Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 198860 July 23, 2012

ABRAHAM RIMANDO, Petitioner,

vs.
NAGUILIAN EMISSION TESTING CENTER, INC., represented by its President, ROSEMARIE
LLARENAS and HON. COURT OF APPEALS, Respondents.

RESOLUTION

REYES, J.:

Before us is a petition for review on certiorari1 under Rule 45 of the Rules of Court seeking to annul
and set aside Decision2 dated March 30, 2011 of the Court of Appeals (CA) in CA-G.R. SP NO.
112152.

The Facts

The present controversy stemmed from a petition for mandamus and damages filed before Branch
67 of the Regional Trial Court (RTC) of Bauang, La Union, by Naguilian Emission Testing Center,
Inc., represented by its President, Rosemarie Llarenas (respondent) against Abraham P. Rimando
(petitioner), who, at the time material to the case, was the sitting mayor of the Municipality of
Naguilian, La Union.

The petition prayed for the issuance of a writ of mandamus to compel the petitioner to issue a
business permit in favor of the respondent.

In support of its plea, the respondent claimed that its business is being conducted on a parcel of land
which formerly belonged to the national government but later on certified by the Department of
Environment and Natural Resources (DENR) as an alienable and disposable land of the public
domain. The respondent had operated its business of emission testing on the land from 2005 to
2007. On January 18, 2008, the respondent filed an application for the renewal of its business permit
and paid the corresponding fees therefor.

The petitioner, however, refused to issue a business permit unless and until the respondent
executes a contract of lease with the Municipality of Naguilian. The respondent was amenable to
signing such contract subject to some proposed revisions, which, however, were not acceptable to
the petitioner. The parties did not reach a common ground hence, the petition for mandamus.

The Ruling of the RTC

On May 26, 2009, the RTC denied the petition3 for lack of merit based on the ratiocinations that: (a)
the Municipality of Naguilian is the declared owner of the subject parcel of land by virtue of Tax
Declaration No. 002-01197; (b) under Section 6A.01 of the Revenue Code of the Municipality of
Naguilian, the municipality has the right to require the petitioner to sign a contract of lease because
its business operation is being conducted on a real property owned by the municipality; and (c) a
mayors duty to issue business permits is discretionary in nature which may not be enforced by a
mandamus writ. The decretal portion of the decision reads:

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.4

The Ruling of the CA

Unwaivering, the respondent appealed to the CA. In its Decision5 dated March 30, 2011, the CA held
that the appeal was dismissible on the ground of mootness considering that the period for which the
business period was being sought had already lapsed. As such, any ruling on the matter would bring
no practical relief. Nonetheless, the CA proceeded to resolve the issues involved in the appeal for
academic purposes.

The CA disagreed with the RTC and found that the factual milieu of the case justifies the issuance of
a writ of mandamus. The CA reasoned that the tax declaration in the name of the municipality was
insufficient basis to require the execution of a contract of lease as a condition sine qua non for the
renewal of a business permit. The CA further observed that Sangguniang Bayan Resolution No.
2007-81, upon which the municipality anchored its imposition of rental fees, was void because it
failed to comply with the requirements of the Local Government Code and its Implementing Rules
and Regulations.

The CA held that the petitioner may not be held liable for damages since his action or inaction, for
that matter, was done in the performance of official duties that are legally protected by the
presumption of good faith. The CA likewise stressed that the civil action filed against the petitioner
had already become moot and academic upon the expiration of his term as the mayor of Naguilian,
La Union.

Despite its incessant declarations on the mootness of the case, the CA disposed of the appeal in this
wise:

WHEREFORE, the Decision dated 26 May 2009 of the Regional Trial Court, First Judicial Region,
Bauang, La Union, Branch 67, in Special Civil Action Case No. 72-BG, is hereby REVERSED and
SET ASIDE.

SO ORDERED.6

The petitioner moved for reconsideration7 questioning the pronouncement of the CA that
Sangguniang Bayan Resolution No. 2007-81 was void and arguing that a petition for mandamus is
not the proper vehicle to determine the issue on the ownership of the subject land. The motion was
denied in the CA Resolution8 dated September 30, 2011.

The petitioner is now before this Court reiterating the arguments raised in his motion for
reconsideration.

Our Ruling

We agree with the CA that the petition for mandamus has already become moot and academic
owing to the expiration of the period intended to be covered by the business permit.

An issue or a case becomes moot and academic when it ceases to present a justiciable controversy
so that a determination thereof would be without practical use and value9 or in the nature of things,
cannot be enforced.10 In such cases, there is no actual substantial relief to which the applicant would
be entitled to and which would be negated by the dismissal of the petition.11 As a rule, courts decline
jurisdiction over such case, or dismiss it on ground of mootness.12

The objective of the petition for mandamus to compel the petitioner to grant a business permit in
favor of respondent corporation for the period 2008 to 2009 has already been superseded by the
passage of time and the expiration of the petitioners term as mayor. Verily then, the issue as to
whether or not the petitioner, in his capacity as mayor, may be compelled by a writ of mandamus to
release the respondents business permit ceased to present a justiciable controversy such that any
ruling thereon would serve no practical value. Should the writ be issued, the petitioner can no longer
abide thereby; also, the effectivity date of the business permit no longer subsists.

While the CA is not precluded from proceeding to resolve the otherwise moot appeal of the
respondent, we find that the decretal portion of its decision was erroneously couched.

The CAs conclusions on the issue of ownership over the subject land and the invalidity of
Sangguniang Bayan Resolution No. 2007-81, aside from being unsubstantiated by convincing
evidence, can no longer be practically utilized in favor of the petitioner. Thus, the overriding and
decisive factor in the final disposition of the appeal was its mootness and the CA should have
dismissed the same along with the petition for mandamus that spawned it.

More importantly, a mayor cannot be compelled by mandamus to issue a business permit since the
exercise of the same is a delegated police power hence, discretionary in nature. This was the
pronouncement of this Court in Roble Arrastre, Inc. v. Hon. Villaflor13 where a determination was
made on the nature of the power of a mayor to grant business permits under the Local Government
Code,14 viz:

Central to the resolution of the case at bar is a reading of Section 444(b)(3)(iv) of the Local
Government Code of 1991, which provides, thus:

SEC. 444. The Chief Executive: Powers, Duties, Functions and Compensation.
 (b) For efficient, effective and economical governance the purpose of which is the general
welfare of the municipality and its inhabitants pursuant to Section 16 of this Code, the
municipal mayor shall:

xxxx

3) Initiate and maximize the generation of resources and revenues, and apply the same to
the implementation of development plans, program objectives and priorities as provided for
under Section 18 of this Code, particularly those resources and revenues programmed for
agro-industrial development and country-wide growth and progress, and relative thereto,
shall:

xxxx

(iv) Issue licenses and permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits had been issued, pursuant to law or
ordinance.

As Section 444(b)(3)(iv) so states, the power of the municipal mayor to issue licenses is pursuant to
Section 16 of the Local Government Code of 1991, which declares:

SEC. 16. General Welfare. Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental
for its efficient and effective governance, and those which are essential to the promotion of the
general welfare. Within their respective territorial jurisdictions, local government units shall ensure
and support, among other things, the preservation and enrichment of culture, promote health and
safety, enhance the right of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full employment among their
residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants.

Section 16, known as the general welfare clause, encapsulates the delegated police power to local
governments. Local government units exercise police power through their respective legislative
1wphi1

bodies. Evidently, the Local Government Code of 1991 is unequivocal that the municipal mayor has
the power to issue licenses and permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits had been issued, pursuant to law or ordinance. x x x

xxxx

Section 444(b)(3)(iv) of the Local Government Code of 1991, whereby the power of the respondent
mayor to issue license and permits is circumscribed, is a manifestation of the delegated police power
of a municipal corporation. Necessarily, the exercise thereof cannot be deemed ministerial. As to the
question of whether the power is validly exercised, the matter is within the province of a writ of
certiorari, but certainly, not of mandamus.15 (Citations omitted)

Indeed, as correctly ruled by the RTC, the petition for mandamus filed by the respondent is
incompetent to compel the exercise of a mayors discretionary duty to issue business permits.

WHEREFORE, premises considered, the Decision dated March 30, 2011 of the Court of Appeals in
CA-G.R. SP No. 112152 is hereby SET ASIDE. The Decision dated May 26, 2009 of the Regional
Trial Court of Bauang, La Union is REINSTATED.

SO ORDERED.

BIENVENIDO L. REYES
Associate justice

WE CONCUR:

ANTONIO T. CARPIO
Senior Associate Justice
Chairperson, Second Division

MARIANO C. DEL CASTILLO

Associate justice

JIOSE PORTUGAL PEREZ

Associate justice
 MARIA LOURDES P.A. SERENO
Associate justice

CERTIFICATION

I certify that the conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court's Division.

ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296, The Judiciary Act of 1948, as amended)

Footnotes
* Additional member per Special Order No. 1257 dated July 19, 2012, in lieu of the absence of Associate Justice Arturo D.
Brion.
1
Rollo, pp. 4-20.
2
Penned by Associate Justice Japar B. Dimaampao, with Associate Justices Mariflor P. Punzalan Castillo and Jane
Aurora C. Lantion, concurring; id. at 22-22.
3
Under the sala of Judge Ferdinand A. Fe; id. at 46-49.
4
Id. at 49.
5
Supra note 2.
6
Rollo, p. 33.
7
Id. at 34-41.
8
Id. at 42-43.
9
Philippine Airlines, Inc. v. Pascua, 456 Phil. 425, 436 (2003).
10
Lanuza, Jr. v. Yuchengco, 494 Phil. 125, 133 (2005); See also Gonzales v. Narvasa, 392 Phil.518, 522 (2000); Villarico
v. Court of Appeals, 424 Phil. 26 (2002); King v. Court of Appeals, 514 Phil. 465, 470 (2005).
11
Soriano Vda. De Dabao v. Court of Appeals, 469 Phil. 928 (2004).
12
Gunsi, Sr. v. Commissioners, The Commission on Elections, G.R. No. 168792, February 23, 2009, 580 SCRA 70, 76.
13
531 Phil. 30 (2006).
14
Although the case involved the issuance of a business permit for arrastre service, the general power of a mayor to issue
business permits is encapsulated in the same legal provision of the Local Government Code without distinguishing the
nature of the business for which a permit is sought.
15
Supra note 13, at 43-46.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

A.M. No. P-92-695 December 7, 1994

CYNTHIA A. FLORENDO, complainant,

vs.
EXEQUIEL ENRILE, respondent.

Edgardo G. Villarin for complainant.

PER CURIAM:

In a sworn letter-complaint filed with the Office of the Court Administrator on 17 March 1992, the
complainant charged the respondent deputy sheriff of the Municipal Trial Court in Cities (MTCC) at
Cabanatuan City with the failure to enforce a writ of demolition notwithstanding his collection and
receipt of P5,200.00. She averred that she was the plaintiff in Civil Cases Nos. 9241 to 9249, all for
ejectment, and that in a joint decision rendered on 22 June 1987 by Branch 2 of the MTCC1 the
defendants were ordered to vacate the premises and to surrender the possession thereof to the
complainant. The defendants appealed this decision to the Regional Trial Court (RTC) which in a
joint decision of 18 August 19892 affirmed it in toto. On 19 January 1990, the MTCC issued a writ of
execution.3

The writ was assigned to the respondent for implementation. In view of the refusal of the defendants
to vacate the premises, the complainant asked for the issuance of a writ of demolition, which the
court granted pursuant to its order of 21 March 1990.4 On 27 June 1990, it denied the defendant's
motion for extension of time to execute the writ of demolition.5 For the service and implementation of
the writ of demolition, the respondent asked and received from the complainant and her lawyer the
total sum of P5,200.00 purportedly as sheriff's fee.6 The respondent issued no official receipt for this
amount. His acknowledgment of the partial payment of P2,700.00 appears on the stationery of the
complainant's lawyer, Atty. Edgardo G. Villarin, while that for the other payment of P500.00 is
handwritten on the stationery of the Office of the City Legal Officer, who is the same Atty. Edgardo
G. Villarin. The other payment of P2,000.00 was by check drawn by the complainant's counsel.

The respondent did not execute the writ of demolition despite the receipt of P5,200.00. The
complainant's lawyer then wrote a letter to the respondent on 8 November 1990 demanding that the
latter implement the writ of demolition or return the aforesaid sum within ten days from receipt of the
letter, otherwise the matter would be brought up to this Court.7 Since nothing was done by the
respondent, the complainant filed this complaint. She asked that the respondent be dismissed from
the service.

On 25 May 1992, we required the respondent to comment on the letter-complaint.

In his comment (denominated as an answer) dated 16 June 1992, the respondent did not deny the
charge that he collected P5,200.00 as sheriff's fee; however, he specifically denied the allegation
that he did not implement the writ of execution and the writ of demolition. He claimed that he
"returned to the defendants for several times to advice [sic] them to vacate the said place," but since
they did not, he advised the complainant's counsel to file a motion for the issuance of a writ of
demolition. When he received the writ of demolition, he served it on the defendants on 25 July 1990;
the latter requested an extension of thirty days. He then prepared a return of service dated 25 July
1990.8Then, after the expiration of the extended period, he again approached the defendants on 4
September 1990 to make them vacate the premises. However, he was threatened by them that if he
would enforce the writ of demolition something would happen, i.e., "magkamatayan muna." He then
prepared the return of service on the said date.9 The writ was thus unsatisfied. It appears, however,
that these returns dated 25 July 1990 and 4 September 1990 were filed with the MTCC only on 29
May 1991 and 6 June 1991, respectively.

He further claimed that on 8 July 1991, Judge Romeo Mauricio of the MTCC referred to Mr. Arsenio
S. Vicencio, Clerk of Court IV and Ex-Officio Sheriff of the MTCC, the respondent's return of service
of 4 September 1990 for comment. 10 In his compliance of 15 July 1991, 11 Mr. Vicencio informed
Judge Mauricio that the threat on the respondent's life was "real, and it will be very risky for him to
implement" it, and requested that a new deputy sheriff be assigned to enforce the writ. Pursuant to
this request, Judge Mauricio sent a formal request to the Presiding Judge of Branch I of the MTCC
of Cabanatuan City asking that deputy sheriff Teodoro Pineda be assigned to implement the writ of
demolition.12

This case was referred to the Executive Judge of the RTC in Cabanatuan City for investigation,
report and recommendation.

In his Report and Recommendation dated 4 March 1994, but transmitted to this Court only on 6 June
1994, Executive Judge Johnson L. Ballutay narrates the several instances that the case was set for
hearing and the postponements thereof because of the respondent's plea for time to secure the
services of counsel or because of his non-appearance. Judge Ballutay recommends:

PREMISES CONSIDERED, and taking into account the stubborn attitude of the
respondent of not engaging the services of counsel to facilitate the early termination
of the investigation, it is respectfully recommended that in addition to the suspension
for one (1) year without pay and to return to the complainant the P5,200.00, a
suspension without pay for six (6) months be imposed upon the respondent.

In the resolution of 8 August 1994, we referred the Report and Recommendation of Judge Ballutay
to the Office of the Court Administrator for evaluation, report and recommendation.

In its Memorandum of 23 September 1994, the Office of the Court Administrator finds that:

An exhaustive study of the evidence on record shows a considerable amount of

Neglect of Duty on the part of respondent. He should have coordinated with the
counsel of the complainant and/or caused the citation of the defiant defendants for
contempt of court when they resisted the implementation of the writ. Moreover, he
should have requested for additional sheriff and/or police assistance for the proper
and immediate implementation of the subject writs, but he did not. For a long period
time, the complainants have been deprived of their constitutional right to a speedy
administration of justice considering that the Decision sought to be enforced was
issued in 1989 yet, all because of the negligence of herein respondent.

In the case of Active Wood Products, Inc. vs. IAC, 183 SCRA 671, the Court
declares that sheriffs must implement or execute the decision of the court without
delay to prevent injury or damage to the winning party and so as not to prejudice said
party of obtaining speedy justice.

Respondent did not also conduct himself in an upright and professional manner as
the judiciary code of ethics require [sic], particularly in his getting the amount of
P5,200.00 in installment basis from the respondent.

This Court, speaking through Justice Regalado, in the case of Anonuevo vs.
Pempena (Administrative Matter No. P-93-795) promulgated on July 18, 1994,
enunciates: "It is an abhorrent and anomalous practice for a sheriff to demand
fees in excess of those lawfully allowed. This Court has emphasized time and again,
that the conduct and behaviour of everyone connected with an office charged with
the dispensation of justice, from the presiding judge to the sheriff down to the lowliest
clerk should be circumscribed with the heavy burden of responsibility. Their conduct
at all times, must be characterized with propriety and decorum, but above all else,
must be above and beyond suspicion," for every employee should be an example of
integrity, uprightness and honesty (Valenton, et al. vs.
Melgar A.M. No. P-92-698, March 3, 1993, 219 SCRA 372).

It then recommends:

WHEREFORE, considering all the foregoing, it is respectfully recommended to the

Honorable Court that respondent be imposed a FINE equivalent to his one (1) month
salary payable within ten (10) days upon notice, taking into account that (a) he was
not totally remiss in his duties but also exerted efforts to execute the writs; (b) he
even went to the extent of approaching the City Mayor for relocation of the
defendants; and (c) the complainant herself is in conformity to the dismissal of the
complaint; and (2) to RETURN the total amount of P5,200.00 to the complainant,
without interest, within twenty (20) days from notice hereof, with a STERN
WARNING that the repetition of similar offense will be dealt with more severely.

We do not agree with the penalty recommended by Judge Ballutay or the Office of the Court
Administrator. Both are, especially that of the latter, grossly inadequate in the light of the gravity of
the administrative offenses committed by the respondent. Moreover, the former's recommendation of
an additional penalty of suspension for six months on account of the "stubborn attitude of the
respondent of not engaging the services of counsel to facilitate the early termination of the
investigation" is improper. The records disclose that Judge Ballutay was very accommodating to the
parties. No less than fifteen scheduled hearings were cancelled or postponed and despite
admonitions that he would proceed with the hearing regardless of the absence of counsel, he never
did.

Having been delegated by this Court the authority to investigate the case and to submit his report
and recommendation, he should have, upon deliberate failure of the respondent to engage the
services of counsel, allowed the complainant to present ex-parte her evidence and, upon the non-
appearance of the respondent on any of the scheduled dates of hearing, considered him to have
waived the presentation of his evidence. As we see it then, Judge Ballutay is not entirely without
blame for the delay in the termination of the investigation of this case.

It must be stressed that administrative cases involving misconduct, nonfeasance, misfeasance, or

malfeasance in office of officers and employees in the judiciary are of paramount public interest as
the respondents are involved in the administration of justice, a sacred and solemn task. Such cases
must be resolved with reasonable dispatch to clear the name of the innocent and to punish forthwith
the guilty whose stay in office, prolonged by delay, could further tarnish the image of and diminish
the public's faith in the judiciary.

We cannot likewise give weight to the circumstances relied upon by the Office of the Court
Administrator to mitigate the respondent's liability. As hereinafter noted, he is guilty of grave
misconduct, gross dishonesty, serious dereliction or neglect of duty, gross inefficiency or
incompetence, and conduct prejudicial to the best interest of the service. That the complainant "is in
conformity to the dismissal of the complaint" can by no means be considered a mitigating
circumstance as it is offensive to the postulate that a complaint for misconduct, malfeasance, or
misfeasance against a public officer or employee cannot just be withdrawn at any time by the
complainant and that the need to maintain the faith and confidence of the people in the Government
and its agencies and instrumentalities demands the proceedings in such cases should not be made
to depend on the whims and caprices of the complainants who are, in a real sense, only witnesses
therein. 13 In this case, the conformity of the complainant, found in the motion to dismiss dated 8
February 1994 14 and signed by the counsel for the complainant, is based on the ground that the
respondent had already "fully implemented the writ of execution." That motion to dismiss was not,
and correctly so, granted by Judge Ballutay. On the contrary, on 4 March 1994 he made his Report
and Recommendation.

The respondent never denied that he received the sum of P5,200.00 from the complainant in
connection with the writ of demolition. He did not issue any official receipt for the amount received.
At the time the writ of demolition was placed on his hands for implementation, the basic amount that
the complainant had to pay was only P8.00 pursuant to paragraph (g), Section 7, Rule 141 of the
Rules of Court. This was later increased to P100.00 per this Court's en banc resolution of 4
September 1990. 15 There are, of course, other sheriff's expenses that prevailing parties have to pay
for the service or implementation of court processes, or the safeguarding of property levied upon,
attached or seized, including kilometrage, guard's fees, warehousing and similar charges, in an
amount to be estimated by the sheriff. However, the approval of the court thereof is needed and
upon such approval, the amount shall be deposited by the interested party with the clerk of court
and ex-officio sheriff, who shall disburse the same to the deputy sheriff assigned to effect the
process, subject to liquidation within the same period for rendering a return of the process. Any
unspent amount shall be refunded to the party making the deposit. A full report shall be submitted by
the deputy sheriff assigned with his return. 16

In the instant case, the respondent did not make any report on the amount he received from the
complainant nor did he issue an official receipt therefor. It is then obvious that he asked for the
amount not as lawful fees alone but as a consideration for the performance of his duty. Any portion
of the P5,200.00 then in excess of the lawful fees allowed by the Rules of Court is an unlawful
exaction which makes the respondent liable for grave misconduct and gross dishonesty.

The records further disclose that the respondent's returns of service dated 25 July 1990 17 and 24
September 1990 18 were filed by him only on 29 May 1991 and 6 June 1991, respectively, with the
MTCC, which issued the writ of demolition. Either the respondent correctly dated the returns, in
which case there was a deliberate and unreasonable delay in their filing with the court, or he
antedated them to make it appear that he prepared it well within the period provided for by the Rules
of Court. Section 11 of Rule 39 thereof provides that a writ of execution should be returned at any
time not less than ten days nor more than sixty days after its receipt by the sheriff who must set forth
in writing on its back the whole of his proceedings by virtue thereof and file it with the clerk or judge
to be preserved with the other papers in the case. 19 As the court personnel primarily responsible for
the speedy and efficient service of all court processes and writs originating from his court, 20 it was
the respondent's duty to immediately implement the writ of demolition. The Manual for Clerks of
Court 21 provides:
 2. Duty of sheriff as to execution of process. When a writ is placed in the hands of
the sheriff, it is his duty in the absence of instructions, to proceed with reasonable
celerity and promptness to execute it in accordance with its mandate. . . . He has no
discretion whether to execute it or not.

Section E(4) of the Manual also provides:

4. All sheriffs and deputy sheriffs shall submit a report to the Judge concerned on the
action taken on all writs and processes assigned to them within ten (10) days from
receipt of said process or writ. Said report shall form part of the records of the case.

The duty imposed upon the sheriff to execute the writ is ministerial, not directory. A purely ministerial
act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of the legal authority, without regard to the exercise of his own
judgment upon the propriety or impropriety of the act done. 22

The respondent's explanation that he was not able to implement the writ of demolition because he
was threatened with death by the defendants is unacceptable. If that were true, he should have
either reported it to the MTCC and requested the assistance of other sheriffs or law enforcement
authorities, or filed the appropriate criminal complaint against the defendants who had threatened
him. Instead of doing so, he filed his returns only after several months had lapsed.

For such nonfeasance and misfeasance, the respondent is guilty of serious dereliction or neglect of
duty, gross inefficiency or incompetence, and conduct prejudicial to the best interest of the service.

Time and again, this Court has stressed that the conduct and behavior of everyone connected with
the dispensation of justice from the presiding judge to the lowliest clerk should be circumscribed with
the heavy burden of responsibility. They must at all times not only observe propriety and decorum,
they must also be above suspicion. 23

WHEREFORE, for grave misconduct, gross dishonesty, serious dereliction or neglect of duty, gross
incompetence or inefficiency, and conduct prejudicial to the best interest of the service, respondent
EXEQUIEL ENRILE, Deputy Sheriff of the Municipal Trial Court in Cities of Cabanatuan City, is
ordered DISMISSED from the service with forfeiture of all benefits and with prejudice to re-
employment in any branch of service of the Government, including government-owned or controlled
corporations.

This decision is immediately executory.

SO ORDERED.

Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug,
Kapunan and Mendoza, JJ., concur.

Feliciano, J., is on leave.

# Footnotes
1 Annex "A" of letter-complaint.
2 Annex "B" of letter-complaint.
3 Annex "C," Id.
4 Annex "D," Id.
5 Annex "E," Id.
6 Annexes "F," "F-1," and "F-2," inclusive, Id.
7 Annex "G" of letter-complaint.
8 Annex "B" of Comment.
9 Annex "C," Id.
10 Annex "D" of Comment.
11 Annex "E," Id.
12 Annex "F," Id.
13 Sy vs. Academia, 198 SCRA 705 [1991].
14 Rollo, 80.
15 See Manual for Clerks of Court, Chapter IX, Section B, subsection 9(g), 194.
16 See Manual for Clerks of Court, op. cit., 195.
17 Annex "B" of Comment.
18 Annex "C," Id.
19 See Cruz vs. Villarin, 181 SCRA 53 [1990].
20 Supreme Court Circular No. 12, dated 1 October 1985; De Castro vs. Santos, 198 SCRA 245 [1991].
21 Page 178. See Young vs. Momblan, 205 SCRA 33 [1992].
22 Lamb vs. Phibbs, 22 Phil. 456 [1912], cited in Young vs. Momblan, supra at note 21.
23 Tan vs. Herras, 195 SCRA 1 [1991]; Sy vs. Academia, supra at note 13.
 THIRD DIVISION

COMMISSIONER OF INTERNAL G.R. No. 159647

REVENUE,
Petitioner, Present:
Panganiban, J.,
Chairman,
Sandoval-Gutierrez,
- versus - Corona,
Carpio Morales, and
Garcia, JJ
CENTRAL LUZON DRUG Promulgated:
CORPORATION,
Respondent. April 15, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, J.:

T
he 20 percent discount required by the law to be given to senior
citizens is a tax credit, not merely a tax deduction from the gross
income or gross sale of the establishment concerned. A tax credit is
used by a private establishment only after the tax has been
computed; a tax deduction, before the tax is computed. RA 7432
unconditionally grants a tax credit to all covered entities. Thus, the provisions
of the revenue regulation that withdraw or modify such grant are void. Basic
is the rule that administrative regulations cannot amend or revoke the law.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of

Court, seeking to set aside the August 29, 2002 Decision [2] and the August
11, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR SP No.
67439. The assailed Decision reads as follows:
 WHEREFORE, premises considered, the Resolution appealed
from is AFFIRMED in toto. No costs.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The CA narrated the antecedent facts as follows:

Respondent is a domestic corporation primarily engaged in retailing
of medicines and other pharmaceutical products. In 1996, it operated
six (6) drugstores under the business name and style Mercury Drug.

From January to December 1996, respondent granted twenty (20%)

percent sales discount to qualified senior citizens on their purchases
of medicines pursuant to Republic Act No. [R.A.] 7432 and its
Implementing Rules and Regulations. For the said period, the amount
allegedly representing the 20% sales discount granted by respondent
to qualified senior citizens totaled P904,769.00.

On April 15, 1997, respondent filed its Annual Income Tax Return for
taxable year 1996 declaring therein that it incurred net losses from its
operations.

On January 16, 1998, respondent filed with petitioner a claim for tax
refund/credit in the amount of P904,769.00 allegedly arising from the
20% sales discount granted by respondent to qualified senior citizens
in compliance with [R.A.] 7432. Unable to obtain affirmative response
from petitioner, respondent elevated its claim to the Court of Tax
Appeals [(CTA or Tax Court)] via a Petition for Review.

On February 12, 2001, the Tax Court rendered

a Decision[5] dismissing respondents Petition for lack of merit. In said
decision, the [CTA] justified its ruling with the following ratiocination:

x x x, if no tax has been paid to the government, erroneously

or illegally, or if no amount is due and collectible from the
taxpayer, tax refund or tax credit is unavailing. Moreover,
whether the recovery of the tax is made by means of a claim
for refund or tax credit, before recovery is allowed[,] it must be
first established that there was an actual collection and receipt
by the government of the tax sought to be recovered. x x x.
xxxxxxxxx

Prescinding from the above, it could logically be deduced that

tax credit is premised on the existence of tax liability on the
part of taxpayer. In other words, if there is no tax liability, tax
credit is not available.

Respondent lodged a Motion for Reconsideration. The [CTA], in its

assailed resolution,[6] granted respondents motion for reconsideration
 and ordered herein petitioner to issue a Tax Credit Certificate in favor
of respondent citing the decision of the then Special Fourth Division
of [the CA] in CA G.R. SP No. 60057 entitled Central [Luzon] Drug
Corporation vs. Commissioner of Internal Revenue promulgated on
May 31, 2001, to wit:

However, Sec. 229 clearly does not apply in the instant case
because the tax sought to be refunded or credited by
petitioner was not erroneously paid or illegally collected. We
take exception to the CTAs sweeping but unfounded
statement that both tax refund and tax credit are modes of
recovering taxes which are either erroneously or illegally paid
to the government. Tax refunds or credits do not exclusively
pertain to illegally collected or erroneously paid taxes as they
may be other circumstances where a refund is warranted. The
tax refund provided under Section 229 deals exclusively with
illegally collected or erroneously paid taxes but there are other
possible situations, such as the refund of excess estimated
corporate quarterly income tax paid, or that of excess input
tax paid by a VAT-registered person, or that of excise tax paid
on goods locally produced or manufactured but actually
exported. The standards and mechanics for the grant of a
refund or credit under these situations are different from that
under Sec. 229. Sec. 4[.a)] of R.A. 7432, is yet another
instance of a tax credit and it does not in any way refer to
illegally collected or erroneously paid taxes, x x x.[7]

Ruling of the Court of Appeals

The CA affirmed in toto the Resolution of the Court of Tax Appeals (CTA)
ordering petitioner to issue a tax credit certificate in favor of respondent in
the reduced amount of P903,038.39. It reasoned that Republic Act No. (RA)
7432 required neither a tax liability nor a payment of taxes by private
establishments prior to the availment of a tax credit. Moreover, such credit
is not tantamount to an unintended benefit from the law, but rather a just
compensation for the taking of private property for public use.

Hence this Petition.[8]

The Issues

Petitioner raises the following issues for our consideration:

 Whether the Court of Appeals erred in holding that respondent may
claim the 20% sales discount as a tax credit instead of as a deduction
from gross income or gross sales.

Whether the Court of Appeals erred in holding that respondent is

entitled to a refund.[9]

These two issues may be summed up in only one: whether respondent,

despite incurring a net loss, may still claim the 20 percent sales discount as a
tax credit.

The Courts Ruling

The Petition is not meritorious.

Sole Issue:
Claim of 20 Percent Sales Discount
as Tax Credit Despite Net Loss

Section 4a) of RA 7432[10] grants to senior citizens the privilege of obtaining

a 20 percent discount on their purchase of medicine from any private
establishment in the country.[11] The latter may then claim the cost of the
discount as a tax credit.[12] But can such credit be claimed, even though an
establishment operates at a loss?

We answer in the affirmative.

Tax Credit versus

Tax Deduction

Although the term is not specifically defined in our Tax Code, [13] tax
credit generally refers to an amount that is subtracted directly from ones total
tax liability.[14] It is an allowance against the tax itself[15] or a deduction from
what is owed[16]