Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-67649 June 28, 1988

ENGRACIO FRANCIA, petitioner,

vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.

GUTIERREZ, JR., J.:

The petitioner invokes legal and equitable grounds to reverse the questioned decision of the Intermediate Appellate Court, to set aside the
auction sale of his property which took place on December 5, 1977, and to allow him to recover a 203 square meter lot which was, sold at
public auction to Ho Fernandez and ordered titled in the latter's name.

The antecedent facts are as follows:

Engracio Francia is the registered owner of a residential lot and a two-story house built upon it
situated at Barrio San Isidro, now District of Sta. Clara, Pasay City, Metro Manila. The lot, with an
area of about 328 square meters, is described and covered by Transfer Certificate of Title No. 4739
(37795) of the Registry of Deeds of Pasay City.

On October 15, 1977, a 125 square meter portion of Francia's property was expropriated by the
Republic of the Philippines for the sum of P4,116.00 representing the estimated amount equivalent
to the assessed value of the aforesaid portion.

Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on December 5,
1977, his property was sold at public auction by the City Treasurer of Pasay City pursuant to Section
73 of Presidential Decree No. 464 known as the Real Property Tax Code in order to satisfy a tax
delinquency of P2,400.00. Ho Fernandez was the highest bidder for the property.

Francia was not present during the auction sale since he was in Iligan City at that time helping his
uncle ship bananas.

On March 3, 1979, Francia received a notice of hearing of LRC Case No. 1593-P "In re: Petition for
Entry of New Certificate of Title" filed by Ho Fernandez, seeking the cancellation of TCT No. 4739
(37795) and the issuance in his name of a new certificate of title. Upon verification through his
lawyer, Francia discovered that a Final Bill of Sale had been issued in favor of Ho Fernandez by the
City Treasurer on December 11, 1978. The auction sale and the final bill of sale were both annotated
at the back of TCT No. 4739 (37795) by the Register of Deeds.

On March 20, 1979, Francia filed a complaint to annul the auction sale. He later amended his
complaint on January 24, 1980.

On April 23, 1981, the lower court rendered a decision, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing the

amended complaint and ordering:

(a) The Register of Deeds of Pasay City to issue a new Transfer

Certificate of Title in favor of the defendant Ho Fernandez over the
 parcel of land including the improvements thereon, subject to
whatever encumbrances appearing at the back of TCT No. 4739
(37795) and ordering the same TCT No. 4739 (37795) cancelled.

(b) The plaintiff to pay defendant Ho Fernandez the sum of P1,000.00

as attorney's fees. (p. 30, Record on Appeal)

The Intermediate Appellate Court affirmed the decision of the lower court in toto.

Hence, this petition for review.

Francia prefaced his arguments with the following assignments of grave errors of law:

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE ERROR OF LAW

IN NOT HOLDING PETITIONER'S OBLIGATION TO PAY P2,400.00 FOR SUPPOSED TAX
DELINQUENCY WAS SET-OFF BY THE AMOUNT OF P4,116.00 WHICH THE GOVERNMENT IS
INDEBTED TO THE FORMER.

II

RESPONDENT INTERMEDIATE APPELLATE COURT COMMITTED A GRAVE AND SERIOUS

ERROR IN NOT HOLDING THAT PETITIONER WAS NOT PROPERLY AND DULY NOTIFIED
THAT AN AUCTION SALE OF HIS PROPERTY WAS TO TAKE PLACE ON DECEMBER 5, 1977
TO SATISFY AN ALLEGED TAX DELINQUENCY OF P2,400.00.

III

RESPONDENT INTERMEDIATE APPELLATE COURT FURTHER COMMITTED A SERIOUS

ERROR AND GRAVE ABUSE OF DISCRETION IN NOT HOLDING THAT THE PRICE OF
P2,400.00 PAID BY RESPONTDENT HO FERNANDEZ WAS GROSSLY INADEQUATE AS TO
SHOCK ONE'S CONSCIENCE AMOUNTING TO FRAUD AND A DEPRIVATION OF PROPERTY
WITHOUT DUE PROCESS OF LAW, AND CONSEQUENTLY, THE AUCTION SALE MADE
THEREOF IS VOID. (pp. 10, 17, 20-21, Rollo)

We gave due course to the petition for a more thorough inquiry into the petitioner's allegations that
his property was sold at public auction without notice to him and that the price paid for the property
was shockingly inadequate, amounting to fraud and deprivation without due process of law.

A careful review of the case, however, discloses that Mr. Francia brought the problems raised in his
petition upon himself. While we commiserate with him at the loss of his property, the law and the
facts militate against the grant of his petition. We are constrained to dismiss it.

Francia contends that his tax delinquency of P2,400.00 has been extinguished by legal
compensation. He claims that the government owed him P4,116.00 when a portion of his land was
expropriated on October 15, 1977. Hence, his tax obligation had been set-off by operation of law as
of October 15, 1977.

There is no legal basis for the contention. By legal compensation, obligations of persons, who in
their own right are reciprocally debtors and creditors of each other, are extinguished (Art. 1278, Civil
Code). The circumstances of the case do not satisfy the requirements provided by Article 1279, to
wit:

(1) that each one of the obligors be bound principally and that he be at the same time
a principal creditor of the other;
 xxx xxx xxx

(3) that the two debts be due.

xxx xxx xxx

This principal contention of the petitioner has no merit. We have consistently ruled that there can be
no off-setting of taxes against the claims that the taxpayer may have against the government. A
person cannot refuse to pay a tax on the ground that the government owes him an amount equal to
or greater than the tax being collected. The collection of a tax cannot await the results of a lawsuit
against the government.

In the case of Republic v. Mambulao Lumber Co. (4 SCRA 622), this Court ruled that Internal
Revenue Taxes can not be the subject of set-off or compensation. We stated that:

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to
be set-off under the statutes of set-off, which are construed uniformly, in the light of
public policy, to exclude the remedy in an action or any indebtedness of the state or
municipality to one who is liable to the state or municipality for taxes. Neither are they
a proper subject of recoupment since they do not arise out of the contract or
transaction sued on. ... (80 C.J.S., 7374). "The general rule based on grounds of
public policy is well-settled that no set-off admissible against demands for taxes
levied for general or local governmental purposes. The reason on which the general
rule is based, is that taxes are not in the nature of contracts between the party and
party but grow out of duty to, and are the positive acts of the government to the
making and enforcing of which, the personal consent of individual taxpayers is not
required. ..."

We stated that a taxpayer cannot refuse to pay his tax when called upon by the collector because he
has a claim against the governmental body not included in the tax levy.

This rule was reiterated in the case of Corders v. Gonda (18 SCRA 331) where we stated that: "...
internal revenue taxes can not be the subject of compensation: Reason: government and taxpayer
are not mutually creditors and debtors of each other' under Article 1278 of the Civil Code and a
"claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off."

There are other factors which compel us to rule against the petitioner. The tax was due to the city
government while the expropriation was effected by the national government. Moreover, the amount
of P4,116.00 paid by the national government for the 125 square meter portion of his lot was
deposited with the Philippine National Bank long before the sale at public auction of his remaining
property. Notice of the deposit dated September 28, 1977 was received by the petitioner on
September 30, 1977. The petitioner admitted in his testimony that he knew about the P4,116.00
deposited with the bank but he did not withdraw it. It would have been an easy matter to withdraw
P2,400.00 from the deposit so that he could pay the tax obligation thus aborting the sale at public
auction.

Petitioner had one year within which to redeem his property although, as well be shown later, he
claimed that he pocketed the notice of the auction sale without reading it.

Petitioner contends that "the auction sale in question was made without complying with the
mandatory provisions of the statute governing tax sale. No evidence, oral or otherwise, was
presented that the procedure outlined by law on sales of property for tax delinquency was followed.
... Since defendant Ho Fernandez has the affirmative of this issue, the burden of proof therefore
rests upon him to show that plaintiff was duly and properly notified ... .(Petition for Review, Rollo p.
18; emphasis supplied)
We agree with the petitioner's claim that Ho Fernandez, the purchaser at the auction sale, has the
burden of proof to show that there was compliance with all the prescribed requisites for a tax sale.

The case of Valencia v. Jimenez (11 Phil. 492) laid down the doctrine that:

xxx xxx xxx

... [D]ue process of law to be followed in tax proceedings must be established by

proof and the general rule is that the purchaser of a tax title is bound to take upon
himself the burden of showing the regularity of all proceedings leading up to the
sale. (emphasis supplied)

There is no presumption of the regularity of any administrative action which results in depriving a
taxpayer of his property through a tax sale. (Camo v. Riosa Boyco, 29 Phil. 437); Denoga v. Insular
Government, 19 Phil. 261). This is actually an exception to the rule that administrative proceedings
are presumed to be regular.

But even if the burden of proof lies with the purchaser to show that all legal prerequisites have been
complied with, the petitioner can not, however, deny that he did receive the notice for the auction
sale. The records sustain the lower court's finding that:

[T]he plaintiff claimed that it was illegal and irregular. He insisted that he was not
properly notified of the auction sale. Surprisingly, however, he admitted in his
testimony that he received the letter dated November 21, 1977 (Exhibit "I") as shown
by his signature (Exhibit "I-A") thereof. He claimed further that he was not present on
December 5, 1977 the date of the auction sale because he went to Iligan City. As
long as there was substantial compliance with the requirements of the notice, the
validity of the auction sale can not be assailed ... .

We quote the following testimony of the petitioner on cross-examination, to wit:

Q. My question to you is this letter marked as Exhibit I for Ho

Fernandez notified you that the property in question shall be sold at
public auction to the highest bidder on December 5, 1977 pursuant to
Sec. 74 of PD 464. Will you tell the Court whether you received the
original of this letter?

A. I just signed it because I was not able to read the same. It was just
sent by mail carrier.

Q. So you admit that you received the original of Exhibit I and you
signed upon receipt thereof but you did not read the contents of it?

A. Yes, sir, as I was in a hurry.

Q. After you received that original where did you place it?

A. I placed it in the usual place where I place my mails.

Petitioner, therefore, was notified about the auction sale. It was negligence on his part when he
ignored such notice. By his very own admission that he received the notice, his now coming to court
assailing the validity of the auction sale loses its force.

Petitioner's third assignment of grave error likewise lacks merit. As a general rule, gross inadequacy
of price is not material (De Leon v. Salvador, 36 SCRA 567; Ponce de Leon v. Rehabilitation
Finance Corporation, 36 SCRA 289; Tolentino v. Agcaoili, 91 Phil. 917 Unrep.). See also Barrozo
Vda. de Gordon v. Court of Appeals (109 SCRA 388) we held that "alleged gross inadequacy of
price is not material when the law gives the owner the right to redeem as when a sale is made at
public auction, upon the theory that the lesser the price, the easier it is for the owner to effect
redemption." In Velasquez v. Coronel (5 SCRA 985), this Court held:

... [R]espondent treasurer now claims that the prices for which the lands were sold
are unconscionable considering the wide divergence between their assessed values
and the amounts for which they had been actually sold. However, while in ordinary
sales for reasons of equity a transaction may be invalidated on the ground of
inadequacy of price, or when such inadequacy shocks one's conscience as to justify
the courts to interfere, such does not follow when the law gives to the owner the right
to redeem, as when a sale is made at public auction, upon the theory that the lesser
the price the easier it is for the owner to effect the redemption. And so it was aptly
said: "When there is the right to redeem, inadequacy of price should not be material,
because the judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered by reason of the price
obtained at the auction sale."

The reason behind the above rulings is well enunciated in the case of Hilton et. ux. v. De Long, et
al. (188 Wash. 162, 61 P. 2d, 1290):

If mere inadequacy of price is held to be a valid objection to a sale for taxes, the
collection of taxes in this manner would be greatly embarrassed, if not rendered
altogether impracticable. In Black on Tax Titles (2nd Ed.) 238, the correct rule is
stated as follows: "where land is sold for taxes, the inadequacy of the price given is
not a valid objection to the sale." This rule arises from necessity, for, if a fair price for
the land were essential to the sale, it would be useless to offer the property. Indeed,
it is notorious that the prices habitually paid by purchasers at tax sales are grossly
out of proportion to the value of the land. (Rothchild Bros. v. Rollinger, 32 Wash. 307,
73 P. 367, 369).

In this case now before us, we can aptly use the language of McGuire, et al. v. Bean, et al. (267 P.
555):

Like most cases of this character there is here a certain element of hardship from
which we would be glad to relieve, but do so would unsettle long-established rules
and lead to uncertainty and difficulty in the collection of taxes which are the life blood
of the state. We are convinced that the present rules are just, and that they bring
hardship only to those who have invited it by their own neglect.

We are inclined to believe the petitioner's claim that the value of the lot has greatly appreciated in
value. Precisely because of the widening of Buendia Avenue in Pasay City, which necessitated the
expropriation of adjoining areas, real estate values have gone up in the area. However, the price
quoted by the petitioner for a 203 square meter lot appears quite exaggerated. At any rate, the
foregoing reasons which answer the petitioner's claims lead us to deny the petition.

And finally, even if we are inclined to give relief to the petitioner on equitable grounds, there are no
strong considerations of substantial justice in his favor. Mr. Francia failed to pay his taxes for 14
years from 1963 up to the date of the auction sale. He claims to have pocketed the notice of sale
without reading it which, if true, is still an act of inexplicable negligence. He did not withdraw from the
expropriation payment deposited with the Philippine National Bank an amount sufficient to pay for
the back taxes. The petitioner did not pay attention to another notice sent by the City Treasurer on
November 3, 1978, during the period of redemption, regarding his tax delinquency. There is
furthermore no showing of bad faith or collusion in the purchase of the property by Mr. Fernandez.
The petitioner has no standing to invoke equity in his attempt to regain the property by belatedly
asking for the annulment of the sale.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition for review is DISMISSED. The decision
of the respondent court is affirmed.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-18994 June 29, 1963

MELECIO R. DOMINGO, as Commissioner of Internal Revenue, petitioner,

vs.
HON. LORENZO C. GARLITOS, in his capacity as Judge of the Court of First Instance of
Leyte,
and SIMEONA K. PRICE, as Administratrix of the Intestate Estate of the late Walter Scott
Price, respondents.

Office of the Solicitor General and Atty. G. H. Mantolino for petitioner.

Benedicto and Martinez for respondents.

LABRADOR, J.:

This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of
Leyte, Ron. Lorenzo C. Garlitos, presiding, seeking to annul certain orders of the court and for an
order in this Court directing the respondent court below to execute the judgment in favor of the
Government against the estate of Walter Scott Price for internal revenue taxes.

It appears that in Melecio R. Domingo vs. Hon. Judge S. C. Moscoso, G.R. No. L-14674, January
30, 1960, this Court declared as final and executory the order for the payment by the estate of the
estate and inheritance taxes, charges and penalties, amounting to P40,058.55, issued by the Court
of First Instance of Leyte in, special proceedings No. 14 entitled "In the matter of the Intestate Estate
of the Late Walter Scott Price." In order to enforce the claims against the estate the fiscal presented
a petition dated June 21, 1961, to the court below for the execution of the judgment. The petition
was, however, denied by the court which held that the execution is not justifiable as the Government
is indebted to the estate under administration in the amount of P262,200. The orders of the court
below dated August 20, 1960 and September 28, 1960, respectively, are as follows:

Atty. Benedicto submitted a copy of the contract between Mrs. Simeona K. Price,
Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo Castrillo
of the Bureau of Lands dated September 19, 1956 and acknowledged before Notary Public
Salvador V. Esguerra, legal adviser in Malacañang to Executive Secretary De Leon dated
December 14, 1956, the note of His Excellency, Pres. Carlos P. Garcia, to Director Castrillo
dated August 2, 1958, directing the latter to pay to Mrs. Price the sum ofP368,140.00, and an
extract of page 765 of Republic Act No. 2700 appropriating the sum of P262.200.00 for the
payment to the Leyte Cadastral Survey, Inc., represented by the administratrix Simeona K.
Price, as directed in the above note of the President. Considering these facts, the Court
orders that the payment of inheritance taxes in the sum of P40,058.55 due the Collector of
Internal Revenue as ordered paid by this Court on July 5, 1960 in accordance with the order
of the Supreme Court promulgated July 30, 1960 in G.R. No. L-14674, be deducted from the
amount of P262,200.00 due and payable to the Administratrix Simeona K. Price, in this
estate, the balance to be paid by the Government to her without further delay. (Order of
August 20, 1960)

The Court has nothing further to add to its order dated August 20, 1960 and it orders that the
payment of the claim of the Collector of Internal Revenue be deferred until the Government
shall have paid its accounts to the administratrix herein amounting to P262,200.00. It may
not be amiss to repeat that it is only fair for the Government, as a debtor, to its accounts to
its citizens-creditors before it can insist in the prompt payment of the latter's account to it,
specially taking into consideration that the amount due to the Government draws interests
 while the credit due to the present state does not accrue any interest. (Order of September
28, 1960)

The petition to set aside the above orders of the court below and for the execution of the claim of the
Government against the estate must be denied for lack of merit. The ordinary procedure by which to
settle claims of indebtedness against the estate of a deceased person, as an inheritance tax, is for
the claimant to present a claim before the probate court so that said court may order the
administrator to pay the amount thereof. To such effect is the decision of this Court in Aldamiz vs.
Judge of the Court of First Instance of Mindoro, G.R. No. L-2360, Dec. 29, 1949, thus:

. . . a writ of execution is not the proper procedure allowed by the Rules of Court for the
payment of debts and expenses of administration. The proper procedure is for the court to
order the sale of personal estate or the sale or mortgage of real property of the deceased
and all debts or expenses of administrator and with the written notice to all the heirs legatees
and devisees residing in the Philippines, according to Rule 89, section 3, and Rule 90,
section 2. And when sale or mortgage of real estate is to be made, the regulations contained
in Rule 90, section 7, should be complied with. 1äwphï1.ñët

Execution may issue only where the devisees, legatees or heirs have entered into
possession of their respective portions in the estate prior to settlement and payment of the
debts and expenses of administration and it is later ascertained that there are such debts
and expenses to be paid, in which case "the court having jurisdiction of the estate may, by
order for that purpose, after hearing, settle the amount of their several liabilities, and order
how much and in what manner each person shall contribute, and may issue execution if
circumstances require" (Rule 89, section 6; see also Rule 74, Section 4; Emphasis supplied.)
And this is not the instant case.

The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle
the estate of a deceased person, the properties belonging to the estate are under the jurisdiction of
the court and such jurisdiction continues until said properties have been distributed among the heirs
entitled thereto. During the pendency of the proceedings all the estate is in custodia legis and the
proper procedure is not to allow the sheriff, in case of the court judgment, to seize the properties but
to ask the court for an order to require the administrator to pay the amount due from the estate and
required to be paid.

Another ground for denying the petition of the provincial fiscal is the fact that the court having
jurisdiction of the estate had found that the claim of the estate against the Government has been
recognized and an amount of P262,200 has already been appropriated for the purpose by a
corresponding law (Rep. Act No. 2700). Under the above circumstances, both the claim of the
Government for inheritance taxes and the claim of the intestate for services rendered have already
become overdue and demandable is well as fully liquidated. Compensation, therefore, takes place
by operation of law, in accordance with the provisions of Articles 1279 and 1290 of the Civil Code,
and both debts are extinguished to the concurrent amount, thus:

ART. 1200. When all the requisites mentioned in article 1279 are present, compensation
takes effect by operation of law, and extinguished both debts to the concurrent amount,
eventhough the creditors and debtors are not aware of the compensation.

It is clear, therefore, that the petitioner has no clear right to execute the judgment for taxes against
the estate of the deceased Walter Scott Price. Furthermore, the petition
for certiorari and mandamus is not the proper remedy for the petitioner. Appeal is the remedy.

The petition is, therefore, dismissed, without costs.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23645 October 29, 1968

BENJAMIN P. GOMEZ, petitioner-appellee,

vs.
ENRICO PALOMAR, in his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and DOMINGO GOPEZ, in
his capacity as Acting Postmaster of San Fernando, Pampanga, respondent-appellants.

Lorenzo P. Navarro and Narvaro Belar S. Navarro for petitioner-appellee.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Frine C. Zaballero and
Solicitor Dominador L. Quiroz for respondents-appellants.

CASTRO, J.:

This appeal puts in issue the constitutionality of Republic Act 1635,1 as amended by Republic Act
2631,2 which provides as follows:

To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order
for the period from August nineteen to September thirty every year the printing and issue of
semi-postal stamps of different denominations with face value showing the regular postage
charge plus the additional amount of five centavos for the said purpose, and during the said
period, no mail matter shall be accepted in the mails unless it bears such semi-postal
stamps: Provided, That no such additional charge of five centavos shall be imposed on
newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall
constitute a special fund and be deposited with the National Treasury to be expended by the
Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate
tuberculosis.

The respondent Postmaster General, in implementation of the law, thereafter issued four (4)
administrative orders numbered 3 (June 20, 1958), 7 (August 9, 1958), 9 (August 28, 1958), and 10
(July 15, 1960). All these administrative orders were issued with the approval of the respondent
Secretary of Public Works and Communications.

The pertinent portions of Adm. Order 3 read as follows:

Such semi-postal stamps could not be made available during the period from August 19 to
September 30, 1957, for lack of time. However, two denominations of such stamps, one at "5
+ 5" centavos and another at "10 + 5" centavos, will soon be released for use by the public
on their mails to be posted during the same period starting with the year 1958.

xxx xxx xxx

During the period from August 19 to September 30 each year starting in 1958, no mail matter
of whatever class, and whether domestic or foreign, posted at any Philippine Post Office and
addressed for delivery in this country or abroad, shall be accepted for mailing unless it bears
at least one such semi-postal stamp showing the additional value of five centavos intended
for the Philippine Tuberculosis Society.

In the case of second-class mails and mails prepaid by means of mail permits or impressions
of postage meters, each piece of such mail shall bear at least one such semi-postal stamp if
 posted during the period above stated starting with the year 1958, in addition to being
charged the usual postage prescribed by existing regulations. In the case of business reply
envelopes and cards mailed during said period, such stamp should be collected from the
addressees at the time of delivery. Mails entitled to franking privilege like those from the
office of the President, members of Congress, and other offices to which such privilege has
been granted, shall each also bear one such semi-postal stamp if posted during the said
period.

Mails posted during the said period starting in 1958, which are found in street or post-office
mail boxes without the required semi-postal stamp, shall be returned to the sender, if known,
with a notation calling for the affixing of such stamp. If the sender is unknown, the mail
matter shall be treated as nonmailable and forwarded to the Dead Letter Office for proper
disposition.

Adm. Order 7, amending the fifth paragraph of Adm. Order 3, reads as follows:

In the case of the following categories of mail matter and mails entitled to franking privilege
which are not exempted from the payment of the five centavos intended for the Philippine
Tuberculosis Society, such extra charge may be collected in cash, for which official receipt
(General Form No. 13, A) shall be issued, instead of affixing the semi-postal stamp in the
manner hereinafter indicated:

1. Second-class mail. — Aside from the postage at the second-class rate, the extra charge of
five centavos for the Philippine Tuberculosis Society shall be collected on each separately-
addressed piece of second-class mail matter, and the total sum thus collected shall be
entered in the same official receipt to be issued for the postage at the second-class rate. In
making such entry, the total number of pieces of second-class mail posted shall be stated,
thus: "Total charge for TB Fund on 100 pieces . .. P5.00." The extra charge shall be entered
separate from the postage in both of the official receipt and the Record of Collections.

2. First-class and third-class mail permits. — Mails to be posted without postage affixed
under permits issued by this Bureau shall each be charged the usual postage, in addition to
the five-centavo extra charge intended for said society. The total extra charge thus received
shall be entered in the same official receipt to be issued for the postage collected, as in
subparagraph 1.

3. Metered mail. — For each piece of mail matter impressed by postage meter under
metered mail permit issued by this Bureau, the extra charge of five centavos for said society
shall be collected in cash and an official receipt issued for the total sum thus received, in the
manner indicated in subparagraph 1.

4. Business reply cards and envelopes. — Upon delivery of business reply cards and
envelopes to holders of business reply permits, the five-centavo charge intended for said
society shall be collected in cash on each reply card or envelope delivered, in addition to the
required postage which may also be paid in cash. An official receipt shall be issued for the
total postage and total extra charge received, in the manner shown in subparagraph 1.

5. Mails entitled to franking privilege. — Government agencies, officials, and other persons
entitled to the franking privilege under existing laws may pay in cash such extra charge
intended for said society, instead of affixing the semi-postal stamps to their mails, provided
that such mails are presented at the post-office window, where the five-centavo extra charge
for said society shall be collected on each piece of such mail matter. In such case, an official
receipt shall be issued for the total sum thus collected, in the manner stated in subparagraph
1.
 Mail under permits, metered mails and franked mails not presented at the post-office window
shall be affixed with the necessary semi-postal stamps. If found in mail boxes without such
stamps, they shall be treated in the same way as herein provided for other mails.

Adm. Order 9, amending Adm. Order 3, as amended, exempts "Government and its Agencies and
Instrumentalities Performing Governmental Functions." Adm. Order 10, amending Adm. Order 3, as
amended, exempts "copies of periodical publications received for mailing under any class of mail
matter, including newspapers and magazines admitted as second-class mail."

The FACTS. On September l5, 1963 the petitioner Benjamin P. Gomez mailed a letter at the post
office in San Fernando, Pampanga. Because this letter, addressed to a certain Agustin Aquino of
1014 Dagohoy Street, Singalong, Manila did not bear the special anti-TB stamp required by the
statute, it was returned to the petitioner.

In view of this development, the petitioner brough suit for declaratory relief in the Court of First
Instance of Pampanga, to test the constitutionality of the statute, as well as the implementing
administrative orders issued, contending that it violates the equal protection clause of the
Constitution as well as the rule of uniformity and equality of taxation. The lower court declared the
statute and the orders unconstitutional; hence this appeal by the respondent postal authorities.

For the reasons set out in this opinion, the judgment appealed from must be reversed.

I.

Before reaching the merits, we deem it necessary to dispose of the respondents' contention that
declaratory relief is unavailing because this suit was filed after the petitioner had committed a breach
of the statute. While conceding that the mailing by the petitioner of a letter without the additional anti-
TB stamp was a violation of Republic Act 1635, as amended, the trial court nevertheless refused to
dismiss the action on the ground that under section 6 of Rule 64 of the Rules of Court, "If before the
final termination of the case a breach or violation of ... a statute ... should take place, the action may
thereupon be converted into an ordinary action."

The prime specification of an action for declaratory relief is that it must be brought "before breach or
violation" of the statute has been committed. Rule 64, section 1 so provides. Section 6 of the same
rule, which allows the court to treat an action for declaratory relief as an ordinary action, applies only
if the breach or violation occurs after the filing of the action but before the termination thereof.3

Hence, if, as the trial court itself admitted, there had been a breach of the statute before the firing of
this action, then indeed the remedy of declaratory relief cannot be availed of, much less can the suit
be converted into an ordinary action.

Nor is there merit in the petitioner's argument that the mailing of the letter in question did not
constitute a breach of the statute because the statute appears to be addressed only to postal
authorities. The statute, it is true, in terms provides that "no mail matter shall be accepted in the
mails unless it bears such semi-postal stamps." It does not follow, however, that only postal
authorities can be guilty of violating it by accepting mails without the payment of the anti-TB stamp. It
is obvious that they can be guilty of violating the statute only if there are people who use the mails
without paying for the additional anti-TB stamp. Just as in bribery the mere offer constitutes a breach
of the law, so in the matter of the anti-TB stamp the mere attempt to use the mails without the stamp
constitutes a violation of the statute. It is not required that the mail be accepted by postal authorities.
That requirement is relevant only for the purpose of fixing the liability of postal officials.

Nevertheless, we are of the view that the petitioner's choice of remedy is correct because this suit
was filed not only with respect to the letter which he mailed on September 15, 1963, but also with
regard to any other mail that he might send in the future. Thus, in his complaint, the petitioner prayed
that due course be given to "other mails without the semi-postal stamps which he may deliver for
mailing ... if any, during the period covered by Republic Act 1635, as amended, as well as other
mails hereafter to be sent by or to other mailers which bear the required postage, without collection
of additional charge of five centavos prescribed by the same Republic Act." As one whose mail was
returned, the petitioner is certainly interested in a ruling on the validity of the statute requiring the use
of additional stamps.

II.

We now consider the constitutional objections raised against the statute and the implementing
orders.

1. It is said that the statute is violative of the equal protection clause of the Constitution. More
specifically the claim is made that it constitutes mail users into a class for the purpose of the tax
while leaving untaxed the rest of the population and that even among postal patrons the statute
discriminatorily grants exemption to newspapers while Administrative Order 9 of the respondent
Postmaster General grants a similar exemption to offices performing governmental functions. .

The five centavo charge levied by Republic Act 1635, as amended, is in the nature of an excise tax,
laid upon the exercise of a privilege, namely, the privilege of using the mails. As such the objections
levelled against it must be viewed in the light of applicable principles of taxation.

To begin with, it is settled that the legislature has the inherent power to select the subjects of
taxation and to grant exemptions.4 This power has aptly been described as "of wide range and
flexibility."5 Indeed, it is said that in the field of taxation, more than in other areas, the legislature
possesses the greatest freedom in classification.6 The reason for this is that traditionally,
classification has been a device for fitting tax programs to local needs and usages in order to
achieve an equitable distribution of the tax burden.7

That legislative classifications must be reasonable is of course undenied. But what the petitioner
asserts is that statutory classification of mail users must bear some reasonable relationship to the
end sought to be attained, and that absent such relationship the selection of mail users is
constitutionally impermissible. This is altogether a different proposition. As explained
in Commonwealth v. Life Assurance Co.:8

While the principle that there must be a reasonable relationship between classification made
by the legislation and its purpose is undoubtedly true in some contexts, it has no application
to a measure whose sole purpose is to raise revenue ... So long as the classification
imposed is based upon some standard capable of reasonable comprehension, be that
standard based upon ability to produce revenue or some other legitimate distinction, equal
protection of the law has been afforded. See Allied Stores of Ohio, Inc. v. Bowers, supra, 358
U.S. at 527, 79 S. Ct. at 441; Brown Forman Co. v. Commonwealth of Kentucky, 2d U.S. 56,
573, 80 S. Ct. 578, 580 (1910).

We are not wont to invalidate legislation on equal protection grounds except by the clearest
demonstration that it sanctions invidious discrimination, which is all that the Constitution forbids. The
remedy for unwise legislation must be sought in the legislature. Now, the classification of mail users
is not without any reason. It is based on ability to pay, let alone the enjoyment of a privilege, and on
administrative convinience. In the allocation of the tax burden, Congress must have concluded that
the contribution to the anti-TB fund can be assured by those whose who can afford the use of the
mails.

The classification is likewise based on considerations of administrative convenience. For it is now a

settled principle of law that "consideration of practical administrative convenience and cost in the
administration of tax laws afford adequate ground for imposing a tax on a well recognized and
defined class."9 In the case of the anti-TB stamps, undoubtedly, the single most important and
influential consideration that led the legislature to select mail users as subjects of the tax is the
relative ease and convenienceof collecting the tax through the post offices. The small amount of five
centavos does not justify the great expense and inconvenience of collecting through the regular
means of collection. On the other hand, by placing the duty of collection on postal authorities the tax
was made almost self-enforcing, with as little cost and as little inconvenience as possible.

And then of course it is not accurate to say that the statute constituted mail users into a class. Mail
users were already a class by themselves even before the enactment of the statue and all that the
legislature did was merely to select their class. Legislation is essentially empiric and Republic Act
1635, as amended, no more than reflects a distinction that exists in fact. As Mr. Justice Frankfurter
said, "to recognize differences that exist in fact is living law; to disregard [them] and concentrate on
some abstract identities is lifeless logic."10

Granted the power to select the subject of taxation, the State's power to grant exemption must
likewise be conceded as a necessary corollary. Tax exemptions are too common in the law; they
have never been thought of as raising issues under the equal protection clause.

It is thus erroneous for the trial court to hold that because certain mail users are exempted from the
levy the law and administrative officials have sanctioned an invidious discrimination offensive to the
Constitution. The application of the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in status of mail users. The Constitution
does not require this kind of equality.

As the United States Supreme Court has said, the legislature may withhold the burden of the tax in
order to foster what it conceives to be a beneficent enterprise.11 This is the case of newspapers
which, under the amendment introduced by Republic Act 2631, are exempt from the payment of the
additional stamp.

As for the Government and its instrumentalities, their exemption rests on the State's sovereign
immunity from taxation. The State cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed.12 Administrative Order 9 of the respondent
Postmaster General, which lists the various offices and instrumentalities of the Government exempt
from the payment of the anti-TB stamp, is but a restatement of this well-known principle of
constitutional law.

The trial court likewise held the law invalid on the ground that it singles out tuberculosis to the
exclusion of other diseases which, it is said, are equally a menace to public health. But it is never a
requirement of equal protection that all evils of the same genus be eradicated or none at all.13 As this
Court has had occasion to say, "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."14

2. The petitioner further argues that the tax in question is invalid, first, because it is not levied for a
public purpose as no special benefits accrue to mail users as taxpayers, and second, because it
violates the rule of uniformity in taxation.

The eradication of a dreaded disease is a public purpose, but if by public purpose the petitioner
means benefit to a taxpayer as a return for what he pays, then it is sufficient answer to say that the
only benefit to which the taxpayer is constitutionally entitled is that derived from his enjoyment of the
privileges of living in an organized society, established and safeguarded by the devotion of taxes to
public purposes. Any other view would preclude the levying of taxes except as they are used to
compensate for the burden on those who pay them and would involve the abandonment of the most
fundamental principle of government — that it exists primarily to provide for the common good.15

Nor is the rule of uniformity and equality of taxation infringed by the imposition of a flat rate rather
than a graduated tax. A tax need not be measured by the weight of the mail or the extent of the
service rendered. We have said that considerations of administrative convenience and cost afford an
adequate ground for classification. The same considerations may induce the legislature to impose a
flat tax which in effect is a charge for the transaction, operating equally on all persons within the
class regardless of the amount involved.16 As Mr. Justice Holmes said in sustaining the validity of a
stamp act which imposed a flat rate of two cents on every $100 face value of stock transferred:

One of the stocks was worth $30.75 a share of the face value of $100, the other $172. The
inequality of the tax, so far as actual values are concerned, is manifest. But, here again
equality in this sense has to yield to practical considerations and usage. There must be a
fixed and indisputable mode of ascertaining a stamp tax. In another sense, moreover, there
is equality. When the taxes on two sales are equal, the same number of shares is sold in
each case; that is to say, the same privilege is used to the same extent. Valuation is not the
only thing to be considered. As was pointed out by the court of appeals, the familiar stamp
tax of 2 cents on checks, irrespective of income or earning capacity, and many others,
illustrate the necessity and practice of sometimes substituting count for weight ...17

According to the trial court, the money raised from the sales of the anti-TB stamps is spent for the
benefit of the Philippine Tuberculosis Society, a private organization, without appropriation by law.
But as the Solicitor General points out, the Society is not really the beneficiary but only the agency
through which the State acts in carrying out what is essentially a public function. The money is
treated as a special fund and as such need not be appropriated by law.18

3. Finally, the claim is made that the statute is so broadly drawn that to execute it the respondents
had to issue administrative orders far beyond their powers. Indeed, this is one of the grounds on
which the lower court invalidated Republic Act 1631, as amended, namely, that it constitutes an
undue delegation of legislative power.

Administrative Order 3, as amended by Administrative Orders 7 and 10, provides that for certain
classes of mail matters (such as mail permits, metered mails, business reply cards, etc.), the five-
centavo charge may be paid in cash instead of the purchase of the anti-TB stamp. It further states
that mails deposited during the period August 19 to September 30 of each year in mail boxes without
the stamp should be returned to the sender, if known, otherwise they should be treated as
nonmailable.

It is true that the law does not expressly authorize the collection of five centavos except through the
sale of anti-TB stamps, but such authority may be implied in so far as it may be necessary to prevent
a failure of the undertaking. The authority given to the Postmaster General to raise funds through the
mails must be liberally construed, consistent with the principle that where the end is required the
appropriate means are given.19

The anti-TB stamp is a distinctive stamp which shows on its face not only the amount of the
additional charge but also that of the regular postage. In the case of business reply cards, for
instance, it is obvious that to require mailers to affix the anti-TB stamp on their cards would be to
make them pay much more because the cards likewise bear the amount of the regular postage.

It is likewise true that the statute does not provide for the disposition of mails which do not bear the
anti-TB stamp, but a declaration therein that "no mail matter shall be accepted in the mails unless it
bears such semi-postal stamp" is a declaration that such mail matter is nonmailable within the
meaning of section 1952 of the Administrative Code. Administrative Order 7 of the Postmaster
General is but a restatement of the law for the guidance of postal officials and employees. As for
Administrative Order 9, we have already said that in listing the offices and entities of the Government
exempt from the payment of the stamp, the respondent Postmaster General merely observed an
established principle, namely, that the Government is exempt from taxation.

ACCORDINGLY, the judgment a quo is reversed, and the complaint is dismissed, without
pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Angeles and Capistrano, JJ., concur.
Zaldivar, J., is on leave.
Separate Opinions

FERNANDO, J., concurring:

I join fully the rest of my colleagues in the decision upholding Republic Act No. 1635 as amended by
Republic Act No. 2631 and the majority opinion expounded with Justice Castro's usual vigor and
lucidity subject to one qualification. With all due recognition of its inherently persuasive character, it
would seem to me that the same result could be achieved if reliance be had on police power rather
than the attribute of taxation, as the constitutional basis for the challenged legislation.

1. For me, the state in question is an exercise of the regulatory power connected with the
performance of the public service. I refer of course to the government postal function, one of
respectable and ancient lineage. The United States Constitution of 1787 vests in the federal
government acting through Congress the power to establish post offices.1 The first act providing for
the organization of government departments in the Philippines, approved Sept. 6, 1901, provided for
the Bureau of Post Offices in the Department of Commerce and Police.2 Its creation is thus a
manifestation of one of the many services in which the government may engage for public
convenience and public interest. Such being the case, it seems that any legislation that in effect
would require increase cost of postage is well within the discretionary authority of the government.

It may not be acting in a proprietary capacity but in fixing the fees that it collects for the use of the
mails, the broad discretion that it enjoys is undeniable. In that sense, the principle announced
in Esteban v. Cabanatuan City,3 in an opinion by our Chief Justice, while not precisely controlling
furnishes for me more than ample support for the validity of the challenged legislation. Thus: "Certain
exactions, imposable under an authority other than police power, are not subject, however, to
qualification as to the amount chargeable, unless the Constitution or the pertinent laws provide
otherwise. For instance, the rates of taxes, whether national or municipal, need not be reasonable, in
the absence of such constitutional or statutory limitation. Similarly, when a municipal corporation
fixes the fees for the use of its properties, such as public markets, it does not wield the police power,
or even the power of taxation. Neither does it assert governmental authority. It exercises merely a
proprietary function. And, like any private owner, it is — in the absence of the aforementioned
limitation, which does not exist in the Charter of Cabanatuan City (Republic Act No. 526) — free to
charge such sums as it may deem best, regardless of the reasonableness of the amount fixed, for
the prospective lessees are free to enter into the corresponding contract of lease, if they are
agreeable to the terms thereof or, otherwise, not enter into such contract."

2. It would appear likewise that an expression of one's personal view both as to

the attitude and awareness that must be displayed by inferior tribunals when the "delicate and
awesome" power of passing on the validity of a statute would not be inappropriate. "The Constitution
is the supreme law, and statutes are written and enforced in submission to its commands."4 It is
likewise common place in constitutional law that a party adversely affected could, again to quote
from Cardozo, "invoke, when constitutional immunities are threatened, the judgment of the courts."5

Since the power of judicial review flows logically from the judicial function of ascertaining the facts
and applying the law and since obviously the Constitution is the highest law before which statutes
must bend, then inferior tribunals can, in the discharge of their judicial functions, nullify legislative
acts. As a matter of fact, in clear cases, such is not only their power but their duty. In the language of
the present Chief Justice: "In fact, whenever the conflicting claims of the parties to a litigation cannot
properly be settled without inquiring into the validity of an act of Congress or of either House thereof,
the courts have, not only jurisdiction to pass upon said issue but, also, the duty to do so, which
cannot be evaded without violating the fundamental law and paving the way to its eventual
destruction."6
Nonetheless, the admonition of Cooley, specially addressed to inferior tribunals, must ever be kept
in mind. Thus: "It must be evident to any one that the power to declare a legislative enactment void
is one which the judge, conscious of the fallibility of the human judgment, will shrink from exercising
in any case where he can conscientiously and with due regard to duty and official oath decline the
responsibility."7

There must be a caveat however to the above Cooley pronouncement. Such should not be the case,
to paraphrase Freund, when the challenged legislation imperils freedom of the mind and of the
person, for given such an undesirable situation, "it is freedom that commands a momentum of
respect." Here then, fidelity to the great ideal of liberty enshrined in the Constitution may require the
judiciary to take an uncompromising and militant stand. As phrased by us in a recent decision, "if the
liberty involved were freedom of the mind or the person, the standard of its validity of governmental
acts is much more rigorous and exacting."8

So much for the appropriate judicial attitude. Now on the question of awareness of the controlling
constitutional doctrines.

There is nothing I can add to the enlightening discussion of the equal protection aspect as found in
the majority opinion. It may not be amiss to recall to mind, however, the language of Justice Laurel in
the leading case of People v. Vera,9 to the effect that the basic individual right of equal protection "is
a restraint on all the three grand departments of our government and on the subordinate
instrumentalities and subdivisions thereof, and on many constitutional powers, like the police power,
taxation and eminent domain."10 Nonetheless, no jurist was more careful in avoiding the dire
consequences to what the legislative body might have deemed necessary to promote the ends of
public welfare if the equal protection guaranty were made to constitute an insurmountable obstacle.

A similar sense of realism was invariably displayed by Justice Frankfurter, as is quite evident from
the various citations from his pen found in the majority opinion. For him, it would be a misreading of
the equal protection clause to ignore actual conditions and settled practices. Not for him the at times
academic and sterile approach to constitutional problems of this sort. Thus: "It would be a narrow
conception of jurisprudence to confine the notion of 'laws' to what is found written on the statute
books, and to disregard the gloss which life has written upon it. Settled state practice cannot
supplant constitutional guaranties, but it can establish what is state law. The Equal Protection
Clause did not write an empty formalism into the Constitution. Deeply embedded traditional ways of
carrying out state policy, such as those of which petitioner complains, are often tougher and truer
law than the dead words of the written text."11 This too, from the same distinguished jurist: "The
Constitution does not require things which are different in fact or opinion to be treated in law as
though they were the same."12

Now, as to non-delegation. It is to be admitted that the problem of non-delegation of legislative

power at times occasions difficulties. Its strict view has been announced by Justice Laurel in the
aforecited case of People v. Verain this language. Thus: "In testing whether a statute constitutes an
undue delegation of legislative power or not, it is usual to inquire whether the statute was complete
in all its terms and provisions when it left the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature. .... In United States v. Ang Tang
Ho ..., this court adhered to the foregoing rule; it held an act of the legislature void in so far as it
undertook to authorize the Governor-General, in his discretion, to issue a proclamation fixing the
price of rice and to make the sale of it in violation of the proclamation a crime."13

Only recently, the present Chief Justice reaffirmed the above view in Pelaez v. Auditor
General,14 specially where the delegation deals not with an administrative function but one
essentially and eminently legislative in character. What could properly be stigmatized though to
quote Justice Cardozo, is delegation of authority that is "unconfined and vagrant, one not canalized
within banks which keep it from overflowing."15

This is not the situation as it presents itself to us. What was delegated was power not legislative in
character. Justice Laurel himself, in a later case, People v. Rosenthal,16 admitted that within certain
limits, there being a need for coping with the more intricate problems of society, the principle of
"subordinate legislation" has been accepted, not only in the United States and England, but in
practically all modern governments. This view was reiterated by him in a 1940 decision, Pangasinan
Transportation Co., Inc. v. Public Service Commission.17 Thus: "Accordingly, with the growing
complexity of modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency toward the
delegation of greater powers by the legislature, and toward the approval of the practice by the
courts."

In the light of the above views of eminent jurists, authoritative in character, of both the equal
protection clause and the non-delegation principle, it is apparent how far the lower court departed
from the path of constitutional orthodoxy in nullifying Republic Act No. 1635 as amended.
Fortunately, the matter has been set right with the reversal of its decision, the opinion of the Court,
manifesting its fealty to constitutional law precepts, which have been reiterated time and time again
and for the soundest of reasons.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 110872 April 18, 1997

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
ALEX GARMA, accused-appellant.

FRANCISCO, J.:

At around 8:00 o'clock in the evening of December 2, 1987, while Herminigildo Isidro was gathering
hay just a few meters away from their house in Sitio Alinaay, Baguingao, Cabugao, Ilocos Sur, he
heard two shots fired in succession.1 Seconds later, he then heard his uncle Sixto Selma cry: "Remy
[referring to Herminigildo] arayatennakman" or "Remy, will you come to my rescue."2 Believing that
Sixto has been shot and that the assailants were still in, the vicinity, Herminigildo immediately ran
toward their house to inform his relatives of what he heard.3

Maria Isidro, Sixto's sister, also heard the gunshots and Sixto's subsequent call for assistance.4 She
forthwith awakened Gil Morales,5 her son- in-law, who, with Perlita Gazmen-Selma, thereafter sought
assistance from Councilor Jose Ardesani.6 The latter, however, refused to extend assistance as he
was himself "afraid" of the assailants.7 Thus, left with no further alternatives, Gil, Perlita, Herminigildo
and Maria, mustered all their courage together and proceeded to the place from where they heard
Sixto moaning. They found the area deserted with Sixto lying on the ground — wounded.8 Upon
seeing them, Sixto promptly complained: "I am hit"; and when asked by Herminigildo about the
identity of the assailant, Sixto replied: "They were three (3) but I recognize[d] only Alex Garma."9

Sixto was rushed to the nearby Pura Clinic, but was transferred to Gabriela Silang General Hospital
in Tanog, Vigan, Ilocos Sur where he expired at around 12:00 o'clock in the same evening. 10 The
cause of his death: "Cardio respiratory arrest . . . [due] to hypovolemic shock . . . to massive
hemorrhage . . . to multiple gunshot wound." 11

On the basis of the separate sworn statements executed by Herminigildo and Gil, appellant and an
unidentified accused, were thereafter charged with Murder in an Information that reads:

That on or about the 2nd day of December, 1987, in the [M]unicipality of Cabugao,
[P]rovince of Ilocos Sur, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, conspiring and confederating together and helping
one another, with treachery and evident premeditation, and with intent to kill, did then
and there wilfully (sic), unlawfully and feloniously assault, attack and shoot with the
use of illegally possessed firearm one Sixto Selma, thereby inflicting upon the latter
mortal wound on his body, which wound necessarily produced the death of said Sixto
Selma, few hours later. 12

Appellant pleaded not guilty when arraigned. Trial ensued. On December 4, 1989, the trial court
handed down a verdict of conviction sentencing the appellant to suffer ten (10) years and one (1)
day of prision mayor, as minimum, to eighteen (18) years, eight (8) months and one (1) day
of reclusion temporal, as maximum. The trial court likewise directed the appellant to indemnify
Sixto's heirs in the amount of P30,000.00. 13 On appeal, the Court of Appeals affirmed the findings of
the trial court, except for the penalty imposed and the amount of civil indemnity awarded which the
Court of Appeals increased to reclusion perpetua and P50,000.00, respectively. 14

The case is now certified to us by the Court of Appeals in accordance with Rule 124, Section 13 of
the Rules of Court, 15 in relation to Article VIII, Section 5, paragraph (2), subparagraph (d) of the 1987
Constitution. 16

It is evident that appellant's conviction was predicated principally on the statement uttered by Sixto
hours before his death, identifying appellant as one of the assailants. Said statement was testified to
by four (4) prosecution witnesses, namely: (1) Herminigildo Aquino; (2) Gil Morales; (3) Maria Isidro;
and (4) Perlita Gazmen-Selma, who all claimed to have heard Sixto's revelation when they found
him lying on the ground-wounded. The trial court admitted such statement as part of res gestae,
while the Court of Appeals considered the same as both part of res gestae and dying declaration.

We agree with the Court of Appeals that the statement of Sixto uttered shortly after the assault and
hours before his death identifying the appellant as one of the assailants, qualifies both as dying
declaration and as part of res gestae.To elaborate, there are four (4) requisites which must concur in
order that a dying declaration may be admissible in evidence, to wit: (a) it must concern the crime
and the surrounding circumstances of the declarant's death; (b) at the time it was made, the
declarant was under a consciousness of an impending death, (c) the declarant was competent as a
witness; and (d) the declaration was offered in a criminal case for homicide, murder or parricide in
which the decedent was the victim. 17

In this case, the foregoing requirements are undoubtedly present. First, Sixto's statement that "they
were three (3) but I recognize[d) only Alex Garma," is a statement of the surrounding circumstances
of his death as the same refers to the identity of his assailants. Second, Sixto gave such declaration
under the consciousness of an impending death as shown by the serious nature of his
wounds, 18 which in fact resulted in his death several hours later. 19 Third, prior to his death, Sixto was
competent to be a witness in court. And fourth, Sixto's dying declaration is offered in a criminal
prosecution for murder where he was himself the victim.

On the other hand, there can be no plausible objection against its admissibility as part of res
gestae even if said statement was uttered by Sixto in response to a question posed by Herminigildo
about the identity of the
assailants. 20 This is because, the record bespeaks that such statement was made right after the
shooting incident and before Sixto had the opportunity to contrive or devise a falsehood. 21

Appellant interposes alibi as defense. According to him, from 7:00 to 10:00 o'clock in the evening of
December 2, 1987, he watched television programs in the house of his grandfather Sotero
Garma. 22 Corroborating appellant's testimony were those of Edilberto Califlores, 23 Simeon
Sonido, 24 Maximo Pacis 25 and David Garma 26 — who all confirmed appellant's presence in Sotero's
house during the night Sixto was gunned down. We are not persuaded. In the face of appellant's
positive identification by the victim as one of the authors of the crime, his defense of alibi necessarily
collapses. It is a settle rule that alibi can not prevail over a positive identification. 27

Appellant also impugns the credibility of the prosecution witnesses contending that their testimonies
are inconsistent with each other in that: (1) Herminigildo and Gil testified that moments before his
death, Sixto uttered that "he cannot survive," while Maria and Perlita did not recount such a remark;
and (2) Maria and Perlita affirmed that the killing was triggered by the previous altercation between
Sixto and appellant about the hay which, however, was not disclosed by Herminigildo and Gil. 28

To our mind, these alleged inconsistencies are not that material so as to cast serious doubts on the
witnesses' credibility. 29 As correctly ruled by the Court of Appeals, these alleged inconsistencies are
merely minor ones, attributable as they are, to the frailty of human memory at times. Neither can it
be successfully argued that since the prosecution witnesses "could not give the definite words of
Sixto," 30 then their testimonies should have been taken with a grain of salt. A witness testifying on
the dying declaration of the deceased need not reproduce exactly the words of the deceased as long
as he is able to give its substance. 31 At any rate, the trial court which had the opportunity to observe
the demeanor of herein prosecution witnesses found that their testimonies rang "with truth and
sincerity." 32 We find no cogent reason to hold otherwise.

However, we agree with the appellant that both the trial court and the Court of Appeals erred in
appreciating the qualifying circumstance of treachery against him. Our settled rule is that treachery
cannot be presumed, 33 but must be proved by clear and convincing evidence, or as conclusively as
the killing
itself. 34 In this case, the trial court declared that the shooting of Sixto was "sudden and
unexpected," 35 which cavalier pronouncement finds no basis from the record as there was no one
who testified to such manner of assault described by the trial court.

Neither may the presence of treachery be simply assumed, as what the Court of Appeals apparently
did, from the mere fact that the fatal wounds were found at the back of Sixto. The location of the fatal
wounds does not, by itself, compel a finding of treachery. 36 Such a finding must be based on some
positive proof, and not be merely an inference drawn more or less logically from hypothetical facts. 37

In fine, we hold that appellant is nonetheless guilty, albeit of the crime of homicide only. Appellant's
guilt has been proven by the prosecution through the dying declaration of the victim himself which
evidence, we must stress, is an evidence of the highest order. 38

WHEREFORE, in view of the foregoing, the decision appealed from is hereby MODIFIED. We find
appellant ALEX GARMA guilty beyond reasonable doubt of the crime of HOMICIDE. Considering the
absence of any mitigating or aggravating circumstance and applying the Indeterminate Sentence
Law in his favor, appellant is hereby sentenced to suffer an indeterminate penalty ranging from Ten
(10) years and One (1) day of Prision Mayor, as minimum, to Sixteen (16) years, Two (2) months
and One (1) day of Reclusion temporal, as maximum. The civil indemnity awarded by the Court of
Appeals for the death of Sixto Selma in the amount of P50,000.00 is AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

G.R. No. L-75697

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

Nelson Y. Ng for petitioner.

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

MELENCIO-HERRERA, J.:

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

On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential
Decree No. 1994 amended the National Internal Revenue Code providing, inter alia:

SEC. 134. Video Tapes. — There shall be collected on each processed video-tape cassette,
ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to sales tax.

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

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

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

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

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

3. WHEREAS, the unregulated activities of videogram establishments have also affected the
viability of the movie industry, particularly the more than 1,200 movie houses and theaters
throughout the country, and occasioned industry-wide displacement and unemployment due
to the shutdown of numerous moviehouses and theaters;
 4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the
Government to create an environment conducive to growth and development of all business
industries, including the movie industry which has an accumulated investment of about P3
Billion;

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

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

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

7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb
these blatant malpractices which have flaunted our censorship and copyright laws;

8. WHEREAS, in the face of these grave emergencies corroding the moral values of the
people and betraying the national economic recovery program, bold emergency measures
must be adopted with dispatch; ... (Numbering of paragraphs supplied).

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

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

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

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

4. There is undue delegation of power and authority;

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

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

We shall consider the foregoing objections in seriatim.

1. The Constitutional requirement that "every bill shall embrace only one subject which shall be
expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to
include the general purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The requirement is satisfied if all
the parts of the statute are related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject and title. 2An act having a
single general subject, indicated in the title, may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of carrying
out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill
should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be
given practical rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a
rider is without merit. That section reads, inter alia:

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

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

xxx xxx xxx

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

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

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

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

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

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

At bottom, the rate of tax is a matter better addressed to the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by
the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in
the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to
act adequately on any matter for any reason that in his judgment requires immediate action, he may,
in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which
shall form part of the law of the land."

In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause
sufficiently summarizes the justification in that grave emergencies corroding the moral values of the
people and betraying the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the exercise of legislative power under the said
Amendment still pends resolution in several other cases, we reserve resolution of the question
raised at the proper time.

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

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

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

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

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

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

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

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

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

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

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

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

WHEREFORE, the instant Petition is hereby dismissed.

No costs.

SO ORDERED.

Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-24756 October 31, 1968

CITY OF BAGUIO, plaintiff-appellee,

vs.
FORTUNATO DE LEON, defendant-appellant.

The City Attorney for plaintiff-appellee.

Fortunato de Leon for and in his own behalf as defendant-appellant.

FERNANDO, J.:

In this appeal, a lower court decision upholding the validity of an ordinance1 of the City of Baguio
imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio
is assailed by defendant-appellant Fortunato de Leon. He was held liable as a real estate dealer with
a property therein worth more than P10,000, but not in excess of P50,000, and therefore obligated to
pay under such ordinance the P50 annual fee. That is the principal question. In addition, there has
been a firm and unyielding insistence by defendant-appellant of the lack of jurisdiction of the City
Court of Baguio, where the suit originated, a complaint having been filed against him by the City
Attorney of Baguio for his failure to pay the amount of P300 as license fee covering the period from
the first quarter of 1958 to the fourth quarter of 1962, allegedly, inspite of repeated demands. Nor
was defendant-appellant agreeable to such a suit being instituted by the City Treasurer without the
consent of the Mayor, which for him was indispensable. The lower court was of a different mind.

In its decision of December 19, 1964, it declared the above ordinance as amended, valid and
subsisting, and held defendant-appellant liable for the fees therein prescribed as a real estate
dealer. Hence, this appeal. Assume the validity of such ordinance, and there would be no question
about the liability of defendant-appellant for the above license fee, it being shown in the partial
stipulation of facts, that he was "engaged in the rental of his property in Baguio" deriving income
therefrom during the period covered by the first quarter of 1958 to the fourth quarter of 1962.

The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending
the city charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades and
occupations as may be established or practiced in the City."

Unless it can be shown then that such a grant of authority is not broad enough to justify the
enactment of the ordinance now assailed, the decision appealed from must be affirmed. The task
confronting defendant-appellant, therefore, was far from easy. Why he failed is understandable,
considering that even a cursory reading of the above amendment readily discloses that the
enactment of the ordinance in question finds support in the power thus conferred.

Nor is the question raised by him as to the validity thereof novel in character. In Medina v. City of
Baguio,3 the effect of the amendatory section insofar as it would expand the previous power vested
by the city charter was clarified in these terms: "Appellants apparently have in mind section 2553,
paragraph (c) of the Revised Administrative Code, which empowers the City of Baguio merely to
impose a license fee for the purpose of rating the business that may be established in the city. The
power as thus conferred is indeed limited, as it does not include the power to levy a tax. But on July
15, 1948, Republic Act No. 329 was enacted amending the charter of said city and adding to its
power to license the power to tax and to regulate. And it is precisely having in view this amendment
that Ordinance No. 99 was approved in order to increase the revenues of the city. In our opinion, the
amendment above adverted to empowers the city council not only to impose a license fee but also to
levy a tax for purposes of revenue, more so when in amending section 2553 (b), the phrase 'as
provided by law' has been removed by section 2 of Republic Act No. 329. The city council of Baguio,
therefore, has now the power to tax, to license and to regulate provided that the subjects affected be
one of those included in the charter. In this sense, the ordinance under consideration cannot be
considered ultra vires whether its purpose be to levy a tax or impose a license fee. The terminology
used is of no consequence."

It would be an undue and unwarranted emasculation of the above power thus granted if defendant-
appellant were to be sustained in his contention that no such statutory authority for the enactment of
the challenged ordinance could be discerned from the language used in the amendatory act. That is
about all that needs to be said in upholding the lower court, considering that the City of Baguio was
not devoid of authority in enacting this particular ordinance. As mentioned at the outset, however,
defendant-appellant likewise alleged procedural missteps and asserted that the challenged
ordinance suffered from certain constitutional infirmities. To such points raised by him, we shall now
turn.

1. Defendant-appellant makes much of the alleged lack of jurisdiction of the City Court of Baguio in
the suit for the collection of the real estate dealer's fee from him in the amount of P300. He
contended before the lower court, and it is his contention now, that while the amount of P300 sought
was within the jurisdiction of the City Court of Baguio where this action originated, since the principal
issue was the legality and constitutionality of the challenged ordinance, it is not such City Court but
the Court of First Instance that has original jurisdiction.

There is here a misapprehension of the Judiciary Act. The City Court has jurisdiction. Only recently,
on September 7, 1968 to be exact, we rejected a contention similar in character in Nemenzo v.
Sabillano.4 The plaintiff in that case filed a claim for the payment of his salary before the Justice of
the Peace Court of Pagadian, Zamboanga del Sur. The question of jurisdiction was raised; the
defendant Mayor asserted that what was in issue was the enforcement of the decision of the
Commission of Civil Service; the Justice of the Peace Court was thus without jurisdiction to try the
case. The above plea was curtly dismissed by Us, as what was involved was "an ordinary money
claim" and therefore "within the original jurisdiction of the Justice of the Peace Court where it was
filed, considering the amount involved." Such is likewise the situation here.

Moreover, in City of Manila v. Bugsuk Lumber Co.,5 a suit to collect from a defendant this license fee
corresponding to the years 1951 and 1952 was filed with the Municipal Court of Manila, in view of
the amount involved. The thought that the municipal court lacked jurisdiction apparently was not
even in the minds of the parties and did not receive any consideration by this Court.

Evidently, the fear is entertained by defendant-appellant that whenever a constitutional question is

raised, it is the Court of First Instance that should have original jurisdiction on the matter. It does not
admit of doubt, however, that what confers jurisdiction is the amount set forth in the complaint. Here,
the sum sought to be recovered was clearly within the jurisdiction of the City Court of Baguio.

Nor could it be plausibly maintained that the validity of such ordinance being open to question as a
defense against its enforcement from one adversely affected, the matter should be elevated to the
Court of First Instance. For the City Court could rely on the presumption of the validity of such
ordinance,6 and the mere fact, however, that in the answer to such a complaint a constitutional
question was raised did not suffice to oust the City Court of its jurisdiction. The suit remains one for
collection, the lack of validity being only a defense to such an attempt at recovery. Since the City
Court is possessed of judicial power and it is likewise axiomatic that the judicial power embraces the
ascertainment of facts and the application of the law, the Constitution as the highest law superseding
any statute or ordinance in conflict therewith, it cannot be said that a City Court is bereft of
competence to proceed on the matter. In the exercise of such delicate power, however, the
admonition of Cooley on inferior tribunals is well worth remembering. Thus: "It must be evident to
any one that the power to declare a legislative enactment void is one which the judge, conscious of
the fallibility of the human judgment, will shrink from exercising in any case where he can
conscientiously and with due regard to duty and official oath decline the responsibility."7 While it
remains undoubted that such a power to pass on the validity of an ordinance alleged to infringe
certain constitutional rights of a litigant exists, still it should be exercised with due care and
circumspection, considering not only the presumption of validity but also the relatively modest rank
of a city court in the judicial hierarchy.

2. To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample
statutory authority for the enactment thereof. Nonetheless, its validity on constitutional grounds is
challenged because of the allegation that it imposed double taxation, which is repugnant to the due
process clause, and that it violated the requirement of uniformity. We do not view the matter 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 unconstitutional on other grounds."8With 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 de graceto 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
state. In a 1947 decision, however,9 we quoted with approval this excerpt from a leading American
decision:10 "Where, as here, Congress has clearly expressed its intention, the statute must be
sustained even though double taxation results."

At any rate, it has been expressly affirmed by us that such an "argument against double taxation
may not be invoked where one tax is imposed by the state and the other is imposed by the city ..., it
being widely recognized that there is nothing inherently obnoxious in the requirement that license
fees or taxes be exacted with respect to the same occupation, calling or activity by both the state
and the political subdivisions thereof."11

The above would clearly indicate how lacking in merit is this argument based on double taxation.

Now, as to the claim that there was a violation of the rule of uniformity established by the
constitution. According to the challenged ordinance, a real estate dealer who leases property worth
P50,000 or above must pay an annual fee of P100. If the property is worth P10,000 but not over
P50,000, then he pays P50 and P24 if the value is less than P10,000. On its face, therefore, the
above ordinance cannot be assailed as violative of the constitutional requirement of uniformity.
In Philippine Trust Company v. Yatco,12 Justice Laurel, speaking for the Court, stated: "A tax is
considered uniform when it operates with the same force and effect in every place where the subject
may be found."

There was no occasion in that case to consider the possible effect on such a constitutional
requirement where there is a classification. The opportunity came in Eastern Theatrical Co. v.
Alfonso.13 Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate. The taxing power has the authority to
make reasonable and natural classifications for purposes of taxation; ..." About two years later,
Justice Tuason, speaking for this Court in Manila Race Horses Trainers Assn. v. De la
Fuente14incorporated the above excerpt in his opinion and continued: "Taking everything into
account, the differentiation against which the plaintiffs complain conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of the Constitution."

To satisfy this requirement then, all that is needed as held in another case decided two years
later, 15 is that the statute or ordinance in question "applies equally to all persons, firms and
corporations placed in similar situation." This Court is on record as accepting the view in a leading
American case16 that "inequalities which result from a singling out of one particular class for taxation
or exemption infringe no constitutional limitation."17

It is thus apparent from the above that in much the same way that the plea of double taxation is
unavailing, the allegation that there was a violation of the principle of uniformity is inherently lacking
in persuasiveness. There is no need to pass upon the other allegations to assail the validity of the
above ordinance, it being maintained that the license fees therein imposed "is excessive,
unreasonable and oppressive" and that there is a failure to observe the mandate of equal protection.
A reading of the ordinance will readily disclose their inherent lack of plausibility.

3. That would dispose of all the errors assigned, except the last two, which would predicate a
grievance on the complaint having been started by the City Treasurer rather than the City Mayor of
Baguio. These alleged errors, as was the case with the others assigned, lack merit.

In much the same way that an act of a department head of the national government, performed
within the limits of his authority, is presumptively the act of the President unless reprobated or
disapproved,18 similarly the act of the City Treasurer, whose position is roughly analogous, may be
assumed to carry the seal of approval of the City Mayor unless repudiated or set aside. This should
be the case considering that such city official is called upon to see to it that revenues due the City
are collected. When administrative steps are futile and unavailing, given the stubbornness and
obduracy of a taxpayer, convinced in good faith that no tax was due, judicial remedy may be
resorted to by him. It would be a reflection on the state of the law if such fidelity to duty would be met
by condemnation rather than commendation.

So, much for the analytical approach. The conclusion thus reached has a reinforcement that comes
to it from the functional and pragmatic test. If a city treasurer has to await the nod from the city
mayor before a municipal ordinance is enforced, then opportunity exists for favoritism and undue
discrimination to come into play. Whatever valid reason may exist as to why one taxpayer is to be
accorded a treatment denied another, the suspicion is unavoidable that such a manifestation of
official favor could have been induced by unnamed but not unknown consideration. It would not be
going too far to assert that even defendant-appellant would find no satisfaction in such a sad state of
affairs. The more desirable legal doctrine therefore, on the assumption that a choice exists, is one
that would do away with such temptation on the part of both taxpayer and public official alike.

WHEREFORE, the lower court decision of December 19, 1964, is hereby affirmed. Costs against
defendant-appellant.

Concepcion, CJ., Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles and Capistrano,
JJ., concur.
Zaldivar, J., is on leave.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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.

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 barrio ordinances 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 prescription for 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 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.

Teehankee, J., reserves his vote.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-65773-74 April 30, 1987

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
BRITISH OVERSEAS AIRWAYS CORPORATION and COURT OF TAX APPEALS, respondents.

Quasha, Asperilla, Ancheta, Peña, Valmonte & Marcos for respondent British Airways.

MELENCIO-HERRERA, J.:

Petitioner Commissioner of Internal Revenue (CIR) seeks a review on certiorari of the joint Decision
of the Court of Tax Appeals (CTA) in CTA Cases Nos. 2373 and 2561, dated 26 January 1983,
which set aside petitioner's assessment of deficiency income taxes against respondent British
Overseas Airways Corporation (BOAC) for the fiscal years 1959 to 1967, 1968-69 to 1970-71,
respectively, as well as its Resolution of 18 November, 1983 denying reconsideration.

BOAC is a 100% British Government-owned corporation organized and existing under the laws of
the United Kingdom It is engaged in the international airline business and is a member-signatory of
the Interline Air Transport Association (IATA). As such it operates air transportation service and sells
transportation tickets over the routes of the other airline members. During the periods covered by the
disputed assessments, it is admitted that BOAC had no landing rights for traffic purposes in the
Philippines, and was not granted a Certificate of public convenience and necessity to operate in the
Philippines by the Civil Aeronautics Board (CAB), except for a nine-month period, partly in 1961 and
partly in 1962, when it was granted a temporary landing permit by the CAB. Consequently, it did not
carry passengers and/or cargo to or from the Philippines, although during the period covered by the
assessments, it maintained a general sales agent in the Philippines — Wamer Barnes and
Company, Ltd., and later Qantas Airways — which was responsible for selling BOAC tickets
covering passengers and cargoes. 1

G.R. No. 65773 (CTA Case No. 2373, the First Case)

On 7 May 1968, petitioner Commissioner of Internal Revenue (CIR, for brevity) assessed BOAC the
aggregate amount of P2,498,358.56 for deficiency income taxes covering the years 1959 to 1963.
This was protested by BOAC. Subsequent investigation resulted in the issuance of a new
assessment, dated 16 January 1970 for the years 1959 to 1967 in the amount of P858,307.79.
BOAC paid this new assessment under protest.

On 7 October 1970, BOAC filed a claim for refund of the amount of P858,307.79, which claim was
denied by the CIR on 16 February 1972. But before said denial, BOAC had already filed a petition
for review with the Tax Court on 27 January 1972, assailing the assessment and praying for the
refund of the amount paid.

G.R. No. 65774 (CTA Case No. 2561, the Second Case)

On 17 November 1971, BOAC was assessed deficiency income taxes, interests, and penalty for the
fiscal years 1968-1969 to 1970-1971 in the aggregate amount of P549,327.43, and the additional
amounts of P1,000.00 and P1,800.00 as compromise penalties for violation of Section 46 (requiring
the filing of corporation returns) penalized under Section 74 of the National Internal Revenue Code
(NIRC).

On 25 November 1971, BOAC requested that the assessment be countermanded and set aside. In a
letter, dated 16 February 1972, however, the CIR not only denied the BOAC request for refund in the
First Case but also re-issued in the Second Case the deficiency income tax assessment for
P534,132.08 for the years 1969 to 1970-71 plus P1,000.00 as compromise penalty under Section 74
of the Tax Code. BOAC's request for reconsideration was denied by the CIR on 24 August 1973.
This prompted BOAC to file the Second Case before the Tax Court praying that it be absolved of
liability for deficiency income tax for the years 1969 to 1971.

This case was subsequently tried jointly with the First Case.

On 26 January 1983, the Tax Court rendered the assailed joint Decision reversing the CIR. The Tax
Court held that the proceeds of sales of BOAC passage tickets in the Philippines by Warner Barnes
and Company, Ltd., and later by Qantas Airways, during the period in question, do not constitute
BOAC income from Philippine sources "since no service of carriage of passengers or freight was
performed by BOAC within the Philippines" and, therefore, said income is not subject to Philippine
income tax. The CTA position was that income from transportation is income from services so that
the place where services are rendered determines the source. Thus, in the dispositive portion of its
Decision, the Tax Court ordered petitioner to credit BOAC with the sum of P858,307.79, and to
cancel the deficiency income tax assessments against BOAC in the amount of P534,132.08 for the
fiscal years 1968-69 to 1970-71.

Hence, this Petition for Review on certiorari of the Decision of the Tax Court.

The Solicitor General, in representation of the CIR, has aptly defined the issues, thus:

1. Whether or not the revenue derived by private respondent British Overseas

Airways Corporation (BOAC) from sales of tickets in the Philippines for air
transportation, while having no landing rights here, constitute income of BOAC from
Philippine sources, and, accordingly, taxable.

2. Whether or not during the fiscal years in question BOAC s a resident foreign
corporation doing business in the Philippines or has an office or place of business in
the Philippines.

3. In the alternative that private respondent may not be considered a resident foreign
corporation but a non-resident foreign corporation, then it is liable to Philippine
income tax at the rate of thirty-five per cent (35%) of its gross income received from
all sources within the Philippines.

Under Section 20 of the 1977 Tax Code:

(h) the term resident foreign corporation engaged in trade or business within the
Philippines or having an office or place of business therein.

(i) The term "non-resident foreign corporation" applies to a foreign corporation not
engaged in trade or business within the Philippines and not having any office or
place of business therein

It is our considered opinion that BOAC is a resident foreign corporation. There is no specific criterion
as to what constitutes "doing" or "engaging in" or "transacting" business. Each case must be judged
in the light of its peculiar environmental circumstances. The term implies a continuity of commercial
dealings and arrangements, and contemplates, to that extent, the performance of acts or works or
the exercise of some of the functions normally incident to, and in progressive prosecution of
commercial gain or for the purpose and object of the business organization. 2 "In order that a foreign
corporation may be regarded as doing business within a State, there must be continuity of conduct
and intention to establish a continuous business, such as the appointment of a local agent, and not
one of a temporary character. 3

BOAC, during the periods covered by the subject - assessments, maintained a general sales agent
in the Philippines, That general sales agent, from 1959 to 1971, "was engaged in (1) selling and
issuing tickets; (2) breaking down the whole trip into series of trips — each trip in the series
corresponding to a different airline company; (3) receiving the fare from the whole trip; and (4)
consequently allocating to the various airline companies on the basis of their participation in the
services rendered through the mode of interline settlement as prescribed by Article VI of the
Resolution No. 850 of the IATA Agreement." 4 Those activities were in exercise of the functions
which are normally incident to, and are in progressive pursuit of, the purpose and object of its
organization as an international air carrier. In fact, the regular sale of tickets, its main activity, is the
very lifeblood of the airline business, the generation of sales being the paramount objective. There
should be no doubt then that BOAC was "engaged in" business in the Philippines through a local
agent during the period covered by the assessments. Accordingly, it is a resident foreign corporation
subject to tax upon its total net income received in the preceding taxable year from all sources within
the Philippines. 5

Sec. 24. Rates of tax on corporations. — ...

(b) Tax on foreign corporations. — ...

(2) Resident corporations. — A corporation organized, authorized, or existing under

the laws of any foreign country, except a foreign fife insurance company, engaged in
trade or business within the Philippines, shall be taxable as provided in subsection
(a) of this section upon the total net income received in the preceding taxable year
from all sources within the Philippines. (Emphasis supplied)

Next, we address ourselves to the issue of whether or not the revenue from sales of tickets by
BOAC in the Philippines constitutes income from Philippine sources and, accordingly, taxable under
our income tax laws.

The Tax Code defines "gross income" thus:

"Gross income" includes gains, profits, and income derived from salaries, wages or
compensation for personal service of whatever kind and in whatever form paid, or
from profession, vocations, trades, business, commerce, sales, or dealings in
property, whether real or personal, growing out of the ownership or use of or interest
in such property; also from interests, rents, dividends, securities, or the transactions
of any business carried on for gain or profile, or gains, profits, and income derived
from any source whatever (Sec. 29[3]; Emphasis supplied)

The definition is broad and comprehensive to include proceeds from sales of transport documents.
"The words 'income from any source whatever' disclose a legislative policy to include all income not
expressly exempted within the class of taxable income under our laws." Income means "cash
received or its equivalent"; it is the amount of money coming to a person within a specific time ...; it
means something distinct from principal or capital. For, while capital is a fund, income is a flow. As
used in our income tax law, "income" refers to the flow of wealth. 6

The records show that the Philippine gross income of BOAC for the fiscal years 1968-69 to 1970-71
amounted to P10,428,368 .00. 7

Did such "flow of wealth" come from "sources within the Philippines",
The source of an income is the property, activity or service that produced the income. 8 For the
source of income to be considered as coming from the Philippines, it is sufficient that the income is
derived from activity within the Philippines. In BOAC's case, the sale of tickets in the Philippines is
the activity that produces the income. The tickets exchanged hands here and payments for fares
were also made here in Philippine currency. The site of the source of payments is the Philippines.
The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection
accorded by the Philippine government. In consideration of such protection, the flow of wealth
should share the burden of supporting the government.

A transportation ticket is not a mere piece of paper. When issued by a common carrier, it constitutes
the contract between the ticket-holder and the carrier. It gives rise to the obligation of the purchaser
of the ticket to pay the fare and the corresponding obligation of the carrier to transport the passenger
upon the terms and conditions set forth thereon. The ordinary ticket issued to members of the
traveling public in general embraces within its terms all the elements to constitute it a valid contract,
binding upon the parties entering into the relationship. 9

True, Section 37(a) of the Tax Code, which enumerates items of gross income from sources within
the Philippines, namely: (1) interest, (21) dividends, (3) service, (4) rentals and royalties, (5) sale of
real property, and (6) sale of personal property, does not mention income from the sale of tickets for
international transportation. However, that does not render it less an income from sources within the
Philippines. Section 37, by its language, does not intend the enumeration to be exclusive. It merely
directs that the types of income listed therein be treated as income from sources within the
Philippines. A cursory reading of the section will show that it does not state that it is an all-inclusive
enumeration, and that no other kind of income may be so considered. " 10

BOAC, however, would impress upon this Court that income derived from transportation is income
for services, with the result that the place where the services are rendered determines the source;
and since BOAC's service of transportation is performed outside the Philippines, the income derived
is from sources without the Philippines and, therefore, not taxable under our income tax laws. The
Tax Court upholds that stand in the joint Decision under review.

The absence of flight operations to and from the Philippines is not determinative of the source of
income or the site of income taxation. Admittedly, BOAC was an off-line international airline at the
time pertinent to this case. The test of taxability is the "source"; and the source of an income is that
activity ... which produced the income. 11 Unquestionably, the passage documentations in these cases were sold in the
Philippines and the revenue therefrom was derived from a activity regularly pursued within the Philippines. business a And even if the BOAC
tickets sold covered the "transport of passengers and cargo to and from foreign cities", 12 it cannot alter the fact that income from the sale of
tickets was derived from the Philippines. The word "source" conveys one essential idea, that of origin, and the origin of the income herein is
the Philippines. 13

It should be pointed out, however, that the assessments upheld herein apply only to the fiscal years covered by the questioned deficiency
income tax assessments in these cases, or, from 1959 to 1967, 1968-69 to 1970-71. For, pursuant to Presidential Decree No. 69,
promulgated on 24 November, 1972, international carriers are now taxed as follows:

... Provided, however, That international carriers shall pay a tax of 2-½ per cent on
their cross Philippine billings. (Sec. 24[b] [21, Tax Code).

Presidential Decree No. 1355, promulgated on 21 April, 1978, provided a statutory definition of the
term "gross Philippine billings," thus:

... "Gross Philippine billings" includes gross revenue realized from uplifts anywhere in
the world by any international carrier doing business in the Philippines of passage
documents sold therein, whether for passenger, excess baggage or mail provided
the cargo or mail originates from the Philippines. ...

The foregoing provision ensures that international airlines are taxed on their income from Philippine
sources. The 2-½ % tax on gross Philippine billings is an income tax. If it had been intended as an
excise or percentage tax it would have been place under Title V of the Tax Code covering Taxes on
Business.
Lastly, we find as untenable the BOAC argument that the dismissal for lack of merit by this Court of
the appeal in JAL vs. Commissioner of Internal Revenue (G.R. No. L-30041) on February 3, 1969,
is res judicata to the present case. The ruling by the Tax Court in that case was to the effect that the
mere sale of tickets, unaccompanied by the physical act of carriage of transportation, does not
render the taxpayer therein subject to the common carrier's tax. As elucidated by the Tax Court,
however, the common carrier's tax is an excise tax, being a tax on the activity of transporting,
conveying or removing passengers and cargo from one place to another. It purports to tax the
business of transportation. 14 Being an excise tax, the same can be levied by the State only when
the acts, privileges or businesses are done or performed within the jurisdiction of the Philippines.
The subject matter of the case under consideration is income tax, a direct tax on the income of
persons and other entities "of whatever kind and in whatever form derived from any source." Since
the two cases treat of a different subject matter, the decision in one cannot be res judicata to the
other.

WHEREFORE, the appealed joint Decision of the Court of Tax Appeals is hereby SET ASIDE.
Private respondent, the British Overseas Airways Corporation (BOAC), is hereby ordered to pay the
amount of P534,132.08 as deficiency income tax for the fiscal years 1968-69 to 1970-71 plus 5%
surcharge, and 1% monthly interest from April 16, 1972 for a period not to exceed three (3) years in
accordance with the Tax Code. The BOAC claim for refund in the amount of P858,307.79 is hereby
denied. Without costs.

SO ORDERED.

Paras, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.

Fernan, J., took no part.

 Republic of the Philippines
Supreme Court
Manila

SECOND DIVISION

ATLAS CONSOLIDATED MINING AND G.R. No. 159471

DEVELOPMENT CORPORATION,
Petitioner, Present:

CARPIO, J., Chairperson,

PERALTA,
- versus - ABAD,
PEREZ,* and
MENDOZA, JJ.

COMMISSIONER OF INTERNAL Promulgated:

REVENUE,
Respondent. January 26, 2011

x-----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:

For this Court's resolution is the Petition for Review on Certiorari under Rule 45 of
the Revised Rules of Civil Procedure assailing the Decision[1] dated April 19,
2001 and Resolution[2] dated August 6, 2003 of the Court of Appeals (CA).

The facts, as shown in the records, are the following:

Under Section 100 of the Tax Code of the Philippines, petitioner is a zero-rated
Value Added Tax (VAT) person for being an exporter of copper
concentrates.According to petitioner, on January 20, 1994, it filed its VAT return for
the fourth quarter of 1993, showing a total input tax of P863,556,963.74 and an
excess VAT credit of P842,336,291.60 and, on January 25, 1996, it applied for a tax
refund or a tax credit certificate for the latter amount with respondent Commissioner
of Internal Revenue (CIR). On the same date, petitioner filed the same claim for
refund with the Court of Tax Appeals (CTA), claiming that the two-year prescriptive
period provided for under Section 230 of the Tax Code for claiming a refund was
about to expire. The CIR failed to file his answer with the CTA; thus, the former
declared the latter in default.

On August 24, 1998, the CTA rendered its Decision[3] denying petitioner's claim for
refund due to petitioner's failure to comply with the documentary requirements
prescribed under Section 16 of Revenue Regulations No. 5-87, as amended by
Revenue Regulations No. 3-88, dated April 7, 1988. The dispositive portion of the
Decision reads:

WHEREFORE, in view of the foregoing, the instant Petition for Review

is hereby DISMISSED for lack of merit.

SO ORDERED.[4]

Petitioner filed a Motion for Reconsideration[5] praying for the reopening of the case
in order for it to present the required documents, together with its proof of non-
availment for prior and succeeding quarters of the input VAT subject of petitioner's
claim for refund. The CTA granted the motion in its Resolution[6] dated October 29,
1998. Thereafter, in a Resolution[7] dated June 21, 2000, the CTA denied petitioner's
claim. It ruled that the action has already prescribed and that petitioner has failed to
substantiate its claim that it has not applied its alleged excess input taxes to any of
its subsequent quarter's output tax liability.

The CTA's Decision and Resolution were questioned in the CA. However, the CA
affirmed in toto the said Decision and Resolution, disposing the case as follows:
WHEREFORE, the petition is DISMISSED for lack of merit. The
questioned Decision of the CTA dated August 24, 1998 and the
Resolution dated June 21, 2000 are AFFIRMED in toto.

SO ORDERED.[8]

Subsequently, petitioner's Motion for Reconsideration[9] of the CA's Decision was

denied in a Resolution[10] dated August 6, 2003.

Thus, the present petition.

Petitioner lists the following as grounds for his petition:

I
 THE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER'S CLAIM FOR REFUND HAS PRESCRIBED,
DESPITE FAILURE OF RESPONDENT AND THE COURT OF TAX
APPEALS TO RAISE THE ISSUE OF PRESCRIPTION IN
RESPONDENT'S ANSWER OR IN THE CTA'S ORIGINAL
DECISION DATED 16 SEPTEMBER 1998.

II
THE COURT OF APPEALS ERRED IN UPHOLDING THE COURT
OF TAX APPEALS' FINDING IN ITS DECISION DATED 24
AUGUST 1998 THAT PETITIONER, IN NOT SUBMITTING ITS
EXPORT DOCUMENTS, FAILED TO PRESENT ADEQUATE
PROOF THAT ITS INPUT TAXES ARE DIRECTLY
ATTRIBUTABLE TO ITS EXPORT SALES.

III
THE COURT OF APPEALS ERRED IN UPHOLDING THE COURT
OF TAX APPEALS FINDING THAT PETITIONER FAILED TO
PRESENT ADEQUATE PROOF THAT IT HAD NOT APPLIED THE
CLAIMED INPUT TAX TO ITS OUTPUT TAXES FROM PRIOR
AND SUCCEEDING QUARTERS.[11]

Petitioner herein had, in the past, similar petitions with this Court regarding the
denial of its claims for tax refund of the input VAT on its purchases of capital goods
and on its zero-rated sales. In Atlas Consolidated Mining and Development
Corporation v. CIR,[12] petitioner filed with the Bureau of Internal Revenue (BIR)
its VAT Return for the first quarter of 1992 and also alleged that it filed with the
BIR the corresponding application for the refund/credit of its input VAT on its
purchases of capital goods and on its zero-rated sales in the amount
of P26,030,460.00. Its application for refund/credit remained having been
unresolved by the BIR, petitioner filed with the CTA, on April 20, 1994, a Petition
for Review. Claiming to be a zero-rated VAT person, petitioner prayed that the CTA
order the CIR to refund/credit petitioner with the amount of P26,030,460.00,
representing the input VAT it had paid for the first quarter of 1992. Both, the CTA
and the CA denied the claims of petitioner, ratiocinating that its claim has been filed
beyond the prescriptive period provided by law and that evidence presented was
insufficient.

In the present case, petitioner is basically asking this Court to review the factual
findings of the CTA and the CA. Petitioner insists that it had presented the necessary
documents or copies thereof with the CTA that would prove that it is entitled to a
tax refund. Again, citing the earlier case of Atlas Consolidated Mining and
Development Corporation v. CIR,[13] this Court has expounded the nature and bases
of claiming tax refund, thus:

Applications for refund/credit of input VAT with the BIR must comply
with the appropriate revenue regulations. As this Court has already ruled,
Revenue Regulations No. 2-88 is not relevant to the applications for
refund/credit of input VAT filed by petitioner corporation; nonetheless,
the said applications must have been in accordance with Revenue
Regulations No. 3-88, amending Section 16 of Revenue Regulations No.
5-87, which provided as follows

SECTION 16. Refunds or tax credits of input tax.

xxxx

(c) Claims for tax credits/refunds. Application for Tax Credit/Refund of

Value-Added Tax Paid (BIR Form No. 2552) shall be filed with the
Revenue District Office of the city or municipality where the principal
place of business of the applicant is located or directly with the
Commissioner, Attention: VAT Division.

A photocopy of the purchase invoice or receipt evidencing the value

added tax paid shall be submitted together with the application. The
original copy of the said invoice/receipt, however, shall be presented for
cancellation prior to the issuance of the Tax Credit Certificate or refund.
In addition, the following documents shall be attached whenever
applicable:

xxxx

3. Effectively zero-rated sale of goods and services.

i) photocopy of approved application for zero-rate if filing

for the first time.
ii) sales invoice or receipt showing name of the person or
entity to whom the sale of goods or services were delivered,
date of delivery, amount of consideration, and description of
goods or services delivered.
iii) evidence of actual receipt of goods or services.

4. Purchase of capital goods.

 i) original copy of invoice or receipt showing the date of
purchase, purchase price, amount of value-added tax paid
and description of the capital equipment locally purchased.
ii) with respect to capital equipment imported, the
photocopy of import entry document for internal revenue tax
purposes and the confirmation receipt issued by the Bureau
of Customs for the payment of the value-added tax.

5. In applicable cases,
where the applicants zero-rated transactions are regulated by
certain government agencies, a statement therefrom showing
the amount and description of sale of goods and services,
name of persons or entities (except in case of exports) to
whom the goods or services were sold, and date of
transaction shall also be submitted.

In all cases, the amount of refund or tax credit that may be granted shall
be limited to the amount of the value-added tax (VAT) paid directly and
entirely attributable to the zero-rated transaction during the period covered
by the application for credit or refund.
Where the applicant is engaged in zero-rated and other taxable and exempt
sales of goods and services, and the VAT paid (inputs) on purchases of
goods and services cannot be directly attributed to any of the
aforementioned transactions, the following formula shall be used to
determine the creditable or refundable input tax for zero-rated sale:

Amount of Zero-rated Sale

Total Sales
x
Total Amount of Input Taxes
= Amount Creditable/Refundable

In case the application for refund/credit of input VAT was denied or

remained unacted upon by the BIR, and before the lapse of the two-year
prescriptive period, the taxpayer-applicant may already file a Petition for
Review before the CTA. If the taxpayers claim is supported by
voluminous documents, such as receipts, invoices, vouchers or long
accounts, their presentation before the CTA shall be governed by CTA
Circular No. 1-95, as amended, reproduced in full below

In the interest of speedy administration of justice, the Court

hereby promulgates the following rules governing the
presentation of voluminous documents and/or long
accounts, such as receipts, invoices and vouchers, as
evidence to establish certain facts pursuant to Section 3(c),
 Rule 130 of the Rules of Court and the doctrine enunciated
in Compania Maritima vs. Allied Free Workers Union (77
SCRA 24), as well as Section 8 of Republic Act No. 1125:

1. The party who desires to introduce as evidence such

voluminous documents must, after motion and approval by
the Court, present:

(a) a Summary containing, among others, a chronological

listing of the numbers, dates and amounts covered by the
invoices or receipts and the amount/s of tax paid; and (b) a
Certification of an independent Certified Public Accountant
attesting to the correctness of the contents of the summary
after making an examination, evaluation and audit of the
voluminous receipts and invoices. The name of the
accountant or partner of the firm in charge must be stated in
the motion so that he/she can be commissioned by the Court
to conduct the audit and, thereafter, testify in Court relative
to such summary and certification pursuant to Rule 32 of the
Rules of Court.

2. The method of individual presentation of each and every

receipt, invoice or account for marking, identification and
comparison with the originals thereof need not be done
before the Court or Clerk of Court anymore after the
introduction of the summary and CPA certification. It is
enough that the receipts, invoices, vouchers or other
documents covering the said accounts or payments to be
introduced in evidence must be pre-marked by the party
concerned and submitted to the Court in order to be made
accessible to the adverse party who desires to check and
verify the correctness of the summary and CPA
certification. Likewise, the originals of the voluminous
receipts, invoices or accounts must be ready for verification
and comparison in case doubt on the authenticity thereof is
raised during the hearing or resolution of the formal offer of
evidence.[14]

As to the evidence that must be presented, the provisions of the pertinent laws
provide:

Section 106, Tax Code

Refunds or tax credits of input tax. - (a) Any VAT-registered person,

whose sales are zero-rated, may, within two (2) years after the close of
the taxable quarter when the sales were made, apply for the issuance of a
tax credit certificate or refund creditable input tax due or paid attributable
to such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That in
case of zero-rated sales under Section 100 (a) (2) (A) (I), (ii) and (b) and
Section 102 (b) (1) and (2), the acceptable foreign currency exchange
proceeds thereof have been duly accounted for in accordance with the
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further,
That where the taxpayer is engaged in zero-rated or effectively zero-rated
sale and also in taxable or exempt sale of goods or properties or services,
and the amount of creditable input tax due or paid cannot be directly and
entirely attributed to any one of the transactions, it shall be allocated
proportionately on the basis of the volume of sales.

Section 16 of Revenue Regulations No. 5-87, as amended by Revenue

Regulations No. 3-88, dated April 7, 1988

A photocopy of the purchase invoice or receipt evidencing the value

added tax paid shall be submitted together with the application. The
original copy of the said invoice/receipt, however, shall be presented for
cancellation prior to the issuance of the Tax Credit Certificate or
refund. In addition, the following documents shall be attached whenever
applicable:

1. Export Sales

i) Photocopy of export document showing the amount of

export, the date and destination of the goods exported. With
respect to foreign currency denominated sale, the photocopy
of the invoice or receipt evidencing the sale of the goods, as
well as the name of the person to whom the goods were
delivered.
ii) Statement from the Central Bank or any of its accredited
agent banks that the proceeds of the sale in acceptable
foreign currency has been inwardly remitted and accounted
for in accordance with applicable banking regulations.

xxxx

In all cases, the amount of refund or tax credit that may be granted shall
be limited to the amount of value-added tax (VAT) paid directly and
entirely attributable to the zero-rated transaction during the period
covered by the application for credit or refund.
The CTA, applying the abovementioned rules, in its Decision dated August 24,
1998, came out with the following factual findings:

The formal offer of evidence of the petitioner failed to include photocopy

of its export documents, as required. There is no way therefore, in
determining the kind of goods and actual amount of export sales it
allegedly made during the quarter involved. This finding is very crucial
when we try to relate it with the requirement of the aforementioned
regulations that the input tax being claimed for refund or tax credit must
be shown to be entirely attributable to the zero-rated transaction, in this
case, export sales of goods. Without the export documents, the purchase
invoice/receipts submitted by the petitioner as proof of its input taxes
cannot be verified as being directly attributable to the goods so exported.

Lastly, We cannot grant petitioner's claim for credit or refund of input

taxes due to its failure to show convincingly that the same has not been
applied to any of its output tax liability as provided under Section 106 (a)
of the Tax Code. There is no evidence to show that the amount herein
claimed for refund when applied for on January 25, 1996has not been
priorly or thereafter applied to its output tax liability.[15]

The above factual findings of the CTA were even bolstered when it granted
petitioner's motion for reconsideration allowing petitioner to submit the necessary
documents and other pieces of evidence, so as to comply with the requirements
provided for by law. However, despite such allowance, petitioner still failed to
comply. Thus, in its Resolution[16] dated June 21, 2000, the CTA finally disposed
the case by ruling that:
The Court finds and so holds that Petitioner failed again to present
proof that it has not applied the alleged excess input taxes to any of its
subsequent quarter's output tax liability. In this Court's decision dated
August 24, 1998, We already mentioned that petitioner failed to convince
us that its input taxes have not been applied to any of its output tax
liability as provided under Section 106 (a). Now on its second
opportunity to substantiate its claim, Petitioner again failed to prove this
particular allegation.Petitioner merely presented in evidence the
following documents to show that it has not applied the amount
of P4,534,933.74, subject of the claim, to its 1994 first quarter output tax
liability, to wit:
Exhibits
1.) Output/Input VAT (Per Return) Listings T
for the first quarter of 1994
2.) Schedule of Output Taxes for the month U, U-1 to U-2
of January 1994 U-3 to U-5
 3.) Schedule of Materials and Supplies for V, V-1 to V-9
for the first quarter of 1994
4.) Schedule of Output Taxes for the month W, W-1 to W-4
of February 1994

Nowhere in all the documents submitted to this Court by the Petitioner

can We find its 1994 first quarter VAT return which, to Our mind and as
repeatedly ruled in a litany of cases, is necessary for purposes of
determining with particular certainty whether or not the claimed input
taxes were applied to any of its output tax liability in the first quarter or
in the succeeding quarters of 1994. And there is no reason at this point
for Us to digress from this ruling.[17]

The above factual findings were affirmed and accorded respect by the CA.
Nevertheless, petitioner insists that it has submitted documents and other pieces of
evidence, except those required by law, that would establish the existence of the
input VAT for the fourth quarter of 1993 and that the excess input VAT claimed for
refund or tax credit has not been applied to its output tax liability for prior and
succeeding quarters.

The above argument, however, is flawed. It must be remembered that when

claiming tax refund/credit, the VAT-registered taxpayer must be able to establish
that it does have refundable or creditable input VAT, and the same has not been
applied against its output VAT liabilities information which are supposed to be
reflected in the taxpayers VAT returns. Thus, an application for tax refund/credit
must be accompanied by copies of the taxpayers VAT return/s for the taxable
quarter/s concerned.[18] The CTA and the CA, based on their appreciation of the
evidence presented, committed no error when they declared that petitioner failed to
prove that it is entitled to a tax refund and this Court, not being a trier of facts, must
defer to their findings. Again, as aptly ruled by this Court in Atlas:[19]

This Court is, therefore, bound by the foregoing facts, as found by the
appellate court, for well-settled is the general rule that the jurisdiction of
this Court in cases brought before it from the Court of Appeals, by way
of a Petition for Review on Certiorari under Rule 45 of the Revised Rules
of Court, is limited to reviewing or revising errors of law; findings of fact
of the latter are conclusive. This Court is not a trier of facts. It is not its
function to review, examine and evaluate or weigh the probative value of
the evidence presented.
 The distinction between a question of law and a question of fact is clear-
cut. It has been held that "[t]here is a question of law in a given case when
the doubt or difference arises as to what the law is on a certain state of
facts; there is a question of fact when the doubt or difference arises as to
the truth or falsehood of alleged facts."

Whether petitioner corporation actually made zero-rated sales; whether it

paid input VAT on these sales in the amount it had declared in its returns;
whether all the input VAT subject of its applications for refund/credit can
be attributed to its zero-rated sales; and whether it had not previously
applied the input VAT against its output VAT liabilities, are all questions
of fact which could only be answered after reviewing, examining,
evaluating, or weighing the probative value of the evidence it presented,
and which this Court does not have the jurisdiction to do in the present
Petitions for Review on Certiorari under Rule 45 of the Revised Rules of
Court.

Granting that there are exceptions to the general rule, when this Court
looked into questions of fact under particular circumstances, none of
these exist in the instant cases. The Court of Appeals, in both cases, found
a dearth of evidence to support the claims for refund/credit of the input
VAT of petitioner corporation, and the records bear out this finding.
Petitioner corporation itself cannot dispute its non-compliance with the
requirements set forth in Revenue Regulations No. 3-88 and CTA
Circular No. 1-95, as amended. It concentrated its arguments on its
assertion that the substantiation requirements under Revenue Regulations
No. 2-88 should not have applied to it, while being conspicuously silent
on the evidentiary requirements mandated by other relevant
regulations.[20]

Taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support
of the government. And, since taxes are what we pay for civilized society, or are the
lifeblood of the nation, the law frowns against exemptions from taxation and statutes
granting tax exemptions are thus construed strictissimi juris against the taxpayer and
liberally in favor of the taxing authority. A claim of refund or exemption from tax
payments must be clearly shown and be based on language in the law too plain to
be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the
exception.[21]

Anent the issue of prescription, wherein petitioner questions the ruling of the CA
that the former's claim for refund has prescribed, disregarding the failure of
respondent Commissioner of Internal Revenue and the CTA to raise the said issue
in their answer and original decision, respectively, this Court finds the same moot
and academic. Although it may appear that the CTA only brought up the issue of
prescription in its later resolution and not in its original decision, its ruling on the
merits of the application for refund, could only imply that the issue of prescription
was not the main consideration for the denial of petitioner's claim for tax
refund. Otherwise, the CTA would have just denied the application on the ground
of prescription.
WHEREFORE, the Petition is hereby DENIED for lack of merit.
The Decision and Resolution of the Court of Appeals, dated April 19,
2001 and August 6, 2003, respectively, are hereby AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-18125 May 31, 1963

BOARD OF ASSESSMENT APPEALS, PROVINCE OF LAGUNA, petitioner,

vs.
COURT OF TAX APPEALS and THE NATIONAL WATERWORKS AND SEWERAGE
AUTHORITY (NAWASA),respondents.

Gabriel V. Valero and Rodolfo F. de Gorostiza for petitioner.

Manuel B. Roño for respondent National Waterworks and Sewerage Authority.

CONCEPCION, J.:

This is a petition for review of a decision of the Court of Tax Appeals reversing a resolution or
decision of the Board of Assessment Appeals for the Province of Laguna.

The question involved in this case is whether the water pipes, reservoir, intake and buildings used by
herein respondent, National Waterworks and Sewerage Authority — hereinafter referred to as
NAWASA — in the operation of its waterworks system in the municipalities of Cabuyao, Sta. Rosa
and Biñan, province of Laguna, are subject to real estate tax.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and
approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove
their case not covered by this stipulation of facts.
1äwphï1.ñët

The parties have submitted in the Court of Tax Appeals a stipulation of facts. The pertinent parts
thereof are to the effect:

1. That the petitioner National Waterworks and Sewerage Authority (NWSA) is a public
corporation created by virtue of Republic Act No. 1383, and that it is owned by the
Government of the Philippines as well as all property comprising waterworks and sewerage
systems placed under it:.

2. That, pursuant to the provisions of Republic Act No. 1383, petitioner NWSA took over all
the property of the former Metropolitan Water District and all the existing local government-
owned waterworks and sewerage systems all over the Philippines, including the Cabuyao-
Sta. Rosa-Biñan Waterworks System owned by the Province of Laguna (Section 8, Republic
Act No. 1283);

3. That the functions and activities of petitioner NWSA, as enumerated in Republic Act No.
1383, more particularly Section 2 thereof, are the same and identical with the functions of the
defunct Metropolitan Water District, particularly Section 2, Act 2832, is amended;

4. That petitioner National Waterworks and Sewerage Authority (NWSA) has no capital stock
divided into shares of stocks, no stockholders, and is not authorized by its Charter to
distribute dividends; and, on the other hand, whatever surplus funds it has realized, may and
 will after meeting its yearly obligations, have been, are and may be, used for the
construction, expansion and improvement of its waterworks and sewer services;

5. That at the time that the Cabuyao-Sta. Rosa-Biñan Waterworks System was taken over by
petitioner NWSA in 1956, the former was self-supporting and revenue-producing, but that all
its surplus income are not declared as profits as this surplus are or may be invested for the
expansion thereof;

6. That in the year 1956 the Provincial Assessor of Laguna assessed, for purposes of real
estate taxes, the property comprising the Cabuyao-Sta. Rosa-Biñan Waterworks System and
described in Tax Declaration No. 5987 (Exh. "A-l") which, as stated in Paragraph 2 hereof,
herein petitioner NWSA had taken over;

7. That against the above-mentioned assessment made by the Provincial Assessor of

Laguna, petitioner NWSA protested, claiming that the property described under Tax
Declaration No. 5987 (Exh. "A-l") are exempted from the payment of real estate taxes in view
of the nature and kind of said property and functions and activities of petitioner, as provided
in Republic Act No. 1383;.

8. That the said protest of petitioner NWSA was overruled on appeal before the herein
respondent Board of Assessment Appeals, hence the present petition for review filed by
petitioner;

xxx xxx xxx"

After appropriate proceedings, the Court of Tax Appeals rendered the aforementioned decision
reversing the action taken by petitioner Board, which, accordingly, has brought the case to us for
review, under the provisions of Republic Act No. 1125, contending that the properties in question are
subject to real estate tax because: (1) although said properties belong to the Republic of the
Philippines, the same holds it, not in its governmental, political or sovereign capacity, but in a
private, proprietary or patrimonial character, which, allegedly, is not covered by the exemption
contained in section 3(a) of Republic Act No. 470; and 2) this exemption, even if applicable to
patrimonial property, must yield to the provisions of section 1 of Republic Act No. 104, under which
all corporations, agencies or instrumentalities owned or controlled by the Government are subject to
taxation, according to petitioner appellant.

Sections 2 and 3(a) of Commonwealth Act No. 470 provide:

SEC. 2. Incidence of real property tax. — Except in chartered cities, there shall be levied,
assessed, and collected, an annual ad valorem tax on real property, including land,
buildings, machinery, and other improvements not hereinafter specifically exempted.

SEC. 3. Property exempt from tax. — The exemptions shall be as follows:

(a) Property owned by . . . the Republic of the Philippines, any province, city, municipality or
municipal district. . . .

It is conceded, in the stipulation of facts, that the property involved in this case "is owned by the
Government of the Philippines". Hence, it belongs to the Republic of the Philippines and falls
squarely within the letter of the above provision. This notwithstanding, petitioner Board maintains
that respondent NAWASA is not entitled to the benefits of the exemption established in said section
3(a), inasmuch as, in the case of the City of Cebu vs. NAWASA, G. R. No. L-12892, decided on April
30, 1960, we ruled that the assets of the water system of the City of Cebu, which the NAWASA had
sought to take over, pursuant to the provisions of Republic Act No. 1383 — as it did in the case at
bar, with respect to the Cabuyao-Sta. Rosa-Biñan Waterworks System — are patrimonial property of
said city, which held it in a proprietary character, not in its governmental capacity.
We did not declare, however, in the Cebu case that said assets were subject to taxation. In that case
we merely reiterated the doctrine, laid down in the case of City of Baguio vs. NAWASA, G. R. No. L-
12032, decided on August 31, 1959, that municipal corporations hold in their proprietary character,
the assets of their respective waterworks, which, accordingly, cannot be taken or appropriated by the
National Government and placed under the NAWASA without payment of just compensation. Neither
the Cebu case nor that of Baguio sustains the theory that said assets are taxable.

Upon the other hand, in exempting from taxation "property owned by the Republic of the Philippines,
any province, city, municipality or municipal district . . .," said section 3(a) of Republic Act No. 470
makes no distinction between property held in a sovereign, governmental or political capacity and
those possessed in a private, proprietary or patrimonial character. And where the law does not
distinguish neither may we, unless there are facts and circumstances clearly showing that the
lawmaker intended the contrary, but no such facts and circumstances have been brought to our
attention. Indeed, the noun "property" and the verb "owned" used in said section 3(a) strongly
suggest that the object of exemption is considered more from the view point of dominion, than from
that of domain. Moreover, taxes are financial burdens imposed for the purpose of raising revenues
with which to defray the cost of the operation of the Government, and a tax on property of the
Government, whether national or local, would merely have the effect of taking money from one
pocket to put it in another pocket (Cooley on Taxation, Sec. 621, 4th Edition.) Hence, it would not
serve, in the final analysis, the main purpose of taxation. What is more, it would tend to defeat it, on
account of the paper work, time and consequently, expenses it would entail. (The Law on Local
Taxation, by Justiniano Y. Castillo, p. 13.)

Section 1 of the Republic Act No. 101, upon which petitioner relies, reads:

. . . All corporations, agencies, or instrumentalities owned or controlled by the government

shall pay such duties, taxes, fees and other charges upon their transaction, business,
industries, sale, or income as are imposed by law upon individuals, associations or
corporations engaged in any taxable business, industry, or activity except on goods or
commodities imported or purchased and sold or distributed for relief purposes as may be
determined by the President of the Philippines.

This provision is inapplicable to the case at bar for it refers only to duties, taxes, fees and other
charges upon "transaction, business, industry, sale or income" and does not include taxes on
property like real estate tax.

WHEREFORE, the decision appealed from is hereby affirmed, without special pronouncement as to
costs. It is so ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, and
Makalintal, JJ., concur.
Labrador, J., took no part.