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Cola Bottling Company of the Philippines, Inc. v.

Municipality of
Tanauan the assessed franchise tax due, plus surcharge and interest. It alleged that
G.R. No. L-31156; February 27, 1976 NAPOCOR’s exemption from local taxes has already been withdrawn by the
Local Government Code. NAPOCOR submitted that it is not liable to pay

Facts: In February 1963, plaintiff commenced a complaint seeking to declare an annual franchise because the city’s taxing power is limited to private
Section 2 of R.A. 2264 (Local Autonomy Act) unconstitutional as an undue entities that are engaged in trade or occupation for profit, and that the
delegation of taxing power and to declare Ordinance Nos. 23 and 27 issued
by the Municipality of Tanauan, Leyte as null and void. NAPOCOR Charter, being a valid exercise of police power, should prevail
over the LGC.
Municipal Ordinance No. 23 levies and collects from soft drinks producers
and manufacturers one-sixteenth (1/16) of a centavo for every bottle of soft Issue: Whether NAPOCOR is liable to pay annual franchise tax to the City of
drink corked. On the other hand, Municipal Ordinance No. 27 levies and Cabanatuan
collects on soft drinks produced or manufactured within the territorial
jurisdiction of the municipality a tax of one centavo (P0.01) on each gallon of Held: Yes. The power to tax is no longer vested exclusively on Congress;
volume capacity. The tax imposed in both Ordinances Nos. 23 and 27 is local legislative bodies are now given direct authority to levy taxes, fees and
denominated as "municipal production tax.”
other charges. Although as a general rule, LGUs cannot impose taxes, fees
Issues: (1) Is Section 2 of R.A. 2264 an undue delegation of the power of or charges of any kind on the National Government, its agencies and
taxation? (2) Do Ordinance Nos. 23 and 24 constitute double taxation and
impose percentage or specific taxes? instrumentalities, this rule now admits of an exception, i.e., when
specific provisions of the LGC authorize the LGUs to impose taxes, fees or
Held: (1) NO. The power of taxation is purely legislative and cannot be
delegated to the executive or judicial department of the government without charges on the aforementioned entities. Nothing prevents Congress from
infringing upon the theory of separation of powers. But as an exception, the
decreeing that even instrumentalities or agencies of the government
theory does not apply to municipal corporations. Legislative powers may be
delegated to local governments in respect of matters of local concern. (2) performing governmental functions may be subject to tax.
NO. The Municipality of Tanauan discovered that manufacturers could
increase the volume contents of each bottle and still pay the same tax rate
since tax is imposed on every bottle corked. To combat this scheme, A franchise is a privilege conferred by government authority, which does not
Municipal Ordinance No. 27 was enacted. As such, it was a repeal of belong to citizens of the country generally as a matter of common right. It
Municipal Ordinance No. 23. In the stipulation of facts, the parties admitted
that the Municipal Treasurer was enforcing Municipal Ordinance No. 27 only. may be construed in two senses: the right vested in the individuals
Hence, there was no case of double taxation. composing the corporation and the right and privileges conferred upon the

NAPOCOR vs. City of Cabanatuan corporation. A franchise tax is understood in the second sense; it is not
Post under case digests, Taxation at Wednesday, February 08, 2012 Posted
levied on the corporation simply for existing as a corporation but on its
by Schizophrenic Mind
exercise of the rights or privileges granted to it by the government.
Facts: City of Cabanatuan filed a collection suit against NAPOCOR, a NAPOCOR is covered by the franchise tax because it exercises a franchise
government-owned and controlled corporation demanding that the latter pay
in the second sense and it is exercising its rights or privileges under this The exercise of the taxing powers of the provinces, cities, barangays,

franchise within the territory of the City. municipalities shall not extend to the levi of the following:

xxx Taxes, fees or charges of any kind in the National Government, its
agencies and instrumentalities, and LGU’s. xxx

Respondent City refused to cancel and set aside petitioner’s realty tax
account, insisting that the MCIAA is a government-controlled corporation
Mactan Cebu International Airport Authority v. Marcos 261 SCRA
whose tax exemption privilege has been withdrawn by virtue of Sections 193
and 234 of Labor Code that took effect on January 1, 1992.
667 (1996)

Facts: Issue:
Petitioner Mactan Cebu International Airport Authority was created by virtue Whether or not the petitioner is a “taxable person”
of R.A. 6958, mandated to principally undertake the economical, efficient,
Rulings:
and effective control, management, and supervision of the Mactan
International Airport and Lahug Airport, and such other airports as may be
Taxation is the rule and exemption is the exception. MCIAA’s exemption from
established in Cebu.
payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor
Code. Statutes granting tax exemptions shall be strictly construed against the
Since the time of its creation, petitioner MCIAA enjoyed the privilege of
taxpayer and liberally construed in favor of the taxing authority.
exemption from payment of realty taxes in accordance with Section 14 of its
charter. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in
The petitioner cannot claim that it was never a “taxable person” under its
Charge, Office of the Treasurer of the City of Cebu, demanded payment from
Charter. It was only exempted from the payment of realty taxes. The grant of
realty taxes in the total amount of P2229078.79. Petitioner objected to such
the privilege only in respect of this tax is conclusive proof of the legislative
demand for payment as baseless and unjustified claiming in its favor the
intent to make it a taxable person subject to all taxes, except real property
afore cited Section 14 of R.A. 6958. It was also asserted that it is an
tax.
instrumentality of the government performing governmental functions, citing
Section 133 of the Local Government Code of 1991.

Tio vs Videogram
Section 133. Common limitations on the Taxing Powers of Local Government
Units. Facts: The case is a petition filed by petitioner on behalf of videogram
operators adversely affected by Presidential Decree No. 1987,
“An ActCreating the Videogram Regulatory Board" with broad powers to
regulate and supervise the videogram industry. (2) Whether or nor the DECREE is constitutional.

A month after the promulgation of the said Presidential Decree, the amended
the National Internal Revenue Code provided that: Held: Taxation has been made the implement of the state's police power.
The levy of the 30% tax is for a public purpose. It was imposed primarily to
"SEC. 134. Video Tapes. — There shall be collected on each processed answer the need for regulating the video industry, particularly because of
video-tape cassette, ready for playback, regardless of length, an annual tax the rampant film piracy, the flagrant violation of intellectual property rights,
of five pesos; Provided, That locally manufactured or imported blank video and the proliferation of pornographic video tapes. And while it was also an
tapes shall be subject to sales tax." objective of the DECREE to protect the movie industry, the tax remains a
valid imposition.
"Section 10. Tax on Sale, Lease or Disposition of Videograms. —
Notwithstanding any provision of law to the contrary, the province shall We find no clear violation of the Constitution which would justify us in
collect a tax of thirty percent (30%) of the purchase price or rental rate, as pronouncing Presidential Decree No. 1987 as unconstitutional and void.
the case may be, for every sale, lease or disposition of a videogram While the underlying objective of the DECREE is to protect the moribund
containing a reproduction of any motion picture or audiovisual program.” movie industry, there is no question that public welfare is at bottom of its
enactment, considering "the unfair competition posed by rampant film piracy;
“Fifty percent (50%) of the proceeds of the tax collected shall accrue to the the erosion of the moral fiber of the viewing public brought about by the
province, and the other fifty percent (50%) shall accrue to the municipality availability of unclassified and unreviewed video tapes containing
where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax pornographic films and films with brutally violent sequences; and losses in
shall be shared equally by the City/Municipality and the Metropolitan government revenues due to the drop in theatrical attendance, not to mention
ManilaCommission.” 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
The rationale behind the tax provision is to curb the proliferation and engage in business."
unregulated circulation of videograms including, among others, videotapes,
discs, cassettes or any technical improvement or variation thereof, have WHEREFORE, the instant Petition is hereby dismissed. No costs.
greatly prejudiced the operations of movie houses and theaters. Such
unregulated circulation 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.

Videogram(s) establishments collectively earn around P600 Million per


annum from rentals, sales and disposition of videograms, and these earnings
have not been subjected to tax, thereby depriving the Government of
approximately P180 Million in taxes each year.

The unregulated activities of videogram establishments have also affected REPUBLIC OF THE PHILIPPINES et al. v. HONORABLE RAMON S.
the viability of the movie industry.
CAGUIOA et al.

Issues:
536 SCRA 193 (2007), EN BANC
(1) Whether or not tax imposed by the DECREE is a valid exercise of police
power.
Congress enacted Republic Act (R.A) No. 7227 or the Bases Conversion and Judge Ramon Caguioa. The injunction bond was approved at One Million

Development Act of 1992 which created the Subic Special Economic and pesos (P1,000,000).

Freeport Zone (SBF) and the Subic Bay Metropolitan Authority (SBMA).
ISSUES:
Section 12 of R.A No. 7227 of the law provides that no taxes, local and

national, shall be imposed within the Subic Special Economic Zone. Pursuant
Whether or not public respondent judge committed grave abuse of discretion
to the law, Indigo Distribution Corporation, et al., which are all domestic
amounting to lack or excess in jurisdiction in peremptorily and unjustly
corporations doing business at the SBF, applied for and were granted
issuing the injunctive writ in favor of private respondents despite the absence
Certificates of Registration and Tax Exemption by the SBMA.
of the legal requisites for its issuance

Congress subsequently passed R.A. No. 9334, which provides that


HELD:
all applicable taxes, duties, charges, including excise taxes due thereon shall

be applied to cigars and cigarettes, distilled spirits, fermented liquors and One such case of grave abuse obtained in this case when Judge Caguioa
wines brought directly into the duly chartered or legislated freeports of the issued his Order of May 4, 2005 and the Writ of Preliminary Injunction on
Subic Economic Freeport Zone. On the basis of Section 6 of R.A. No. 9334, May 11, 2005 despite the absence of a clear and unquestioned legal right of
SBMA issued a Memorandum declaring that, all importations of cigars, private respondents. In holding that the presumption of constitutionality and
cigarettes, distilled spirits, fermented liquors and wines into the SBF, shall be validity of R.A. No. 9334 was overcome by private respondents for the
treated as ordinary importations subject to all applicable taxes, duties and reasons public respondent cited in his May 4, 2005 Order, he disregarded
charges, including excise taxes. the fact that as a condition sine qua non to the issuance of a writ of

preliminary injunction, private respondents needed also to show a clear legal


Upon its implementation, Indigo et al., sought for a reconsideration of the
right that ought to be protected. That requirement is not satisfied in this case.
directives on the imposition of duties and taxes, particularly excise taxes by
To stress, the possibility of irreparable damage without proof of an actual
the Collector of Customs and the SBMA Administrator. Their request was
existing right would not justify an injunctive relief.
subsequently denied prompting them to file with the RTC of Olongapo City a

special civil action for declaratory relief to have certain provisions of R.A. No. Indeed, Sections 204 and 229 of the NIRC provide for the recovery of
9334 declared as unconstitutional. They prayed for the issuance of a writ of erroneously or illegally collected taxes which would be the nature of the
preliminary injunction and/or Temporary Restraining Order (TRO) and excise taxes paid by private respondents should Section 6 of R.A. No. 9334
preliminary mandatory injunction. The same was subsequently granted by be declared unconstitutional or invalid.
The Court finds that public respondent had also ventured into the delicate

area which courts are cautioned from taking when deciding applications for

the issuance of the writ of preliminary injunction. Having ruled preliminarily COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
against the prima facie validity of R.A. No. 9334, he assumed in effect the SM PRIME HOLDINGS, INC. and FIRST ASIA REALTY DEVELOPMENT
proposition that private respondents in their petition for declaratory relief CORPORATION, Respondents.

were duty bound to prove, thereby shifting to petitioners the burden of FACTS
proving that R.A. No. 9334 is not unconstitutional or invalid. Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia
Realty Development Corporation (First Asia) are domestic corporations duly
In the same vein, the Court finds Judge Caguioa to have overstepped his organized and existing under the laws of the Republic of the Philippines.
Both are engaged in the business of operating cinema houses, among
discretion when he arbitrarily fixed the injunction bond of the SBF enterprises others. The BIR sent First Asia and SM Prime four PAN for vat deficiency on
at only P1million. Rule 58, Section 4(b) provides that a bond is executed in cinema ticket sales for taxable year 1999, 2000, 2002 and 2003. The two
corporations protested every time but the BIR denied all their protests which
favor of the party enjoined to answer for all damages which it may sustain by prompted them file a petition for review before the Court of Tax Appeals,
consolidating all four into one petition on the ground that SM prime is a
reason of the injunction. The purpose of the injunction bond is to protect the
majority shareholder of First Asia.
defendant against loss or damage by reason of the injunction in case the
The First Division of the CTA rendered a Decision granting the
court finally decides that the plaintiff was not entitled to it, and the bond is Petition for Review.Resorting to the language used and the legislative history
usually conditioned accordingly. of the law, it ruled that the activity of showing cinematographic films is not a
service covered by VAT under the National Internal Revenue Code (NIRC) of
1997, as amended, but an activity subject to amusement tax under RA 7160,
Whether this Court must issue the writ of prohibition, suffice it to stress that otherwise known as the Local Government Code (LGC) of 1991. The
being possessed of the power to act on the petition for declaratory relief, assessment notices issued by the BIR was ordered cancelled and set aside.
Aggrieved, the CIR moved for reconsideration which was denied by the First
public respondent can proceed to determine the merits of the main case. Division.
Moreover, lacking the requisite proof of public respondent‘s alleged partiality,
ISSUE
this Court has no ground to prohibit him from proceeding with the case for
Whether or not the gross receipts derived by operators or proprietors
declaratory relief. For these reasons, prohibition does not lie. of cinema/theater houses from admission tickets are subject to VAT.

HELD

NO. A cursory reading of the provisions of Section 108 of the NIRC


of 1997 clearly shows that the enumeration of the sale or exchange of
services subject to VAT is not exhaustive.The words, including, similar
services, and shall likewise include, indicate that theenumeration is by way of
example only.Among those included in the enumeration is the lease of But sufficient evidence has already been adduced by Tokyo proving that it
motion picture films, films, tapes and discs.This, however, is not the same as derived no receipt from its charter agreement with NASUTRA - M/V
the showing or exhibition of motion pictures or films. Since the activity of "Gardenia" arrived in Iloilo on January 10, 1981 but found no raw sugar to
load and returned to Japan without any cargo laden on board.
showing motion pictures, films or movies by cinema/ theater operators or
proprietors is not included in the enumeration, it is incumbent upon the court
COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN
to the determine whether such activity falls under the phrase similar
TORRES, as Executive Secretary, et al
services.The intent of the legislature must therefore be ascertained in which
G.R. No. 132527. July 29, 2005
case the legislature never intended operatorsor proprietors of cinema/theater
houses to be covered by VAT.
Facts: On March 13, 1992, RA No. 7227 was enacted, providing for, among
1. COMMISSIONER OF INTERNAL REVENUE vs.TOKYO SHIPPING other things, the sound and balanced conversion of the Clark and Subic
CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES military reservations and their extensions into alternative productive uses in
INC., and COURT OF TAX APPEALS the form of special economic zones in order to promote the economic and
244 SCRA 342; May 26, 1995 social development of Central Luzon in particular and the country in general.
The law contains provisions on tax exemptions for importations of raw
Facts: Tokyo Shipping a foreign corporation represented in the Philippines materials, capital and equipment. After which the President issued several
by Soriamont Steamship Agencies and owns and operates M/V Gardenia.
Executive Orders as mandated by the law for the implementation of RA
NASUTRA 2 chartered M/V Gardenia to load 16,500 metric tons of raw sugar
in the Philippines. Soriamont Agency, 4 paid the required income and 7227. Herein petitioners contend the validity of the tax exemption provided
common carrier's taxes P59,523.75 and P47,619.00, respectively (Total for in the law.
P107,142.75). Upon arriving, however, at Guimaras Port of Iloilo, the vessel
found no sugar for loading. NASUTRA and Soriamont mutually agreed to Issue: Whether or not the Executive Orders issued by President for the
have the vessel sail for Japan without any cargo. Claiming the pre-payment implementation of the tax exemptions constitutes executive legislation.
of income and common carrier's taxes as erroneous since no receipt was
realized from the charter agreement, Tokyo instituted a claim for tax credit or
Held: To limit the tax-free importation privilege of enterprises located inside
refund of the sum P107,142.75 from CIR. Petitioner failed to act promptly on
the claim , hence Tokyo filed a petition for review 6 before Court of Tax the special economic zone only to raw materials, capital and equipment
Appeals. CTA decided for Tokyo and denied MR of CIR. clearly runs counter to the intention of the Legislature to create a free port
where the “free flow of goods or capital within, into, and out of the zones” is
Issue: WON Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit – insured.
whether it was able to prove that it derived no receipts from its charter The phrase “tax and duty-free importations of raw materials, capital and
agreement, and hence is entitled to a refund of the taxes it pre-paid to the equipment” was merely cited as an example of incentives that may be given
government. to entities operating within the zone. Public respondent SBMA correctly
argued that the maxim expressio unius est exclusio alterius, on which
Ruling: Yes. Pursuant to Section 24 (b) (2) of the National Internal Revenue petitioners impliedly rely to support their restrictive interpretation, does not
Code which at that time, a resident foreign corporation engaged in the
apply when words are mentioned by way of example. It is obvious from the
transport of cargo is liable for taxes depending on the amount of income it
derives from sources within the Philippines. Thus, before such a tax liability wording of RA No. 7227, particularly the use of the phrase “such as,” that the
can be enforced the taxpayer must be shown to have earned income enumeration only meant to illustrate incentives that the SSEZ is authorized to
sourced from the Philippines. grant, in line with its being a free port zone.
The Court finds that the setting up of such commercial establishments which
Indeed, a claim for refund is in the nature of a claim for exemption 8 and are the only ones duly authorized to sell consumer items tax and duty-free is
should be construed in strictissimi juris against the taxpayer. And Tokyo has still well within the policy enunciated in Section 12 of RA No. 7227 that “. .
the burden of proof to establish the factual basis of its claim for tax refund. .the Subic Special Economic Zone shall be developed into a self-sustaining,
industrial, commercial, financial and investment center to generate Issue:
employment opportunities in and around the zone and to attract and promote
1. WON MMDA, through Sec. 5(f) of Rep. Act No. 7924 could validly
productive foreign investments.” However, the Court reiterates that the
exercise police power.
second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A,
allowing tax and duty-free removal of goods to certain individuals, even in a
limited amount, from the Secured Area of the SSEZ, are null and void for HELD: Police Power, having been lodged primarily in the National
being contrary to Section 12 of RA No. 7227. Said Section clearly provides Legislature, cannot be exercised by any group or body of individuals not
that “exportation or removal of goods from the territory of the Subic Special possessing legislative power. The National Legislature, however, may
Economic Zone to the other parts of the Philippine territory shall be subject to delegate this power to the president and administrative boards as well as the
customs duties and taxes under the Customs and Tariff Code and other
lawmaking bodies of municipal corporations or local government units
relevant tax laws of the Philippines.”
(LGUs). Once delegated, the agents can exercise only such legislative
powers as are conferred on them by the national lawmaking body.
Our Congress delegated police power to the LGUs in the Local Government
MMDA v. Garin, 456 SCRA 176, GR 130230 (2005)
Code of 1991. 15 A local government is a "political subdivision of a nation or
state which is constituted by law and has substantial control of local affairs."
Facts: The issue arose from an incident involving the respondent Dante O.
16 Local government units are the provinces, cities, municipalities and
Garin, a lawyer, who was issued a traffic violation receipt (TVR) by MMDA
barangays, which exercise police power through their respective legislative
and his driver's license confiscated for parking illegally along Gandara Street,
bodies.
Binondo, Manila, on August 1995.
Metropolitan or Metro Manila is a body composed of several local
Shortly before the expiration of the TVR's validity, the respondent addressed
government units. With the passage of Rep. Act No. 7924 in 1995,
a letter to then MMDA Chairman Prospero Oreta requesting the return of his
Metropolitan Manila was declared as a "special development and
driver's license, and expressing his preference for his case to be filed in
administrative region" and the administration of "metro-wide" basic services
court.
affecting the region placed under "a development authority" referred to as the
Receiving no immediate reply, Garin filed the original complaint with
MMDA. Thus:
application for preliminary injunction, contending that, in the absence of any
The MMDA is, as termed in the charter itself, a "development authority." It is
implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924 grants the
an agency created for the purpose of laying down policies and coordinating
MMDA unbridled discretion to deprive erring motorists of their licenses, pre-
with the various national government agencies, people's organizations, non-
empting a judicial determination of the validity of the deprivation, thereby
governmental organizations and the private sector for the efficient and
violating the due process clause of the Constitution.
expeditious delivery of basic services in the vast metropolitan area. All its
functions are administrative in nature and these are actually summed up in
The respondent further contended that the provision violates the
the charter itself
constitutional prohibition against undue delegation of legislative authority,
allowing as it does the MMDA to fix and impose unspecified — and therefore
* Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of
unlimited — fines and other penalties on erring motorists.
the Metro Manila Development Authority." The contested clause in Sec. 5(f)
states that the petitioner shall "install and administer a single ticketing
The trial court rendered the assailed decision in favor of herein respondent.
system, fix, impose and collect fines and penalties for all kinds of violations of
traffic rules and regulations, whether moving or non-moving in nature, and as they shall judge to be for the good and welfare of the commonwealth, and
confiscate and suspend or revoke drivers' licenses in the enforcement of
of the subjects of the same.”
such traffic laws and regulations, the provisions of Rep. Act No. 4136 and
P.D. No. 1605 to the contrary notwithstanding," and that "(f)or this purpose,
the Authority shall enforce all traffic laws and regulations in Metro Manila, For this reason, when the conditions so demand as determined by the
through its traffic operation center, and may deputize members of the PNP, legislature, property rights must bow to the primacy of police power because
traffic enforcers of local government units, duly licensed security guards, or
property rights, though sheltered by due process, must yield to general
members of non-governmental organizations to whom may be delegated
certain authority, subject to such conditions and requirements as the welfare.
Authority may impose."

Gerochi vs. DOE


Carlos Superdrug Corp. v. DSWD, 526 SCRA 130 (2007)
Facts: RA 9136, otherwise known as the Electric Power Industry Reform Act
Facts: Petitioners are domestic corporations and proprietors
of 2001 (EPIRA), which sought to impose a universal charge on all end-users
operating drugstores in the Philippines. Petitioners assail
of electricity for the purpose of funding NAPOCOR’s projects,
theconstitutionality of Section 4(a) of RA 9257, otherwise known as the
was enacted and took effect in 2001.
“Expanded Senior Citizens Act of 2003.” Section 4(a) of RA 9257 grants
twenty percent (20%) discount as privileges for the Senior Citizens. Petitioner Petitioners contest the constitutionality of the EPIRA, stating that the
contends that said law is unconstitutional because it imposition of the universal charge on all end-users is oppressive and
constitutes deprivation of private property. confiscatory and amounts to taxation without representation for not giving the
consumers a chance to be heard and be represented.
Issue: Whether or not RA 9257 is unconstitutional
Issue: Whether or not the universal charge is a tax.
Held: Petition is dismissed. The law is a legitimate exercise of police power
Held: NO. The assailed universal charge is not a tax, but an exaction in
which, similar to the power of eminent domain, has general welfare for its
the exercise of the State’s police power. That public welfare is promoted may
object.
be gleaned from Sec. 2 of the EPIRA, which enumerates the policies of the
Accordingly, it has been described as “the most essential, insistent and the
State regarding electrification. Moreover, the Special Trust Fund feature of
least limitable of powers, extending as it does to all the great public needs.” It
the universal charge reasonably serves and assures the attainment and
is the power vested in the legislature by the constitution to make, ordain, and
perpetuity of the purposes for which the universal charge is imposed (e.g. to
establish all manner of wholesome and reasonable laws, statutes, and
ensure the viability of the country’s electric power industry), further boosting
ordinances, either with penalties or without, not repugnant to the constitution,
the position that the same is an exaction primarily in pursuit of the State’s Statement of Account from CDC billing them to pay the royalty fees

police objectives amounting to Php115,000 for its fuel sales from Coastal depot to Nanox
Philippines from August 1 to September 21, 2002.
If generation of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the Petitioner, contending that nothing in the law authorizes CDC to impose
fact that revenue is incidentally raised does not make the imposition a tax. royalty fees based on a per unit measurement of any commodity sold within
the special economic zone, protested against the CDC and Bases
The taxing power may be used as an implement of policepower. The theory
Conversion Development Authority (BCDA). They alleged that the royalty
behind the exercise of the power to tax emanates from necessity; fees imposed had no reasonable relation to the probably expenses of
without taxes, government cannot fulfill its mandateof promoting regulation and that the imposition on a per unit measurement of fuel sales
the general welfare and well-being of the people. was for a revenue generating purpose, thus, akin to a “tax”.

CHEVRON PHILIPPINES, INC. (Formerly CALTEX PHILIPPINES,


BCDA denied the protest. The Office of the President dismissed the appeal
INC.), Petitioner,
as well for lack of merit.
vs.
BASES CONVERSION DEVELOPMENT AUTHORITY and CLARK
Upon appeal, CA dismissed the case. CA held that in imposing the royalty
DEVELOPMENT CORPORATION, Respondents
fees, CDC was exercising its right to regulate the flow of fuel into CSEZ
under the vested exclusive right to distribute fuel within CSEZ pursuant to its
Facts:
Joint Venture Agreement (JVA) with Subic Bay Metropolitan Authority
(SBMA) and Coastal Subic Bay Terminal, Inc. (CSBTI) dated April 11, 1996.
On June 28, 2002, the Board of Directors of respondent Clark Development
The appellate court also found that royalty fees were assessed on fuel
Corporation (CDC) issued and approved Policy Guidelines on the Movement
delivered, not on the sale, by petitioner and that the basis of such imposition
of Petroleum Fuel to and from the Clark Special Economic Zone. In one of its
was petitioner’s delivery receipts to Nanox Philippines. The fact that revenue
provisions, it levied royalty fees to suppliers delivering Coastal fuel from
is incidentally also obtained does not make the imposition a tax as long as
outside sources for Php0.50 per liter for those delivering fuel to CSEZ
the primary purpose of such imposition is regulation.
locators not sanctioned by CDC and Php1.00 per litter for those bringing-in
petroleum fuel from outside sources. The policy guidelines were
When elevated in SC, petitioner argued that: 1) CDC has no power to impose
implemented effective July 27, 2002.
fees on sale of fuel inside CSEZ on the basis of income generating functions
and its right to market and distribute goods inside the CSEZ as this would
The petitioner Chevron Philippines Inc (formerly Caltex Philippines Inc) who
amount to tax which they have no power to impose, and that the imposed fee
is a fuel supplier to Nanox Philippines, a locator inside the CSEZ, received a
is not regulatory in nature but rather a revenue generating measure; 2) even part of the regulatory framework to ensure “free flow or movement” of
if the fees are regulatory in nature, it is unreasonable and are grossly in petroleum fuel to and from the CSEZ. The fact that respondents have the
excess of regulation costs. exclusive right to distribute and market petroleum products within CSEZ
pursuant to its JVA with SBMA and CSBTI does not diminish the regulatory
Respondents contended that the purpose of royalty fees is to regulate the purpose of the royalty fee for fuel products supplied by petitioner to its client
flow of fuel to and from the CSEZ and revenue (if any) is just an incidental at the CSEZ.
product. They viewed it as a valid exercise of police power since it is aimed
at promoting the general welfare of public; that being the CSEZ However, it was erroneous for petitioner to argue that such exclusive right of
administrator, they are responsible for the safe distribution of fuel products respondent CDC to market and distribute fuel inside CSEZ is the sole basis
inside the CSEZ. of the royalty fees imposed under the Policy Guidelines. Being the
administrator of CSEZ, the responsibility of ensuring the safe, efficient and
Issue: orderly distribution of fuel products within the Zone falls on CDC. Addressing
Whether the act of CDC in imposing royalty fees can be considered as valid specific concerns demanded by the nature of goods or products involved is
exercise of the police power. encompassed in the range of services which respondent CDC is expected to
provide under Sec. 2 of E.O. No. 80, in pursuance of its general power of
Held: supervision and control over the movement of all supplies and equipment
Yes. SC held that CDC was within the limits of the police power of the State into the CSEZ.
when it imposed royalty fees.
There can be no doubt that the oil industry is greatly imbued with public
In distinguishing tax and regulation as a form of police power, the interest as it vitally affects the general welfare. Fuel is a highly combustible
determining factor is the purpose of the implemented measure. If the purpose product which, if left unchecked, poses a serious threat to life and property.
is primarily to raise revenue, then it will be deemed a tax even though the Also, the reasonable relation between the royalty fees imposed on a “per
measure results in some form of regulation. On the other hand, if the purpose liter” basis and the regulation sought to be attained is that the higher the
is primarily to regulate, then it is deemed a regulation and an exercise of the volume of fuel entering CSEZ, the greater the extent and frequency of
police power of the state, even though incidentally, revenue is generated. supervision and inspection required to ensure safety, security, and order
within the Zone.
In this case, SC held that the subject royalty fee was imposed for regulatory
purposes and not for generation of income or profits. The Policy Guidelines Respondents submit that the increased administrative costs were triggered
was issued to ensure the safety, security, and good condition of the by security risks that have recently emerged, such as terrorist strikes. The
petroleum fuel industry within the CSEZ. The questioned royalty fees form need for regulation is more evident in the light of 9/11 tragedy considering
ISSUE: Whether or not Fertiphil has locus standi to question the
that what is being moved from one location to another are highly combustible
constitutionality of LOI No. 1465.
fuel products that could cause loss of lives and damage to properties.
What is the power of taxation?

As to the issue of reasonableness of the amount of the fees, SC held that no RULING: Fertiphil has locus standi because it suffered direct injury; doctrine
evidence was adduced by the petitioner to show that the fees imposed are of standing is a mere procedural technicality which may be waived.

unreasonable. Administrative issuances have the force and effect of law. The imposition of the levy was an exercise of the taxation power of the state.
They benefit from the same presumption of validity and constitutionality While it is true that the power to tax can be used as an implement of police
power, the primary purpose of the levy was revenue generation. If the
enjoyed by statutes. These two precepts place a heavy burden upon any
purpose is primarily revenue, or if revenue is, at least, one of the real and
party assailing governmental regulations. Petitioner’s plain allegations are substantial purposes, then the exaction is properly called a tax.
simply not enough to overcome the presumption of validity and
Police power and the power of taxation are inherent powers of the State.
reasonableness of the subject imposition. These powers are distinct and have different tests for validity. Police power is
the power of the State to enact legislation that may interfere with personal
Planters Products Inc vs Fertiphil Corp G.R. No. 166006 liberty or property in order to promote the general welfare, while the power of
March 14, 2008 taxation is the power to levy taxes to be used for public purpose. The main
purpose of police power is the regulation of a behavior or conduct, while
FACTS: Petitioner PPI and respondent Fertiphil are private corporations taxation is revenue generation. The "lawful subjects" and "lawful means"
incorporated under Philippine laws, both engaged in the importation and tests are used to determine the validity of a law enacted under the police
distribution of fertilizers, pesticides and agricultural chemicals. power. The power of taxation, on the other hand, is circumscribed by
inherent and constitutional limitations.
Marcos issued Letter of Instruction (LOI) 1465, imposing a capital recovery
component of Php10.00 per bag of fertilizer. The levy was to continue until
adequate capital was raised to make PPI financially viable. Fertiphil remitted
to the Fertilizer and Pesticide Authority (FPA), which was then remitted the Terminal Facilities TEFASCO/ Vs. PPA
depository bank of PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986. GRN 135826 February 27, 2002
De Leon, Jr. &:
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the
P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted, Facts:
however PPI refused. Fertiphil filed a complaint for collection and damages, Tefasco proposed to construct as specialized terminal complex with part
questioning the constitutionality of LOI 1465, claiming that it was unjust, facilities and a provision for sport services in Davao City. On May 7, 1976,
unreasonable, oppressive, invalid and an unlawful imposition that amounted PPA accepted the projects TOCs and was authorized to start work. Tefasco
to a denial of due process. PPI argues that Fertiphil has no locus standi to contracted dollar lessons concern from private commercial institution abroad
question the constitutionality of LOI No. 1465 because it does not have a to construct its specialized facilities and long after the ground breaking, PPA
"personal and substantial interest in the case or will sustain direct injury as a passed a resolution which imposed a construction; PPA issued another
result of its enforcement." It asserts that Fertiphil did not suffer any damage permit the provision of which states that 10% of arrastre and stevedoring
from the imposition because "incidence of the levy fell on the ultimate gross income and 100% wharf age and berthing charges be given as
consumer or the farmers themselves, not on the seller fertilizer company. government share it had paid and for damage as a result of alleged illegal
exaction from its clients of 100% berthing and wharf age fees. RTC ruled for 23, 1981. Petitioner failed to act promptly on the claim, hence, on May 14,
Tefasco. 1981, private respondent filed a petition for review before public respondent
CTA.
Issue:
Petitioner contested the petition. As special and affirmative defenses, it
Whether or not the collection of 100% wharf age fees and berthing charge
alleged the following: that taxes are presumed to have been collected in
are valid. accordance with law; that in an action for refund, the burden of proof is upon
the taxpayer to show that taxes are erroneously or illegally collected and the
Ruling: taxpayer’s failure to sustain said burden is fatal to the action for refund; and
The authorization for a Tefasco to construct a port was truly a binding that claims for refund are construed strictly against tax claimants.
construct between the parties. It was a 2-way advantage for both parties
which were the consideration for the contract. The right- privilege dechotomy After trial, respondent tax court decided in favor of the private respondent.
came to an end when courts realized that individuals should not be subjected
to the unfettered whims of government officials to withhold privileges
Issue: Whether or not tax claimants has the burden of proof to support its
previously given them.
claim of refund.
In as much as the part is privately owned and maintained, we rule that
applicable rate for imported or exported articles loaded or unloaded thereat is
not more than 100% but only 50%. Held: A claim for refund is in the nature of a claim for exemption and should
As regards berthing charges, the Court’s opinion is that only vessels berthing be construed in strictissimi juris against the taxpayer. Likewise, there can be
at the national ports arte liable for berthing fees. The Berthing fees imposed no disagreement with petitioner’s stance that private respondent has the
upon vessels berthing are national ports are applied by the national burden of proof to establish the factual basis of its claim for tax refund.
government for the maintenance ports. The national ports does not maintain
municipal ports which are solely maintain by private entities or municipalities.
Thus, PPA erred in collecting berthing fees. CIR v Tokyo Shipping Co. LTD

CIR V TOKYO SHIPPING CO., LTD. May 26, 1995


CIR v Tokyo Shipping Co. LTD. GR No L-68252, May 26, 1995

FACTS:
Facts: Private respondent is a foreign corporation represented in the
Tokyo Shipping filed a claim for refund from the BIR for erroneous
Philippines by Soriamont Steamship Agencies, Inc. It owns and operates
prepayment of income and common carrier’s taxes amounting to
tramper vessel M/V Gardenia. In December 1980, NASUTRA chartered M/V
P107,142.75 since no receipt was realized from its charter agreement. BIR
Gardenia to load 16,500 metric tons of raw sugar in the Philippines. On
failed to act promptly on the claim and thus it was elevated to the Court of
December 23, 1980 Mr. Edilberto Lising, the operations supervisor of
Tax Appeals which decided in favor of the refund. Hence, this petition for
Soriamont Agency, paid the required income and common carrier’s taxes in
review on certiorari.
the sum total of P107,142.75 based on the expected gross receipts of the
vessel. Upon arriving, however, at Guimaras Port of Iloilo, the vessel found
ISSUE:
no sugar for loading. On January 10, 1981, NASUTRA and private
Whether Tokyo Shipping is entitled to a refund or tax credit for the
respondent’s agent mutually agreed to have the vessel sail for Japan without
prepayment of taxes
any cargo.
RULING:
Claiming the pre-payment of income and common carrier’s taxes as
Yes. The power of taxation is sometimes called also the power to destroy.
erroneous since no receipt was realized from the charter agreement private
Therefore, it should be exercised with caution to minimize injury to the
respondent instituted a claim for tax credit or refund of the sum of
proprietary rights of a taxpayer. It must be exercised fairly, equally and
P107,142,75 before petitioner commissioner of Internal Revenue on March
uniformly, lest the tax collector kill the “hen that lays the golden egg”. Fair
deal is expected by taxpayers from the BIR and the duty demands that BIR Code. Statutes granting tax exemptions shall be strictly construed against the
should refund without unreasonable delay the erroneous collection. taxpayer and liberally construed in favor of the taxing authority.

Mactan Cebu International Airport Authority v. Marcos 261 SCRA The petitioner cannot claim that it was never a “taxable person” under its
667 (1996) Charter. It was only exempted from the payment of realty taxes. The grant of
the privilege only in respect of this tax is conclusive proof of the legislative
Facts: intent to make it a taxable person subject to all taxes, except real property
Petitioner Mactan Cebu International Airport Authority was created by virtue tax.
of R.A. 6958, mandated to principally undertake the economical, efficient,
and effective control, management, and supervision of the Mactan
International Airport and Lahug Airport, and such other airports as may be
established in Cebu.

Since the time of its creation, petitioner MCIAA enjoyed the privilege of
exemption from payment of realty taxes in accordance with Section 14 of its
charter. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in
Charge, Office of the Treasurer of the City of Cebu, demanded payment from
realty taxes in the total amount of P2229078.79. Petitioner objected to such
demand for payment as baseless and unjustified claiming in its favor the
afore cited Section 14 of R.A. 6958. It was also asserted that it is an
instrumentality of the government performing governmental functions, citing
Section 133 of the Local Government Code of 1991.

Section 133. Common limitations on the Taxing Powers of Local Government


Units.

The exercise of the taxing powers of the provinces, cities, barangays,


municipalities shall not extend to the levi of the following:

xxx Taxes, fees or charges of any kind in the National Government, its
agencies and instrumentalities, and LGU’s. xxx

Respondent City refused to cancel and set aside petitioner’s realty tax
account, insisting that the MCIAA is a government-controlled corporation
whose tax exemption privilege has been withdrawn by virtue of Sections 193
and 234 of Labor Code that took effect on January 1, 1992.

Issue:
Whether or not the petitioner is a “taxable person”

Rulings:

Taxation is the rule and exemption is the exception. MCIAA’s exemption from
payment of taxes is withdrawn by virtue of Sections 193 and 234 of Labor