interlocutory. The denial of the motion to quash means that the criminal information
remains pending with the court, which must proceed with the trial to determine
whether the accused is guilty of the crime charged therein. Equally settled is the rule
that an order denying a motion to quash, being interlocutory, is not
immediately appealable,[38] nor can it be the subject of a petition for certiorari. Such
order may only be reviewed in the ordinary course of law by an appeal from the
judgment after trial.[39]

The Court cannot agree in petitioners contention that there would exist a
procedural void following the denial of her Motion to Quash by the CTA First
Division in its Resolutions dated 23 February 2006 and 11 May 2006, leaving her
helpless. The remedy of an accused from the denial of his or her motion to quash has
already been clearly laid down as follows:
An order denying a Motion to Acquit (like an order denying a motion to
quash) is interlocutory and not a final order. It is, therefore, not appealable. Neither
can it be the subject of a petition for certiorari. Such order of denial may only be
reviewed, in the ordinary course of law, by an appeal from the judgment, after trial.
As stated in Collins vs. Wolfe, and reiterated in Mill vs. Yatco, the accused, after the
denial of his motion to quash, should have proceeded with the trial of the case in
the court below, and if final judgment is rendered against him, he could then appeal,
and, upon such appeal, present the questions which he sought to be decided by the
appellate court in a petition for certiorari.
 In Acharon vs. Purisima, the procedure was well defined, thus:

Moreover, when the motion to quash filed by Acharon to

nullify the criminal cases filed against him was denied by the
Municipal Court of General Santos his remedy was not to file a
petition for certiorari but to go to trial without prejudice on his part
to reiterate the special defenses he had invoked in his motion and,
if, after trial on the merits, an adverse decision is rendered, to
appeal therefrom in the manner authorized by law. This is the
procedure that he should have followed as authorized by law and
precedents. Instead, he took the usual step of filing a writ
of certiorari before the Court of First Instance which in our opinion
is unwarranted it being contrary to the usual course of law.[40]

Hence, the CTA en banc herein did not err in denying petitioners Motion for
Extension of Time to File Petition for Review, when such Petition for Review is the
wrong remedy to assail an interlocutory order denying her Motion to Quash.

While the general rule proscribes the appeal of an interlocutory order, there
are also recognized exceptions to the same. The general rule is not absolute. Where
special circumstances clearly demonstrate the inadequacy of an appeal, then the
special civil action of certiorari or prohibition may exceptionally be
allowed.[ 41 ] This Court recognizes that under certain situations, recourse to
extraordinary legal remedies, such as a petition for certiorari, is considered proper
to question the denial of a motion to quash (or any other interlocutory order) in the
interest of a more enlightened and substantial justice;[42] or to promote public welfare
and public policy;[43]or when the cases have attracted nationwide attention, making
it essential to proceed with dispatch in the consideration thereof;[44] or when the
order was rendered with grave abuse of discretion.[45] Certiorari is an appropriate
remedy to assail an interlocutory order (1) when the tribunal issued such order
without or in excess of jurisdiction or with grave abuse of discretion; and (2) when
the assailed interlocutory order is patently erroneous, and the remedy of appeal
would not afford adequate and expeditious relief.[46]
 Recourse to a petition for certiorari to assail an interlocutory order is now
expressly recognized in the ultimate paragraph of Section 1, Rule 41 of the Revised
Rules of Court on the subject of appeal, which states:

In all the above instances where the judgment or final order is

not appealable, the aggrieved party may file an appropriate special civil action
under Rule 65.

As to whether the CTA en banc, under its expanded jurisdiction in Republic

Act No. 9282, has been granted jurisdiction over special civil actions for certiorari is
not raised as an issue in the Petition at bar, thus, precluding the Court from making
a definitive pronouncement thereon.However, even if such an issue is answered in
the negative, it would not substantially affect the ruling of this Court herein, for a
party whose motion to quash had been denied may still seek recourse, under
exceptional and meritorious circumstances, via a special civil action
for certiorari with this Court, refuting petitioners assertion of a procedural void.

The CTA First Division did not commit

grave abuse of discretion in denying
petitioners Motion to Quash.

Assuming that the CTA en banc, as an exception to the general rule, allowed
and treated petitioners Petition for Review in C.T.A. EB. CRIM. No. 001 as a special
civil action for certiorari, [47] it would still be dismissible for lack of merit.

An act of a court or tribunal may only be considered as committed in grave

abuse of discretion when the same was performed in a capricious or whimsical
exercise of judgment, which is equivalent to lack of jurisdiction. The abuse of
discretion must be so patent and gross as to amount to an evasion of positive duty or
to 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 or personal hostility. In this connection, it is only upon showing that the
court acted without or in excess of jurisdiction or with grave abuse of discretion that
an interlocutory order such as that involved in this case may be impugned. Be that
as it may, it must be emphasized that this practice is applied only under certain
exceptional circumstances to prevent unnecessary delay in the administration of
justice and so as not to unduly burden the courts.[48]

Certiorari is not available to correct errors of procedure or mistakes in the

judges findings and conclusions of law and fact. It is only in the presence of
extraordinary circumstances evincing a patent disregard of justice and fair play
where resort to a petition for certiorari is proper. A party must not be allowed to
delay litigation by the sheer expediency of filing a petition for certiorari under Rule
65 of the Revised Rules of Court based on scant allegations of grave abuse.[49]

A writ of certiorari is not intended to correct every controversial interlocutory

ruling: it is resorted to only to correct a grave abuse of discretion or a whimsical
exercise of judgment equivalent to lack of jurisdiction. Its function is limited to
keeping an inferior court within its jurisdiction and to relieve persons from arbitrary
acts acts which courts or judges have no power or authority in law to perform. It is
not designed to correct erroneous findings and conclusions made by the courts.[50]

The Petition for Review which petitioner intended to file before the CTA en
banc relied on two grounds: (1) the lack of authority of Prosecuting
Attorney Torrevillas to file the Information; and (2) the filing of the said Information
in violation of petitioners constitutional rights to due process and equal protection
of the laws.

Anent the first ground, petitioner argues that the Information was filed without
the approval of the BIR Commissioner in violation of Section 220 of NIRC, as
amended, which provides:

SEC. 220. Form and Mode of Proceeding in Actions Arising under this
Code. - Civil and criminal actions and proceedings instituted in behalf of the
Government under the authority of this Code or other law enforced by the Bureau
of Internal Revenue shall be brought in the name of the Government of the
 Philippines and shall be conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of taxes or the enforcement
of any fine, penalty or forfeiture under this Code shall be filed in court without the
approval of the Commissioner.

Petitioners argument must fail in light of BIR Commissioner Paraynos letter dated
19 May 2005 to DOJ Secretary Gonzales referring for preliminary investigation and
filing of an information in court if evidence so warrants, the findings of the BIR
officers recommending the criminal prosecution of petitioner. In said letter, BIR
Commissioner Parayno already gave his prior approval to the filing of an
information in court should the DOJ, based on the evidence submitted, find probable
cause against petitioner during the preliminary investigation. Section 220 of the
NIRC, as amended, simply requires that the BIR Commissioner approve the
institution of civil or criminal action against a tax law violator, but it does not
describe in what form such approval must be given. In this case, BIR
Commissioner Paraynos letter of 19 May 2005 already states his express approval
of the filing of an information against petitioner and his signature need not appear
on the Resolution of the State Prosecutor or the Information itself.

Still on the purported lack of authority of Prosecution Attorney Torrevillasto file the
Information, petitioner asserts that it is the City Prosecutor under the Quezon City
Charter, who has the authority to investigate and prosecute offenses allegedly
committed within the jurisdiction of Quezon City, such as petitioners case.

The Court is not persuaded. Under Republic Act No. 537, the Revised Charter
of Quezon City, the City Prosecutor shall have the following duties relating to the
investigation and prosecution of criminal offenses:

SEC. 28. The City Attorney - His assistants - His duties.

xxxx
 (g) He shall also have charge of the prosecution of all
crimes, misdemeanors, and violations of city ordinances, in the Court of First
Instance and the municipal courts of the city, and shall discharge all the duties in
respect to the criminal prosecutions enjoined by law upon provincial fiscals.
(h) He shall cause to be investigated all charges of crimes, misdemeanors,
and violations of ordinances and have the necessary information or complaints
prepared or made against the persons accused. He or any of his assistants may
conduct such investigations by taking oral evidence of reputable witnesses, and for
this purpose may issue subpoena, summon witnesses to appear and testify under
oath before him, and the attendance or evidence of an absent or recalcitrant witness
may be enforced by application to the municipal court or the Court of First Instance.
No witness summoned to testify under this section shall be under obligation to give
any testimony which tend to incriminate himself.

Evident from the foregoing is that the City Prosecutor has the power to
investigate crimes, misdemeanors, and violations of ordinances committed within
the territorial jurisdiction of the city, and which can be prosecuted before the trial
courts of the said city. The charge against petitioner, however, is already within the
exclusive original jurisdiction of the CTA,[51] as the Information states that her
gross underdeclarationresulted in an income tax deficiency of P1,395,116.24,
excluding interest and penalties. The City Prosecutor does not have the authority to
appear before the CTA, which is now of the same rank as the Court of Appeals.

In contrast, the DOJ is the principal law agency of the Philippine government
which shall be both its legal counsel and prosecution arm.[52]It has the power to
investigate the commission of crimes, prosecute offenders and administer the
probation and correction system.[53] Under the DOJ is the Office of the State
Prosecutor whose functions are described as follows:

Sec. 8. Office of the Chief State Prosecutor. - The Office of the Chief State
Prosecutor shall have the following functions:

(1) Assist the Secretary in the performance of powers and functions of the
Department relative to its role as the prosecution arm of the government;
 (2) Implement the provisions of laws, executive orders and rules, and carry
out the policies, plans, programs and projects of the Department relative to the
investigation and prosecution of criminal cases;

(3) Assist the Secretary in exercising supervision and control over the
National Prosecution Service as constituted under P.D. No. 1275 and/or otherwise
hereinafter provided; and

(4) Perform such other functions as may be provided by law or assigned by

the Secretary.[54]

As explained by CTA First Division in its Resolution dated 11 May 2006:

[T]he power or authority of the Chief State Prosecutor Jovencito Zuo, Jr. and his
deputies in the Department of Justice to prosecute cases is national in scope; and
the Special Prosecutors authority to sign and file informations in court proceeds
from the exercise of said persons authority to conduct preliminary investigations.[55]

Moreover, there is nothing in the Revised Quezon City Charter which would
suggest that the power of the City Prosecutor to investigate and prosecute crimes,
misdemeanors, and violations of ordinances committed within the territorial
jurisdiction of the city is to the exclusion of the State Prosecutors. In fact, the Office
of the State Prosecutor exercises control and supervision over City Prosecutors under
Executive Order No. 292, otherwise known as the Administrative Code of 1987.

As regards petitioners second ground in her intended Petition for Review with
the CTA en banc, she asserts that she has been denied due process and equal
protection of the laws when similar charges for violation of the NIRC, as amended,
against Regina Encarnacion A. Velasquez (Velasquez) were dismissed by the DOJ
in its Resolution dated 10 August 2005 in I.S. No. 2005-330 for the reason that
Velasquezs tax liability was not yet fully determined when the charges were filed.

The Court is unconvinced.

First, a motion to quash should be based on a defect in the information which

is evident on its face.[56] The same cannot be said herein. The Information against
petitioner appears valid on its face; and that it was filed in violation of her
constitutional rights to due process and equal protection of the laws is not evident
on the face thereof. As pointed out by the CTA First Division in its 11 May
2006 Resolution, the more appropriate recourse petitioner should have taken, given
the dismissal of similar charges against Velasquez, was to appeal the Resolution
dated 21 October 2005 of the Office of the State Prosecutor recommending the filing
of an information against her with the DOJ Secretary.[57]

Second, petitioner cannot claim denial of due process when she was given the
opportunity to file her affidavits and other pleadings and submit evidence before the
DOJ during the preliminary investigation of her case and before the Information was
filed against her. Due process is merely an opportunity to be heard. In addition,
preliminary investigation conducted by the DOJ is merely inquisitorial. It is not a
trial of the case on the merits. Its sole purpose is to determine whether a crime has
been committed and whether the respondent therein is probably guilty of the
crime. It is not the occasion for the full and exhaustive display of the parties
evidence. Hence, if the investigating prosecutor is already satisfied that he can
reasonably determine the existence of probable cause based on the parties evidence
thus presented, he may terminate the proceedings and resolve the case.[58]

Third, petitioner cannot likewise aver that she has been denied equal
protection of the laws.

The equal protection clause exists to prevent undue favor or privilege. It is

intended to eliminate discrimination and oppression based on inequality.
Recognizing the existence of real differences among men, the equal protection
clause does not demand absolute equality. It merely requires that all persons shall be
treated alike, under like circumstances and conditions, both as to the privileges
conferred and liabilities enforced.[59]
 Petitioner was not able to duly establish to the satisfaction of this Court that
she and Velasquez were indeed similarly situated, i.e., that they committed identical
acts for which they were charged with the violation of the same provisions of the
NIRC; and that they presented similar arguments and evidence in their defense - yet,
they were treated differently.
Furthermore, that the Prosecution Attorney dismissed what were supposedly
similar charges against Velasquez did not compel Prosecution
Attorney Torrevillas to rule the same way on the charges against
petitioner.In People v. Dela Piedra,[60] this Court explained that:

The prosecution of one guilty person while others equally guilty are not
prosecuted, however, is not, by itself, a denial of the equal protection of the
laws. Where the official action purports to be in conformity to the statutory
classification, an erroneous or mistaken performance of the statutory duty, although
a violation of the statute, is not without more a denial of the equal protection of the
laws. The unlawful administration by officers of a statute fair on its face, resulting
in its unequal application to those who are entitled to be treated alike, is not a denial
of equal protection unless there is shown to be present in it an element of intentional
or purposeful discrimination. This may appear on the face of the action taken with
respect to a particular class or person, or it may only be shown by extrinsic evidence
showing a discriminatory design over another not to be inferred from the action
itself. But a discriminatory purpose is not presumed, there must be a showing
of clear and intentional discrimination. Appellant has failed to show that, in
charging appellant in court, that there was a clear and intentional discrimination on
the part of the prosecuting officials.
The discretion of who to prosecute depends on the prosecutions sound
assessment whether the evidence before it can justify a reasonable belief that a
person has committed an offense. The presumption is that the prosecuting
officers regularly performed their duties, and this presumption can be
overcome only by proof to the contrary, not by mere speculation. Indeed,
appellant has not presented any evidence to overcome this presumption. The mere
allegation that appellant, a Cebuana, was charged with the commission of a crime,
while a Zamboanguea, the guilty party in appellants eyes, was not, is insufficient
to support a conclusion that the prosecution officers denied appellant equal
protection of the laws.
There is also common sense practicality in sustaining appellants
prosecution.

While all persons accused of crime are to be treated on a basis of

equality before the law, it does not follow that they are to be protected in the
commission of crime. It would be unconscionable, for instance, to excuse a
 defendant guilty of murder because others have murdered with impunity. The
remedy for unequal enforcement of the law in such instances does not lie in the
exoneration of the guilty at the expense of society x x x. Protection of the law
will be extended to all persons equally in the pursuit of their lawful occupations,
but no person has the right to demand protection of the law in the commission of a
crime.
Likewise, [i]f the failure of prosecutors to enforce the criminal laws as to
some persons should be converted into a defense for others charged with crime, the
result would be that the trial of the district attorney for nonfeasance would become
an issue in the trial of many persons charged with heinous crimes and the
enforcement of law would suffer a complete breakdown. (Emphasis ours.)

In the case at bar, no evidence of a clear and intentional discrimination against

petitioner was shown, whether by Prosecution Attorney Torrevillas in
recommending the filing of Information against petitioner or by the CTA First
Division in denying petitioners Motion to Quash. The only basis for petitioners
claim of denial of equal protection of the laws was the dismissal of the charges
against Velasquez while those against her were not.

And lastly, the Resolutions of the CTA First Division dated 23 February 2006
and 11 May 2006 directly addressed the arguments raised by petitioner in her Motion
to Quash and Motion for Reconsideration, respectively, and explained the reasons
for the denial of both Motions. There is nothing to sustain a finding that these
Resolutions were rendered capriciously, whimsically, or arbitrarily, as to constitute
grave abuse of discretion amounting to lack or excess of jurisdiction.

In sum, the CTA en banc did not err in denying petitioners Motion for
Extension of Time to File Petition for Review. Petitioner cannot file a Petition for
Review with the CTA en banc to appeal the Resolution of the CTA First Division
denying her Motion to Quash. The Resolution is interlocutory and,
thus, unappealable. Even if her Petition for Review is to be treated as a petition
for certiorari, it is dismissible for lack of merit.
 WHEREFORE, premises considered, the instant Petition for Review is
hereby DENIED. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice

RUBEN T. REYES
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

*
Justice Renato C. Corona was designated to sit as additional member replacing Justice Antonio Eduardo
B. Nachura per Raffle dated 3 January 2008.
[1]
Rollo, pp. 3-24.
[2]
Signed by Associate Justices Juanito C. Castaeda, Jr, Lovell R. Bautista, Erlinda P. Uy, and Caesar A. Casanova;
with Presiding Justice Ernesto D. Acosta and Associate Justice Olga Palanca-Enriquez, on leave. Id. at 25-
28.
[3]
Signed by Caesar A. Casanova, with a Separate Concurring Opinion penned by Presiding Justice Ernesto D.
Acosta; Associate Justice Lovell R. Bautista, on leave. Id. at 340-342.
[4]
Signed by Presiding Justice Ernesto D. Acosta and Associate Justices Lovell R. Bautista and Caesar A.
Casanova. Id. at 364-372.
[5]
Id. at 298-299.
[6]
SEC. 248. Civil Penalties.
xxxx
(b) In case of willful neglect to file the return within the period prescribed by this Code or by rules
and regulations, or in case a false or fraudulent return is wilfully made, the penalty to be imposed shall be
fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been made on the basis of
such return before the discovery of the falsity or fraud: Provided,That a substantial underdeclaration of
taxable sales, receipts or income, or a substantial overstatement of deductions, as determined by the
Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance, shall
constitute prima facie evidence of a false or fraudulent return: Provided, further, That failure to report sales,
receipts or income in an amount exceeding thirty percent (30%) of that declared per return, and a claim of
deductions in an amount exceeding (30%) of actual deductions, shall render the taxpayer liable for
substantial underdeclaration of sales, receipts or income or for overstatement of deductions, as mentioned
herein.
[7]
SEC. 254. Attempt to Evade or Defeat Tax. - Any person who willfully attempts in any manner to evade or defeat
any tax imposed under this Code or the payment thereof shall, in addition to other penalties provided by law,
upon conviction thereof, be punished by a fine not less than Thirty thousand pesos (P30,000) but not more
than One hundred thousand pesos (P100,000) and suffer imprisonment of not less than two (2) years but not
more than four (4) years: Provided, That the conviction or acquittal obtained under this Section shall not be
a bar to the filing of a civil suit for the collection of taxes.
[8]
SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and
Refund Excess Taxes Withheld on Compensation. - Any person required under this Code or by rules and
regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply any correct and
accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply
correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on
compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties
provided by law, upon conviction thereof, be punished by a fine of not less than Ten thousand pesos (P10,000)
nor more than Fifty thousand pesos (P50,000.00) and suffer imprisonment of not less than one (1) year but
not more than ten (10) years.
[9]
Rollo, pp. 322-330.
[10]
Id. at 331-333.
[11]
CTA First Division Resolution, dated 14 November 2005. Id. at 212-214.
[12]
Id. at 215-217.
[13]
Id. at 334-336.
[14]
Signed by Presiding Justice Ernesto D. Acosta and Associate Justices Lovell R. Bautista and Caesar A.
Casanova. Id. at 218.
[15]
Id. at 219.
[16]
CTA First Division Resolution signed by Associate Justices Lovell R. Bautista and Caesar A. Casanova, with
Presiding Justice Ernesto D. Acosta, on leave. Id. at 220.
[17]
Id. at 337-339.
[18]
Id. at 340-342.
[19]
Id. at 347-354.
[20]
Id. at 364-372.
[21]
Id. at 25-28.
[22]
Id. at 27-28.
[23]
Id. at 28.
[24]
Id. at 10.
[25]
An Act Creating the Court of Tax Appeals.
[26]
An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to the Level of a
Collegiate Court with Special Jurisdiction and Enlarging Its Membership, Amending for the Purpose Certain
Sections of Republic Act No. 1125, as Amended, Otherwise Known as the Law Creating the Court of Tax
Appeals, and for Other Purposes.
[27]
Section 1 of Republic Act No. 1125.
[28]
Section 2 of Republic Act No. 1125.
[29]
Section 1 of Republic Act No. 9282.
[30]
Section 2 of Republic Act No. 9282.
[31]
Section 2, Rule 4.
[32]
Section 3, Rule 4.
[33]
Section 1(c), Rule 41 of the Revised Rules of Court.
[34]
De la Cruz v. Paras, G.R. No. L-41053, 27 February 1976, 69 SCRA 556, 560-561.
[35]
BA Finance Corporation v. Court of Appeals, G.R. No. 84294, 16 October 1989, 178 SCRA 589, 596.
[36]
136 Phil. 157, 203-204 (1969).
[37]
Sitchon v. Sheriff of Occidental Negros, 80 Phil. 397, 399 (1948).
[38]
Villasin v. Seven-Up Bottling Co. of the Philippines, 107 Phil. 801, 802 (1960).
[39]
Gamboa v. Cruz, G.R. No. L-56291, 27 June 1988, 162 SCRA 642, 652.
[40]
Id. at 652-653.
[41]
Principio v. Barrientos, G.R. No. 167025, 19 December 2005, 478 SCRA 639, 646.
[42]
Mead v. Hon. Argel, 200 Phil. 650, 656 (1982); Yap v. Lutero, 105 Phil. 1307, 1308 (1959).
[43]
Pineda v. Bartolome, 95 Phil. 930, 937 (1954), citing People v. Zulueta, 89 Phil. 752, 756 (1951).
[44]
Id.
[45]
Id.
[46]
Casil v. Court of Appeals, 349 Phil. 187, 196-197 (1998).
[47]
This Court proceeds with the discussion on the assumption that the CTA en banc has jurisdiction over special civil
actions for certiorari. The issue on whether the CTA, under its expanded jurisdiction in Republic Act No.
9282, has been granted jurisdiction over special civil actions for certiorari is not raised in the Petition at bar,
thus, precluding the Court from making a definitive pronouncement thereon. If such an issue is subsequently
ruled upon by this Court in the negative, it would not substantially alter the ruling of this Court herein, for
under exceptional and meritorious circumstances, a party whose motion to quash has been denied may still
seek recourse via a special civil action for certiorari with this Court.
[48]
Yee v. Bernabe, G.R. No. 141393, 19 April 2006, 487 SCRA 385, 393.
[49]
La Campana Development Corp. v. See, G.R. No. 149195, 26 June 2006, 492 SCRA 584, 590.
[50]
Bonifacio Construction Management Corporation v. Perlas-Bernabe, G.R. No. 148174, 30 June 2005, 462
SCRA 392, 396-397, citing Indiana Aerospace University v. Commission on Higher Education, 408 Phil.
483, 501 (2001).
[51]
According to Section 7(b)(1) of Republic Act No. 1125, as amended by Republic Act No. 9282:
SEC. 7. Jurisdiction. The CTA shall exercise:
xxxx
(b) Jurisdiction over cases involving criminal offenses as herein provided:
(1) Exclusive original jurisdiction over all criminal offenses arising from violations of the
National Internal Revenue Code or Tariff and Customs Code and other laws
administered by the Bureau of Internal Revenue or the Bureau of Customs: Provided,
however, That offenses or felonies mentioned in this paragraph where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One
million pesos (P1,000,000.00) or where there is no specified amount claimed shall be
tried by the regular Courts and the jurisdiction of the CTA shall be appellate. Any
provision of law or the Rules of Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the recovery of civil liability for taxes
and penalties shall at all times be simultaneously instituted with, and jointly
determined in the same proceeding by the CTA, the filing of the criminal action being
deemed to necessarily carry with it the filing of the civil action, and no right to reserve
the filing of such civil action separately from the criminal action shall be recognized.
[52]
Section 1, Chapter 1, Title III, Book IV of Executive Order No. 292, otherwise known as the Administrative Code
of 1987.
[53]
Section 3(2), Chapter 1, Title III, Book IV of the Administrative Code of 1987.
[54]
Chapter 2, Title III, Book IV of the Administrative Code of 1987.
[55]
Rollo, pp. 369-370.
[56]
Gozos v. Hon. Tac-An, 360 Phil. 453, 464 (1998).
[57]
Rollo, pp. 370-371.
[58]
De Ocampo v. Secretary of Justice, G.R. No. G.R. No. 147932, 25 January 2006, 480 SCRA 71, 81-82.
[59]
Himagan v. People, G.R. No. 113811, 7 October 1994, 237 SCRA 538, 551.
[60]
403 Phil. 31, 54-56 (2001).

G.R. No. 210551, June 30, 2015 - JOSE J. FERRER, JR., Petitioner, v. CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QU
 JOSE J. FERRER, JR., Petitioner, v. CITY MAY

Before this Court is a petition for certiorari under Rule 65 of the Rules of Court with prayer for the issuance of a temporary res

On October 17, 2011,1 respondent Quezon City Council enacted Ordinance No. SP-2095, S-2011,2 or the Socialized Housin
chanRoble svirtual Lawlib ra ry

SECTION 3. IMPOSITION. A special assessment equivalent to one-half percent (0.5%) on the assessed value of land i
General Fund under a special account to be established for the purpose.
chanroblesv irt uallawl ibra ry

Effective for five (5) years, the Socialized Housing Tax (SHT) shall be utilized by the Quezon City Government for the following
financing of public-private partnership agreement of the Quezon City Government and National Housing Authority (NHA) with
chanRoble svirtual Lawlib ra ry

SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special assessment tax as imposed by this ordinance shall en

The tax credit to be granted shall be equivalent to the total amount of the special assessment paid by the property ow
chanRoble svirtual Lawlib ra ry

1. 6th year - 20%

2. 7th year - 20%

3. 8th year - 20%

4. 9th year - 20%

5. 10th year -
chanroblesv irt uallawl ibra ry
20%
Furthermore, only the registered owners may avail of the tax credit and may not be continued by the subsequent pro
chanroblesv irt uallawl ibra ry

On the other hand, Ordinance No. SP-2235, S-20135 was enacted on December 16, 2013 and took effect ten days after wh
collections.7 Section 1 of the Ordinance set forth the schedule and manner for the collection of garbage fees:
chanRoble svirtual Lawlib ra ry

SECTION 1. The City Government of Quezon City in conformity with and in relation to Republic Act No. 7160, otherwis

On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00
201 sq. m. – 500 sq. m. PHP 200.00
501 sq. m. – 1,000 sq. m. PHP 300.00
1,001 sq. m. – 1,500 sq. m. PHP 400.00
1,501 sq. m. – 2,000 sq. m. or more PHP 500.00
On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP25.00
41 sq. m. – 60 sq. m. PHP50.00
61 sq. m. – 100 sq. m. PHP75.00
101 sq. m. – 150 sq. m. PHP100.00
 151 sq. m. – 200 sq. [m.] or more PHP200.00
On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high- rise co

based on area occupied for every unit already sold or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall

The collection of the garbage fee shall accrue on the first day of January and shall be paid simultaneously with the payment of

Petitioner alleges that he is a registered co-owner of a 371-square-meter residential property in Quezon City which is covered

The instant petition was filed on January 17, 2014. We issued a TRO on February 5, 2014, which enjoined the enforcement of

Respondents filed their Comment12 with urgent motion to dissolve the TRO on February 17, 2014. Thereafter, petitioner filed a

A. Propriety of a Petition for Certiorari

Respondents are of the view that this petition for certiorari is improper since they are not tribunals, boards or officers exercisin
who must pay the SHT and the garbage fee, exacting from them funds for basic essential public services that they should not

We agree that respondents neither acted in any judicial or quasi-judicial capacity nor arrogated unto themselves any judicial o
A respondent is said to be exercising judicial function where he has the power to determine what the law is and what

Quasi-judicial function, on the other hand, is “a term which applies to the actions, discretion, etc., of public administra

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is necessary that there be a law that
determine the law and adjudicate the respective rights of the contending parties.14
chanroblesv irt uallawl ibra ry

For a writ of certiorari to issue, the following requisites must concur: (1) it must be directed against a tribunal, board, or office
any plain, speedy, and adequate remedy in the ordinary course of law. The enactment by the Quezon City Council of the assai
Panlungsod for the city.15 Said law likewise is specific in providing that the power to impose a tax, fee, or charge, or to genera

Also, although the instant petition is styled as a petition for certiorari, it essentially seeks to declare the unconstitutionality an

Despite these, a petition for declaratory relief may be treated as one for prohibition or mandamus, over which We exercise ori
redress sought cannot be obtained in the proper courts or when exceptional and compelling circumstances warrant availment

Section 2, Rule 65 of the Rules of Court lay down under what circumstances a petition for prohibition may be filed:
chanRoble svirtual Lawlib ra ry

SEC. 2. Petition for prohibition. - When the proceedings of any tribunal, corporation, board, officer or person, whether
and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the prop
law and justice may require.
chanroblesv irt uallawl ibra ry

In a petition for prohibition against any tribunal, corporation, board, or person – whether exercising judicial, quasi-judicial, or
specified in the petition. In this case, petitioner's primary intention is to prevent respondents from implementing Ordinance No

We consider that respondents City Mayor, City Treasurer, and City Assessor are performing ministerialfunctions. A ministeria
Mayor, as chief executive of the city government, exercises such powers and performs such duties and functions as provided f
accordance with law or ordinance.22 On the other hand, under the LGC, all local taxes, fees, and charges shall be collected by
taxation purposes are properly executed.23Anent the SHT, the Department of Finance (DOF) Local Finance Circular No. 1-97, d
chanRoble svirtual Lawlib ra ry

6.3 The Assessor’s office of the Id.ntified LGU shall:

a. immediately undertake an inventory of lands within its jurisdiction which shall be subject to the levy

b. inform the affected registered owners of the effectivity of the SHT; a list of the lands and registered o
 c. furnish the Treasurer’s office and the local sanggunian concerned of the list of lands affected;

6.4 The Treasurer’s office shall:

a. collect the Social Housing Tax on top of the Real Property Tax, SEF Tax and other special assessment

b. report to the DOF, thru the Bureau of Local Government Finance, and the Mayor’s office the monthly

Petitioner has adduced special and important reasons as to why direct recourse to Us should be allowed. Aside from presentin
other local government units (LGUs). Indeed, the petition at bar is of transcendental importance warranting a relaxation of the
chanRoble svirtual Lawlib ra ry

Granting arguendo that the present action cannot be properly treated as a petition for prohibition, the transcendent
principle that rules of procedure are not inflexible tools designed to hinder or delay, but to facilitate and p
chanroblesv irt uallawl ibra ry

B. Locus Standi of Petitioner

Respondents challenge petitioner’s legal standing to file this case on the ground that, in relation to Section 3 of Ordinance No.
According to respondents, the petition is not a class suit, and that, for not having specifically alleged that petitioner filed the c
It is a general rule that every action must be prosecuted or defended in the name of the real party-in-interest, who st

Jurisprudence defines interest as "material interest, an interest in issue and to be affected by the decree, as distinguis
interest." "To qualify a person to be a real party-in-interest in whose name an action must be prosecuted, he must ap
chanroblesv irt uallawl ibra ry

“Legal standing” or locus standi calls for more than just a generalized grievance.28 The concept has been defined as a persona
stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upo

A party challenging the constitutionality of a law, act, or statute must show “not only that the law is invalid, but also that he h
some right or privilege to which he is lawfully entitled, or that he is about to be subjected to some burdens or penalties by rea

Tested by the foregoing, petitioner in this case clearly has legal standing to file the petition. He is a real party-in-interest to as
the SHT and the garbage fee. He has substantial right to seek a refund of the payments he made and to stop future imposition

C. Litis Pendentia

Respondents move for the dismissal of this petition on the ground of litis pendentia. They claim that, as early as February 22,
of Ordinance No. SP-2095. Relying on City of Makati, et al. v. Municipality (now City) of Taguig, et al.,32 respondents assert th

For petitioner, however, respondents’ contention is untenable since he is not a party in Alliance and does not even have the re
Constitution.33 ChanRoblesVirt ualawli bra ry

Litis pendentia is a Latin term which literally means “a pending suit” and is variously referred to in some decisions as lis pende
in court.35 In Film Development Council of the Philippines v. SM Prime Holdings, Inc.,36 We elucidated:
chanRoble svirtual Lawlib ra ry

Litis pendentia, as a ground for the dismissal of a civil action, refers to a situation where two actions are pending betw

xxxx

The requisites in order that an action may be dismissed on the ground of litis pendentiaare: (a) the identity of parties
regardless of which party is successful, would amount to res judicata in the other.

xxxx

The underlying principle of litis pendentia is the theory that a party is not allowed to vex another more than once rega
conflicting judgments may be avoided for the sake of the stability of the rights and status of persons, and also to avoi

Among the several tests resorted to in ascertaining whether two suits relate to a single or common cause of action ar

The determination of whether there is an identity of causes of action for purposes of litis pendentia is inextricably link
chanroblesv irt uallawl ibra ry

There is substantial identity of the parties when there is a community of interest between a party in the first case and a party
the identity of parties for purposes of determining whether the case is dismissible on the ground of litis pendentia.39 ChanRoblesVirt ualawli bra ry

In this case, it is notable that respondents failed to attach any pleading connected with the alleged civil case pending before th
no way for Us to determine whether both cases are based on the same set of facts that require the presentation of the same e
judgment that may be rendered in one, regardless of which party would be successful, would amount to res judicata in the oth

D. Failure to Exhaust Administrative Remedies

Respondents contend that petitioner failed to exhaust administrative remedies for his non-compliance with Section 187 of the
chanRoble svirtual Lawlib ra ry

Section 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hear
thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measure
shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or
proceedings with a court of competent jurisdiction.
chanroblesv irt uallawl ibra ry

The provision, the constitutionality of which was sustained in Drilon v. Lim,40 has been construed as mandatory41 considering t
A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the most effective
prosperity of the people. Consequently, any delay in implementing tax measures would be to the detriment of the pub
chanroblesv irt uallawl ibra ry

The obligatory nature of Section 187 was underscored in Hagonoy Market Vendor Asso. v. Municipality of Hagonoy:43 cralaw lawlib rary

x x x [T]he timeframe fixed by law for parties to avail of their legal remedies before competent courts is not a “mere t
for the operation of its agencies and provision of basic services to its inhabitants are largely derived from its revenues
and tax ordinances.”44
chanroblesv irt uallawl ibra ry

Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones,45 held that there was no need for petitioners therein to exh
Light Co., Inc. v. City of Cagayan de Oro,46We relaxed the application of the rules in view of the more substantive matters. Fo

Petitioner asserts that the protection of real properties from informal settlers and the collection of garbage are basic and essen
imposed on property, idle land, business, transfer, amusement, etc., as well as the Internal Revenue Allotment (IRA) from the
garbage collection. In fact, it has not denied that its revenue collection in 2012 is in the sum of P13.69 billion.

Moreover, the imposition of the SHT and the garbage fee cannot be justified by the Quezon City Government as an exercise of
the provision itself admits of guidelines and limitations.

Petitioner further claims that the annual property tax is an ad valorem tax, a percentage of the assessed value of the property
property or its reassessment every three years; hence, in violation of Sections 232 and 233 of the LGC.48 ChanRoblesVi rt ualawlib ra ry

For their part, respondents relied on the presumption in favor of the constitutionality of Ordinance Nos. SP-2095 and SP-2235
challenging its constitutionality. They insist that the questioned ordinances are proper exercises of police power similar to Tele
Constitution.

As to the issue of publication, respondents argue that where the law provides for its own effectivity, publication in the Official
became effective after its approval on December 26, 2013.

Additionally, the parties articulate the following positions:

On the Socialized Housing Tax

Respondents emphasize that the SHT is pursuant to the social justice principle found in Sections 1 and 2, Article XIII 57 of the 1

Relying on Manila Race Horse Trainers Assn., Inc. v. De La Fuente,60 and Victorias Milling Co., Inc. v. Municipality of Victorias,
settlers do not belong to the same class.

Ordinance No. SP-2095 is also not oppressive since the tax rate being imposed is consistent with the UDHA. While the law aut
equivalent to the total amount of the special assessment paid by the property owner beginning in the sixth (6th) year of the ef

On the contrary, petitioner claims that the collection of the SHT is tantamount to a penalty imposed on real property owners d
SHT cannot be viewed as a “charity” from real property owners since it is forced, not voluntary.

Also, petitioner argues that the collection of the SHT is a kind of class legislation that violates the right of property owners to e

Petitioner further contends that respondents’ characterization of the SHT as “nothing more than an advance payment on the r
assessment that is made every three (3) years.
As to the rationale of SHT stated in Ordinance No. SP-2095, which, in turn, was based on Section 43 of the UDHA, petitioner a
owners should provide funds for the housing of informal settlers and for home site development. Social justice and police pow
Law principle that property should not be enjoyed and abused to the injury of other properties and the community, and that th

Finally, petitioner alleges that 6 Bistekvilles will be constructed out of the SHT collected. Bistek is the monicker of respondent

On the Garbage Fee

Respondents claim that Ordinance No. S-2235, which is an exercise of police power, collects on the average from every house

In addition, there is no double taxation because the ordinance involves a fee. Even assuming that the garbage fee is a tax, the
no “taxing twice” because the real property tax is imposed on ownership based on its assessed value, while the garbage fee is

Petitioner argues, however, that Ordinance No. S-2235 cannot be justified as an exercise of police power. The cases of Calalan
disposal or other aspect of garbage.

The subject ordinance, for petitioner, is discriminatory as it collects garbage fee only from domestic households and not from

Petitioner likewise contends that the imposition of garbage fee is tantamount to double taxation because garbage collection is
the revenue collection of the Quezon City Government reached Php13.69 billion in 2012. A small portion of said amount could

It is further noted that the Quezon City Government already collects garbage fee under Section 4768 of R.A. No. 9003, or the E
Waste Management (SWM) Fund created under Section 4669 of the same law. Also, according to petitioner, it is evident that O
involvement of the barangay in the collection, segregation, and recycling of garbage, the ordinance skips such mandate.

Lastly, in challenging the ordinance, petitioner avers that the garbage fee was collected even if the required publication of its a

Respondents correctly argued that an ordinance, as in every law, is presumed valid.

An ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial inqu
confiscatory. A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal condition
chanroblesv irt uallawl ibra ry

For an ordinance to be valid though, it must not only be within the corporate powers of the LGU to enact and must be passed
regulate trade; (5) general and consistent with public policy; and (6) not unreasonable.71 As jurisprudence indicates, the tests
like the conformity of the ordinance with the limitations under the Constitution and the statutes, as well as with the requireme

An ordinance must pass muster under the test of constitutionality and the test of consistency with the prevailing laws.73 If not
chanRoble svirtual Lawlib ra ry

It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the laws of the state.
cannot adopt ordinances which infringe the spirit of a state law or repugnant to the general policy of the state. In eve
Corp., Inc., ruled that:
chanRoble svirtual Lawlib ra ry

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal go
principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local governmen
chanroblesv irt uallawl ibra ry

Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It breathes
act, and if we can suppose it capable of so great a folly and so great a wrong, sweep from existence all of the municip

This basic relationship between the national legislature and the local government units has not been enfeebled by the
degree now than under our previous Constitutions. The power to create still includes the power to destroy. The power
mere statute. By and large, however, the national legislature is still the principal of the local government units, which
chanroblesv irt uallawl ibra ry

LGUs must be reminded that they merely form part of the whole; that the policy of ensuring the autonomy of local governmen
corporate, created not only as local units of local self-government, but as governmental agencies of the state. The legislature,
district which it possesses before the charter was granted.”79 ChanRoblesVirtualawl ibra ry

LGUs are able to legislate only by virtue of a valid delegation of legislative power from the national legislature; they are mere
domain, and the power of taxation. The LGC was fashioned to delineate the specific parameters and limitations to be complied

Specifically, with regard to the power of taxation, it is indubitably the most effective instrument to raise needed revenues in fi
Power Corp. v. City of Cabanatuan:83 cralawlawl ibra ry
 In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has b
ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local
chanRoble svirtual Lawlib ra ry

“Section 5. Each Local Government unit shall have the power to create its own sources of revenue, to levy tax
chanroblesv irt uallawl ibra ry

This paradigm shift results from the realization that genuine development can be achieved only by strengthening loca
also “dampened the spirit of initiative, innovation and imaginative resilience in matters of local development on the pa
achieve this goal, Section 3 of Article X of the 1987 Constitution mandates Congress to enact a local government code
chanroblesv irt uallawl ibra ry

Fairly recently, We also stated in Pelizloy Realty Corporation v. Province of Benguet85 that:
chanRoble svirtual Lawlib ra ry

The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized in Icard v. City
chanRoble svirtual Lawlib ra ry

It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation
term used in granting that power must be resolved against the municipality. Inferences, implications, deducti

xxxx

Per Section 5, Article X of the 1987 Constitution, “the power to tax is no longer vested exclusively on Congres
chanroblesv irt uallawl ibra ry

In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise k
chanroblesv irt uallawl ibra ry

Indeed, LGUs have no inherent power to tax except to the extent that such power might be delegated to them either by the b
basic rationale for the current rule is to safeguard the viability and self-sufficiency of local government units by directly grantin
strengthened and made more autonomous, the legislature must still see to it that (a) the taxpayer will not be over-burdened o
uniform, and just.”88 ChanRoblesVirtualawl ibra ry

Subject to the provisions of the LGC and consistent with the basic policy of local autonomy, every LGU is now empowered and
in the exercise or furtherance of their governmental or proprietary powers and functions.89 The relevant provisions of the LGC
chanRoble svirtual Lawlib ra ry

SECTION 130. Fundamental Principles. – The following fundamental principles shall govern the exercise of the taxing

(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:

chanRoble svirtual Lawlib ra ry

(1) be equitable and based as far as practicable on the taxpayer’s ability to pay;

(2) be levied and collected only for public purposes;

(3) not be unjust, excessive, oppressive, or confiscatory;

(4) not be contrary to law, public policy, national economic policy, or in restraint of trade;

(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any private pers

(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be s

(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.
chanroblesv irt uallawl ibra ry

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided he
chanRoble svirtual Lawlib ra ry

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise pro

(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds o

(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing through, the

(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a pe
 (h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, f

(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or se

(j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of pas

(k) Taxes on premiums paid by way of reinsurance or retrocession;

(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or

(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided here

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registe

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and lo
chanroblesv irt uallawl ibra ry

SECTION 151. Scope of Taxing Powers. – Except as otherwise provided in this Code, the city, may levy the taxes, fee
accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by

SECTION 186. Power To Levy Other Taxes, Fees or Charges. – Local government units may exercise the power to levy
or charges shall not be unjust, excessive, oppressive, confiscatory or contrary to declared national policy: Provided, fu
chanroblesv irt uallawl ibra ry

On the Socialized Housing Tax

Contrary to petitioner’s submission, the 1987 Constitution explicitly espouses the view that the use of property bears a social
Property has not only an individual function, insofar as it has to provide for the needs of the owner, but also a social f
chanRoble svirtual Lawlib ra ry

Police power proceeds from the principle that every holder of property, however absolute and unqualified may
Rights of property, like all other social and conventional rights, are subject to reasonable limitations in their e
think necessary and expedient.92
chanroblesv irt uallawl ibra ry

Police power, which flows from the recognition that salus populi est suprema lex (the welfare of the people is the supreme law
restraints and burdens in order to fulfill the objectives of the government in the exercise of police power. 94 In this jurisdiction

Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to 0.5% on the assessed value of land in excess of Php10
chanRoble svirtual Lawlib ra ry

Sec. 43. Socialized Housing Tax. – Consistent with the constitutional principle that the ownership and enjoyment of pr
thousand pesos (P50,000.00).
chanroblesv irt uallawl ibra ry

The rationale of the SHT is found in the preambular clauses of the subject ordinance, to wit:
chanRoble svirtual Lawlib ra ry

WHEREAS, the imposition of additional tax is intended to provide the City Government with sufficient funds to initiate,

WHEREAS, the imposition of 0.5% tax will benefit the Socialized Housing Programs and Projects of the City Governme

WHEREAS, the removal of the urban blight will definitely increase fair market value of properties in the city[.]
chanroblesv irt uallawl ibra ry

The above-quoted are consistent with the UDHA, which the LGUs are charged to implement in their respective localities in coo
the State to undertake a comprehensive and continuing urban development and housing program that shall, among others, up
particularly those that adversely affect public health, safety and ecology, and access to land and housing by the underprivilege

Under the UDHA, socialized housing102 shall be the primary strategy in providing shelter for the underprivileged and homeless.
power distribution system, sewerage facilities, and an efficient and adequate solid waste disposal system; and access to prima
cooperation with the private sector and the beneficiaries themselves.105 ChanRoble sVirt ualawli bra ry

Moreover, within two years from the effectivity of the UDHA, the LGUs, in coordination with the NHA, are directed to implemen
with the NHA, the LGUs shall provide relocation or resettlement sites with basic services and facilities and access to employme

Clearly, the SHT charged by the Quezon City Government is a tax which is within its power to impose. Aside from the specific
services and facilities which include, among others, programs and projects for low-cost housing and other mass dwellings.108 T
power for the general welfare of the entire city. It is greatly imbued with public interest. Removing slum areas in Quezon City
secure, and safe community, and will enhance the quality of life of the poor, making them law-abiding constituents and better
Though broad and far-reaching, police power is subordinate to constitutional limitations and is subject to the requirement that
The police power granted to local government units must always be exercised with utmost observance of the rights of
regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights. Individual r
the rights of the person to his life, liberty and property.

xxxx

To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free it
be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. It must b
accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to pri

Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary intrusion into p
chanroblesv irt uallawl ibra ry

As with the State, LGUs may be considered as having properly exercised their police power only if there is a lawful subject and
accomplishment of the purpose and not unduly oppressive upon individuals.112 ChanRob les Vi rtualawl ib rary

In this case, petitioner argues that the SHT is a penalty imposed on real property owners because it burdens them with expen

We disagree.

Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and r
differently so as to give undue favor to some and unjustly discriminate against others.115 The law may, therefore, treat and re

An ordinance based on reasonable classification does not violate the constitutional guaranty of the equal protection of the law.
to all members of the same class.117 ChanRobles Virtualawl ibra ry

For the purpose of undertaking a comprehensive and continuing urban development and housing program, the disparities betw
meaning of the Constitution. Notably, the public purpose of a tax may legally exist even if the motive which impelled the legis
infringe no constitutional limitation.120 ChanRobles Vi rtua lawlib rary

Further, the reasonableness of Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive since the tax be
with an assessed value exceeding P100,000.00. Even better, on certain conditions, the ordinance grants a tax credit equivalen

On the Garbage Fee

In the United States of America, it has been held that the authority of a municipality to regulate garbage falls within its police
well as the environment by minimizing or eliminating a source of disease and preventing and abating nuisances; and (2) to de

Ordinances regulating waste removal carry a strong presumption of validity.123 Not surprisingly, the overwhelming majority of

A municipality has an affirmative duty to supervise and control the collection of garbage within its corporate limits.125 The LGC
impose on local governments the responsibility to regulate solid waste but not grant them the authority necessary to fulfill the
chanRoble svirtual Lawlib ra ry

x x x When a municipality has general authority to regulate a particular subject matter, the manner and means of exe
a range of reasonableness within which a municipality's exercise of discretion will not be interfered with or upset by th
chanroblesv irt uallawl ibra ry

In this jurisdiction, pursuant to Section 16 of the LGC and in the proper exercise of its corporate powers under Section 22 of th
LGC provides:
chanRoble svirtual Lawlib ra ry

SECTION 16. General Welfare. – Every local government unit shall exercise the powers expressly granted, those nece
jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment o
enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and
chanroblesv irt uallawl ibra ry

The general welfare clause is the delegation in statutory form of the police power of the State to LGUs.130 The provisions relate
only what the interests of the public require but also what measures are necessary for the protection of such interests since th

One of the operative principles of decentralization is that, subject to the provisions of the LGC and national policies, the LGUs
other functions and responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the basic
Management Act of 2000,135 affirms this authority as it expresses that the LGUs shall be primarily responsible for the impleme

Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees and charges for services rendered.137

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed for the regulation of an activity. The b
chanRoble svirtual Lawlib ra ry
 WHEREAS, Quezon City being the largest and premiere city in the Philippines in terms of population and urban geogra
basic services such as the effective system of waste management, public information programs on proper garbage an

WHEREAS, to help augment the funds to be spent for the city’s waste management system, the City Government thro
chanroblesv irt uallawl ibra ry

Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax. In Smart Communications, Inc. v. Municipality of M
chanRoble svirtual Lawlib ra ry

In Progressive Development Corporation v. Quezon City, the Court declared that “if the generating of revenue is the p

In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court reiterated that the purpose and effect of the imposit
We accordingly say that the designation given by the municipal authorities does not decide whether the impo
regulation is provided, nor any standard set for the applicant to establish, or that he agrees to attain or main
conduct and under no guardian eye, but according to the unrestrained judgment or fancy of the applicant and
chanroblesv irt uallawl ibra ry

In Georgia, U.S.A., assessments for garbage collection services have been consistently treated as a fee and not a tax.140 In an

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235 violates the rule on double taxation

Nonetheless, although a special charge, tax, or assessment may be imposed by a municipal corporation, it must be reasonably
generated by the regulation exceeds the cost of the regulation.144 ChanRobles Vi rtua lawlib rary

Petitioner argues that the Quezon City Government already collects garbage fee under Section 47 of R.A. No. 9003, which aut
S-2235 is inconsistent with R.A. No. 9003, because the ordinance emphasizes the collection and payment of garbage fee with

We now turn to the pertinent provisions of R.A. No. 9003.

Under R.A. No. 9003, it is the declared policy of the State to adopt a systematic, comprehensive and ecological solid waste ma
management.145 The law provides that segregation and collection of solid waste shall be conducted at the barangay level, spec
conducted at the source, to include household, institutional, industrial, commercial and agricultural sources.147Segregation at s
disposal.148 Based on Rule XVII of the Department of Environment and Natural Resources (DENR) Administrative Order No. 20
wastes.150 For the purpose, a Materials Recovery Facility (MRF), which shall receive biodegradable wastes for composting and

According to R.A. 9003, an LGU, through its local solid waste management board, is mandated by law to prepare a 10-year so
waste generated within its jurisdiction; and place primary emphasis on implementation of all feasible re-use, recycling, and co
source reduction:
chanRoble svirtual Lawlib ra ry

(e) Source reduction – The source reduction component shall include a program and implementation schedule which s

The source reduction component shall describe the following:

chanRoble svirtual Lawlib ra ry

(1) strategies in reducing the volume of solid waste generated at source;

(2) measures for implementing such strategies and the resources necessary to carry out such activities;

(3) other appropriate waste reduction technologies that may also be considered, provided that such technolog

(4) the types of wastes to be reduced pursuant to Section 15 of this Act;

(5) the methods that the LGU will use to determine the categories of solid wastes to be diverted from disposa

(6) new facilities and of expansion of existing facilities which will be needed to implement re-use, recycling an
chanroblesv irt uallawl ibra ry

The LGU source reduction component shall include the evaluation and identification of rate structures and fees for the
materials, replace disposable materials and products with reusable materials and products, reduce packaging, and inc
requirements, social concerns, disposition of residual waste and environmental impact: Provided, That, projection of f
chanroblesv irt uallawl ibra ry

The solid waste management plan shall also include an implementation schedule for solid waste diversion:
chanRoble svirtual Lawlib ra ry

SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU plan shall include an implementation schedule wh
activities: Provided, That the waste diversion goals shall be increased every three (3) years thereafter: Provided, furth
chanroblesv irt uallawl ibra ry

The baseline for the twenty-five percent (25%) shall be derived from the waste characterization result155that each LGU is man

In accordance with Section 46 of R.A. No. 9003, the LGUs are entitled to avail of the SWM Fund on the basis of their approved
chanRoble svirtual Lawlib ra ry
 SEC. 47. Authority to Collect Solid Waste Management Fees – The local government unit shall impose fees in amounts
chanRoble svirtual Lawlib ra ry

(a) types of solid waste;

(b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

chanroblesv irt uallawl ibra ry

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In determining the amo
chanroblesv irt uallawl ibra ry

Rule XVII of the IRR of R.A. No. 9003 sets forth the details:
chanRoble svirtual Lawlib ra ry

Section 1. Power to Collect Solid Waste Management Fees. – The Local SWM Board/Local SWM Cluster Board shall imp
the adoption and implementation of the SWM Plan and the setting and collection of the local fees. This power to impos
Agreement between the respective board and the private sector or civil society group.

The fees shall pay for the costs of preparing, adopting and implementing a SWM Plan prepared pursuant to the Act. Fu

Section 2. Basis of SWM Service Fees

Reasonable SWM service fees shall be computed based on but not limited to the following minimum factors:
chanRoble svirtual Lawlib ra ry

a) Types of solid waste to include special waste

b) amount/volume of waste

c) distance of the transfer station to the waste management facility

d) capacity or type of LGU constituency

e) cost of construction

f) cost of management

g) type of technology
chanroblesv irt uallawl ibra ry

Section 3. Collection of Fees. – Fees may be collected corresponding to the following levels:
chanRoble svirtual Lawlib ra ry

a) Barangay – The Barangay may impose fees for collection and segregation of biodegradable, compostable a
of the fees shall be dependent on the style of administration of respective Barangay Councils. However, all tra

b) Municipality – The municipal and city councils may impose fees on the barangay MRFs for the collection an
supported by LGU ordinances, however, payments shall be consistent with the accounting system of governm

c) Private Sector/Civil Society Group – On the basis of the stipulations of contract or Memorandum of Agreem
chanroblesv irt uallawl ibra ry

From the afore-quoted provisions, it is clear that the authority of a municipality or city to impose fees is limited to the collectio
compostable and reusable wastes from households, commerce, other sources of domestic wastes, and for the use of baran
materials and special wastes shall be the responsibility of the municipality or city.

In this case, the alleged bases of Ordinance No. S-2235 in imposing the garbage fee is the volume of waste currently generate
the specific types of wastes generated – whether residential, market, commercial, industrial, construction/demolition, street w
however, the authority of a municipality or city to impose fees extends only to those related to the collection and transport of

Granting, for the sake of argument, that the 0.66 kilogram of solid waste per day refers only to non-recyclable and special wa
ability to pay, and not unjust, excessive, oppressive, confiscatory.158 ChanRoblesVirtualawl ibra ry

In the subject ordinance, the rates of the imposable fee depend on land or floor area and whether the payee is an occupant of
chanRoble svirtual Lawlib ra ry

On all domestic households in Quezon City;

LAND AREA IMPOSABLE FEE

Less than 200 sq. m. PHP 100.00
201 sq. m. – 500 sq. m. PHP 200.00
 501 sq. m. – 1,000 sq. m. PHP 300.00
1,001 sq. m. – 1,500 sq. m. PHP 400.00
1,501 sq. m. – 2,000 sq. m. or more PHP 500.00
On all condominium unit and socialized housing projects/units in Quezon City;

FLOOR AREA IMPOSABLE FEE

Less than 40 sq. m. PHP25.00
41 sq. m. – 60 sq. m. PHP50.00
61 sq. m. – 100 sq. m. PHP75.00
101 sq. m. – 150 sq. m. PHP100.00
151 sq. m. – 200 sq. [m.] or more PHP200.00
On high-rise Condominium Units

a) High-rise Condominium – The Homeowners Association of high rise con

on area occupied for every unit already sold or being amortized.

b) High-rise apartment units – Owners of high-rise apartment units shall

For the purpose of garbage collection, there is, in fact, no substantial distinction between an occupant of a lot, on one hand, a
of fee is both just and equitable.159 ChanRoble sVirt ualawli bra ry

The rates being charged by the ordinance are unjust and inequitable: a resident of a 200 sq. m. unit in a condominium or soci
garbage fee is imposed regardless of whether the resident is from a condominium or from a socialized housing project.

Indeed, the classifications under Ordinance No. S-2235 are not germane to its declared purpose of “promoting shared respons
condominium, socialized housing project or apartment, respondent City Council should have considered factors that could truly
actual occupancy of the property. R.A. No. 9003 may also be looked into for guidance. Under said law, SWM service fees may
construction, cost of management, and type of technology. With respect to utility rates set by municipalities, a municipality ha
service furnished, the time of its use or any other matter which presents a substantial difference as a ground of distinction.161 c

[A] lack of uniformity in the rate charged is not necessarily unlawful discrimination. The establishment of classification
between those in like circumstances having equal rights and privileges. Discrimination with respect to rates charged d
chanroblesv irt uallawl ibra ry

On top of an unreasonable classification, the penalty clause of Ordinance No. SP-2235, which states:
chanRoble svirtual Lawlib ra ry

SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due plus an interest of 2% per month or a fraction
chanroblesv irt uallawl ibra ry

lacks the limitation required by Section 168 of the LGC, which provides:
chanRoble svirtual Lawlib ra ry

SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. – The sanggunian may impose a surchar
amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed th
chanroblesv irt uallawl ibra ry

Finally, on the issue of publication of the two challenged ordinances.

Petitioner argues that the garbage fee was collected even if the required publication of its approval had not yet elapsed. He no
nature. Allegedly, Ordinance No. SP-2095 took effect after its publication while Ordinance No. SP-2235 became effective after

The pertinent provisions of the LGC state:

chanRoble svirtual Lawlib ra ry

SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless otherwise stated in the ordinance or the resol
city, municipal, or barangay hall, as the case may be, and in at least two (2) other conspicuous places in the local gov

(b) The secretary to the sanggunian concerned shall cause the posting of an ordinance or resolution in the bulletin bo

The text of the ordinance or resolution shall be disseminated and posted in Filipino or English and in the language or d

(c) The gist of all ordinances with penal sanctions shall be published in a newspaper of general circulation within the p
sanggunian of origin is situated.
 (d) In the case of highly urbanized and independent component cities, the main features of the ordinance or resolutio
published in any newspaper of general circulation.

SECTION 188. Publication of Tax Ordinances and Revenue Measures. – Within ten (10) days after their approval,
cities and municipalities where there are no newspapers of local circulation, the same may be posted in at least two (2
chanroblesv irt uallawl ibra ry

On October 17, 2011, respondent Quezon City Council enacted Ordinance No. SP-2095, which provides that it would take effe
after its enactment, or on December 26, 2013, respondent City Mayor approved the same.165 ChanRoblesVirt ualawli bra ry

The case records are bereft of any evidence to prove petitioner’s negative allegation that respondents did not comply with the

WHEREFORE, the petition is PARTIALLY GRANTED. The constitutionality and legality of Ordinance No. SP-2095, S-2011, or
in Quezon City, is hereby declared as UNCONSTITUTIONAL AND ILLEGAL. Respondents are DIRECTED to REFUND with r

The temporary restraining order issued by the Court on February 5, 2014 is LIFTED with respect to Ordinance No. SP-2095. I

SO ORDERED. cralawlawlibra ry

Sereno, C.J., Carpio, Leonardo-De Castro, Bersamin, Del Castillo, Villarama, Jr., Perez, Mendoza, Perlas-Bernabe, Leonen, and
Velasco, Jr., Brion, and Reyes, JJ., on leave.

Endnotes:

1
Rollo, p. 18.

2
AN ORDINANCE FURTHER AMENDING THE QUEZON CITY REVENUE CODE, AS AMENDED, TO IMPOSE AN ADDITIONA
GOVERNMENT AS PROVIDED FOR UNDER SECTION 43 OF REPUBLIC ACT NO. 7279, OTHERWISE KNOWN AS THE URB

3
Secs. 4 and 6. (Rollo, pp. 16-17)

4
Sec. 7. (Id. at 17-18)

5
AN ORDINANCE IMPOSING AN ANNUAL GARBAGE FEE ON ALL DOMESTIC HOUSEHOLDS AND PROVIDING PENALTY F

6
Rollo, pp. 23, 33.

7
Sec. 4. (Id. at 22)

8
Sec. 2. (Id.)

9
Sec. 3. (Id.)

10
Id. at 3-4; 10-11.

11
Id. at 25.

12
Id. at 28-48.

13
G.R. No. 89554, July 10, 1992, 211 SCRA 384.

14
Liga ng mga Barangay National v. City Mayor of Manila, 465 Phil. 529, 540-541 (2004).

15
See Secs. 48, 457 (a), and 458 (a).

16
Sec. 132.

17
CONSTITUTION, Art. VIII, Sec. 5 (2) (a).

18
Social Justice Society (SJS) Officers et al. v. Lim, G.R. No. 187836, November 25, 2014; Rayos v. City of Manila, G.
19
Liga ng mga Barangay National v. City Mayor of Manila, supra note 14, at 543 and Ortega v. Quezon City Gov’t., sup

20
Ongsuco, et al. vs. Hon. Malones, 619 Phil. 492, 508 (2009).

21
Sec. 455 (a).

22
Sec. 455 (b) (3) (iii).

23
Secs. 170 and 472 (b) (1).

24
Supra note 18.

25
464 Phil. 375 (2004).

26
Senator Jaworski v. PAGCOR, supra, at 385. (Emphasis ours)

27
Miñoza v. Hon. Lopez, et al., 664 Phil. 115, 123 (2011).

28
Chamber of Real Estate and Builders' Ass’ns, Inc. v. Energy Regulatory Commission (ERC), et al., 638 Phil. 542, 554

29
Public Interest Center, Inc. v. Judge Roxas, 542 Phil. 443,456 (2007).

30
Id. at 456.

31
Disomangcop v. Sec. Datumanong, 486 Phil. 398, 425-426 (2004).

32
578 Phil. 773 (2008).

33
Section 5. The Supreme Court shall have the following powers:

xxxx

(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of Court may provide, fin
chanRoble svirtual Lawlib ra ry

(a) All cases in which the constitutionality or validity of any treaty, international or executive agreement, law,

(b) All cases involving the legality of any tax, impost, assessment, or toll, or any penalty imposed in relation
chanroblesv irt uallawl ibra ry

xxxx

34
Benavidez v. Salvador, G.R. No. 173331, December 11, 2013, 712 SCRA, 238, 248.

35
Subic Telecommunications Co., Inc. v. Subic Bay Metropolitan Authority, et al., 618 Phil. 480, 493 (2009).

36
G.R. No. 197937, April 3, 2013, 695 SCRA 175.

37
Film Development Council of the Philippines v. SM Prime Holdings, Inc., supra, at 185-188.

38
Solidbank Union v. Metropolitan Bank and Trust Company, G.R. No. 153799, September 17, 2012, 680 SCRA 629, 6

39
Brown-Araneta v. Araneta, G.R. No. 190814, October 9, 2013, 707 SCRA 222, 246.

40
G.R. No. 112497, August 4, 1994, 235 SCRA 135.

41
Reyes v. Court of Appeals, 378 Phil. 232 (1999). See also subsequent case of Figuerres v. Court of Appeals, 364 Phi

42
Reyes v. Court of Appeals, supra, at 238, and Jardine Davies Insurance Brokers, Inc. v. Hon. Aliposa, 446 Phil. 243,

43
Hagonoy Market Vendor Asso. v. Municipality of Hagonoy, 426 Phil. 769 (2002).

44
Id. at 778.
45
Supra note 20.

46
G.R. No. 191761, November 14, 2012, 685 SCRA 609.

47
Sec. 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fe

48
SECTION 232. Power to Levy Real Property Tax. – A province or city or a municipality within the Metropolitan Manil

SECTION 233. Rates of Levy. – A province or city or a municipality within the Metropolitan Manila Area shall fix a unifo
chanRoble svirtual Lawlib ra ry

(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed value of real prope

(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate not exceeding two p
chanroblesv irt uallawl ibra ry

49
134 Phil. 180 (1968).

50
616 Phil. 449 (2009).

51
666 Phil. 122 (2011).

52
352 Phil. 153 (1998).

53
568 Phil. 658 (2008).

54
Section 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence

55
110 Phil. 150 (1960).

56
46 Phil. 179 (1924).

57
Section 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the righ

To this end, the State shall regulate the acquisition, ownership, use, and disposition of property and its increments.

Section 2. The promotion of social justice shall include the commitment to create economic opportunities based on fre

58
Sec. 2. Declaration of State Policy and Program Objectives. – It shall be the policy of the State to undertake, in coo

(a) Uplift the conditions of the underprivileged and homeless citizens in urban areas and in resettlement areas by mak

59
Sec. 43. Socialized Housing Tax. – Consistent with the constitutional principle that the ownership and enjoyment of
Fifty thousand pesos (P50,000).

60
88 Phil. 60 (1951).

61
Supra note 49.

62
Rollo, p. 37.

63
135 Phil. 572 (1968).

64
Supra note 49.

65
70 Phil. 726 (1940).

66
G.R. No. 104786, January 27, 1994, 229 SCRA 554.

67
Supra note 53.

68
Section 47. Authority to Collect Solid Waste Management Fees. – The local government unit shall impose fees in am
chanRoble svirtual Lawlib ra ry

(a) types of solid waste;

 (b) amount/volume of waste; and

(c) distance of the transfer station to the waste management facility.

chanroblesv irt uallawl ibra ry

The fees shall be used to pay the actual costs incurred by the LGU in collecting the local fees. In determining the amo

69
Section 46. Solid Waste Management Fund. – There is hereby created, as a special account in the National Treasury
chanRoble svirtual Lawlib ra ry

(a) Fines and penalties imposed, proceeds of permits and licenses issued by the Department under this Act, d

(b) Amounts specifically appropriated for the Fund under the annual General Appropriations Act.
chanroblesv irt uallawl ibra ry

The Fund shall be used to finance the following:

chanRoble svirtual Lawlib ra ry

(1) products, facilities, technologies and processes to enhance proper solid waste management;

(2) awards and incentives;

(3) research programs;

(4) information, education, communication and monitoring activities;

(5) technical assistance; and

(6) capability building activities.

chanroblesv irt uallawl ibra ry

LGUs are entitled to avail of the Fund on the basis of their approved solid waste management plan. Specific criteria fo

The fines collected under Sec. 49 shall be allocated to the LGU where the fined prohibited acts are committed in order

In no case, however, shall the Fund be used for the creation of positions or payment of salaries and wages.

70
Victorias Milling Co., Inc. v. Municipality of Victorias, etc., supra note 49, at 194, as cited in Progressive Developmen

71
Legaspi v. City of Cebu, G.R. No. 159110, December 10, 2013, 711 SCRA 771, 784-785; White Light Corp., et al. v.

72
Legaspi v. City of Cebu, supra, at 785.

73
City of Manila v. Hon. Laguio, Jr., supra note 71, at 308.

74
Tan v. Pereña, 492 Phil. 200, 221 (2005).

75
City of Manila v. Hon. Laguio, Jr., supra note 71, at 308.

76
482 Phil. 544 (2004).

77
Batangas CATV, Inc. v. Court of Appeals, supra, at 564-565. Social Justice Society (SJS), et al. v. Hon. Atienza, Jr.,

78
Batangas CATV, Inc. v. Court of Appeals, supra not 76, at 571.

79
Id. at 570.

80
City of Manila v. Hon. Laguio, Jr., supra note 71, at 337.

81
Legaspi v. City of Cebu, supra note 71, at 785.

82
National Power Corp. v. City of Cabanatuan, 449 Phil. 233, 261 (2003).

83
Id.

84
Id. at 247-249.

85
G.R. No. 183137, April 10, 2013, 695 SCRA 491.
86
Pelizloy Realty Corporation v. Province of Benguet, supra, at 500-501.

MERALCO v. Province of Laguna, 366 Phil. 428, 433 (1999).

87

Id. at 434-435.
88

89
See LGC, Secs. 18 and 129.

90
1987 CONSTITUTION, Art. XII, Sec. 6.

Supra note 53.

91

Social Justice Society (SJS), et al. v. Hon. Atienza, Jr., supra note 53, at 707.
92

Id. at 700-701.
93

94
Id. at 703.

95
See Rep. of the Phils. v. Judge Caguioa, 562 Phil. 187 (2007) (withdrawal of the tax exemption on cigars and cigare
general safeguard measures); Republic of the Philippines v. COCOFED et al., 423 Phil. 735 (2001) (on the Coconut Co
amended); Gaston v. Republic Planters Bank, 242 Phil. 377 (1988) (stabilization fees to accrue to a Development and
lease or disposition of videograms under P.D. No. 1987); Republic of the Philippines v. Bacolod-Murcia Milling Co., 124
and ceded to others for a consideration in favor of the Sugar Adjustment and Stabilization Fund under Commonwealth

96
Approved on March 24, 1992.

97
See Sec. 42.

98
Sec. 39.

99
Sec. 2.

100
"Blighted lands" refers to the areas where the structures are dilapidated, obsolete and unsanitary, tending to depre

101
Sec. 26.

102
"Socialized housing" refers to housing programs and projects covering houses and lots or homelots only undertake
accordance with the provisions of R.A. No. 7279. (Sec. 3 [r])

103
Sec. 15.

104
Sec. 21.

105
Sec. 21.

106
Sec. 29.

107
Sec. 29.

108
LGC, Sec. 17 (b) (4), in relation to (b) (3) (viii).

109
City of Manila v. Hon. Laguio, Jr., supra note 71, at 308.

110
Supra note 71.

111
City of Manila v. Hon. Laguio, Jr., supra note 71, at 312-313; See also White Light Corp., et al. v. City of Manila, su

112
Social Justice Society (SJS), et al. v. Hon. Atienza, supra note 53, at 702.

113
City of Manila v. Hon. Laguio, Jr., supra note 71, at 326.

114
Id.
 Id.
115

Social Justice Society (SJS), et al. v. Hon. Atienza, Jr., supra note 53, at 708.
116

Id., See also City of Manila v. Hon. Laguio, Jr., supra note 71, at 328.
117

118
See Tio v. Videogram Regulatory Board, 235 Phil. 198, 206 (1987).

Id.
119

Id. at 206.
120

121
See Ennis v. City of Ray, 595 N.W. 2d 305 (1999) and Village of Winside v. Jackson, 553 N.W. 2d 476 (1996).

122
See Jacobson v. Solid Waste Agency of Northwest Nebraska (SWANN), 653 N.W. 2d 482 (2002); Ennis v. City of R

Ennis v. City of Ray, supra.

123

Id.
124

Jacobson v. Solid Waste Agency of Northwest Nebraska (SWANN), supra note 122.
125

126
See id.

Jacobson v. Solid Waste Agency of Northwest Nebraska (SWANN), supra note 122.
127

Ennis v. City of Ray, supra note 121.

128

129
LGC, Sec. 458.

Batangas CATV, Inc. v. Court of Appeals, supra note 76, at 561.

130

131
LGC, Sec. 5 (c).

See Social Justice Society (SJS), et al. v. Hon. Atienza, Jr., supra note 53, at 703.
132

133
LGC, Sec. 3 (i).

134
LGC, Sec. 17 (b) (4), in relation to (b) (2) (vi).

135
Approved on January 26, 2001.

136
LGC, Secs. 2 (g) and 10.

137
LGC, Sec. 153.

138
LGC, Sec. 131 (g) and (l).

Supra note 70, at 690-691.

139

Monticello, Ltd. v. City of Atlanta, 499 S.E. 2d 157 (1998).

140

Martin v. City of Trussville, 376 So. 2d 1089 (1979).

141

142
"In order to constitute double taxation in the objectionable or prohibited sense the same property must be taxed tw
during the same taxing period, and they must be the same kind or character of tax." (Villanueva, et al. v. City of Iloilo

143
See Ennis v. City of Ray, supra note 121; and Town of Eclectic v. Mays, 547 So. 2d 96 (1989).

144
See Iroquois Properties v. City of East Lansing, 408 N.W. 2d 495 (1987).
145
Sec. 2 (a) and (d).

146
Sec. 10.

147
Sec. 21.

148
Sec. 3 (jj).

149
Adopted in December 20, 2001.

150
Rule XI, Sec. 1.

Id.
151

152
Republic Act No. 9003 (2001), Sec. 16.

153
Id.

154
Sec. 17.

155
Sec. 17 of R.A. No. 9003 provides:

SEC. 17. The Components of the Local Government Solid Waste Management Plan. – The solid waste management pla

xxxx

(b) Waste characterization – For the initial source reduction and recycling element of a local waste management plan,
disposed of within that area. The constituent materials shall be identified by volume, percentage in weight or its volum
which comprise the solid waste disposed of at permitted disposal facilities.

xxxx

156
See DENR Administrative Order No. 2001-34, Rule VII, Sec. 7.

Rollo, p. 50.
157

158
LGC, Secs. 130 and 186.

159
See City of New Smyrna Beach v. Fish, 384 So. 2d. 1272 (1980).

Rollo, p. 51.
160

City of New Smyrna Beach v. Fish, supra note 159.

161

Id.
162

163
Sec. 9.

164
Sec. 10.

Rollo, p. 23.
165