June 18, 1987

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;

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 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. 2 An
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

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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

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 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.

G.R. No. L-28896 February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

CRUZ, J.:

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be
made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common
good, may be achieved.

The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private
respondent Algue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private
respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law.

We deal first with the procedural question.

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The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied
activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and
1959.1 On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the
office of the petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty.
Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. 3 A search of the protest in the dockets of the case proved
fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant. 4 On April 7,
1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of
distraint and levy earlier sought to be served.5 Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the
Commissioner of Internal Revenue with the Court of Tax Appeals.6

The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days
after receipt of the decision or ruling challenged.7 It is true that as a rule the warrant of distraint and levy is "proof of the finality of the
assessment" 8 and renders hopeless a request for reconsideration," 9 being "tantamount to an outright denial thereof and makes the said request
deemed rejected."10 But there is a special circumstance in the case at bar that prevents application of this accepted doctrine.

The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was
apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the
petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the
intervening period, the warrant was premature and could therefore not be served.

As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro forma and was based on strong legal
considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the
assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely
informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965,
only 20 days of the reglementary period had been consumed.

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary
business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by
the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for
their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the
Philippine Sugar Estate Development Company.

Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company
income 12 but later conformed to the decision of the respondent court rejecting this assertion. 13 In fact, as the said court found, the amount was
earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate
Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to
such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in it. 14 Ultimately, after its incorporation largely through the promotion of
the said persons, this new corporation purchased the PSEDC properties.15 For this sale, Algue received as agent a commission of P126,000.00, and it
was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. 16

There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes
thereon.17 The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved. 18

The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of Algue. It is
argued that no indication was made as to how such payments were made, whether by check or in cash, and there is not enough substantiation of
such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction.

We find that these suspicions were adequately met by the private respondent when its President, Alberto Guevara, and the accountant, Cecilia V.
de Jesus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee's need arose. 19 It
should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts
was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by
him or her, to make up the total of P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was understandable, however,
in view of the close relationship among the persons in the family corporation.

We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar
Estate Development Co. to the private respondent was P125,000.00. 21After deducting the said fees, Algue still had a balance of P50,000.00 as clear
profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was
the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar
Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code:
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 SEC. 30. Deductions from gross income.--In computing net income there shall be allowed as deductions —

(a) Expenses:

(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or
business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ... 22

and Revenue Regulations No. 2, Section 70 (1), reading as follows:

SEC. 70. Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any
trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually
rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact,
payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable
and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as
follows:

Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. (a) An
ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a
corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those
ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of
the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive
payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)

It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders. 23

The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case,
however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary
and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental
enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently
recompensed.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person
who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of
tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic
relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of
power.

But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised
reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to
his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that
the law has not been observed.

We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance
with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code
and should therefore not have been disallowed by the petitioner.

ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in toto, without costs.

SO ORDERED.

G.R. No. L-30232 July 29, 1988

LUZON STEVEDORING CORPORATION, petitioner-appellant,

vs.
COURT OF TAX APPEALS and the HONORABLE COMMISSIONER OF INTERNAL REVENUE, respondents-appellees.

H. San Luis & V.L. Simbulan for petitioner-appellant.

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PARAS, J.:

This is a petition for review of the October 21, 1968 Decision * of the Court of Tax Appeals in CTA Case No. 1484, "Luzon Stevedoring Corporation v.
Hon. Ramon Oben, Commissioner, Bureau of Internal Revenue", denying the various claims for tax refund; and the February 20, 1969 Resolution of
the same court denying the motion for reconsideration.

Herein petitioner-appellant, in 1961 and 1962, for the repair and maintenance of its tugboats, imported various engine parts and other equipment
for which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund from the Commissioner of Internal Revenue, on
January 2, 1964, it filed a Petition for Review (Rollo, pp. 14-18) with the Court of Tax Appeals, docketed therein as CTA Case No. 1484, praying
among others, that it be granted the refund of the amount of P33,442.13. The Court of Tax Appeals, however, in a Decision dated October 21, 1969
(Ibid., pp. 22-27), denied the various claims for tax refund. The decretal portion of the said decision reads:

WHEREFORE, finding petitioner's various claims for refund amounting to P33,442.13 without sufficient legal justification, the
said claims have to be, as they are hereby, denied. With costs against petitioner.

On January 24, 1969, petitioner-appellant filed a Motion for Reconsideration (Ibid., pp. 28-34), but the same was denied in a Resolution dated
February 20, 1969 (Ibid., p. 35). Hence, the instant petition.

This Court, in a Resolution dated March 13, 1969, gave due course to the petition (Ibid., p. 40). Petitioner-appellant raised three (3) assignments of
error, to wit:

The lower court erred in holding that the petitioner-appellant is engaged in business as stevedore, the work of unloading and
loading of a vessel in port, contrary to the evidence on record.

II

The lower court erred in not holding that the business in which petitioner-appellant is engaged, is part and parcel of the
shipping industry.

III

The lower court erred in not allowing the refund sought by petitioner-appellant.

The instant petition is without merit.

The pivotal issue in this case is whether or not petitioner's tugboats" can be interpreted to be included in the term "cargo vessels" for purposes of
the tax exemption provided for in Section 190 of the National Internal Revenue Code, as amended by Republic Act No. 3176.

Said law provides:

Sec. 190. Compensating tax. — ... And Provided further, That the tax imposed in this section shall not apply to articles to be
used by the importer himself in the manufacture or preparation of articles subject to specific tax or those for consignment
abroad and are to form part thereof or to articles to be used by the importer himself as passenger and/or cargo vessel, whether
coastwise or oceangoing, including engines and spare parts of said vessel. ....

Petitioner contends that tugboats are embraced and included in the term cargo vessel under the tax exemption provisions of Section 190 of the
Revenue Code, as amended by Republic Act. No. 3176. He argues that in legal contemplation, the tugboat and a barge loaded with cargoes with the
former towing the latter for loading and unloading of a vessel in part, constitute a single vessel. Accordingly, it concludes that the engines, spare
parts and equipment imported by it and used in the repair and maintenance of its tugboats are exempt from compensating tax (Rollo, p. 23).

On the other hand, respondents-appellees counter that petitioner-appellant's "tugboats" are not "Cargo vessel" because they are neither designed
nor used for carrying and/or transporting persons or goods by themselves but are mainly employed for towing and pulling purposes. As such, it
cannot be claimed that the tugboats in question are used in carrying and transporting passengers or cargoes as a common carrier by water, either
coastwise or oceangoing and, therefore, not within the purview of Section 190 of the Tax Code, as amended by Republic Act No. 3176 (Brief for
Respondents-Appellees, pp. 45).

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This Court has laid down the rule that "as the power of taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any
reduction or dimunition thereof with respect to its mode or its rate, must be strictly construed, and the same must be coached in clear and
unmistakable terms in order that it may be applied." (84 C.J.S. pp. 659-800), More specifically stated, the general rule is that any claim for
exemption from the tax statute should be strictly construed against the taxpayer (Acting Commissioner of Customs v. Manila Electric Co. et al., 69
SCRA 469 [1977] and Commissioner of Internal Revenue v. P.J. Kiener Co. Ltd., et al., 65 SCRA 142 [1975]).

As correctly analyzed by the Court of Tax Appeals, in order that the importations in question may be declared exempt from the compensating tax, it
is indispensable that the requirements of the amendatory law be complied with, namely: (1) the engines and spare parts must be used by the
importer himself as a passenger and/or cargo, vessel; and (2) the said passenger and/or cargo vessel must be used in coastwise or oceangoing
navigation (Decision, CTA Case No. 1484; Rollo, p. 24).

As pointed out by the Court of Tax Appeals, the amendatory provisions of Republic Act No. 3176 limit tax exemption from the compensating tax to
imported items to be used by the importer himself as operator of passenger and/or cargo vessel (Ibid., p. 25).

As quoted in the decision of the Court of Tax Appeals, a tugboat is defined as follows:

A tugboat is a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel.
(Webster New International Dictionary, 2nd Ed.)

A tugboat is a diesel or steam power vessel designed primarily for moving large ships to and from piers for towing barges and
lighters in harbors, rivers and canals. (Encyclopedia International Grolier, Vol. 18, p. 256).

A tug is a steam vessel built for towing, synonymous with tugboat. (Bouvier's Law Dictionary.) (Rollo, p. 24).

Under the foregoing definitions, petitioner's tugboats clearly do not fall under the categories of passenger and/or cargo vessels. Thus, it is a
cardinal principle of statutory construction that where a provision of law speaks categorically, the need for interpretation is obviated, no plausible
pretense being entertained to justify non-compliance. All that has to be done is to apply it in every case that falls within its terms (Allied Brokerage
Corp. v. Commissioner of Customs, L-27641, 40 SCRA 555 [1971]; Quijano, etc. v. DBP, L-26419, 35 SCRA 270 [1970]).

And, even if construction and interpretation of the law is insisted upon, following another fundamental rule that statutes are to be construed in the
light of purposes to be achieved and the evils sought to be remedied (People v. Purisima etc., et al., L-42050-66, 86 SCRA 544 [1978], it will be
noted that the legislature in amending Section 190 of the Tax Code by Republic Act 3176, as appearing in the records, intended to provide
incentives and inducements to bolster the shipping industry and not the business of stevedoring, as manifested in the sponsorship speech of
Senator Gil Puyat (Rollo, p. 26).

On analysis of petitioner-appellant's transactions, the Court of Tax Appeals found that no evidence was adduced by petitioner-appellant that
tugboats are passenger and/or cargo vessels used in the shipping industry as an independent business. On the contrary, petitioner-appellant's own
evidence supports the view that it is engaged as a stevedore, that is, the work of unloading and loading of a vessel in port; and towing of barges
containing cargoes is a part of petitioner's undertaking as a stevedore. In fact, even its trade name is indicative that its sole and principal business is
stevedoring and lighterage, taxed under Section 191 of the National Internal Revenue Code as a contractor, and not an entity which transports
passengers or freight for hire which is taxed under Section 192 of the same Code as a common carrier by water (Decision, CTA Case No. 1484; Rollo,
p. 25).

Under the circumstances, there appears to be no plausible reason to disturb the findings and conclusion of the Court of Tax Appeals.

As a matter of principle, this Court will not set aside the conclusion reached by an agency such as the Court of Tax Appeals, which is, by the very
nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the
subject unless there has been an abuse or improvident exercise of authority (Reyes v. Commissioner of Internal Revenue, 24 SCRA 199 [1981]),
which is not present in the instant case.

PREMISES CONSIDERED, the instant petition is DISMISSED and the decision of the Court of Tax Appeals is AFFIRMED.

SO ORDERED.

G.R. No. L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal
Revenue, petitioners,
vs.

8|Page
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the
Estate of the late LUIS D. TONGOY respondents.

DE CASTRO, J.:

Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No. 7794, entitled: "Intestate Estate of
Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of Payment of Taxes by the
Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency income taxes for the years 1963 and
1964 of the decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise penalties, and the second,
dated October 7, 1969, denying the Motion for reconsideration of the Order of dismissal.

The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the abovementioned special
proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents the indebtedness to the Government of the late Luis D. Tongoy for
deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment Notices Nos. 11-50-29-1-11061-21-63 and 11-50-
291-1 10875-64, to which motion was attached Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator opposed the motion solely
on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court (par. 4, Opposition to Motion for Allowance of Claim, pp. 23-
24, Rollo). Finding the opposition well-founded, the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of claim filed by
herein petitioner, Regional Director of the Bureau of Internal Revenue, in an order dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On
September 18, 1969, a motion for reconsideration was filed, of the order of July 29, 1969, but was denied in an Order dated October 7, 1969.

Hence, this appeal on certiorari, petitioner assigning the following errors:

1. The lower court erred in holding that the claim for taxes by the government against the estate of Luis D. Tongoy was filed
beyond the period provided in Section 2, Rule 86 of the Rules of Court.

2. The lower court erred in holding that the claim for taxes of the government was already barred under Section 5, Rule 86 of
the Rules of Court.

which raise the sole issue of whether or not the statute of non-claims Section 5, Rule 86 of the New Rule of Court, bars claim of the government for
unpaid taxes, still within the period of limitation prescribed in Section 331 and 332 of the National Internal Revenue Code.

Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion for Allowance of Claim, etc. of the petitioners
reads as follows:

All claims for money against the decedent, arising from contracts, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against
the decedent, must be filed within the time limited in they notice; otherwise they are barred forever, except that they may be
set forth as counter claims in any action that the executor or administrator may bring against the claimants. Where the
executor or administrator commence an action, or prosecutes an action already commenced by the deceased in his lifetime,
the debtor may set forth may answer the claims he has against the decedents, instead of presenting them independently to the
court has herein provided, and mutual claims may be set off against each other in such action; and in final judgment is rendered
in favored of the decedent, the amount to determined shall be considered the true balance against the estate, as though the
claim has been presented directly before the court in the administration proceedings. Claims not yet due, or contingent may be
approved at their present value.

A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary obligation of the decedent created by law, such as
taxes which is entirely of different character from the claims expressly enumerated therein, such as: "all claims for money against the decedent
arising from contract, express or implied, whether the same be due, not due or contingent, all claim for funeral expenses and expenses for the last
sickness of the decedent and judgment for money against the decedent." Under the familiar rule of statutory construction ofexpressio unius est
exclusio alterius, the mention of one thing implies the exclusion of another thing not mentioned. Thus, if a statute enumerates the things upon
which it is to operate, everything else must necessarily, and by implication be excluded from its operation and effect (Crawford, Statutory
Construction, pp. 334-335).

In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No. L-23081, December 30, 1969, it was held that the
assessment, collection and recovery of taxes, as well as the matter of prescription thereof are governed by the provisions of the National Internal
revenue Code, particularly Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim Tio, Dy Heng and Dee Jue vs. Court of
Tax Appeals & Collector of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically mentioned, the provisions of
Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to have been also in the mind of the Court as not affecting the aforecited
Section of the National Internal Revenue Code.

9|Page
In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed against the estate of a deceased person
... need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator,
the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate." The abolition of the
Committee on Claims does not alter the basic ruling laid down giving exception to the claim for taxes from being filed as the other claims
mentioned in the Rule should be filed before the Court. Claims for taxes may be collected even after the distribution of the decedent's estate
among his heirs who shall be liable therefor in proportion of their share in the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil.
13).

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the
statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need.
(Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government
ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted
with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made
to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not
hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's
exception, as a general rule, from the operation of the principle of estoppel. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177;
Manila Lodge No. 761, Benevolent and Protective Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs.
Central Bank of the Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of
Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L-
18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector
of Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may be collected even after the distribution of the estate of the
decedent among his heirs (Government of the Philippines vs. Pamintuan, supra; Pineda vs. CFI of Tayabas, supra Clara Diluangco Palanca vs.
Commissioner of Internal Revenue, G. R. No. L-16661, January 31, 1962).

Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315 of the Tax Code payment of
income tax shall be a lien in favor of the Government of the Philippines from the time the assessment was made by the Commissioner of Internal
Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held that the property of the estate already in the hands of an heir
or transferee may be subject to the payment of the tax due the estate. A fortiori before the inheritance has passed to the heirs, the unpaid taxes
due the decedent may be collected, even without its having been presented under Section 2 of Rule 86 of the Rules of Court. It may truly be said
that until the property of the estate of the decedent has vested in the heirs, the decedent, represented by his estate, continues as if he were still
alive, subject to the payment of such taxes as would be collectible from the estate even after his death. Thus in the case above cited, the income
taxes sought to be collected were due from the estate, for the three years 1946, 1947 and 1948 following his death in May, 1945.

Even assuming arguendo that claims for taxes have to be filed within the time prescribed in Section 2, Rule 86 of the Rules of Court, the claim in
question may be filed even after the expiration of the time originally fixed therein, as may be gleaned from the italicized portion of the Rule herein
cited which reads:

Section 2. Time within which claims shall be filed. - In the notice provided in the preceding section, the court shall state the time
for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6) months after the date of
the first publication of the notice. However, at any time before an order of distribution is entered, on application of a creditor
who has failed to file his claim within the time previously limited the court may, for cause shown and on such terms as are
equitable, allow such claim to be flied within a time not exceeding one (1) month. (Emphasis supplied)

In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of Taxes) which, though filed after
the expiration of the time previously limited but before an order of the distribution is entered, should have been granted by the respondent court,
in the absence of any valid ground, as none was shown, justifying denial of the motion, specially considering that it was for allowance Of claim for
taxes due from the estate, which in effect represents a claim of the people at large, the only reason given for the denial that the claim was filed out
of the previously limited period, sustaining thereby private respondents' contention, erroneously as has been demonstrated.

WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment in the total amount of P3,254.80 with 5 % surcharge
and 1 % monthly interest as provided in the Tax Code is a final one and the respondent estate's sole defense of prescription has been herein
overruled, the Motion for Allowance of Claim is herein granted and respondent estate is ordered to pay and discharge the same, subject only to the
limitation of the interest collectible thereon as provided by the Tax Code. No pronouncement as to costs.

SO ORDERED.

G.R. No. L-59431 July 25, 1984

ANTERO M. SISON, JR., petitioner,

vs.
RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal Revenue;

10 | P a g e
TOMAS TOLEDO Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman,
Commissioner on Audit, and CESAR E. A. VIRATA, Minister of Finance, respondents.

Antero Sison for petitioner and for his own behalf.

The Solicitor General for respondents.

FERNANDO, C.J.:

The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the validity of Section I of Batas Pambansa Blg.
135 depends upon a showing of its constitutional infirmity. The assailed provision further amends Section 21 of the National Internal Revenue Code
of 1977, which provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net income, (c) royalties, prizes,
and other winnings, (d) interest from bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and
similar arrangements, (e) dividends and share of individual partner in the net profits of taxable partnership, (f) adjusted gross
income. 2 Petitioner 3 as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of higher rates of tax
upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual
taxpayers. 4 He characterizes the above sction as arbitrary amounting to class legislation, oppressive and capricious in character 5 For petitioner,
therefore, there is a transgression of both the equal protection and due process clauses 6 of the Constitution as well as of the rule requiring
uniformity in taxation. 7

The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10 days from notice. Such an answer, after two
extensions were granted the Office of the Solicitor General, was filed on May 28, 1982. 8The facts as alleged were admitted but not the allegations
which to their mind are "mere arguments, opinions or conclusions on the part of the petitioner, the truth [for them] being those stated [in their]
Special and Affirmative Defenses." 9 The answer then affirmed: "Batas Pambansa Big. 135 is a valid exercise of the State's power to tax. The
authorities and cases cited while correctly quoted or paraghraph do not support petitioner's stand." 10 The prayer is for the dismissal of the
petition for lack of merit.

This Court finds such a plea more than justified. The petition must be dismissed.

1. It is manifest that the field of state activity has assumed a much wider scope, The reason was so clearly set forth by retired Chief Justice
Makalintal thus: "The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally,
and only 'because it was better equipped to administer for the public welfare than is any private individual or group of individuals,' continue to lose
their well-defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the
increasing social challenges of the times." 11 Hence the need for more revenues. The power to tax, an inherent prerogative, has to be availed of to
assure the performance of vital state functions. It is the source of the bulk of public funds. To praphrase a recent decision, taxes being the lifeblood
of the government, their prompt and certain availability is of the essence. 12

2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the powers of of
government." 13 It is, of course, to be admitted that for all its plenitude 'the power to tax is not unconfined. There are restrictions. The
Constitution sets forth such limits . Adversely affecting as it does properly rights, both the due process and equal protection clauses inay properly
be invoked, all petitioner does, to invalidate in appropriate cases a revenue measure. if it were otherwise, there would -be truth to the 1803 dictum
of Chief Justice Marshall that "the power to tax involves the power to destroy." 14 In a separate opinion in Graves v. New York, 15 Justice
Frankfurter, after referring to it as an 1, unfortunate remark characterized it as "a flourish of rhetoric [attributable to] the intellectual fashion of the
times following] a free use of absolutes." 16 This is merely to emphasize that it is riot and there cannot be such a constitutional mandate. Justice
Frankfurter could rightfully conclude: "The web of unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice
Holmess pen: 'The power to tax is not the power to destroy while this Court sits."17 So it is in the Philippines.

3. This Court then is left with no choice. The Constitution as the fundamental law overrides any legislative or executive, act that runs counter to it.
In any case therefore where it can be demonstrated that the challenged statutory provision — as petitioner here alleges — fails to abide by its
command, then this Court must so declare and adjudge it null. The injury thus is centered on the question of whether the imposition of a higher tax
rate on taxable net income derived from business or profession than on compensation is constitutionally infirm.

4, The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here. does not suffice. There must be a
factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a provision as void or its face, he has not
made out a case. This is merely to adhere to the authoritative doctrine that were the due process and equal protection clauses are invoked,
considering that they arc not fixed rules but rather broad standards, there is a need for of such persuasive character as would lead to such a
conclusion. Absent such a showing, the presumption of validity must prevail. 18

11 | P a g e
5. It is undoubted that the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An
obvious example is where it can be shown to amount to the confiscation of property. That would be a clear abuse of power. It then becomes the
duty of this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. That properly calls for the application of
the Holmes dictum. It has also been held that where the assailed tax measure is beyond the jurisdiction of the state, or is not for a public purpose,
or, in case of a retroactive statute is so harsh and unreasonable, it is subject to attack on due process grounds. 19

6. Now for equal protection. The applicable standard to avoid the charge that there is a denial of this constitutional mandate whether the assailed
act is in the exercise of the lice power or the power of eminent domain is to demonstrated that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in
reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated
in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue
preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumtances which if not
Identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding on the rest." 20 That same formulation applies as well to taxation measures. The
equal protection clause is, of course, inspired by the noble concept of approximating the Ideal of the laws benefits being available to all and the
affairs of men being governed by that serene and impartial uniformity, which is of the very essence of the Idea of law. There is, however, wisdom,
as well as realism in these words of Justice Frankfurter: "The equality at which the 'equal protection' clause aims is not a disembodied equality. The
Fourteenth Amendment enjoins 'the equal protection of the laws,' and laws are not abstract propositions. They do not relate to abstract units A, B
and C, but are expressions of policy arising out of specific difficulties, address to the attainment of specific ends by the use of specific remedies. The
Constitution does not require things which are different in fact or opinion to be treated in law as though they were the same." 21 Hence the
constant reiteration of the view that classification if rational in character is allowable. As a matter of fact, in a leading case of Lutz V. Araneta, 22 this
Court, through Justice J.B.L. Reyes, went so far as to hold "at any rate, it is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that 'inequalities which result from a singling out of one particular class for taxation, or exemption
infringe no constitutional limitation.'" 23

7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution: "The rule of taxation shag be uniform and
equitable." 24 This requirement is met according to Justice Laurel in Philippine Trust Company v. Yatco,25 decided in 1940, when the tax "operates
with the same force and effect in every place where the subject may be found. " 26 He likewise added: "The rule of uniformity does not call for
perfect uniformity or perfect equality, because this is hardly attainable." 27 The problem of classification did not present itself in that case. It did not
arise until nine years later, when the Supreme Court held: "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, ... . 28 As clarified by Justice Tuason, where "the differentiation" complained of "conforms to the practical dictates of justice and equity" it
"is not discriminatory within the meaning of this clause and is therefore uniform." 29 There is quite a similarity then to the standard of equal
protection for all that is required is that the tax "applies equally to all persons, firms and corporations placed in similar situation."30

8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration the distinction between a tax rate and a tax
base. There is no legal objection to a broader tax base or taxable income by eliminating all deductible items and at the same time reducing the
applicable tax rate. Taxpayers may be classified into different categories. To repeat, it. is enough that the classification must rest upon substantial
distinctions that make real differences. In the case of the gross income taxation embodied in Batas Pambansa Blg. 135, the, discernible basis of
classification is the susceptibility of the income to the application of generalized rules removing all deductible items for all taxpayers within the
class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation income are set apart as a
class. As there is practically no overhead expense, these taxpayers are e not entitled to make deductions for income tax purposes because they are
in the same situation more or less. On the other hand, in the case of professionals in the practice of their calling and businessmen, there is no
uniformity in the costs or expenses necessary to produce their income. It would not be just then to disregard the disparities by giving all of them
zero deduction and indiscriminately impose on all alike the same tax rates on the basis of gross income. There is ample justification then for the
Batasang Pambansa to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as
regards professional and business income.

9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1) lack of factual foundation to show the arbitrary
character of the assailed provision; 31 (2) the force of controlling doctrines on due process, equal protection, and uniformity in taxation and (3) the
reasonableness of the distinction between compensation and taxable net income of professionals and businessman certainly not a suspect
classification,

WHEREFORE, the petition is dismissed. Costs against petitioner.

Makasiar, Concepcion, Jr., Guerero, Melencio-Herrera, Escolin, Relova, Gutierrez, Jr., De la Fuente and Cuevas, JJ., concur.

Teehankee, J., concurs in the result.

Plana, J., took no part.

12 | P a g e
Separate Opinions

AQUINO, J., concurring:

I concur in the result. The petitioner has no cause of action for prohibition.

ABAD SANTOS, J., dissenting:

This is a frivolous suit. While the tax rates for compensation income are lower than those for net income such circumtance does not necessarily
result in lower tax payments for these receiving compensation income. In fact, the reverse will most likely be the case; those who file returns on
the basis of net income will pay less taxes because they claim all sort of deduction justified or not I vote for dismissal.

G.R. No. L-7859 December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio Jayme Ledesma, plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.

Ernesto J. Gonzaga for appellant.

Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres and Solicitor Felicisimo R. Rosete for appellee.

REYES, J.B L., J.:

This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No. 567,
otherwise known as the Sugar Adjustment Act.

Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to the threat to our industry by the imminent
imposition of export taxes upon sugar as provided in the Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United
States market"; wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from the sugar industry by the
component elements thereof" and "to stabilize the sugar industry so as to prepare it for the eventuality of the loss of its preferential position in the
United States market and the imposition of the export taxes."

In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture of sugar, on a graduated basis, on each picul of
sugar manufactured; while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others
for a consideration, on lease or otherwise —

a tax equivalent to the difference between the money value of the rental or consideration collected and the amount representing 12 per
centum of the assessed value of such land.

According to section 6 of the law —

SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine Treasury, to be known as the 'Sugar Adjustment
and Stabilization Fund,' and shall be paid out only for any or all of the following purposes or to attain any or all of the following
objectives, as may be provided by law.

First, to place the sugar industry in a position to maintain itself, despite the gradual loss of the preferntial position of the Philippine sugar
in the United States market, and ultimately to insure its continued existence notwithstanding the loss of that market and the consequent
necessity of meeting competition in the free markets of the world;

Second, to readjust the benefits derived from the sugar industry by all of the component elements thereof — the mill, the landowner, the
planter of the sugar cane, and the laborers in the factory and in the field — so that all might continue profitably to engage
therein;lawphi1.net

13 | P a g e
 Third, to limit the production of sugar to areas more economically suited to the production thereof; and

Fourth, to afford labor employed in the industry a living wage and to improve their living and working conditions: Provided, That the
President of the Philippines may, until the adjourment of the next regular session of the National Assembly, make the necessary
disbursements from the fund herein created (1) for the establishment and operation of sugar experiment station or stations and the
undertaking of researchers (a) to increase the recoveries of the centrifugal sugar factories with the view of reducing manufacturing costs,
(b) to produce and propagate higher yielding varieties of sugar cane more adaptable to different district conditions in the Philippines, (c)
to lower the costs of raising sugar cane, (d) to improve the buying quality of denatured alcohol from molasses for motor fuel, (e) to
determine the possibility of utilizing the other by-products of the industry, (f) to determine what crop or crops are suitable for rotation
and for the utilization of excess cane lands, and (g) on other problems the solution of which would help rehabilitate and stabilize the
industry, and (2) for the improvement of living and working conditions in sugar mills and sugar plantations, authorizing him to organize
the necessary agency or agencies to take charge of the expenditure and allocation of said funds to carry out the purpose hereinbefore
enumerated, and, likewise, authorizing the disbursement from the fund herein created of the necessary amount or amounts needed for
salaries, wages, travelling expenses, equipment, and other sundry expenses of said agency or agencies.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from the Collector
of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950;
alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion
is not a public purpose for which a tax may be constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs
appealed the case directly to this Court (Judiciary Act, section 17).

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

This Court can take judicial notice of the fact that sugar production is one of the great industries of our nation, sugar occupying a leading position
among its export products; that it gives employment to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is
one of the important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a regime committed to a policy of
currency stability. Its promotion, protection and advancement, therefore redounds greatly to the general welfare. Hence it was competent for the
legislature to find that the general welfare demanded that the sugar industry should be stabilized in turn; and in the wide field of its police power,
the lawmaking body could provide that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added
strain of the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson vs. State ex rel. Marey, 99 Fla. 1311, 128
So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).

As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida —

The protection of a large industry constituting one of the great sources of the state's wealth and therefore directly or indirectly affecting
the welfare of so great a portion of the population of the State is affected to such an extent by public interests as to be within the police
power of the sovereign. (128 Sp. 857).

Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of public concern, it follows that the Legislature
may determine within reasonable bounds what is necessary for its protection and expedient for its promotion. Here, the legislative discretion must
be allowed fully play, subject only to the test of reasonableness; and it is not contended that the means provided in section 6 of the law (above
quoted) bear no relation to the objective pursued or are oppressive in character. If objective and methods are alike constitutionally valid, no reason
is seen why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may be made the implement of the state's
police power (Great Atl. & Pac. 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).

That the tax to be levied should burden the sugar producers themselves can hardly be a ground of complaint; indeed, it appears rational that the
tax be obtained precisely from those who are to be benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the
power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling
out of one particular class for taxation, or exemption infringe no constitutional limitation" (Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495,
81 L. Ed. 1245, citing numerous authorities, at p. 1251).

From the point of view we have taken it appears of no moment that the funds raised under the Sugar Stabilization Act, now in question, should be
exclusively spent in aid of the sugar industry, since it is that very enterprise that is being protected. It may be that other industries are also in need
of similar protection; that the legislature is not required by the Constitution to adhere to a policy of "all or none." As ruled in Minnesota ex rel.
Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the law presumably hits the evil where it is most felt, it is not to be overthrown because
there are other instances to which it might have been applied;" and that "the legislative authority, exerted within its proper field, need not
embrace all the evils within its reach" (N. L. R. B. vs. Jones & Laughlin Steel Corp. 301 U. S. 1, 81 L. Ed. 893).

14 | P a g e
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek
increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements of living and
working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes
expenditure of tax money for private purposes, (compare Everson vs. Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).

The decision appealed from is affirmed, with costs against appellant. So ordered.

Paras, C. J., Bengzon, Padilla, Reyes, A., Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

G.R. No. L-41631 December 17, 1976

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as Secretary to the Mayor; THE MARKET
ADMINISTRATOR; and THE MUNICIPAL BOARD OF MANILA, petitioners,
vs.
HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of Manila, Branch XXX and the FEDERATION OF
MANILA MARKET VENDORS, INC., respondents.

Santiago F. Alidio and Restituto R. Villanueva for petitioners.

Antonio H. Abad, Jr. for private respondent.

Federico A. Blay for petitioner for intervention.

MARTIN, J.:

The chief question to be decided in this case is what law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila,
the Revised City Charter (R.A. 409, as amended), which requires publication of the ordinance before its enactment and after its approval, or the
Local Tax Code (P.D. No. 231), which only demands publication after approval.

On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE REGULATING THE OPERATION OF PUBLIC
MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER
PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on June 15, 1974.

On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil Case 96787 before the Court of First Instance of
Manila presided over by respondent Judge, seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication
requirement under the Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not given any
participation in the enactment of the ordinance, as envisioned by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has
been violated; and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the collection of fees and charges
on livestock and animal products.

Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent Judge issued an order on March 11, 1975,
denying the plea for failure of the respondent Federation of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the
Local Tax Code.

After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975, declaring the nullity of Ordinance No. 7522 of the City
of Manila on the primary ground of non-compliance with the requirement of publication under the Revised City Charter. Respondent Judge ruled:

There is, therefore, no question that the ordinance in question was not published at all in two daily newspapers of general
circulation in the City of Manila before its enactment. Neither was it published in the same manner after approval, although it
was posted in the legislative hall and in all city public markets and city public libraries. There being no compliance with the
mandatory requirement of publication before and after approval, the ordinance in question is invalid and, therefore, null and
void.

Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication is required by the Local Tax Code; and (b)
private respondent failed to exhaust all administrative remedies before instituting an action in court.

On September 26, 1975, respondent Judge denied the motion.

15 | P a g e
Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.

We find the petition impressed with merits.

1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the City of Manila and the Local Tax Code on the
manner of publishing a tax ordinance enacted by the Municipal Board of Manila. For, while Section 17 of the Revised Charter provides:

Each proposed ordinance shall be published in two daily newspapers of general circulation in the city, and shall not be discussed
or enacted by the Board until after the third day following such publication. * * * Each approved ordinance * * * shall be
published in two daily newspapers of general circulation in the city, within ten days after its approval; and shall take effect and
be in force on and after the twentieth day following its publication, if no date is fixed in the ordinance.

Section 43 of the Local Tax Code directs:

Within ten days after their approval, certified true copies of all provincial, city, municipal and barrioordinances levying or
imposing taxes, fees or other charges shall be published for three consecutive days in a newspaper or publication widely
circulated within the jurisdiction of the local government, or posted in the local legislative hall or premises and in two other
conspicuous places within the territorial jurisdiction of the local government. In either case, copies of all provincial, city,
municipal and barrio ordinances shall be furnished the treasurers of the respective component and mother units of a local
government for dissemination.

In other words, while the Revised Charter of the City of Manila requires publication before the enactment of the ordinance and after the approval
thereof in two daily newspapers of general circulation in the city, the Local Tax Code only prescribes for publication after the approval of
"ordinances levying or imposing taxes, fees or other charges" either in a newspaper or publication widely circulated within the jurisdiction of the
local government or by posting the ordinance in the local legislative hall or premises and in two other conspicuous places within the territorial
jurisdiction of the local government. Petitioners' compliance with the Local Tax Code rather than with the Revised Charter of the City spawned this
litigation.

There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax
Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire
community and special law as one relating to particular persons or things of a class. 1 And the rule commonly said is that a prior special law is not
ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be
considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. 2 However, the rule
readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. The exactly is the
circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective
of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges"
in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant
force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the
Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. 3 Special provision governs. 4 This is especially
true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila
was promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973. The law-making power cannot be said to have
intended the establishment of conflicting and hostile systems upon the same subject, or to leave in force provisions of a prior law by which the new
will of the legislating power may be thwarted and overthrown. Such a result would render legislation a useless and Idle ceremony, and subject the
law to the reproach of uncertainty and unintelligibility. 5

The case of City of Manila v. Teotico 6 is opposite. In that case, Teotico sued the City of Manila for damages arising from the injuries he suffered
when he fell inside an uncovered and unlighted catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the
City Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to persons or property arising from the failure of the
city officers to enforce the provisions of the charter or any other law or ordinance, or from negligence of the City Mayor, Municipal Board, or other
officers while enforcing or attempting to enforce the provisions of the charter or of any other law or ordinance. Upon the other hand, Article 2189
of the Civil Code makes cities liable for damages for the death of, or injury suffered by any persons by reason of the defective condition of roads,
streets, bridges, public buildings, and other public works under their control or supervision. On review, the Court held the Civil Code controlling. It
is true that, insofar as its territorial application is concerned, the Revised City Charter is a special law and the subject matter of the two laws, the
Revised City Charter establishes a general rule of liability arising from negligence in general, regardless of the object thereof, whereas the Civil Code
constitutes a particular prescriptionfor liability due to defective streets in particular. In the same manner, the Revised Charter of the City prescribes
a rule for the publication of "ordinance" in general, while the Local Tax Code establishes a rule for the publication of "ordinance levying or imposing
taxes fees or other charges in particular.

In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a general or broad one. 7 A charter provision
may be impliedly modified or superseded by a later statute, and where a statute is controlling, it must be read into the charter notwithstanding any
particular charter provision. 8 A subsequent general law similarly applicable to all cities prevails over any conflicting charter provision, for the
reason that a charter must not be inconsistent with the general laws and public policy of the state. 9 A chartered city is not an independent

16 | P a g e
sovereignty. The state remains supreme in all matters not purely local. Otherwise stated, a charter must yield to the constitution and general laws
of the state, it is to have read into it that general law which governs the municipal corporation and which the corporation cannot set aside but to
which it must yield. When a city adopts a charter, it in effect adopts as part of its charter general law of such character. 10

2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as having been violated by private respondent in
bringing a direct suit in court. This is because Section 47 of the Local Tax Code provides that any question or issue raised against the legality of any
tax ordinance, or portion thereof, shall be referred for opinion to the city fiscal in the case of tax ordinance of a city. The opinion of the city fiscal is
appealable to the Secretary of Justice, whose decision shall be final and executory unless contested before a competent court within thirty (30)
days. But, the petition below plainly shows that the controversy between the parties is deeply rooted in a pure question of law: whether it is the
Revised Charter of the City of Manila or the Local Tax Code that should govern the publication of the tax ordinance. In other words, the dispute is
sharply focused on the applicability of the Revised City Charter or the Local Tax Code on the point at issue, and not on the legality of the imposition
of the tax. Exhaustion of administrative remedies before resort to judicial bodies is not an absolute rule. It admits of exceptions. Where the
question litigated upon is purely a legal one, the rule does not apply. 11 The principle may also be disregarded when it does not provide a plain,
speedy and adequate remedy. It may and should be relaxed when its application may cause great and irreparable damage. 12

3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because the imposition of rentals, permit fees, tolls
and other fees is not strictly a taxing power but a revenue-raising function, so that the procedure for publication under the Local Tax Code finds no
application. The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object of taxation. Under Section 5,
Article XI of the New Constitution, "Each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject
to such provisions as may be provided by law." 13 And one of those sources of revenue is what the Local Tax Code points to in particular: "Local
governments may collect fees or rentals for the occupancy or use of public markets and premises * * *." 14 They can provide for and regulate
market stands, stalls and privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or otherwise
dispose of stands, stalls or marketing privileges. 15

It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated September 30, 1972, insofar as it affects livestock and
animal products, because the said decree prescribes the collection of other fees and charges thereon "with the exception of ante-mortem and
post-mortem inspection fees, as well as the delivery, stockyard and slaughter fees as may be authorized by the Secretary of Agriculture and Natural
Resources." 16Clearly, even the exception clause of the decree itself permits the collection of the proper fees for livestock. And the Local Tax Code
(P.D. 231, July 1, 1973) authorizes in its Section 31: "Local governments may collect fees for the slaughter of animals and the use of corrals * * * "

4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522 supposedly in accordance with Republic Act No. 6039,
an amendment to the City Charter of Manila, providing that "the market committee shall formulate, recommend and adopt, subject to the
ratification of the municipal board, and approval of the mayor, policies and rules or regulation repealing or maneding existing provisions of the
market code" does not infect the ordinance with any germ of invalidity. 17 The function of the committee is purely recommendatory as the
underscored phrase suggests, its recommendation is without binding effect on the Municipal Board and the City Mayor. Its prior acquiescence of
an intended or proposed city ordinance is not a condition sine qua non before the Municipal Board could enact such ordinance. The native power
of the Municipal Board to legislate remains undisturbed even in the slightest degree. It can move in its own initiative and the Market Committee
cannot demur. At most, the Market Committee may serve as a legislative aide of the Municipal Board in the enactment of city ordinances affecting
the city markets or, in plain words, in the gathering of the necessary data, studies and the collection of consensus for the proposal of ordinances
regarding city markets. Much less could it be said that Republic Act 6039 intended to delegate to the Market Committee the adoption of regulatory
measures for the operation and administration of the city markets. Potestas delegata non delegare potest.

5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted to the exclusive private use of the Asiatic
Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating
Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation.
Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The
entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter
whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object
for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in
applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation. 18

Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt Practices Act because the increased rates of
market stall fees as levied by the ordinance will necessarily inure to the unwarranted benefit and advantage of the corporation. 19 We are
concerned only with the issue whether the ordinance in question is intra vires. Once determined in the affirmative, the measure may not be
invalidated because of consequences that may arise from its enforcement. 20

ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No. 7522 of the City of Manila, dated June 15, 1975, is
hereby held to have been validly enacted. No. costs.

SO ORDERED.

Castro, C.J., Barredo, Makasiar, Antonio, Muñoz Palma, Aquino and Concepcion, Jr., JJ., concur.

17 | P a g e
Teehankee, J., reserves his vote.

Separate Opinions

FERNANDO, J., concurring:

But qualifies his assent as to an ordinance intra vires not being open to question "because of consequences that may arise from its enforcement."

G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115525 October 30, 1995

JUAN T. DAVID, petitioner,

vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary of Finance; LIWAYWAY VINZONS-CHATO, as
Commissioner of Internal Revenue; and their AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.

G.R. No. 115543 October 30, 1995

RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,

vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE BUREAU OF INTERNAL REVENUE AND BUREAU OF
CUSTOMS, respondents.

G.R. No. 115544 October 30, 1995

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L.
PAVIA; and OFELIA L. DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive
Secretary; and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115754 October 30, 1995

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995

KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO,
FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN
S. DOROMAL, MOVEMENT OF ATTORNEYS FOR BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT
COALITION, INC., and PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAÑADA,petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE and THE COMMISSIONER OF
CUSTOMS, respondents.

G.R. No. 115852 October 30, 1995

18 | P a g e
PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 October 30, 1995

COOPERATIVE UNION OF THE PHILIPPINES, petitioner,

vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON. TEOFISTO T. GUINGONA, JR., in his capacity as
Executive Secretary, and HON. ROBERTO B. DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115931 October 30, 1995

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF PHILIPPINE BOOK SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO, as the Commissioner of Internal Revenue; and HON.
GUILLERMO PARAYNO, JR., in his capacity as the Commissioner of Customs, respondents.

RESOLUTION

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these cases for the declaration of unconstitutionality of
R.A. No. 7716, otherwise known as the Expanded Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several
petitioners in these cases, with the exception of the Philippine Educational Publishers Association, Inc. and the Association of Philippine
Booksellers, petitioners in G.R. No. 115931.

The Solicitor General, representing the respondents, filed a consolidated comment, to which the Philippine Airlines, Inc., petitioner in G.R. No.
115852, and the Philippine Press Institute, Inc., petitioner in G.R. No. 115544, and Juan T. David, petitioner in G.R. No. 115525, each filed a reply. In
turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.

I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino, Kilosbayan, Inc., Philippine Airlines (PAL), Roco,
and Chamber of Real Estate and Builders Association (CREBA)) reiterate previous claims made by them that R.A. No. 7716 did not "originate
exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution. Although they admit that H. No. 11197 was filed in the
House of Representatives where it passed three readings and that afterward it was sent to the Senate where after first reading it was referred to
the Senate Ways and Means Committee, they complain that the Senate did not pass it on second and third readings. Instead what the Senate did
was to pass its own version (S. No. 1630) which it approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should
have done was to amend H. No. 11197 by striking out the text of the bill and substituting it with the text of S. No. 1630. That way, it is said, "the bill
remains a House bill and the Senate version just becomes the text (only the text) of the House bill."

The contention has no merit.

The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment to a House revenue bill by enacting its own
version of a revenue bill. On at least two occasions during the Eighth Congress, the Senate passed its own version of revenue bills, which, in
consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY EXTENDING FROM FIVE (5) YEARS TO TEN YEARS THE PERIOD
FOR TAX AND DUTY EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was approved by the President on April 10, 1992. This Act is
actually a consolidation of H. No. 34254, which was approved by the House on January 29, 1992, and S. No. 1920, which was approved by the
Senate on February 3, 1992.

R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD TO ANY FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC
GAMES) which was approved by the President on May 22, 1992. This Act is a consolidation of H. No. 22232, which was approved by the House of
Representatives on August 2, 1989, and S. No. 807, which was approved by the Senate on October 21, 1991.

19 | P a g e
On the other hand, the Ninth Congress passed revenue laws which were also the result of the consolidation of House and Senate bills. These are
the following, with indications of the dates on which the laws were approved by the President and dates the separate bills of the two chambers of
Congress were respectively passed:

1. R.A. NO. 7642

AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR THIS PURPOSE THE PERTINENT SECTIONS OF THE
NATIONAL INTERNAL REVENUE CODE (December 28, 1992).

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE THE PAYMENT OF THE VALUE-ADDED TAX
EVERY MONTH AND TO ALLOW LOCAL GOVERNMENT UNITS TO SHARE IN VAT REVENUE, AMENDING FOR THIS PURPOSE
CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO PRESCRIBE THE PLACE FOR PAYMENT OF INTERNAL
REVENUE TAXES BY LARGE TAXPAYERS, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED (February 24, 1993)

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES
INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS) TO DEDUCT AND WITHHOLD THE VALUE-ADDED
TAX DUE AT THE RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND SIX PERCENT (6%) ON
GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS (April 6, 1993)

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS TO DECLARE DIVIDENDS UNDER CERTAIN

CONDITIONS TO THE NATIONAL GOVERNMENT, AND FOR OTHER PURPOSES (November 9, 1993)

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION OF THE DOCUMENTARY STAMP TAX, AMENDING
FOR THE PURPOSE CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ALLOCATING FUNDS FOR
SPECIFIC PROGRAMS, AND FOR OTHER PURPOSES (December 23, 1993)

20 | P a g e
 House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED AND TRADED THROUGH THE
LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC OFFERING, AMENDING FOR THE PURPOSE THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, BY INSERTING A NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5, 1994)

House Bill No. 9187, November 3, 1993

Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of its power to propose amendments to bills
required to originate in the House, passed its own version of a House revenue measure. It is noteworthy that, in the particular case of S. No. 1630,
petitioners Tolentino and Roco, as members of the Senate, voted to approve it on second and third readings.

On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino, concerns a mere matter of form. Petitioner has not
shown what substantial difference it would make if, as the Senate actually did in this case, a separate bill like S. No. 1630 is instead enacted as a
substitute measure, "taking into Consideration . . . H.B. 11197."

Indeed, so far as pertinent, the Rules of the Senate only provide:

RULE XXIX

AMENDMENTS

xxx xxx xxx

§68. Not more than one amendment to the original amendment shall be considered.

No amendment by substitution shall be entertained unless the text thereof is submitted in writing.

Any of said amendments may be withdrawn before a vote is taken thereon.

§69. No amendment which seeks the inclusion of a legislative provision foreign to the subject matter of a bill (rider) shall be
entertained.

xxx xxx xxx

§70-A. A bill or resolution shall not be amended by substituting it with another which covers a subject distinct from that
proposed in the original bill or resolution. (emphasis added).

Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate possesses less power than the U.S. Senate
because of textual differences between constitutional provisions giving them the power to propose or concur with amendments.

Art. I, §7, cl. 1 of the U.S. Constitution reads:

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with
amendments as on other Bills.

Art. VI, §24 of our Constitution reads:

All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills
shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

21 | P a g e
The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the phrase "as on other Bills" in the American version,
according to petitioners, shows the intention of the framers of our Constitution to restrict the Senate's power to propose amendments to revenue
bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate" and "the words 'as in any other bills' (sic) were
eliminated so as to show that these bills were not to be like other bills but must be treated as a special kind."

The history of this provision does not support this contention. The supposed indicia of constitutional intent are nothing but the relics of an
unsuccessful attempt to limit the power of the Senate. It will be recalled that the 1935 Constitution originally provided for a unicameral National
Assembly. When it was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the procedure for lawmaking by
the Senate and the House of Representatives. The work of proposing amendments to the Constitution was done by the National Assembly, acting
as a constituent assembly, some of whose members, jealous of preserving the Assembly's lawmaking powers, sought to curtail the powers of the
proposed Senate. Accordingly they proposed the following provision:

All bills appropriating public funds, revenue or tariff bills, bills of local application, and private bills shall originate exclusively in
the Assembly, but the Senate may propose or concur with amendments. In case of disapproval by the Senate of any such bills,
the Assembly may repass the same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be deemed
enacted and may be submitted to the President for corresponding action. In the event that the Senate should fail to finally act
on any such bills, the Assembly may, after thirty days from the opening of the next regular session of the same legislative term,
reapprove the same with a vote of two-thirds of all the members of the Assembly. And upon such reapproval, the bill shall be
deemed enacted and may be submitted to the President for corresponding action.

The special committee on the revision of laws of the Second National Assembly vetoed the proposal. It deleted everything after the first sentence.
As rewritten, the proposal was approved by the National Assembly and embodied in Resolution No. 38, as amended by Resolution No. 73. (J.
ARUEGO, KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was submitted to the people and ratified by them in the elections
held on June 18, 1940.

This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present Constitution was derived. It explains why the
word "exclusively" was added to the American text from which the framers of the Philippine Constitution borrowed and why the phrase "as on
other Bills" was not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments must be understood to be
full, plenary and complete "as on other Bills." Thus, because revenue bills are required to originate exclusively in the House of Representatives, the
Senate cannot enact revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by the House, however, the
Senate certainly can pass its own version on the same subject matter. This follows from the coequality of the two chambers of Congress.

That this is also the understanding of book authors of the scope of the Senate's power to concur is clear from the following commentaries:

The power of the Senate to propose or concur with amendments is apparently without restriction. It would seem that by virtue
of this power, the Senate can practically re-write a bill required to come from the House and leave only a trace of the original
bill. For example, a general revenue bill passed by the lower house of the United States Congress contained provisions for the
imposition of an inheritance tax . This was changed by the Senate into a corporation tax. The amending authority of the Senate
was declared by the United States Supreme Court to be sufficiently broad to enable it to make the alteration. [Flint v. Stone
Tracy Company, 220 U.S. 107, 55 L. ed. 389].

(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247 (1961))

The above-mentioned bills are supposed to be initiated by the House of Representatives because it is more numerous in
membership and therefore also more representative of the people. Moreover, its members are presumed to be more familiar
with the needs of the country in regard to the enactment of the legislation involved.

The Senate is, however, allowed much leeway in the exercise of its power to propose or concur with amendments to the bills
initiated by the House of Representatives. Thus, in one case, a bill introduced in the U.S. House of Representatives was changed
by the Senate to make a proposed inheritance tax a corporation tax. It is also accepted practice for the Senate to introduce
what is known as an amendment by substitution, which may entirely replace the bill initiated in the House of Representatives.

(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).

In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application,
and private bills must "originate exclusively in the House of Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise of this power, the Senate may propose an entirely new bill as a substitute measure. As petitioner Tolentino states in
a high school text, a committee to which a bill is referred may do any of the following:

22 | P a g e
 (1) to endorse the bill without changes; (2) to make changes in the bill omitting or adding sections or altering its language; (3) to
make and endorse an entirely new bill as a substitute, in which case it will be known as a committee bill; or (4) to make no
report at all.

(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))

To except from this procedure the amendment of bills which are required to originate in the House by prescribing that the number of the House bill
and its other parts up to the enacting clause must be preserved although the text of the Senate amendment may be incorporated in place of the
original body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing this form. S. No. 1630, as a substitute measure, is
therefore as much an amendment of H. No. 11197 as any which the Senate could have made.

II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that S. No. 1630 is an independent and distinct bill.
Hence their repeated references to its certification that it was passed by the Senate "in substitution of S.B. No. 1129, taking into consideration P.S.
Res. No. 734 and H.B. No. 11197," implying that there is something substantially different between the reference to S. No. 1129 and the reference
to H. No. 11197. From this premise, they conclude that R.A. No. 7716 originated both in the House and in the Senate and that it is the product of
two "half-baked bills because neither H. No. 11197 nor S. No. 1630 was passed by both houses of Congress."

In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere amendments of the corresponding provisions of H. No.
11197. The very tabular comparison of the provisions of H. No. 11197 and S. No. 1630 attached as Supplement A to the basic petition of petitioner
Tolentino, while showing differences between the two bills, at the same time indicates that the provisions of the Senate bill were precisely
intended to be amendments to the House bill.

Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was a mere amendment of the House bill, H. No.
11197 in its original form did not have to pass the Senate on second and three readings. It was enough that after it was passed on first reading it
was referred to the Senate Committee on Ways and Means. Neither was it required that S. No. 1630 be passed by the House of Representatives
before the two bills could be referred to the Conference Committee.

There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When the House bill and Senate bill, which became
R.A. No. 1405 (Act prohibiting the disclosure of bank deposits), were referred to a conference committee, the question was raised whether the two
bills could be the subject of such conference, considering that the bill from one house had not been passed by the other and vice versa. As
Congressman Duran put the question:

MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill is passed by the House but not passed by
the Senate, and a Senate bill of a similar nature is passed in the Senate but never passed in the House, can the two bills be the
subject of a conference, and can a law be enacted from these two bills? I understand that the Senate bill in this particular
instance does not refer to investments in government securities, whereas the bill in the House, which was introduced by the
Speaker, covers two subject matters: not only investigation of deposits in banks but also investigation of investments in
government securities. Now, since the two bills differ in their subject matter, I believe that no law can be enacted.

Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:

THE SPEAKER. The report of the conference committee is in order. It is precisely in cases like this where a conference should be
had. If the House bill had been approved by the Senate, there would have been no need of a conference; but precisely because
the Senate passed another bill on the same subject matter, the conference committee had to be created, and we are now
considering the report of that committee.

(2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))

III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct and unrelated measures also accounts for the
petitioners' (Kilosbayan's and PAL's) contention that because the President separately certified to the need for the immediate enactment of these
measures, his certification was ineffectual and void. The certification had to be made of the version of the same revenue bill which at the
momentwas being considered. Otherwise, to follow petitioners' theory, it would be necessary for the President to certify as many bills as are
presented in a house of Congress even though the bills are merely versions of the bill he has already certified. It is enough that he certifies the bill
which, at the time he makes the certification, is under consideration. Since on March 22, 1994 the Senate was considering S. No. 1630, it was that
bill which had to be certified. For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate enactment because it
was the one which at that time was being considered by the House. This bill was later substituted, together with other bills, by H. No. 11197.

As to what Presidential certification can accomplish, we have already explained in the main decision that the phrase "except when the President
certifies to the necessity of its immediate enactment, etc." in Art. VI, §26 (2) qualifies not only the requirement that "printed copies [of a bill] in its
final form [must be] distributed to the members three days before its passage" but also the requirement that before a bill can become a law it must
have passed "three readings on separate days." There is not only textual support for such construction but historical basis as well.

23 | P a g e
Art. VI, §21 (2) of the 1935 Constitution originally provided:

(2) No bill shall be passed by either House unless it shall have been printed and copies thereof in its final form furnished its
Members at least three calendar days prior to its passage, except when the President shall have certified to the necessity of its
immediate enactment. Upon the last reading of a bill, no amendment thereof shall be allowed and the question upon its
passage shall be taken immediately thereafter, and the yeas and nays entered on the Journal.

When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):

(2) No bill 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 the Members three days before its passage, except when the Prime Minister 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.

This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the present Constitution, thus:

(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 yeasand nays entered in the Journal.

The exception is based on the prudential consideration that if in all cases three readings on separate days are required and a bill has to be printed
in final form before it can be passed, the need for a law may be rendered academic by the occurrence of the very emergency or public calamity
which it is meant to address.

Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a country like the Philippines where budget deficit is a
chronic condition. Even if this were the case, an enormous budget deficit does not make the need for R.A. No. 7716 any less urgent or the situation
calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed that there was an urgent need for consideration
of S. No. 1630, because they responded to the call of the President by voting on the bill on second and third readings on the same day. While the
judicial department is not bound by the Senate's acceptance of the President's certification, the respect due coequal departments of the
government in matters committed to them by the Constitution and the absence of a clear showing of grave abuse of discretion caution a stay of
the judicial hand.

At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it was discussed for six days. Only its distribution
in advance in its final printed form was actually dispensed with by holding the voting on second and third readings on the same day (March 24,
1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on second reading and its approval on March 24, 1994
elapsed before it was finally voted on by the Senate on third reading.

The purpose for which three readings on separate days is required is said to be two-fold: (1) to inform the members of Congress of what they must
vote on and (2) to give them notice that a measure is progressing through the enacting process, thus enabling them and others interested in the
measure to prepare their positions with reference to it. (1 J. G. SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION §10.04, p. 282 (1972)).
These purposes were substantially achieved in the case of R.A. No. 7716.

IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the Movement of Attorneys for Brotherhood, Integrity and
Nationalism, Inc. (MABINI)) that in violation of the constitutional policy of full public disclosure and the people's right to know (Art. II, §28 and Art.
III, §7) the Conference Committee met for two days in executive session with only the conferees present.

As pointed out in our main decision, even in the United States it was customary to hold such sessions with only the conferees and their staffs in
attendance and it was only in 1975 when a new rule was adopted requiring open sessions. Unlike its American counterpart, the Philippine Congress
has not adopted a rule prescribing open hearings for conference committees.

It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least staff members were present. These were staff
members of the Senators and Congressmen, however, who may be presumed to be their confidential men, not stenographers as in this case who
on the last two days of the conference were excluded. There is no showing that the conferees themselves did not take notes of their proceedings
so as to give petitioner Kilosbayan basis for claiming that even in secret diplomatic negotiations involving state interests, conferees keep notes of
their meetings. Above all, the public's right to know was fully served because the Conference Committee in this case submitted a report showing
the changes made on the differing versions of the House and the Senate.

24 | P a g e
Petitioners cite the rules of both houses which provide that conference committee reports must contain "a detailed, sufficiently explicit statement
of the changes in or other amendments." These changes are shown in the bill attached to the Conference Committee Report. The members of both
houses could thus ascertain what changes had been made in the original bills without the need of a statement detailing the changes.

The same question now presented was raised when the bill which became R.A. No. 1400 (Land Reform Act of 1955) was reported by the
Conference Committee. Congressman Bengzon raised a point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of the conference committee regarding House
Bill No. 2557 by reason of the provision of Section 11, Article XII, of the Rules of this House which provides specifically that the
conference report must be accompanied by a detailed statement of the effects of the amendment on the bill of the House. This
conference committee report is not accompanied by that detailed statement, Mr. Speaker. Therefore it is out of order to
consider it.

Petitioner Tolentino, then the Majority Floor Leader, answered:

MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection with the point of order raised by the
gentleman from Pangasinan.

There is no question about the provision of the Rule cited by the gentleman from Pangasinan, but this provision applies to those
cases where only portions of the bill have been amended. In this case before us an entire bill is presented; therefore, it can be
easily seen from the reading of the bill what the provisions are. Besides, this procedure has been an established practice.

After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for the provisions of the Rules, and the reason
for the requirement in the provision cited by the gentleman from Pangasinan is when there are only certain words or phrases
inserted in or deleted from the provisions of the bill included in the conference report, and we cannot understand what those
words and phrases mean and their relation to the bill. In that case, it is necessary to make a detailed statement on how those
words and phrases will affect the bill as a whole; but when the entire bill itself is copied verbatim in the conference report, that
is not necessary. So when the reason for the Rule does not exist, the Rule does not exist.

(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was appealed, it was upheld by viva voce and when a
division of the House was called, it was sustained by a vote of 48 to 5. (Id.,
p. 4058)

Nor is there any doubt about the power of a conference committee to insert new provisions as long as these are germane to the subject of the
conference. As this Court held in Philippine Judges Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then Justice Cruz, the
jurisdiction of the conference committee is not limited to resolving differences between the Senate and the House. It may propose an entirely new
provision. What is important is that its report is subsequently approved by the respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been added by the conference committee, there was thereby a violation of the
constitutional injunction that "upon the last reading of a bill, no amendment thereto shall be allowed."

Applying these principles, we shall decline to look into the petitioners' charges that an amendment was made upon the last
reading of the bill that eventually became R.A. No. 7354 and that copiesthereof in its final form were not distributed among the
members of each House. Both the enrolled bill and the legislative journals certify that the measure was duly enacted i.e., in
accordance with Article VI, Sec. 26 (2) of the Constitution. We are bound by such official assurances from a coordinate
department of the government, to which we owe, at the very least, a becoming courtesy.

(Id. at 710. (emphasis added))

It is interesting to note the following description of conference committees in the Philippines in a 1979 study:

Conference committees may be of two types: free or instructed. These committees may be given instructions by their parent
bodies or they may be left without instructions. Normally the conference committees are without instructions, and this is why
they are often critically referred to as "the little legislatures." Once bills have been sent to them, the conferees have almost
unlimited authority to change the clauses of the bills and in fact sometimes introduce new measures that were not in the
original legislation. No minutes are kept, and members' activities on conference committees are difficult to determine. One
congressman known for his idealism put it this way: "I killed a bill on export incentives for my interest group [copra] in the
conference committee but I could not have done so anywhere else." The conference committee submits a report to both
25 | P a g e
 houses, and usually it is accepted. If the report is not accepted, then the committee is discharged and new members are
appointed.

(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND LEGISLATURES: A COMPARATIVE ANALYSIS 163 (J. D.
LEES AND M. SHAW, eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only to say that conference committees here are no
different from their counterparts in the United States whose vast powers we noted in Philippine Judges Association v. Prado, supra. At all events,
under Art. VI, §16(3) each house has the power "to determine the rules of its proceedings," including those of its committees. Any meaningful
change in the method and procedures of Congress or its committees must therefore be sought in that body itself.

V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26 (1) of the Constitution which provides that
"Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." PAL contends that the amendment of
its franchise by the withdrawal of its exemption from the VAT is not expressed in the title of the law.

Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all other taxes, duties, royalties, registration, license
and other fees and charges of any kind, nature, or description, imposed, levied, established, assessed or collected by any municipal, city, provincial
or national authority or government agency, now or in the future."

PAL was exempted from the payment of the VAT along with other entities by §103 of the National Internal Revenue Code, which provides as
follows:

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

xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory.

R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending §103, as follows:

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

xxx xxx xxx

(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491,
1590. . . .

The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS
ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.

By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT) SYSTEM [BY] WIDENING ITS TAX BASE AND ENHANCING ITS
ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED AND FOR OTHER PURPOSES," Congress thereby clearly expresses its intention to amend any provision of the NIRC which
stands in the way of accomplishing the purpose of the law.

PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific reference to P.D. No. 1590. It is unnecessary to
do this in order to comply with the constitutional requirement, since it is already stated in the title that the law seeks to amend the pertinent
provisions of the NIRC, among which is §103(q), in order to widen the base of the VAT. Actually, it is the bill which becomes a law that is required to
express in its title the subject of legislation. The titles of H. No. 11197 and S. No. 1630 in fact specifically referred to §103 of the NIRC as among the
provisions sought to be amended. We are satisfied that sufficient notice had been given of the pendency of these bills in Congress before they
were enacted into what is now R.A.
No. 7716.

In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was rejected. R.A. No. 7354 is entitled AN ACT
CREATING THE PHILIPPINE POSTAL CORPORATION, DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR REGULATION OF
THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED THEREWITH. It contained a provision repealing all franking privileges. It was contended

26 | P a g e
that the withdrawal of franking privileges was not expressed in the title of the law. In holding that there was sufficient description of the subject of
the law in its title, including the repeal of franking privileges, this Court held:

To require every end and means necessary for the accomplishment of the general objectives of the statute to be expressed in
its title would not only be unreasonable but would actually render legislation impossible. [Cooley, Constitutional Limitations,
8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its title, but matter germane to the subject
as expressed in the title, and adopted to the accomplishment of the object in view, may properly be
included in the act. Thus, it is proper to create in the same act the machinery by which the act is to be
enforced, to prescribe the penalties for its infraction, and to remove obstacles in the way of its execution. If
such matters are properly connected with the subject as expressed in the title, it is unnecessary that they
should also have special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed. 725)

(227 SCRA at 707-708)

VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the press is not exempt from the taxing power of the
State and that what the constitutional guarantee of free press prohibits are laws which single out the press or target a group belonging to the press
for special treatment or which in any way discriminate against the press on the basis of the content of the publication, and R.A. No. 7716 is none of
these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while maintaining those granted to others, the law
discriminates against the press. At any rate, it is averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is
unconstitutional."

With respect to the first contention, it would suffice to say that since the law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been
subject. It is thus different from the tax involved in the cases invoked by the PPI. The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80
L. Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts only of newspapers whose weekly circulation
was over 20,000, with the result that the tax applied only to 13 out of 124 publishers in Louisiana. These large papers were critical of Senator Huey
Long who controlled the state legislature which enacted the license tax. The censorial motivation for the law was thus evident.

On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S. 575, 75 L. Ed. 2d 295 (1983), the tax was found to
be discriminatory because although it could have been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using,
storing or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes. It was, however, later made to pay
a special use tax on the cost of paper and ink which made these items "the only items subject to the use tax that were component of goods to be
sold at retail." The U.S. Supreme Court held that the differential treatment of the press "suggests that the goal of regulation is not related to
suppression of expression, and such goal is presumptively unconstitutional." It would therefore appear that even a law that favors the press is
constitutionally suspect. (See the dissent of Rehnquist, J. in that case)

Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely and unqualifiedly" by R.A. No. 7716. Other
exemptions from the VAT, such as those previously granted to PAL, petroleum concessionaires, enterprises registered with the Export Processing
Zone Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially withdrawn, in an effort to broaden
the base of the tax.

The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented, continue to enjoy
exemption under R.A. No. 7716. An enumeration of some of these transactions will suffice to show that by and large this is not so and that the
exemptions are granted for a purpose. As the Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural
production and, in other cases, for the personal benefit of the end-user rather than for profit. The exempt transactions are:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton seeds in
their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services to
enhance agriculture (milling of palay, corn, sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to the Philippines) or for
professional use, like professional instruments and implements, by persons coming to the Philippines to settle here.

27 | P a g e
 (c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products subject to
excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-employee
relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

The PPI asserts that it does not really matter that the law does not discriminate against the press because "even nondiscriminatory taxation on
constitutionally guaranteed freedom is unconstitutional." PPI cites in support of this assertion the following statement in Murdock v. Pennsylvania,
319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection afforded by the First Amendment is not so
restricted. A license tax certainly does not acquire constitutional validity because it classifies the privileges protected by the
First Amendment along with the wares and merchandise of hucksters and peddlers and treats them all alike. Such equality in
treatment does not save the ordinance. Freedom of press, freedom of speech, freedom of religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition on the press is
unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application to others, such those selling goods, is
valid, its application to the press or to religious groups, such as the Jehovah's Witnesses, in connection with the latter's sale of religious books and
pamphlets, is unconstitutional. As the U.S. Supreme Court put it, "it is one thing to impose a tax on income or property of a preacher. It is quite
another thing to exact a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386 (1957) which invalidated a city ordinance requiring
a business license fee on those engaged in the sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by
the American Bible Society without restraining the free exercise of its right to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege, much less a constitutional right. It is imposed on
the sale, barter, lease or exchange of goods or properties or the sale or exchange of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to burden the exercise of its right any more than to make the press pay income tax or subject it
to general regulation is not to violate its freedom under the Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to subsidize the cost
of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the
volume of sale. Granting that to be the case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to
differentiate it from any other economic imposition that might make the right to disseminate religious doctrines costly. Otherwise, to follow the
petitioner's argument, to increase the tax on the sale of vestments would be to lay an impermissible burden on the right of the preacher to make a
sermon.

On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by §7 of R.A. No. 7716, although fixed in amount, is
really just to pay for the expenses of registration and enforcement of provisions such as those relating to accounting in §108 of the NIRC. That the
PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the payment of this fee because it also sells some
copies. At any rate whether the PBS is liable for the VAT must be decided in concrete cases, in the event it is assessed this tax by the Commissioner
of Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on taxation. CREBA asserts that R.A. No. 7716 (1)
impairs the obligations of contracts, (2) classifies transactions as covered or exempt without reasonable basis and (3) violates the rule that taxes
should be uniform and equitable and that Congress shall "evolve a progressive system of taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of the sale of real property by installment or on
deferred payment basis would result in substantial increases in the monthly amortizations to be paid because of the 10% VAT. The additional
amount, it is pointed out, is something that the buyer did not anticipate at the time he entered into the contract.

28 | P a g e
The short answer to this is the one given by this Court in an early case: "Authorities from numerous sources are cited by the plaintiffs, but none of
them show that a lawful tax on a new subject, or an increased tax on an old one, interferes with a contract or impairs its obligation, within the
meaning of the Constitution. Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the
security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless
prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense." (La Insular v. Machuca
Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not only existing laws but also "the reservation of the essential attributes of
sovereignty, is . . . read into contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22 SCRA 135, 147
(1968)) Contracts must be understood as having been made in reference to the possible exercise of the rightful authority of the government and no
obligation of contract can extend to the defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).

It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of agricultural products, food items, petroleum, and
medical and veterinary services, it grants no exemption on the sale of real property which is equally essential. The sale of real property for
socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate transactions of "the less poor," i.e., the middle class,
who are equally homeless, should likewise be exempted.

The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods and services was already exempt under §103,
pars. (b) (d) (1) of the NIRC before the enactment of R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted exemption to these
transactions, while subjecting those of petitioner to the payment of the VAT. Moreover, there is a difference between the "homeless poor" and the
"homeless less poor" in the example given by petitioner, because the second group or middle class can afford to rent houses in the meantime that
they cannot yet buy their own homes. The two social classes are thus differently situated in life. "It is inherent in the power to tax that the State be
free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord, City of Baguio v. De Leon, 134 Phil.
912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371
(1988)).

Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1) which provides that "The rule of taxation shall
be uniform and equitable. The Congress shall evolve a progressive system of taxation."

Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same rate. The taxing
power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement it is enough that the
statute or ordinance applies equally to all persons, forms and corporations placed in similar situation. (City of Baguio v. De Leon, supra; Sison, Jr. v.
Ancheta, supra)

Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A. No. 7716 merely expands the base of the tax.
The validity of the original VAT Law was questioned in Kapatiran ng Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on
grounds similar to those made in these cases, namely, that the law was "oppressive, discriminatory, unjust and regressive in violation of Art. VI,
§28(1) of the Constitution." (At 382) Rejecting the challenge to the law, this Court held:

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. . . .

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 engaged 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, so that the costs of basic food and other necessities,
spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general public.

(At 382-383)

The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of the Philippines, Inc. (CUP), while petitioner Juan T.
David argues that the law contravenes the mandate of Congress to provide for a progressive system of taxation because the law imposes a flat rate
of 10% and thus places the tax burden on all taxpayers without regard to their ability to pay.

The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that
Congress shall "evolve a progressive system of taxation." The constitutional provision has been interpreted to mean simply that "direct taxes are . .
. to be preferred [and] as much as possible, indirect taxes should be minimized." (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221
(Second ed. (1977)). Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, §17(1) of the 1973 Constitution from
which the present Art. VI, §28(1) was taken. Sales taxes are also regressive.

29 | P a g e
Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes
according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero
rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716,
§4, amending §103 of the NIRC).

Thus, the following transactions involving basic and essential goods and services are exempted from the VAT:

(a) Goods for consumption or use which are in their original state (agricultural, marine and forest products, cotton seeds in
their original state, fertilizers, seeds, seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services to
enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock, poultry feeds, fertilizer, ingredients used for the
manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of citizens returning to the Philippines) and or
professional use, like professional instruments and implements, by persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for manufacture of petroleum products subject to
excise tax and services subject to percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and services rendered under employer-employee
relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and services which are used or availed of mainly by
higher income groups. These include real properties held primarily for sale to customers or for lease in the ordinary course of trade or business, the
right or privilege to use patent, copyright, and other similar property or right, the right or privilege to use industrial, commercial or scientific
equipment, motion picture films, tapes and discs, radio, television, satellite transmission and cable television time, hotels, restaurants and similar
places, securities, lending investments, taxicabs, utility cars for rent, tourist buses, and other common carriers, services of franchise grantees of
telephone and telegraph.

The problem with CREBA's petition is that it presents broad claims of constitutional violations by tendering issues not at retail but at wholesale and
in the abstract. There is no fully developed record which can impart to adjudication the impact of actuality. There is no factual foundation to show
in the concrete the application of the law to actual contracts and exemplify its effect on property rights. For the fact is that petitioner's members
have not even been assessed the VAT. Petitioner's case is not made concrete by a series of hypothetical questions asked which are no different
from those dealt with in advisory opinions.

The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere allegation, as here, does not suffice.
There must be a factual foundation of such unconstitutional taint. Considering that petitioner here would condemn such a
provision as void on its face, he has not made out a case. This is merely to adhere to the authoritative doctrine that where the
due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards,
there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the
presumption of validity must prevail.

(Sison, Jr. v. Ancheta, 130 SCRA at 661)

Adjudication of these broad claims must await the development of a concrete case. It may be that postponement of adjudication would result in a
multiplicity of suits. This need not be the case, however. Enforcement of the law may give rise to such a case. A test case, provided it is an actual
case and not an abstract or hypothetical one, may thus be presented.

Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues. Otherwise, adjudication would be no different from
the giving of advisory opinion that does not really settle legal issues.

30 | P a g e
We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "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." This duty can only arise if an actual
case or controversy is before us. Under Art . VIII, §5 our jurisdiction is defined in terms of "cases" and all that Art. VIII, §1, ¶2 can plausibly mean is
that in the exercise of that jurisdiction we have the judicial power to determine questions of grave abuse of discretion by any branch or
instrumentality of the government.

Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a court to hear and decide cases pending between
parties who have the right to sue and be sued in the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from
legislative and executive power. This power cannot be directly appropriated until it is apportioned among several courts either by the Constitution,
as in the case of Art. VIII, §5, or by statute, as in the case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980
(B.P. Blg. 129). The power thus apportioned constitutes the court's "jurisdiction," defined as "the power conferred by law upon a court or judge to
take cognizance of a case, to the exclusion of all others." (United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its
jurisdiction, this Court cannot inquire into any allegation of grave abuse of discretion by the other departments of the government.

VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of the Philippines (CUP), after briefly surveying the
course of legislation, argues that it was to adopt a definite policy of granting tax exemption to cooperatives that the present Constitution embodies
provisions on cooperatives. To subject cooperatives to the VAT would therefore be to infringe a constitutional policy. Petitioner claims that in 1973,
P.D. No. 175 was promulgated exempting cooperatives from the payment of income taxes and sales taxes but in 1984, because of the crisis which
menaced the national economy, this exemption was withdrawn by P.D. No. 1955; that in 1986, P.D. No. 2008 again granted cooperatives
exemption from income and sales taxes until December 31, 1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in
1987 the framers of the Constitution "repudiated the previous actions of the government adverse to the interests of the cooperatives, that is, the
repeated revocation of the tax exemption to cooperatives and instead upheld the policy of strengthening the cooperatives by way of the grant of
tax exemptions," by providing the following in Art. XII:

§1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained
increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform,
through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic
and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade
practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to
develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to
broaden the base of their ownership.

§15. The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social justice
and economic development.

Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out cooperatives by withdrawing their exemption
from income and sales taxes under P.D. No. 175, §5. What P.D. No. 1955, §1 did was to withdraw the exemptions and preferential treatments
theretofore granted to private business enterprises in general, in view of the economic crisis which then beset the nation. It is true that after P.D.
No. 2008, §2 had restored the tax exemptions of cooperatives in 1986, the exemption was again repealed by E.O. No. 93, §1, but then again
cooperatives were not the only ones whose exemptions were withdrawn. The withdrawal of tax incentives applied to all, including government and
private entities. In the second place, the Constitution does not really require that cooperatives be granted tax exemptions in order to promote their
growth and viability. Hence, there is no basis for petitioner's assertion that the government's policy toward cooperatives had been one of
vacillation, as far as the grant of tax privileges was concerned, and that it was to put an end to this indecision that the constitutional provisions
cited were adopted. Perhaps as a matter of policy cooperatives should be granted tax exemptions, but that is left to the discretion of Congress. If
Congress does not grant exemption and there is no discrimination to cooperatives, no violation of any constitutional policy can be charged.

Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt from taxation. Such theory is contrary to the
Constitution under which only the following are exempt from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, §28
(3), and non-stock, non-profit educational institutions by reason of Art. XIV, §4 (3).

CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the equal protection of the law because electric
cooperatives are exempted from the VAT. The classification between electric and other cooperatives (farmers cooperatives, producers
cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that there is greater need to provide cheaper
electric power to as many people as possible, especially those living in the rural areas, than there is to provide them with other necessities in life.
We cannot say that such classification is unreasonable.

31 | P a g e
We have carefully read the various arguments raised against the constitutional validity of R.A. No. 7716. We have in fact taken the extraordinary
step of enjoining its enforcement pending resolution of these cases. We have now come to the conclusion that the law suffers from none of the
infirmities attributed to it by petitioners and that its enactment by the other branches of the government does not constitute a grave abuse of
discretion. Any question as to its necessity, desirability or expediency must be addressed to Congress as the body which is electorally responsible,
remembering that, as Justice Holmes has said, "legislators are the ultimate guardians of the liberties and welfare of the people in quite as great a
degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194 U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R.
No. 115543 does in arguing that we should enforce the public accountability of legislators, that those who took part in passing the law in question
by voting for it in Congress should later thrust to the courts the burden of reviewing measures in the flush of enactment. This Court does not sit as
a third branch of the legislature, much less exercise a veto power over legislation.

WHEREFORE, the motions for reconsideration are denied with finality and the temporary restraining order previously issued is hereby lifted.

SO ORDERED.

G.R. No. 87479 June 4, 1990

NATIONAL POWER CORPORATION, petitioner,

vs.
THE PROVINCE OF ALBAY, ALBAY GOVERNOR ROMEO R. SALALIMA, and ALBAY PROVINCIAL TREASURER ABUNDIO M. NUÑEZ, respondents.

Romulo L. Ricafort and Jesus R. Cornago for respondents.

SARMIENTO, J.:

The National Power Corporation (NAPOCOR) questions the power of the provincial government of Albay to collect real property taxes on its
properties located at Tiwi, Albay, amassed between June 11, 1984 up to March 10, 1987.

It appears that on March 14 and 15, 1989, the respondents caused the publication of a notice of auction sale involving the properties of NAPOCOR
and the Philippine Geothermal Inc. consisting of buildings, machines, and similar improvements standing on their offices at Tiwi, Albay. The
amounts to be realized from this advertised auction sale are supposed to be applied to the tax delinquencies claimed, as and for, as we said, real
property taxes. The back taxes NAPOCOR has supposedly accumulated were computed at P214,845,184.76.

NAPOCOR opposed the sale, interposing in support of its non-liability Resolution No. 17-87, of the Fiscal Incentives Review Board (FIRB), which
provides as follows:

BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty exemption privileges of the National Power Corporation,
including those pertaining to its domestic purchases of petroleum and petroleum products, granted under the terms and
conditions of Commonwealth Act No. 120 (Creating the National Power Corporation, defining its powers, objectives and
functions, and for other purposes), as amended, are restored effective March 10, 1987, subject to the following conditions: 1

as well as the Memorandum of Executive Secretary Catalino Macaraig, which also states thus:

Pursuant to Sections 1 (f) and 2 (e) of Executive Order No. 93, series of 1986, FIRB Resolution No. 17-87, series of 1987,
restoring, subject to certain conditions prescribed therein, the tax and duty exemption privileges of NPC as provided under
Commonwealth Act No. 120, as amended, effective March 10, 1987, is hereby confirmed and approved. 2

On March 10, 1989, the Court resolved to issue a temporary restraining order directing the Albay provincial government "to CEASE AND DESIST
from selling and disposing of the NAPOCOR properties subject matter of this petition. 3 It appears, however, that "the temporary restraining order
failed to reach respondents before the scheduled bidding at 10:00 a.m. on March 30, 1989 ... [h]ence, the respondents proceeded with the bidding
wherein the Province of Albay was the highest bidder. 4

The Court gathers from the records that:

(1) Under Section 13, of Republic Act No. 6395, amending Commonwealth Act No. 120 (charter of NAPOCOR):

Section 13. Non-profit Character of the Corporation; Exemption from All Taxes, Duties, Fees, Imposts and Other Charges by the
Government and Government Instrumentalities. The Corporation shall be non-profit and shall devote all its returns from its
capital investment as well as excess revenues from its operation, for expansion, To enable the Corporation to pay its
32 | P a g e
 indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section One of this
Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees,
imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings. 5

(2) On August 24, 1975, Presidential Decree No. 776 was promulgated, creating the Fiscal Incentives Review Board (FIRB). Among other things, the
Board was tasked as follows:

Section 2. A Fiscal Incentives Review Board is hereby created for the purpose of determining what subsidies and tax exemptions
should be modified, withdrawn, revoked or suspended, which shall be composed of the following officials:

Chairman - Secretary of Finance

Members - Secretary of Industry
- Director General of the National Economic and
Development Authority
- Commissioner of Internal Revenue
- Commissioner of Customs

The Board may recommend to the President of the Philippines and for reasons of compatibility with the declared economic
policy, the withdrawal, modification, revocation or suspension of the enforceability of any of the abovestated statutory
subsidies or tax exemption grants, except those granted by the Constitution. To attain its objectives, the Board may require the
assistance of any appropriate government agency or entity. The Board shall meet once a month, or oftener at the call of the
Secretary of Finance. 6

(3) On June 11, 1984, Presidential Decree No. 1931 was promulgated, prescribing, among other things, that:

Section 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the payment of duties,
taxes, fees, impost and other charges heretofore granted in favor of government-owned or controlled corporations including
their subsidiaries are hereby withdrawn. 7

(4) Meanwhile, FIRB Resolution No. 10-85 was issued, "restoring" NAPOCOR's tax exemption effective June 11, 1984 to June 30, 1985;

(5) Thereafter, FIRB Resolution No. 1-86 was issued, granting tax exemption privileges to NAPOCOR from July 1, 1985 and indefinitely thereafter;

(6) Likewise, FIRB Resolution No. 17-87 was promulgated, giving NAPOCOR tax exemption privileges effective until March 10, 1987; 8

(7) On December 17, 1986, Executive Order No. 93 was promulgated by President Corazon Aquino, providing, among other things, as follows:

SECTION 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to
government and private entities are hereby withdrawn, except. 9

and

SECTION 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is hereby authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

b) revise the scope and coverage of tax and/or duty exemption that may be restored;

c) impose conditions for the restoration of tax and/or duty exemption;

d) prescribe the date or period of effectivity of the restoration of tax and/or duty exemption;

e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving beneficiaries,
in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in taxation, indicating the
source of funding therefor, eligible beneficiaries and the terms and conditions for the grant thereof taking into consideration
the international commitments of the Philippines and the necessary precautions such that the grant of subsidies does not
become the basis for countervailing action. 10

33 | P a g e
(8) On October 5, 1987, the Office of the President issued the Memorandum, confirming NAPOCOR's tax exemption aforesaid. 11

The provincial government of Albay now defends the auction sale in question on the theory that the various FIRB issuances constitute an undue
delegation of the taxing Power and hence, null and void, under the Constitution. It is also contended that, insofar as Executive Order No. 93
authorizes the FIRB to grant tax exemptions, the same is of no force and effect under the constitutional provision allowing the legislature alone to
accord tax exemption privileges.

It is to be pointed out that under Presidential Decree No. 776, the power of the FIRB was merely to "recommend to the President of the Philippines
and for reasons of compatibility with the declared economic policy, the withdrawal, modification, revocation or suspension of the enforceability of
any of the above-cited statutory subsidies or tax exemption grants, except those granted by the Constitution." It has no authority to impose taxes
or revoke existing ones, which, after all, under the Constitution, only the legislature may accomplish. 12 The question therefore is whether or not
the various tax exemptions granted by virtue of FIRB Resolutions Nos. 10-85, 1-86, and 17-87 are valid and constitutional.

We shall deal with FIRB No. 17-87 later, but with respect to FIRB Resolutions Nos. 10- 85 and 1-86, we sustain the provincial government of Albay.

As we said, the FIRB, under its charter, Presidential Decree No. 776, had been empowered merely to "recommend" tax exemptions. By itself, it
could not have validly prescribed exemptions or restore taxability. Hence, as of June 11, 1984 (promulgation of Presidential Decree No. 1931),
NAPOCOR had ceased to enjoy tax exemption privileges.

The fact that under Executive Order No. 93, the FIRB has been given the prerogative to "restore tax and/or duty exemptions withdrawn hereunder
in whole or in part," 13 and "impose conditions for ... tax and/or duty exemption" 14is of no moment. These provisions are prospective in character
and can not affect the Board's past acts.

The Court is aware that in its preamble, Executive Order No. 93 states:

WHEREAS, a number of affected entities, government and private were able to get back their tax and duty exemption privileges through the review
mechanism implemented by the Fiscal Incentives Review Board (FIRB); 15but by no means can we say that it has "ratified" the acts of FIRB. It is to
misinterpret the scope of FIRB's powers under Presidential Decree No. 776 to say that it has. Apart from that, Section 2 of the Executive Order was
clearly intended to amend Presidential Decree No. 776, which means, mutatis mutandis, that FIRB did not have the right, in the first place, to grant
tax exemptions or withdraw existing ones.

Does Executive Order No. 93 constitute an unlawful delegation of legislative power? It is to be stressed that the provincial government of Albay
admits that as of March 10, 1987 (the date Resolution No. 17-87 was affirmed by the Memorandum of the Office of the President, dated October 5,
1987), NAPOCOR's exemption had been validly restored. What it questions is NAPOCOR's liability in the interregnum between June 11, 1984, the
date its tax privileges were withdrawn, and March 10, 1987, the date they were purportedly restored. To be sure, it objects to Executive Order No.
93 as alledgedly a delegation of legislative power, but only insofar as its (NAPOCOR's) June 11, 1984 to March 10, 1987 tax accumulation is
concerned. We therefore leave the issue of "delegation" to the future and its constitutionality when the proper case arises. For the nonce, we leave
Executive Order No. 93 alone, and so also, its validity as far as it grants tax exemptions (through the FIRB) beginning December 17, 1986, the date
of its promulgation.

NAPOCOR must then be held liable for the intervening years aforesaid. So it has been held:

xxx xxx xxx

The last issue to be resolved is whether or not the private-respondent is liable for the fixed and deficiency percentage taxes in
the amount of P3,025.96 (i.e. for the period from January 1, 1946 to February 29, 1948) before the approval of its municipal
franchises. As aforestated, the franchises were approved by the President only on February 24,1948. Therefore, before the said
date, the private respondent was liable for the payment of percentage and fixed taxes as seller of light, heat, and power which,
as the petitioner claims, amounted to P3,025.96. The legislative franchise (R.A. No. 3843) exempted the grantee from all kinds
of taxes other than the 2% tax from the date the original franchise was granted. The exemption, therefore, did not cover the
period before the franchise was granted, i.e. before February 24, 1948. ... 16

Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and by way of real property taxes. Real property taxes, after all,
form part and parcel of the financing apparatus of the Government in development and nation-building, particularly in the local government level,
Thus:

SEC. 86. Distribution of proceeds. — (a) The proceeds of the real property tax, except as otherwise provided in this Code, shall
accrue to the province, city or municipality where the property subject to the tax is situated and shall be applied by the
respective local government unit for its own use and benefit.

34 | P a g e
 (b) Barrio shares in real property tax collections. — The annual shares of the barrios in real property tax collections shall be as
follows:

(1) Five per cent of the real property tax collections of the province and another five percent of the collections of the
municipality shall accrue to the barrio where the property subject to the tax is situated.

(2) In the case of the city, ten per cent of the collections of the tax shag likewise accrue to the barrio where the property is
situated.

Thirty per cent of the barrio shares herein referred to may be spent for salaries or per diems of the barrio officials and other administrative
expenses, while the remaining seventy per cent shall be utilized for development projects approved by the Secretary of Local Government and
Community Development or by such committee created, or representatives designated, by him.

SEC. 87. Application of proceeds. — (a) The proceeds of the real property tax pertaining to the city and to the municipality shall
accrue entirely to their respective general funds. In the case of the province, one-fourth thereof shall accrue to its road and
bridge fund and the remaining three-fourths, to its general fund.

(b) The entire proceeds of the additional one per cent real property tax levied for the Special Education Fund created under R.A.
No. 5447 collected in the province or city on real property situated in their respective territorial jurisdictions shall be distributed
as follows:

(1) Collections in the provinces: Fifty per cent shall accrue to the municipality where the property subject to the tax is situated;
twenty per cent shall accrue to the province; and thirty per cent shall be remitted to the Treasurer of the Philippines to be
expended exclusively for stabilizing the Special Education Fund in municipalities, cities and provinces in accordance with the
provisions of Section seven of R.A. No. 5447.

(2) Collections in the cities: Sixty per cent shall be retained by the city; and forty per cent shall be remitted to the Treasurer of
the Philippines to be expended exclusively for stabilizing the special education fund in municipalities, cities and provinces as
provided under Section 7 of R.A. No. 5447.

However, any increase in the shares of provinces, cities and municipalities from said additional tax accruing
to their respective local school boards commencing with fiscal year 1973-74 over what has been actually
realized during the fiscal year 1971-72 which, for purposes of this Code, shall remain as the based year, shall
be divided equally between the general fund and the special education fund of the local government units
concerned. The Secretary of Finance may, however, at his discretion, increase to not more than seventy-five
per cent the amount that shall accrue annually to the local general fund.

(c) The proceeds of all delinquent taxes and penalties, as well as the income realized from the use, lease or other disposition of
real property acquired by the province or city at a public auction in accordance with the provisions of this Code, and the
proceeds of the sale of the delinquent real property or, of the redemption thereof shall accrue to the province, city or
municipality in the same manner and proportion as if the tax or taxes had been paid in regular course.

(d) The proceeds of the additional real property tax on Idle private lands shall accrue to the respective general funds of the
province, city and municipality where the land subject to the tax is situated. 17

To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In no measure can the
Government be said to have lost anything.

As a rule finally, claims of tax exemption are construed strongly against the claimant. 18 They must also be shown to exist clearly and categorically,
and supported by clear legal provisions. 19

Taxes are the lifeblood of the nation. 20 Their primary purpose is to generate funds for the State to finance the needs of the citizenry and to
advance the common weal.

WHEREFORE, the petition is DENIED. No costs. The auction sale of the petitioner's properties to answer for real estate taxes accumulated between
June 11, 1984 through March 10, 1987 is hereby declared valid.

SO ORDERED.

G.R. No. 88291 June 8, 1993

35 | P a g e
ERNESTO M. MACEDA, petitioner,
vs.
HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President, HON. VICENTE JAYME, ETC., ET AL., respondents.

Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.

Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.:

Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent
National Power Corporation (NPC) is brought to this Court a second time. Unfazed by the Decision We promulgated on May 31, 19911 petitioner
Ernesto Maceda asks this Court to reconsider said Decision. Lest We be criticized for denying due process to the petitioner. We have decided to
take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all parties presented their respective arguments. Etched
in this Court's mind are the paradoxical claims by both petitioner and private respondents that their respective positions are for the benefit of the
Filipino people.

A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at the risk of being repetitious is, therefore,
in order.

On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop
hydraulic power from all water sources in the Philippines. 2 The sum of P250,000.00 was appropriated out of the funds in the Philippine Treasury for
the purpose of organizing the NPC and conducting its preliminary work.3 The main source of funds for the NPC was the flotation of bonds in the
capital markets4 and these bonds

. . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the
Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of
Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face
of said bonds. . . . .5

On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial operations of the NPC and reiterating the
provision of the flotation of bonds as soon as the first construction of any hydraulic power project was to be decided by the NPC Board. 6 The
provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.

On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's principal and interest in "gold coins" but
adding that payment could be made in United States dollars.7 The provision on tax exemption in relation to the issuance of the NPC bonds was
neither amended nor deleted.

On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as
primary obligor, the payment of any and all NPC loans.8 He was also authorized to contract on behalf of the NPC with the International Bank for
Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives 9 and for the reconstruction and
development of the economy of the country. 10 It was expressly stated that:

Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic
of the Philippines, its provinces, cities and municipalities. 11

On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from
indebtedness incurred by flotation of bonds. 12 As to the pertinent tax exemption provision, the law stated as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts,
charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities. 13

On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the President of the Philippines was authorized to
negotiate, contract and guarantee loans with the Export-Import Bank of of Washigton, D.C., U.S.A., or any other international financial
institution. 14 The tax provision for repayment of these loans, as stated in R.A. No. 357, was not amended.

36 | P a g e
On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. As enacted, the law states as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, except real property
tax, and from all duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities, and
municipalities.15

On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the increased indebtedness 16 should bear the
National Economic Council's stamp of approval. The tax exemption provision related to the payment of this total indebtedness was not amended
nor deleted.

On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from
the US$50,000,000.00 ceiling in R.A. No. 357. 17 The tax provision related to the repayment of these loans was not amended nor deleted.

On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000. 18 All laws or provisions of laws and executive
orders contrary to said R.A. No. 2058 were expressly repealed. 19

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock
of P100,000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the
Government. 20 No tax exemption was incorporated in said Act.

On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250,000,000.00 with the increase to be
wholly subscribed by the Government. 21 No tax provision was incorporated in said Act.

On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300,000,000.00, the increase to be wholly subscribed by
the Government. No tax provision was incorporated in said Act. 22

On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Declared as primary objectives of
the nation were:

Declaration of Policy. — Congress hereby declares that (1) the comprehensive development, utilization and conservation of
Philippine water resources for all beneficial uses, including power generation, and (2) the total electrification of the Philippines
through the development of power from all sources to meet the needs of industrial development and dispersal and the needs
of rural electrification are primary objectives of the nation which shall be pursued coordinately and supported by all
instrumentalities and agencies of the government, including the financial institutions. 23

Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur Domestic Indebtedness) and Section 8 (b)
(Authority to Incur Foreign Loans).

As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:

The bonds issued under the authority of this subsection shall be exempt from the payment of all taxes by the Republic of the
Philippines, or by any authority, branch, division or political subdivision thereof which facts shall be stated upon the face of said
bonds. . . . 24

As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other
charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the
proceeds of any loan, credit or indebtedeness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other
charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political
subdivisions. 25

A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-profit character and tax exemptions of
NPC as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation is hereby declared exempt:

37 | P a g e
 (a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or administrative
proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, and
municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities,
municipalities and other government agencies and instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required
for its operations and projects; and

(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities, municipalities and other government agencies
and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale
of electric power. 26

On November 7, 1972, Presidential Decree No. 40 was issued declaring that the electrification of the entire country was one of
the primary concerns of the country. And in connection with this, it was specifically stated that:

The setting up of transmission line grids and the construction of associated generation facilities in Luzon, Mindanao and major
islands of the country, including the Visayas, shall be the responsibility of the National Power Corporation (NPC) as the
authorized implementing agency of the State. 27

xxx xxx xxx

It is the ultimate objective of the State for the NPC to own and operate as a single integrated system all generating facilities
supplying electric power to the entire area embraced by any grid set up by the NPC. 28

On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D. No. 40. Its authorized
capital stock was raised to P2,000,000,000.00, 29 its total domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one
time, 30 and the NPC was authorized to borrow a total of US$1,000,000,000.00 31 in foreign loans.

The relevant tax exemption provision for these foreign loans states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other
charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid
from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect
taxes, fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be
imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. 32 (Emphasis supplied)

Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:

(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the Republic of the Philippines, its provinces,
cities, municipalities and other government agencies and instrumentalities including the taxes, duties, fees, imposts and other
charges provided for under the Tariff and Customs Code of the Philippines, Republic Act Numbered Nineteen Hundred Thirty-
Seven, as amended, and as further amended by Presidential Decree No. 34 dated October 27, 1972, and Presidential Decree
No. 69, dated November 24, 1972, and costs and service fees in any court or administrative proceedings in which it may be a
party;

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the Philippines,
its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric power. 33 (Emphasis supplied)

On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity to its different customers. 34 No tax
exemption provision was amended, deleted or added.

On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually to cover the unpaid subscription of the
Government in the NPC authorized capital stock, which amount would be taken from taxes accruing to the General Funds of the Government,
proceeds from loans, issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this particular purpose. 35

38 | P a g e
On May 27, 1976 P.D. No. 938 was issued

(I)n view of the accelerated expansion programs for generation and transmission facilities which includes nuclear power
generation, the present capitalization of National Power Corporation (NPC) and the ceilings for domestic and foreign
borrowings are deemed insufficient; 36

xxx xxx xxx

(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit character of NPC has not been fully
utilized because of restrictive interpretation of the taxing agencies of the government on said provisions; 37

xxx xxx xxx

(I)n order to effect the accelerated expansion program and attain the declared objective of total electrification of the country,
further amendments of certain sections of Republic Act No. 6395, as amended by Presidential Decrees Nos. 380, 395 and 758,
have become imperative; 38

Thus NPC's capital stock was raised to P8,000,000,000.00, 39 the total domestic indebtedness ceiling was increased to P12,000,000,000.00, 40 the
total foreign loan ceiling was raised to US$4,000,000,000.00 41 and Section 13 of R.A. No. 6395, was amended to read as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay to its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is
hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including
filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings. 42

II

On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and Executive Order No. 93 (S'86).

On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports as follows:

WHEREAS, importations by certain government agencies, including government-owned or controlled corporation, are exempt
from the payment of customs duties and compensating tax; and

WHEREAS, in order to reduce foreign exchange spending and to protect domestic industries, it is necessary to restrict and
regulate such tax-free importations.

NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the
Constitution, and do hereby decree and order the following:

Sec. 1. All importations of any government agency, including government-owned or controlled corporations which are exempt
from the payment of customs duties and internal revenue taxes, shall be subject to the prior approval of an Inter-Agency
Committee which shall insure compliance with the following conditions:

(a) That no such article of local manufacture are available in sufficient quantity and comparable quality at reasonable prices;

(b) That the articles to be imported are directly and actually needed and will be used exclusively by the grantee of the
exemption for its operations and projects or in the conduct of its functions; and

(c) The shipping documents covering the importation are in the name of the grantee to whom the goods shall be delivered
directly by customs authorities.

xxx xxx xxx

Sec. 3. The Committee shall have the power to regulate and control the tax-free importation of government agencies in
accordance with the conditions set forth in Section 1 hereof and the regulations to be promulgated to implement the provisions
of this Decree. Provided, however, That any government agency or government-owned or controlled corporation, or any local

39 | P a g e
 manufacturer or business firm adversely affected by any decision or ruling of the Inter-Agency Committee may file an appeal
with the Office of the President within ten days from the date of notice thereof. . . . .

xxx xxx xxx

Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all general and special laws and decrees are
hereby amended accordingly.

xxx xxx xxx

On July 30, 1977, P.D. 1177 was issued as it was

. . . declared the policy of the State to formulate and implement a National Budget that is an instrument of national
development, reflective of national objectives, strategies and plans. The budget shall be supportive of and consistent with the
socio-economic development plan and shall be oriented towards the achievement of explicit objectives and expected results, to
ensure that funds are utilized and operations are conducted effectively, economically and efficiently. The national budget shall
be formulated within a context of a regionalized government structure and of the totality of revenues and other receipts,
expenditures and borrowings of all levels of government-owned or controlled corporations. The budget shall likewise be
prepared within the context of the national long-term plan and of a long-term budget program. 43

In line with such policy, the law decreed that

All units of government, including government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees
are imposed under revenues laws: provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a
subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the Secretary of
Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the
General Fund. 44

The law also declared that —

[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are inconsistent with the provisions of the
Decree are hereby repealed and/or modified accordingly. 45

On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino assassination, P.D. No. 1931 was issued
to reiterate that:

WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or
controlled corporation and all other units of government; 46

and since there was a

. . . need for government-owned or controlled corporations and all other units of government enjoying tax privileges to share in
the requirements of development, fiscal or otherwise, by paying the duties, taxes and other charges due from them. 47

it was decreed that:

Sec. 1. The provisions of special on general law to the contrary notwithstanding, all exemptions from the payment of duties,
taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled corporations including
their subsidiaries, are hereby withdrawn.

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives
Review Board created under Presidential Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions
withdrawn by Section 1 above, any applicable tax and duty, taking into account, among others, any or all of the following:

1) The effect on the relative price levels;

2) The relative contribution of the corporation to the revenue generation effort;

3) The nature of the activity in which the corporation is engaged in; or

40 | P a g e
 4) In general the greater national interest to be served.

xxx xxx xxx

Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees, executive orders, administrative orders,
rules, regulations or parts thereof which are inconsistent with this Decree are hereby repealed, amended or modified
accordingly.

On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or grant of tax exemption to other government
and private entities without benefit of review by the Fiscal Incentives Review Board, to wit:

WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and October 14, 1984, respectively, withdrew the
tax and duty exemption privileges, including the preferential tax treatment, of government and private entities with certain
exceptions, in order that the requirements of national economic development, in terms of fiscals and other resources, may be
met more adequately;

xxx xxx xxx

WHEREAS, in addition to those tax and duty exemption privileges were restored by the Fiscal Incentives Review Board (FIRB), a
number of affected entities, government and private, had their tax and duty exemption privileges restored or granted by
Presidential action without benefit or review by the Fiscal Incentives Review Board (FIRB);

xxx xxx xxx

Since it was decided that:

[A]ssistance to government and private entities may be better provided where necessary by explicit subsidy and budgetary
support rather than tax and duty exemption privileges if only to improve the fiscal monitoring aspects of government
operations.

It was thus ordered that:

Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to
government and private entities are hereby withdrawn, except:

a) those covered by the non-impairment clause of the Constitution;

b) those conferred by effective internation agreement to which the Government of the Republic of the Philippines is a
signatory;

c) those enjoyed by enterprises registered with:

(i) the Board of Investment pursuant to Presidential Decree No. 1789, as amended;

(ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66 as amended;

(iii) the Philippine Veterans Investment Development Corporation Industrial Authority pursuant to
Presidential Decree No. 538, was amended.

d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instructions No. 1416;

e) those conferred under the four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

41 | P a g e
 (iv) the Real Property Tax Code, as amended;

f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board.

Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is hereby authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

b) revise the scope and coverage of tax and/or duty exemption that may be restored;

c) impose conditions for the restoration of tax and/or duty exemption;

d) prescribe the date of period of effectivity of the restoration of tax and/or duty exemption;

e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving beneficiaries,
in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in taxation, indicating the
source of funding therefor, eligible beneficiaries and the terms and conditions for the grant thereof taking into consideration
the international commitment of the Philippines and the necessary precautions such that the grant of subsidies does not
become the basis for countervailing action.

Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall take into account any or all of the
following considerations:

a) the effect on relative price levels;

b) relative contribution of the beneficiary to the revenue generation effort;

c) nature of the activity the beneficiary is engaged; and

d) in general, the greater national interest to be served.

xxx xxx xxx

Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with this Executive Order are hereby
repealed or modified accordingly.

E.O. No. 93 (S'86) was decreed to be effective 48 upon the promulgation of the rules and regulations, to be issued by the Ministry of Finance. 49 Said
rules and regulations were promulgated and published in the Official Gazette
on February 23, 1987. These became effective on the 15th day after promulgation 50 in the Official Gasetter, 51which 15th day was March 10, 1987.

III

Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their TAXATION I course, which fro convenient
reference, is as follows:

Classifications or kinds of Taxes:

According to Persons who pay or who bear the burden:

a. Direct Tax — the where the person supposed to pay the tax really pays it. WITHOUT transferring the burden to someone else.

Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's tax), residence tax, immigration tax

b. Indirect Tax — that where the tax is imposed upon goods BEFORE reaching the consumer who ultimately pays for it, not as a
tax, but as a part of the purchase price.

Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and the tariff and customs indirect taxes
(import duties, special import tax and other dues) 52

42 | P a g e
 IV

To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the following:

(1) What kind of tax exemption privileges did NPC have?

(2) For what periods in time were these privileges being enjoyed?

(3) If there are taxes to be paid, who shall pay for these taxes?

Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of taxes etc.," in its section 10, amending
Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not expressly include "indirect taxes."

His point is not well-taken.

A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all
forms of taxes — direct and indirect.

NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon its creation by virtue of C.A. No. 120.

When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be completely tax exempt.

After the NPC was authorized to borrow from other sources of funds — aside issuance of bonds — it was again specifically exempted from all types
of taxes "to facilitate payment of its indebtedness." Even when the ceilings for domestic and foreign borrowings were periodically increased, the
tax exemption privileges of the NPC were maintained.

NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as above stated. The exemption was,
however, restored by R.A. No. 6395.

Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed NPC. Its section 13(d) is the starting point of
this bone of contention among the parties. For easy reference, it is reproduced as follows:

[T]he Corporation is hereby declared exempt:

xxx xxx xxx

(d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the
generation, transmission, utilization, and sale of electric power.

P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the Philippines,
its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the
Corporation in the generation, transmission, utilization and sale of electric power. (Emphasis supplied)

Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is hereby
declared exempt from the payment of ALL FORMS OF taxes, duties, fees, imposts as well as costs and service fees including
filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings. (Emphasis supplied)

43 | P a g e
Petitioner reminds Us that:

[I]t must be borne in mind that Presidential Decree Nos. 380

and 938 were issued by one man, acting as such the Executive and Legislative. 53

xxx xxx xxx

[S]ince both presidential decrees were made by the same person, it would have been very easy for him to retain the same or
similar language used in P.D. No. 380 P.D. No. 938 if his intention were to preserve the indirect tax exemption of NPC. 54

Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were. It should be noted that section 13, R.A.
No. 6395, provided for tax exemptions for the following items:

13(a) : court or administrative proceedings;

13(b) : income, franchise, realty taxes;

13(c) : import of foreign goods required for its operations and projects;

13(d) : petroleum products used in generation of electric power.

P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included 13(a) under the "as well as" clause and
added PNOC subsidiaries as qualified for tax exemptions.

This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or issuance as narrated above in part I hereof.
President Marcos must have considered all the NPC statutes from C.A. No. 120 up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No.
759, AND came up 55 with a very simple Section 13, R.A. No. 6395, as amended by P.D. No. 938.

One common theme in all these laws is that the NPC must be enable to pay its indebtedness 56 which, as of P.D. No. 938, was P12 Billion in total
domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all
forms of taxes if this goal is to be achieved.

By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay the government share in its capital stock
P.D. No. 758 was issued mandating that P200 Million would be appropriated annually to cover the said unpaid subscription of the Government in
NPC's authorized capital stock. And significantly one of the sources of this annual appropriation of P200 million is TAX MONEY accruing to the
General Fund of the Government. It does not stand to reason then that former President Marcos would order P200 Million to be taken partially or
totally from tax money to be used to pay the Government subscription in the NPC, on one hand, and then order the NPC to pay all its indirect taxes,
on the other.

The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the phrase "All FORMS OF" is supported by the fact
that he did not do the same for the tax exemption provision for the foreign loans to be incurred.

The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other
charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the
proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other
charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political
subdivisions. 57

The same was amended by P.D. No. 380 as follows:

The loans, credits and indebtedness contracted this subsection and the payment of the principal, interest and other charges
thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from
the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes,
fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be
imposed by the Republic of the Philippines, or any of its agencies and political subdivisions. 58(Emphasis supplied)

44 | P a g e
P.D. No. 938 did not amend the same 59 and so the tax exemption provision in Section 8 (b), R.A. No. 6395, as amended by P.D. No. 380, still stands.
Since the subject matter of this particular Section 8 (b) had to do only with loans and machinery imported, paid for from the proceeds of these
foreign loans, THERE WAS NO OTHER SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood as is — with the express mention of
"direct
and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes, fees, imposts, other charges . . . to be
imposed" in the future — surely, an indication that the lawmakers wanted the NPC to be exempt from ALL FORMS of taxes — direct and indirect.

It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect taxes under P.D. No. 938.

VI

Five (5) years on into the now discredited New Society, the Government decided to rationalize government receipts and expenditures by
formulating and implementing a National Budget. 60 The NPC, being a government owned and controlled corporation had to be shed off its tax
exemption status privileges under P.D. No. 1177. It was, however, allowed to ask for a subsidy from the General Fund in the exact amount of
taxes/duties due.

Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It allowed, however, NPC to appeal said repeal with
the Office of the President and to avail of tax-free importation privileges under its Section 1, subject to the prior approval of an Inter-Agency
Committed created by virtue of said P.D. No. 882. It is presumed that the NPC, being the special creation of the State, was allowed to continue its
tax-free importations.

This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's tax exemption privileges by P.D. No.
1177 61 only in his Common Reply/Comment to private Respondents' "Opposition" and "Comment" to Motion for Reconsideration, four (4) months
AFTER the motion for Reconsideration had been filed. During oral arguments heard on July 9, 1992, he proceeded to discuss this tax exemption
withdrawal as explained by then Secretary of Justice Vicente Abad Santos in opinion No. 133 (S '77). 62 A careful perusal of petitioner's senate Blue
Ribbon Committee Report No. 474, the basis of the petition at bar, fails to yield any mention of said P.D. No. 1177's effect on NPC's tax exemption
privileges. 63 Applying by analogy Pulido vs. Pablo,64 the court declares that the matter of P.D. No. 1177 abolishing NPC's tax exemption privileges
was not seasonably invoked 65 by the petitioner.

Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption privileges as this statute has been reiterated
twice in P.D. No. 1931. The express repeal of tax privileges of any government-owned or controlled corporation (GOCC). NPC included, was
reiterated in the fourth whereas clause of P.D. No. 1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177, being inconsistent with
Section 2, P.D. No. 1931, was deemed repealed as the Fiscal Incentives Revenue Board was tasked with recommending the partial or total
restoration of tax exemptions withdrawn by Section 1, P.D. No. 1931.

The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section 23, P.D. No. 1177. Considering, however,
that under Section 16 of P.D. No. 1177, NPC had to submit to the Office of the President its request for the P200 million mandated by P.D. No. 758
to be appropriated annually by the Government to cover its unpaid subscription to the NPC authorized capital stock and that under Section 22, of
the same P.D. No. NPC had to likewise submit to the Office of the President its internal operating budget for review due to capital inputs of the
government (P.D. No. 758) and to the national government's guarantee of the domestic and foreign indebtedness of the NPC, it is clear that NPC
was covered by P.D. No. 1177.

There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found themselves having to pay taxes. It will be
noted that Section 23, P.D. No. 1177, mandated that the Secretary of Finance and the Commissioner of the Budget had to establish the necessary
procedure to accomplish the tax payment/tax subsidy scheme of the Government. In effect, NPC, did not put any cash to pay any tax as it got from
the General Fund the amounts necessary to pay different revenue collectors for the taxes it had to pay.

In his memorandum filed July 16, 1992, petitioner submits:

[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and tax exemptions, whether direct or
indirect. And so there was nothing to be withdrawn or to be restored under P.D. No. 1931, issued on June 11, 1984. This is
evident from sections 1 and 2 of said P.D. No. 1931, which reads:

"Section 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from
the payment of duties, taxes, fees, imports and other charges heretofore granted in favor of government-
owned or controlled corporations including their subsidiaries are hereby withdrawn."

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the
Fiscal Incentives Review Board created under P.D. No. 776, is hereby empowered to restore partially or
totally, the exemptions withdrawn by section 1 above. . . .

45 | P a g e
 Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had already lost all its tax exemptions
privilege with the issuance of P.D. No. 1177 seven (7) years earlier or on July 30, 1977, there were no tax exemptions to be
withdrawn by section 1 which could later be restored by the Minister of Finance upon the recommendation of the FIRB under
Section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-86, were all illegally and validly issued since FIRB
acted beyond their statutory authority by creating and not merely restoring the tax exempt status of NPC. The same is true for
FIRB Res. No. 17-87 which restored NPC's tax exemption under E.O. No. 93 which likewise abolished all duties and tax
exemptions but allowed the President upon recommendation of the FIRB to restore those abolished.

The Court disagrees.

Applying by analogy the weight of authority that:

When a revised and consolidated act re-enacts in the same or substantially the same terms the provisions of the act or acts so
revised and consolidated, the revision and consolidation shall be taken to be a continuation of the former act or acts, although
the former act or acts may be expressly repealed by the revised and consolidated act; and all rights
and liabilities under the former act or acts are preserved and may be enforced. 66

the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23, P.D. No. 1177, on withdrawal of tax
exemption privileges of all GOCC's said Section 1, P.D. No. 1931 was deemed to be a continuation of the first half of Section 23, P.D. No. 1177,
although the second half of Section 23, P.D. No. 177, on the subsidy scheme for former tax exempt GOCCs had been expressly repealed by Section
2 with its institution of the FIRB recommendation of partial/total restoration of tax exemption privileges.

The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax exemption privileges withdrawn by Section 23,
P.D. No. 1177. NPC could no longer obtain a subsidy for the taxes it had to pay. It could, however, under P.D. No. 1931, ask for a total restoration of
its tax exemption privileges, which, it did, and the same were granted under FIRB Resolutions Nos. 10-85 67 and 1-86 68 as approved by the Minister
of Finance.

Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally and validly issued by the FIRB pursuant
to P.D. No. 1931. FIRB did not created NPC's tax exemption status but merely restored it. 69

Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather infamous Amendment No. 6 70 as there was no
showing that President Marcos' encroachment on legislative prerogatives was justified under the then prevailing condition that he could legislate
"only if the Batasang Pambansa 'failed or was unable to act inadequately on any matter that in his judgment required immediate action' to meet
the 'exigency'. 71

Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the Interim Batasang Pambansa failed or was
unable to act adequately on any matter for any reason that in his (Marcos') judgment required immediate action, but also when there existed a
grave emergency or a threat or thereof. It must be remembered that said Presidential Decree was issued only around nine (9) months after the
Philippines unilaterally declared a moratorium on its foreign debt payments 72 as a result of the economic crisis triggered by loss of confidence in
the government brought about by the Aquino assassination. The Philippines was then trying to reschedule its debt payments. 73 One of the big
borrowers was the NPC 74 which had a US$ 2.1 billion white elephant of a Bataan Nuclear Power Plant on its back. 75 From all indications, it must
have been this grave emergency of a debt rescheduling which compelled Marcos to issue P.D. No. 1931, under his Amendment 6 power.76

The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed without the concurrence of a majority of all
the members of the Batasang Pambansa" 77 does not apply as said P.D. No. 1931 was not passed by the Interim Batasang Pambansa but by then
President Marcos under His Amendment No. 6 power.

P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6 authority.

Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President Aquino. Its section 2 allowed the NPC to apply
for the restoration of its tax exemption privileges. The same was granted under FIRB Resolution No. 17-87 78 dated June 24, 1987 which restored
NPC's tax exemption privileges effective, starting March 10, 1987, the date of effectivity of E.O. No. 93 (S'86).

FIRB Resolution No. 17-87 was approved by the President on October 5, 1987. 79 There is no indication, however, from the records of the case
whether or not similar approvals were given by then President Marcos for FIRB Resolutions Nos. 10-85 and 1- 86. This has led some quarters to
believe that a "travesty of justice" might have occurred when the Minister of Finance approved his own recommendation as Chairman of the Fiscal
Incentives Review Board as what happened in Zambales Chromate vs. Court of Appeals 80 when the Secretary of Agriculture and Natural Resources
approved a decision earlier rendered by him when he was the Director of Mines, 81 and inAnzaldo vs. Clave 82 where Presidential Executive
Assistant Clave affirmed, on appeal to Malacañang, his own decision as Chairman of the Civil Service Commission. 83

46 | P a g e
Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated when FIRB Resolutions Nos. 10-85 and 1-
86 were approved by the Minister of Finance when the same were recommended by him in his capacity as Chairman of the Fiscal Incentives Review
Board. 84

In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientist-doctors, respectively. Thus, there was a
need for procedural due process to be followed.

In the case of the tax exemption restoration of NPC, there is no other comparable entity — not even a single public or private corporation — whose
rights would be violated if NPC's tax exemption privileges were to be restored. While there might have been a MERALCO before Martial Law, it is of
public knowledge that the MERALCO generating plants were sold to the NPC in line with the State policy that NPC was to be the State
implementing arm for the electrification of the entire country. Besides, MERALCO was limited to Manila and its environs. And as of 1984, there was
no more MERALCO — as a producer of electricity — which could have objected to the restoration of NPC's tax exemption privileges.

It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was just asking that its tax exemption
privileges be restored. It is for these reasons that, at least in NPC's case, the recommendation and approval of NPC's tax exemption privileges under
FIRB Resolution Nos. 10-85 and 1-86, done by the same person acting in his dual capacities as Chairman of the Fiscal Incentives Review Board and
Minister of Finance, respectively, do not violate procedural due process.

While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5, 1987, the view has been expressed that
President Aquino, at least with regard to E.O. 93 (S'86), had no authority to sub-delegate to the FIRB, which was allegedly not a delegate of the
legislature, the power delegated to her thereunder.

A misconception must be cleared up.

When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative powers. Thus, there was no power delegated to
her, rather it was she who was delegating her power. She delegated it to the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the
legislature. Clearly, she was not sub-delegating her power.

And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy to be carried out 85 and it fixed the standard to which the
delegate had to conform in the performance of his functions, 86 both qualities having been enunciated by this Court in Pelaez vs. Auditor General. 87

Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June 11, 1984 up to the present.

VII

The next question that projects itself is — who pays the tax?

The answer to the question could be gleamed from the manner by which the Commissaries of the Armed Forces of the Philippines sell their goods.

By virtue of P.D. No. 83, 88 veterans, members of the Armed of the Philippines, and their defendants but groceries and other goods free of all taxes
and duties if bought from any AFP Commissaries.

In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and other taxes on the goods earmarked for AFP
Commissaries as an added cost of operation and distribute it over the total units of goods sold as it would any other cost. Thus, even the ordinary
supermarket buyer probably pays for the specific, ad valorem and other taxes which theses suppliers do not charge the AFP Commissaries. 89

IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the taxes they add to the bunker fuel oil they sell
to NPC.

It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an opinion, 90wherein he stated and We quote:

xxx xxx xxx

Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties, fees, imposts, charges, and restrictions of
the Republic of the Philippines and its provinces, cities, and municipalities." This exemption is broad enough to include all taxes,
whether direct or indirect, which the National Power Corporation may be required to pay, such as the specific tax on petroleum
products. That it is indirect or is of no amount [should be of no moment], for it is the corporation that ultimately pays it. The
view which refuses to accord the exemption because the tax is first paid by the seller disregards realities and gives more
importance to form than to substance. Equity and law always exalt substance over from.

47 | P a g e
 xxx xxx xxx

Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as knowledge that many impositions taxpayers
have to pay are in the nature of indirect taxes. To limit the exemption granted the National Power Corporation to direct taxes
notwithstanding the general and broad language of the statue will be to thwrat the legislative intention in giving exemption
from all forms of taxes and impositions without distinguishing between those that are direct and those that are not. (Emphasis
supplied)

In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel oil to NPC have to pay the taxes imposed
upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the economic burden of such taxation is expected to be passed on
through the channels of commerce to the user or consumer of the goods sold. Because, however, the NPC has been exempted from both direct
and indirect taxation, the NPC must beheld exempted from absorbing the economic burden of indirect taxation. This means, on the one hand, that
the oil companies which wish to sell to NPC absorb all or part of the economic burden of the taxes previously paid to BIR, which could they shift to
NPC if NPC did not enjoy exemption from indirect taxes. This means also, on the other hand, that the NPC may refuse to pay the part of the
"normal" purchase price of bunker fuel oil which represents all or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless
purchases such oil from the oil companies — because to do so may be more convenient and ultimately less costly for NPC than NPC itself importing
and hauling and storing the oil from overseas — NPC is entitled to be reimbursed by the BIR for that part of the buying price of NPC which verifiably
represents the tax already paid by the oil company-vendor to the BIR.

It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS BEEN RENDERED moot and academic by E.O.
No. 195 issued on June 16, 1987 by virtue of which the ad valorem tax rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no.
195 reads as follows:

EXECUTIVE ORDER NO. 195

AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED BY REVISING THE
EXCISE TAX RATES OF CERTAIN PETROLEUM PRODUCTS.

xxx xxx xxx

Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended, is hereby amended to read as follows:

Par. (b) — For products subject to ad valorem tax only:

PRODUCT AD VALOREM TAX RATE

1. . . .

2. . . .

3. . . .

4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less the same generating power 0%

xxx xxx xxx

Sec. 3. This Executive Order shall take effect immediately.

Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred and eighty-seven. (Emphasis
supplied)

The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear the economic burden of the ad
valorem taxes. What this Court will now dispose of are petitioner's complaints that some indirect tax money has been illegally refunded by the
Bureau of Internal Revenue to the NPC and that more claims for refunds by the NPC are being processed for payment by the BIR.

A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last July 7, 1986 for P58.020.110.79 which were
for "erroneously paid specific and ad valorem taxes during the period from October 31, 1984 to April 27, 1985. 91 Petitioner asks Us to declare this
Tax Credit Memo illegal as the PNC did not have indirect tax exemptions with the enactment of P.D. No. 938. As We have already ruled otherwise,

48 | P a g e
the only questions left are whether NPC Is entitled to a tax refund for the tax component of the price of the bunker fuel oil purchased from Caltex
(Phils.) Inc. and whether the Bureau of Internal Revenue properly refunded the amount to NPC.

After P.D. No. 1931 was issued on June 11, 1984 withdrawing the
tax exemptions of all GOCCs — NPC included, it was only on May 8, 1985 when the BIR issues its letter authority to the NPC authorizing it to
withdraw tax-free bunker fuel oil from the oil companies pursuant to FIRB Resolution No. 10-85. 92 Since the tax exemption restoration was
retroactive to June 11, 1984 there was a need. therefore, to recover said amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific and ad
valorem taxes on the bunker oil it sold NPC during the period above indicated and had billed NPC correspondingly. 93 It should be noted that the
NPC, in its letter-claim dated September 11, 1985 to the Commissioner of the Bureau of Internal Revenue DID NOT CATEGORICALLY AND
UNEQUIVOCALLY STATE that itself paid the P58.020,110.79 as part of the bunker fuel oil price it purchased from Caltex (Phils) Inc. 94

The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal Revenue Code of 1977, as amended
which reads as follows:

Sec. 230. Recover of tax erroneously or illegally collected. — No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any Manner
wrongfully collected. until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding
may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after payment; Provided, however, That the Commissioner may,
even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly, to have been erroneously paid.

xxx xxx xxx

Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985, 95 the Commissioner correctly issued the Tax Credit Memo in view of
NPC's indirect tax exemption.

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for P410.580,000.00 which represents specific
and ad valorem taxes paid by the oil companies to the BIR from June 11, 1984 to the early part of 1986. 96

A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the alleged claim for a P410,580,000.00 tax
refund was filed. It is only stated In paragraph No. 2 of the Deed of Assignment 97executed by and between NPC and Caltex (Phils.) Inc., as follows:

That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal Revenue amounting to P442,887,716.16.
P58.020,110.79 of which is due to Assignor's oil purchases from the Assignee (Caltex [Phils.] Inc.)

Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding said amount because of Our
ruling that NPC has both direct and indirect tax exemption privileges. Neither can We order the BIR to refund said amount to NPC as there is no
pending petition for review on certiorariof a suit for its collection before Us. At any rate, at this point in time, NPC can no longer file any suit to
collect said amount EVEN IF lt has previously filed a claim with the BIR because it is time-barred under Section 230 of the National Internal Revenue
Code of 1977. as amended, which states:

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or
penalty REGARDLESS of any supervening cause that may arise afterpayment. . . . (Emphasis supplied)

The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the amount of P410,580,000.00 had been
made on said date. it is clear that more than two (2) years had already elapsed from said date. At the same time, We should note that there is no
legal obstacle to the BIR granting, even without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim had been made
seasonably, and assuming the amounts covered had actually been paid previously by the oil companies to the BIR.

WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED for lack of merit and the decision of this
Court promulgated on May 31, 1991 is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-31156 February 27, 1976

49 | P a g e
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,
vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees.

Sabido, Sabido & Associates for appellant.

Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General Conrado T. Limcaoco & Solicitor
Enrique M. Reyes for appellees.

MARTIN, J.:

This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was certified to Us by the Court of Appeals
on October 6, 1969, as involving only pure questions of law, challenging the power of taxation delegated to municipalities under the Local
Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).

On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary
injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. 2264. 1 otherwise known as the Local
Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the
municipality of Tanauan, Leyte, null and void.

On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that, first, both Ordinances Nos. 23 and 27
embrace or cover the same subject matter and the production tax rates imposed therein are practically the same, and second, that on January 17,
1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said
municipality, sought to enforce compliance by the latter of the provisions of said Ordinance No. 27, series of 1962.

Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from soft drinks producers and
manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked." 2 For the purpose of computing the taxes due, the
person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of
bottles produced and corked during the month. 3

On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft drinks produced or
manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity." 4 For the purpose of computing the taxes due, the person, fun company, partnership, corporation or plant producing soft drinks shall
submit to the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month. 5

The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'

On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding the constitutionality of
[Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the
oft the said Ordinances; and to pay the costs."

From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn, elevated the case to Us pursuant to
Section 31 of the Judiciary Act of 1948, as amended.

There are three capital questions raised in this appeal:

1. — Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive?

2. — Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?

3. — Are Ordinances Nos. 23 and 27 unjust and unfair?

1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government,
without being expressly conferred by the people. 6 It is a power that is purely legislative and which the central legislative body cannot delegate
either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception,
however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice. 8 By necessary implication, the legislative power to
create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the
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power to tax. 9 Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and
to levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes,
subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the
sphere of the legislative power to enact and vest in local governments the power of local taxation.

The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to invalidate the said law as
confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it is
said that the taxing power may be delegated to municipalities and the like, it is meant that there may be delegated such measure of power to
impose and collect taxes as the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public
policy the State has not deemed wise to tax for more general purposes. 10 This is not to say though that the constitutional injunction against
deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the
property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of
certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually violated where the tax imposed is for a private as
distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive
methods are used in assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although
the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the
tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the
manner in which it shall be apportioned are generally not necessary to due process of law. 12

There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be
observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. 13 The
reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our
fundamental law, since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States
and some states of the Union.14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same
governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not in a case where one tax is imposed by the State and the other
by the city or municipality. 17

2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two ordinances cover the same subject
matter and impose practically the same tax rate. The thesis proceeds from its assumption that both ordinances are valid and legally enforceable.
This is not so. As earlier quoted, Ordinance No. 23, which was approved on September 25, 1962, levies or collects from soft drinks producers or
manufacturers a tax of one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used. When it was
discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate, the Municipality of
Tanauan enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of
volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was
1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity.
The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior
Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. 18 Plaintiff-appellant in its brief admitted that
defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting
Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of
1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the
Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance
No. 23 as the provisions of the latter are inconsistent with the provisions of the former."

That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax. Undoubtedly, the taxing
authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting
those which are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and
limitations in the law, the same comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum
in cabisus non excepti 19 The limitation applies, particularly, to the prohibition against municipalities and municipal districts to impose "any
percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the provisions of
the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a set ratio between the
amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to
enact. 20 But, the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced
or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the amount
of the tax.21

Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as distilled spirits, wines, fermented
liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel
fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs. 22 Soft drink is not one of those specified.

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3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or manufactured, or an equivalent of
1-½ centavos per case, 23 cannot be considered unjust and unfair. 24 an increase in the tax alone would not support the claim that the tax is
oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in determining the reates of imposable taxes. 25 This is in
line with the constutional policy of according the widest possible autonomy to local governments in matters of local taxation, an aspect that is
given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive as to be prohibitive, courts will go slow in
writing off an ordinance as unreasonable. 27 Reluctance should not deter compliance with an ordinance such as Ordinance No. 27 if the purpose of
the law to further strengthen local autonomy were to be realized. 28

Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten crowners or P2,000.00 with ten but not more
than twenty crowners imposed on manufacturers, producers, importers and dealers of soft drinks and/or mineral waters under Ordinance No. 54,
series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant Municipality, 29 appears not to affect the resolution of the validity of
Ordinance No. 27. Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any business or occupation
but also to levy for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a
municipality.

ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, as amended, is hereby
upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series,
is hereby declared of valid and legal effect. Costs against petitioner-appellant.

SO ORDERED.

Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muñoz Palma, Aquino and Concepcion, Jr., JJ., concur.

Separate Opinions

FERNANDO, J., concurring:

The opinion of the Court penned by Justice Martin is impressed with a scholarly and comprehensive character. Insofar as it shows adherence to
tried and tested concepts of the law of municipal taxation, I am only in agreement. If I limit myself to concurrence in the result, it is primarily
because with the article on Local Autonomy found in the present Constitution, I feel a sense of reluctance in restating doctrines that arose from a
different basic premise as to the scope of such power in accordance with the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so as I
am unable to share fully what for me are the nuances and implications that could arise from the approach taken by my brethren. Likewise as to the
constitutional aspect of the thorny question of double taxation, I would limit myself to what has been set forth in City of Baguio v. De Leon.1

1. The present Constitution is quite explicit as to the power of taxation vested in local and municipal corporations. It is therein specifically provided:
"Each local government unit shall have the power to create its own sources of revenue and to levy taxes subject to such limitations as may be
provided by law. 2 That was not the case under the 1935 Charter. The only limitation then on the authority, plenary in character of the national
government, was that while the President of the Philippines was vested with the power of control over all executive departments, bureaus, or
offices, he could only . It exercise general supervision over all local governments as may be provided by law ... 3 As far as legislative power over local
government was concerned, no restriction whatsoever was placed on the Congress of the Philippines. It would appear therefore that the extent of
the taxing power was solely for the legislative body to decide. It is true that in 1939, there was a statute that enlarged the scope of the municipal
taxing power. 4 Thereafter, in 1959 such competence was further expanded in the Local Autonomy Act. 5Nevertheless, as late as December of 1964,
five years after its enactment of the Local Autonomy Act, this Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, 6 reaffirmed the traditional concept in these words: "The rule is well-settled that municipal corporations, unlike sovereign states, after
clothed with no power of taxation; that its charter or a statute must clearly show an intent to confer that power or the municipal corporation
cannot assume and exercise it, and that any such power granted must be construed strictly, any doubt or ambiguity arising from the terms of the
grant to be resolved against the municipality."7

Taxation, according to Justice Parades in the earlier case of Tan v. Municipality of Pagbilao,8 "is an attribute of sovereignty which municipal
corporations do not enjoy." 9 That case left no doubt either as to weakness of a claim "based merely by inferences, implications and deductions, [as
they have no place in the interpretation of the power to tax of a municipal corporation." 10 As the conclusion reached by the Court finds support in
such grant of the municipal taxing power, I concur in the result. 2. As to any possible infirmity based on an alleged double taxation, I would prefer
to rely on the doctrine announced by this Court in City of Baguio v. De Leon. 11 Thus: "As to why double taxation is not violative of due process,
Justice Holmes made clear in this language: 'The objection to the taxation as double may be laid down on one side. ... The 14th Amendment [the
due process clause) no more forbids double taxation than it does doubling the amount of a tax, short of (confiscation or proceedings

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unconstitutional on other grouse With that decision rendered at a time when American sovereignty in the Philippines was recognized, it possesses
more than just a persuasive effect. To some, it delivered the coup justice to the bogey of double taxation as a constitutional bar to the exercise of
the taxing power. It would seem though that in the United States, as with us, its ghost, as noted by an eminent critic, still stalks the juridical stage.
'In a 1947 decision, however, we quoted with approval this excerpt from a leading American decision: 'Where, as here, Congress has clearly
expressed its intention, the statute must be sustained even though double taxation results. 12

So I would view the issues in this suit and accordingly concur in the result.

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