Floro v Gorospe - The municipality of Lugait, province of Misamis Oriental,
represented jointly in this action by its Municipal Treasurer
SUMMARY: Floro Cement is engaged in manufacturing and exporting and the Provincial Treasurer of the said province, filed with cement. They were taxed by the municipality of Lugait for this Court a verified complaint for collection of manufacturer’s and exporter’s tax pursuant to 2 municipal manufacturer's and exporter's taxes including surcharge for ordinances. They alleged that they were exempted from the tax based the period covering January 1, 1974 to September 30, 1975 on PD 231 and PD 463 granting exemptions to mining products. The against Floro based on its Municipal Ordinance No. 5, court held that cement, which is the product of Floro, is not a mining otherwise known as the Municipal Revenue Code of 1974, product. It is not cement that is mined but the ingredients of cement. which was passed pursuant to Presidential Decree No. 231 Hence, Floro is not covered by the exemption. Furthermore, we follow dated June 28, 1973 and also Municipal Ordinance No. 10 the maxim that exemptions are strictly construed against the person passed on June 11, 1974 pursuant to Presidential Decree No. seeking to be exempted. 426 dated March 30, 1974, amending Presidential Decree No. 231. FACTS: - Trial court ordered Floro to pay 161,875 as manufacturer’s and exporter’s tax - Floro Cement is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines with Petitioner’s argument: business establishment and office address at its compound in 1. power of municipality repealed by sec. 5(m) of PD 231 and sec. 52 of the aforementioned municipality of Lugait PD 463 - As a mining operator of mineral land/lands situated at Lugait, Misamis Oriental, Floro was granted by the Secretary of Sec. 5(m) of P.D. No. 231, which reads: Agriculture and Natural Resources a Certificate of "Sec. 5. Common Limitations on the Taxing Powers of Local Qualification for Tax Exemption, dated July 7, 1960, entitling Governments. defendant to exemption for a period of five years from April The exercise of taxing power of provinces, cities, municipalities and 30, 1969 to April 29, 1974, from the payment of all taxes, barrios shall not extend to the imposition of the following: except income tax, (m) Taxes on mines, mining operations and mineral products and their - the certificate of tax exemption was amended and granted tax exemption to Floro from May 17, 1974 to Jan. 1, 1978 by-products when sold domestically by the operator." - July 3, 1974, plaintiff, through its Municipal Mayor, wired the Secretary of Finance, opposing the application of defendant Petitioners allege that cement is a mineral product, hence, covered by for the extension of its exemption from all forms of taxation, 5(m) including its application for extension of its exemption from realty taxes, which opposition was not favorably acted upon Sec. 52. Power to Levy Taxes on Mines, Mining Corporation and by the said Secretary of Finance Mineral Products. Any law to the contrary notwithstanding, no province, city, municipality, barrio or municipal district shall levy and - Cement not a mineral product. While cement is composed of collect taxes, fees, rentals, royalties or charges of any kind whatsoever 80% minerals, it is not merely an admixture or blending of raw on mines, mining claims, mineral products, or on any operation, materials, as lime, silica, shale and others. It is the result of a process or activity connected therewith definite process the crushing of minerals, grinding, mixing, calcining, adding of retarder or raw gypsum. In short, before 2. granted by the Secretary of Agriculture and Natural Resources a cement reaches its saleable form, the minerals had already undergone a chemical change through manufacturing process Certificate of Qualification for Tax Exemption, CQTE No. 22, dated July - Power of taxation is a high prerogative of sovereignty, the 7, 1960, entitling defendant to exemption for a period of five (5) years relinquishment is never presumed and any reduction or from April 30, 1969 to April 29, 1974 from payment of all taxes, except diminution thereof. He who claims an exemption must be able income tax, and which Certificate was amended on November 5, 1974 to point out some provision of law creating the right; it cannot (CQTE P.D. 46322), entitling defendant to exemption from all taxes, be allowed to exist upon a mere vague implication or duties and fees except income tax, for five (5) years from the first date inference. It must be shown indubitably to exist, for every of actual commercial production of saleable mineral products that is presumption is against it, and a well-founded doubt is fatal to from May 17, 1974 to January 1, 1978 the claim - the exemption mentioned in Sec. 52 of P.D. No. 463 refers Respondent’s argument: while respondent municipality admits that only to machineries, equipment, tools for production, etc., as petitioner Floro Cement Corporation undertakes exploration, provided in Sec. 53 of the same decree. The manufacture and development and exploitation of mineral products, the taxes sought the export of cement does not fall under the said provision for it is not a mineral product. It is not cement that is mined, only to be collected were not imposed on these activities in view of the the mineral products composing the finished product mentioned prohibition under Sec. 52 of P.D. No. 463. Said taxes were - by the parties’ own stipulation of facts submitted before the levied on the corporation's business of manufacturing and exporting court a quo, it is admitted that Floro Cement Corporation is cement. The business of manufacturing and exporting cement does engaged in the manufacturing and selling, including exporting not fall under exploration, development nor exploitation of mineral of cement. As such, and since the taxes sought to be collected resources as defined in Sec. 2 of P.D. No. 463, hence, it is outside the were levied on these activities pursuant to Sec. 19 of P.D. No. scope of application of Sec. 52 of said decree 231. Ordinances Nos. 5 and 10, which were enacted pursuant to P.D. No. 231 and P.D. No. 426, respectively, properly apply ISSUES: whether or not Ordinances Nos. 5 and 10 of Lugait, Misamis to petitioner Floro Cement Corporation Oriental apply to petitioner Floro Corporation notwithstanding the limitation on the taxing power of local government as provided for in Sec. 5(m) of P.D. 231 and Sec. 52 of P.D. 463