I_E1

SECOND DIVISION
COMMISSIONER OF INTERNAL G.R. Nos. 167274-75
REVENUE,
Petitioner, Present:

QUISUMBING, J.,
Chairperson,
YNARES-SANTIAGO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
FORTUNE TOBACCO
CORPORATION, Promulgated:
Respondent.
July 21, 2008

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

DECISION

TINGA, J.:

Simple and uncomplicated is the central issue involved, yet whopping is the amount at stake in this case.

After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax refund or tax

credit representing specific taxes erroneously collected from its tobacco products. The tax refund is being re-claimed by the Commissioner of Internal Revenue

(Commissioner) in this petition.

The following undisputed facts, summarized by the Court of Appeals, are quoted in the assailed Decision [1] dated 28 September 2004:

CAG.R. SP No. 80675

xxxx

Petitioner[2] is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines,
with principal address at Fortune Avenue, Parang, Marikina City.

Petitioner is the manufacturer/producer of, among others, the following cigarette brands, with tax rate classification based on net retail
price prescribed by Annex D to R.A. No. 4280, to wit:

Brand Tax Rate

Champion M 100 P1.00
Salem M 100 P1.00
Salem M King P1.00
Camel F King P1.00
Camel Lights Box 20s P1.00
Camel Filters Box 20s P1.00
Winston F Kings P5.00
Winston Lights P5.00

Immediately prior to January 1, 1997, the above-mentioned cigarette brands were subject to ad valorem tax pursuant to then Section
142 of the Tax Code of 1977, as amended. However, on January 1, 1997, R.A. No. 8240 took effect whereby a shift from the ad valorem tax (AVT)
system to the specific tax system was made and subjecting the aforesaid cigarette brands to specific tax under [S]ection 142 thereof, now
renumbered as Sec. 145 of the Tax Code of 1997, pertinent provisions of which are quoted thus:

Section 145. Cigars and Cigarettes-

(A) Cigars. There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.

(B) Cigarettes packed by hand. There shall be levied, assessesed and collected on cigarettes packed by hand a tax of Forty
centavos (P0.40) per pack.

(C) Cigarettes packed by machine. There shall be levied, assessed and collected on cigarettes packed by machine a tax at
the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax
shall be Twelve (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but
does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six
Pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;

1
 (4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax
shall be One peso (P1.00) per pack;

Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240
shall be taxed under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be
lower than the tax, which is due from each brand on October 1, 1996. Provided, however, that in cases were (sic) the excise tax rate
imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for
a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one
hundred percent (100%) of the increase shall be effective in 1998.

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by
twelve percent (12%) on January 1, 2000. (Emphasis supplied)

New brands shall be classified according to their current net retail price.

For the above purpose, net retail price shall mean the price at which the cigarette is sold on retail in twenty (20) major
supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable
excise tax and value-added tax. For brands which are marketed only outside Metro [M]anila, the net retail price shall mean the price
at which the cigarette is sold in five (5) major supermarkets in the region excluding the amount intended to cover the applicable excise
tax and the value-added tax.

The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex D,
shall remain in force until revised by Congress.

Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or
a different brand which carries the same logo or design of the existing brand.

To implement the provisions for a twelve percent (12%) increase of excise tax on, among others, cigars and cigarettes packed by
machines by January 1, 2000, the Secretary of Finance, upon recommendation of the respondent Commissioner of Internal Revenue, issued
Revenue Regulations No. 17-99, dated December 16, 1999, which provides the increase on the applicable tax rates on cigar and cigarettes as
follows:

SECTION DESCRIPTION OF PRESENT SPECIFIC NEW SPECIFIC TAX

TAX RATE PRIOR TO RATE EFFECTIVE
ARTICLES JAN. 1, 2000 JAN. 1, 2000

145 (A) P1.00/cigar P1.12/cigar

(B)Cigarettes packed by
machine

(1) Net retail price (excluding

VAT and excise) P12.00/pack P13.44/ pack
exceeds P10.00 per pack

(2) Exceeds P10.00 per pack

P8.00/pack P8.96/pack
(3) Net retail price (excluding
VAT and excise) is P5.00
to P6.50 per pack

(4) Net Retail Price (excluding P5.00/pack P5.60/pack

VAT and excise) is below P5.00
per pack

P1.00/pack P1.12/pack

Revenue Regulations No. 17-99 likewise provides in the last paragraph of Section 1 thereof, (t)hat the new specific tax rate for any
existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise
tax that is actually being paid prior to January 1, 2000.

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 For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes on all brands manufactured and removed in the
total amounts of P585,705,250.00.

On February 7, 2000, petitioner filed with respondents Appellate Division a claim for refund or tax credit of its purportedly overpaid
excise tax for the month of January 2000 in the amount of P35,651,410.00

On June 21, 2001, petitioner filed with respondents Legal Service a letter dated June 20, 2001 reiterating all the claims for refund/tax
credit of its overpaid excise taxes filed on various dates, including the present claim for the month of January 2000 in the amount
of P35,651,410.00.

As there was no action on the part of the respondent, petitioner filed the instant petition for review with this Court on December 11,
2001, in order to comply with the two-year period for filing a claim for refund.

In his answer filed on January 16, 2002, respondent raised the following Special and Affirmative Defenses;

4. Petitioners alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau;

5. The amount of P35,651,410 being claimed by petitioner as alleged overpaid excise tax for the month of January 2000
was not properly documented.

6. In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the
burden is fatal to its claim for refund/credit.

7. Petitioner must show that it has complied with the provisions of Section 204(C) in relation [to] Section 229 of the Tax
Code on the prescriptive period for claiming tax refund/credit;

8. Claims for refund are construed strictly against the claimant for the same partake of tax exemption from taxation; and

9. The last paragraph of Section 1 of Revenue Regulation[s] [No.]17-99 is a valid implementing regulation which has the
force and effect of law.

CA G.R. SP No. 83165

The petition contains essentially similar facts, except that the said case questions the CTAs December 4, 2003 decision in CTA Case
No. 6612 granting respondents[3] claim for refund of the amount of P355,385,920.00 representing erroneously or illegally collected specific taxes
covering the period January 1, 2002 to December 31, 2002, as well as its March 17, 2004 Resolution denying a reconsideration thereof.

xxxx

In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax Appeals reduced the issues to be resolved into two as stipulated by
the parties, to wit: (1) Whether or not the last paragraph of Section 1 of Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent provisions
of Republic Act [No.] 8240, now incorporated in Section 145 of the Tax Code of 1997; and (2) Whether or not petitioner is entitled to a refund
of P35,651,410.00 as alleged overpaid excise tax for the month of January 2000.

xxxx

Hence, the respondent CTA in its assailed October 21, 2002 [twin] Decisions[s] disposed in CTA Case Nos. 6365 & 6383:

WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious and in accordance with law. Accordingly,
respondent is hereby ORDERED to REFUND to petitioner the amount of P35,651.410.00 representing erroneously paid excise
taxes for the period January 1 to January 31, 2000.

SO ORDERED.

Herein petitioner sought reconsideration of the above-quoted decision. In [twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an apparent
change of heart, granted the petitioners consolidated motions for reconsideration, thereby denying the respondents claim for refund.

However, on consolidated motions for reconsideration filed by the respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution was set
aside, and the Tax Court ruled, this time with a semblance of finality, that the respondent is entitled to the refund claimed. Hence, in a resolution
dated November 4, 2003, the tax court reinstated its December 21, 2002 Decision and disposed as follows:

WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383 are hereby REINSTATED. Accordingly, respondent is hereby
ORDERED to REFUND petitioner the total amount of P680,387,025.00 representing erroneously paid excise taxes for the
period January 1, 2000 to January 31, 2000 and February 1, 2000 to December 31, 2001.

SO ORDERED.

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 Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered decision in CTA Case No. 6612 granting the prayer for the refund of the amount
of P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002. The tax court disposed of the case
as follows:

IN VIEW OF THE FOREGOING, the Petition for Review is GRANTED. Accordingly, respondent is hereby ORDERED to REFUND
to petitioner the amount of P355,385,920.00 representing overpaid excise tax for the period covering January 1,
2002 to December 31, 2002.

SO ORDERED.

Petitioner sought reconsideration of the decision, but the same was denied in a Resolution dated March 17, 2004.[4] (Emphasis supplied) (Citations
omitted)

The Commissioner appealed the aforesaid decisions of the CTA. The petition questioning the grant of refund in the amount of P680,387,025.00 was docketed as CA-G.R.

SP No. 80675, whereas that assailing the grant of refund in the amount of P355,385,920.00 was docketed as CA-G.R. SP No. 83165. The petitions were consolidated and

eventually denied by the Court of Appeals. The appellate court also denied reconsideration in its Resolution[5] dated 1 March 2005.

In its Memorandum[6] 22 dated November 2006, filed on behalf of the Commissioner, the Office of the Solicitor General (OSG) seeks to convince the Court that the literal

interpretation given by the CTA and the Court of Appeals of Section 145 of the Tax Code of 1997 (Tax Code) would lead to a lower tax imposable on 1 January 2000

than that imposable during the transition period. Instead of an increase of 12% in the tax rate effective on 1 January 2000 as allegedly mandated by the Tax Code, the

appellate courts ruling would result in a significant decrease in the tax rate by as much as 66%.

The OSG argues that Section 145 of the Tax Code admits of several interpretations, such as:

1. That by January 1, 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed
under the ad valorem tax system plus the 12% increase imposed by par. 5, Sec. 145 of the Tax Code;

2. The increase of 12% starting on January 1, 2000 does not apply to the brands of cigarettes listed under Annex D referred to in par. 8, Sec.
145 of the Tax Code;

3. The 12% increment shall be computed based on the net retail price as indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if
the resulting figure will be lower than the amount already being paid at the end of the transition period. This is the interpretation followed
by both the CTA and the Court of Appeals.[7]

This being so, the interpretation which will give life to the legislative intent to raise revenue should govern, the OSG stresses.

Finally, the OSG asserts that a tax refund is in the nature of a tax exemption and must, therefore, be construed strictly against the taxpayer, such as Fortune Tobacco.

In its Memorandum[8] dated 10 November 2006, Fortune Tobacco argues that the CTA and the Court of Appeals merely followed the letter of the law when they ruled

that the basis for the 12% increase in the tax rate should be the net retail price of the cigarettes in the market as outlined in paragraph C, sub paragraphs (1)-(4), Section

145 of the Tax Code. The Commissioner allegedly has gone beyond his delegated rule-making power when he promulgated, enforced and implemented Revenue

Regulation No. 17-99, which effectively created a separate classification for cigarettes based on the excise tax actually being paid prior to January 1, 2000.[9]

It should be mentioned at the outset that there is no dispute between the fact of payment of the taxes sought to be refunded and the receipt thereof by the Bureau of Internal

Revenue (BIR). There is also no question about the mathematical accuracy of Fortune Tobaccos claim since the documentary evidence in support of the refund has not

been controverted by the revenue agency. Likewise, the claims have been made and the actions have been filed within the two (2)-year prescriptive period provided under

Section 229 of the Tax Code.

The power to tax is inherent in the State, such power being inherently legislative, based on the principle that taxes are a grant of the people who are taxed, and

the grant must be made by the immediate representatives of the people; and where the people have laid the power, there it must remain and be exercised.[10]

This entire controversy revolves around the interplay between Section 145 of the Tax Code and Revenue Regulation 17-99. The main issue is an inquiry into whether the

revenue regulation has exceeded the allowable limits of legislative delegation.

For ease of reference, Section 145 of the Tax Code is again reproduced in full as follows:

4
 Section 145. Cigars and Cigarettes-

(A) Cigars.There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.

(B). Cigarettes packed by hand.There shall be levied, assessed and collected on cigarettes packed by hand a tax of Forty centavos
(P0.40) per pack.

(C) Cigarettes packed by machine.There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates
prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve
pesos (P12.00) per pack;
(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not
exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty
centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One
peso (P1.00) per pack;

Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be
taxed under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than
the tax, which is due from each brand on October 1, 1996. Provided, however, That in cases where the excise tax rates imposed in paragraphs (1),
(2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall
take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be
effective in 1998.

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent
(12%) on January 1, 2000.

New brands shall be classified according to their current net retail price.

For the above purpose, net retail price shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in
Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added
tax. For brands which are marketed only outside Metro Manila, the net retail price shall mean the price at which the cigarette is sold in five (5)
major intended to cover the applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex D, shall
remain in force until revised by Congress.

Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different
brand which carries the same logo or design of the existing brand.[11](Emphasis supplied)

Revenue Regulation 17-99, which was issued pursuant to the unquestioned authority of the Secretary of Finance to promulgate rules and regulations for the effective

implementation of the Tax Code,[12] interprets the above-quoted provision and reflects the 12% increase in excise taxes in the following manner:

SECTION DESCRIPTION OF PRESENT SPECIFIC NEW SPECIFIC TAX

TAX RATES PRIOR TO RATE Effective Jan..
ARTICLES JAN. 1, 2000 1, 2000

145 (A) Cigars P1.00/cigar P1.12/cigar

(B)Cigarettes packed by
Machine

(1) Net Retail Price (excluding

VAT and Excise) P12.00/pack P13.44/pack
exceeds P10.00 per pack

(2) Net Retail Price (excluding

VAT and Excise) is P6.51 up
to P10.00 per pack

(3) Net Retail Price (excluding P8.00/pack P8.96/pack

VAT and excise) is P5.00
to P6.50 per pack

P5.00/pack P5.60/pack

5
 (4) Net Retail Price (excluding
VAT and excise) is below P5.00
per pack)

P1.00/pack P1.12/pack

This table reflects Section 145 of the Tax Code insofar as it mandates a 12% increase effective on 1 January 2000 based on the taxes indicated under paragraph C, sub-

paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further and added that [T]he new specific tax rate for any existing brand of cigars, cigarettes packed by

machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.[13]

Parenthetically, Section 145 states that during the transition period, i.e., within the next three (3) years from the effectivity of the Tax Code, the excise tax from any brand

of cigarettes shall not be lower than the tax due from each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards the 12% increase

which is to be applied on cigars and cigarettes packed by machine, among others, effective on 1 January 2000. Clearly and unmistakably, Section 145 mandates a new

rate of excise tax for cigarettes packed by machine due to the 12% increase effective on 1 January 2000 without regard to whether the revenue collection starting from

this period may turn out to be lower than that collected prior to this date.

By adding the qualification that the tax due after the 12% increase becomes effective shall not be lower than the tax actually paid prior to 1 January 2000, Revenue

Regulation No. 17-99 effectively imposes a tax which is the higher amount between the ad valorem tax being paid at the end of the three (3)-year transition period and

the specific tax under paragraph C, sub-paragraph (1)-(4), as increased by 12%a situation not supported by the plain wording of Section 145 of the Tax Code.

This is not the first time that national revenue officials had ventured in the area of unauthorized administrative legislation.

In Commissioner of Internal Revenue v. Reyes,[14] respondent was not informed in writing of the law and the facts on which the assessment of estate taxes was

made pursuant to Section 228 of the 1997 Tax Code, as amended by Republic Act (R.A.) No. 8424. She was merely notified of the findings by the Commissioner, who

had simply relied upon the old provisions of the law and Revenue Regulation No. 12-85 which was based on the old provision of the law. The Court held that in case of

discrepancy between the law as amended and the implementing regulation based on the old law, the former necessarily prevails. The law must still be followed, even

though the existing tax regulation at that time provided for a different procedure. [15]

In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,[16] the tax authorities gave the term tax credit in Sections 2(i) and 4 of Revenue Regulation 2-

94 a meaning utterly disparate from what R.A. No. 7432 provides. Their interpretation muddled up the intent of Congress to grant a mere discount privilege and not a

sales discount. The Court, striking down the revenue regulation, held that an administrative agency issuing regulations may not enlarge, alter or restrict the provisions of

the law it administers, and it cannot engraft additional requirements not contemplated by the legislature. The Court emphasized that tax administrators are not allowed to

expand or contract the legislative mandate and that the plain meaning rule or verba legis in statutory construction should be applied such that where the words of a statute

are clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation.

As we have previously declared, rule-making power must be confined to details for regulating the mode or proceedings in order to carry into effect the law as it has been

enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not covered by the statute. Administrative regulations must always

be in harmony with the provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic law. [17]

In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,[18] Commissioner Jose Ong issued Revenue Memorandum Order (RMO) No. 15-

91, as well as the clarificatory Revenue Memorandum Circular (RMC) 43-91, imposing a 5% lending investors tax under the 1977 Tax Code, as amended by Executive

Order (E.O.) No. 273, on pawnshops. The Commissioner anchored the imposition on the definition of lending investors provided in the 1977 Tax Code which, according

to him, was broad enough to include pawnshop operators. However, the Court noted that pawnshops and lending investors were subjected to different tax treatments under

the Tax Code prior to its amendment by the executive order; that Congress never intended to treat pawnshops in the same way as lending investors; and that the particularly

involved section of the Tax Code explicitly subjected lending investors and dealers in securities only to percentage tax. And so the Court affirmed the invalidity of the

6
challenged circulars, stressing that administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry

out.[19]

In Philippine Bank of Communications v. Commissioner of Internal Revenue,[20] the then acting Commissioner issued RMC 7-85, changing the prescriptive

period of two years to ten years for claims of excess quarterly income tax payments, thereby creating a clear inconsistency with the provision of Section 230 of the 1977

Tax Code. The Court nullified the circular, ruling that the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress. The

Court held:

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general
interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation
placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation
is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override,
instead of remaining consistent and in harmony with, the law they seek to apply and implement. [21]

In Commissioner of Internal Revenue v. CA, et al.,[22] the central issue was the validity of RMO 4-87 which had construed the amnesty coverage under E.O. No. 41 (1986)

to include only assessments issued by the BIR after the promulgation of the executive order on 22 August 1986 and not assessments made to that date. Resolving the issue

in the negative, the Court held:

x x x all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement.
Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law. [23]

xxx

If, as the Commissioner argues, Executive Order No. 41 had not been intended to include 1981-1985 tax liabilities already assessed
(administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is
unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases
specifically excepted by it.[24]

In the case at bar, the OSGs argument that by 1 January 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax

imposed under the ad valorem tax system plus the 12% increase imposed by paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify what is clearly

an impermissible incursion into the limits of administrative legislation. Such an interpretation is not supported by the clear language of the law and is obviously only

meant to validate the OSGs thesis that Section 145 of the Tax Code is ambiguous and admits of several interpretations.

The contention that the increase of 12% starting on 1 January 2000 does not apply to the brands of cigarettes listed under Annex

D is likewise unmeritorious, absurd even.Paragraph 8, Section 145 of the Tax Code simply states that, [T]he classification of each brand of cigarettes based on its average

net retail price as of October 1, 1996, as set forth in Annex D, shall remain in force until revised by Congress. This declaration certainly does not lend itself to the

interpretation given to it by the OSG. As plainly worded, the average net retail prices of the listed brands under Annex D, which classify cigarettes according to their net

retail price into low, medium or high, obviously remain the bases for the application of the increase in excise tax rates effective on 1 January 2000.

The foregoing leads us to conclude that Revenue Regulation No. 17-99 is indeed indefensibly flawed. The Commissioner cannot seek refuge in his claim that the purpose

behind the passage of the Tax Code is to generate additional revenues for the government. Revenue generation has undoubtedly been a major consideration in the passage

of the Tax Code. However, as borne by the legislative record,[25] the shift from the ad valorem system to the specific tax system

is likewise meant to promote fair competition among the players in the industries concerned, to ensure an equitable distribution of the tax burden and to simplify tax

administration by classifying cigarettes, among others, into high, medium and low-priced based on their net retail price and accordingly graduating tax rates.

At any rate, this advertence to the legislative record is merely gratuitous because, as we have held, the meaning of the law is clear on its face and free from the ambiguities

that the Commissioner imputes. We simply cannot disregard the letter of the law on the pretext of pursuing its spirit. [26]

Finally, the Commissioners contention that a tax refund partakes the nature of a tax exemption does not apply to the tax refund to which Fortune Tobacco is

entitled. There is parity between tax refund and tax exemption only when the former is based either on a tax exemption statute or a tax refund statute. Obviously, that is

not the situation here.Quite the contrary, Fortune Tobaccos claim for refund is premised on its erroneous payment of the tax, or better still the governments exaction in

the absence of a law.

Tax exemption is a result of legislative grace. And he who claims an exemption from the burden of taxation must justify his claim by showing that the

legislature intended to exempt him by words too plain to be mistaken. [27] The rule is that tax exemptions must be strictly construed such that the exemption will not be

held to be conferred unless the terms under which it is granted clearly and distinctly show that such was the intention.[28]

7
 A claim for tax refund may be based on statutes granting tax exemption or tax refund. In such case, the rule of strict interpretation against the taxpayer is

applicable as the claim for refund partakes of the nature of an exemption, a legislative grace, which cannot be allowed unless granted in the most explicit and categorical

language. The taxpayer must show that the legislature intended to exempt him from the tax by words too plain to be mistaken. [29]

Tax refunds (or tax credits), on the other hand, are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts abhorring a

persons unjust enrichment at the expense of another.[30] The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio indebiti, which covers

not only mistake in fact but also mistake in law.[31]

The Government is not exempt from the application of solutio indebiti.[32] Indeed, the taxpayer expects fair dealing from the Government, and the latter has

the duty to refund without any unreasonable delay what it has erroneously collected. [33] If the State expects its taxpayers to observe fairness and honesty in paying their

taxes, it must hold itself against the same standard in refunding excess (or erroneous) payments of such taxes. It should not unjustly enrich itself at the expense of

taxpayers.[34] And so, given its essence, a claim for tax refund necessitates only preponderance of evidence for its approbation like in any other ordinary civil case.

Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the following: (a)

erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) any sum alleged to have been excessive or in any

manner wrongfully collected.[35]

What is controlling in this case is the well-settled doctrine of strict interpretation in the imposition of taxes, not the similar doctrine as applied to tax exemptions. The rule

in the interpretation of tax laws is that a statute will not be construed as imposing a tax unless it does so clearly, expressly, and unambiguously. A tax cannot be imposed

without clear and express words for that purpose. Accordingly, the general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness

to tax laws and the provisions of a taxing act are not to be extended by implication. In answering the question of who is subject to tax statutes, it is basic that in case of

doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or citizens because burdens are not to be imposed nor presumed

to be imposed beyond what statutes expressly and clearly import. [36] As burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax

laws.[37]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA G.R. SP No. 80675, dated 28 September 2004, and its Resolution, dated 1 March

2005, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

I_E2 [G.R. No. 158540. August 3, 2005]

SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, THE
SECRETARY OF THE DEPARTMENT OF TRADE AND INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE and THE
COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.

RESOLUTION

TINGA, J.:

Cement is hardly an exciting subject for litigation. Still, the parties in this case have done their best to put up a spirited advocacy of their respective
positions, throwing in everything including the proverbial kitchen sink. At present, the burden of passion, if not proof, has shifted to public respondents
Department of Trade and Industry (DTI) and private respondent Philippine Cement Manufacturers Corporation (Philcemcor), [1] who now seek
reconsideration of our Decision dated 8 July 2004 (Decision), which granted the petition of petitioner Southern Cross Cement Corporation (Southern
Cross).

This case, of course, is ultimately not just about cement. For respondents, it is about love of country and the future of the domestic industry in the
face of foreign competition. For this Court, it is about elementary statutory construction, constitutional limitations on the executive power to impose tariffs
and similar measures, and obedience to the law. Just as much was asserted in the Decision, and the same holds true with this present Resolution.

An extensive narration of facts can be found in the Decision.[2] As can well be recalled, the case centers on the interpretation of provisions of Republic
Act No. 8800, the Safeguard Measures Act (SMA), which was one of the laws enacted by Congress soon after the Philippines ratified the General
Agreement on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement. [3] The SMA provides the structure and mechanics for the
imposition of emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict serious
injury on them.[4]

A brief summary as to how the present petition came to be filed by Southern Cross. Philcemcor, an association of at least eighteen (18) domestic
cement manufacturers filed with the DTI a petition seeking the imposition of safeguard measures on gray Portland cement, [5] in accordance with the SMA.
After the DTI issued a provisional safeguard measure,[6] the application was referred to the Tariff Commission for a formal investigation pursuant to Section
9 of the SMA and its Implementing Rules and Regulations, in order to determine whether or not to impose a definitive safeguard measure on imports of
gray Portland cement. The Tariff Commission held public hearings and conducted its own investigation, then on 13 March 2002, issued its Formal
Investigation Report (Report). The Report determined as follows:
8
The elements of serious injury and imminent threat of serious injury not having been established, it is hereby recommended that no definitive general safeguard measure
be imposed on the importation of gray Portland cement.[7]

The DTI sought the opinion of the Secretary of Justice whether it could still impose a definitive safeguard measure notwithstanding the negative
finding of the Tariff Commission. After the Secretary of Justice opined that the DTI could not do so under the SMA,[8] the DTI Secretary then promulgated
a Decision[9] wherein he expressed the DTIs disagreement with the conclusions of the Tariff Commission, but at the same time, ultimately denying
Philcemcors application for safeguard measures on the ground that the he was bound to do so in light of the Tariff Commissions negative findings.[10]

Philcemcor challenged this Decision of the DTI Secretary by filing with the Court of Appeals a Petition for Certiorari, Prohibition and
Mandamus[11] seeking to set aside the DTI Decision, as well as the Tariff Commissions Report. It prayed that the Court of Appeals direct the DTI Secretary
to disregard the Report and to render judgment independently of the Report. Philcemcor argued that the DTI Secretary, vested as he is under the law with
the power of review, is not bound to adopt the recommendations of the Tariff Commission; and, that the Report is void, as it is predicated on a flawed
framework, inconsistent inferences and erroneous methodology.[12]

The Court of Appeals Twelfth Division, in a Decision[13] penned by Court of Appeals Associate Justice Elvi John Asuncion,[14] partially granted
Philcemcors petition. The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion. While it
refused to annul the findings of the Tariff Commission,[15] it also held that the DTI Secretary was not bound by the factual findings of the Tariff Commission
since such findings are merely recommendatory and they fall within the ambit of the Secretarys discretionary review. It determined that the legislative
intent is to grant the DTI Secretary the power to make a final decision on the Tariff Commissions recommendation. [16]

On 23 June 2003, Southern Cross filed the present petition, arguing that the Court of Appeals has no jurisdiction over Philcemcors petition, as the
proper remedy is a petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or
non-existence of conditions warranting the imposition of general safeguard measures are binding upon the DTI Secretary.

Despite the fact that the Court of Appeals Decision had not yet become final, its binding force was cited by the DTI Secretary when he issued a
new Decision on 25 June 2003, wherein he ruled that that in light of the appellate courts Decision, there was no longer any legal impediment to his deciding
Philcemcors application for definitive safeguard measures.[17] He made a determination that, contrary to the findings of the Tariff Commission, the local
cement industry had suffered serious injury as a result of the import surges.[18] Accordingly, he imposed a definitive safeguard measure on the importation
of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 kg. bag for three years on imported gray Portland Cement.[19]

On 7 July 2003, Southern Cross filed with the Court a Very Urgent Application for a Temporary Restraining Order and/or A Writ of Preliminary
Injunction (TRO Application), seeking to enjoin the DTI Secretary from enforcing his Decision of 25 June 2003 in view of the pending petition before this
Court. Philcemcor filed an opposition, claiming, among others, that it is not this Court but the CTA that has jurisdiction over the application under the law.

On 1 August 2003, Southern Cross filed with the CTA a Petition for Review, assailing the DTI Secretarys 25 June 2003 Decision which imposed the
definite safeguard measure. Yet Southern Cross did not promptly inform this Court about this filing. The first time the Court would learn about
this Petition with the CTA was when Southern Cross mentioned such fact in a pleading dated 11 August 2003 and filed the next day with this Court. [20]

Philcemcor argued before this Court that Southern Cross had deliberately and willfully resorted to forum-shopping; that the CTA, being a special
court of limited jurisdiction, could only review the ruling of the DTI Secretary when a safeguard measure is imposed; and that the factual findings of the
Tariff Commission are not binding on the DTI Secretary.[21]

After giving due course to Southern Crosss Petition, the Court called the case for oral argument on 18 February 2004. [22] At the oral argument,
attended by the counsel for Philcemcor and Southern Cross and the Office of the Solicitor General, the Court simplified the issues in this wise: (i) whether
the Decision of the DTI Secretary is appealable to the CTA or the Court of Appeals; (ii) assuming that the Court of Appeals has jurisdiction, whether
its Decision is in accordance with law; and, whether a Temporary Restraining Order is warranted.[23]

After the parties had filed their respective memoranda, the Courts Second Division, to which the case had been assigned, promulgated
its Decision granting Southern Crosss Petition.[24]The Decision was unanimous, without any separate or concurring opinion.

The Court ruled that the Court of Appeals had no jurisdiction over Philcemcors Petition, the proper remedy under Section 29 of the SMA being a
petition for review with the CTA; and that the Court of Appeals erred in ruling that the DTI Secretary was not bound by the negative determination of the
Tariff Commission and could therefore impose the general safeguard measures, since Section 5 of the SMA precisely required that the Tariff Commission
make a positive final determination before the DTI Secretary could impose these measures. Anent the argument that Southern Cross had committed
forum-shopping, the Court concluded that there was no evident malicious intent to subvert procedural rules so as to match the standard under Section 5,
Rule 7 of the Rules of Court of willful and deliberate forum shopping. Accordingly, the Decision of the Court of Appeals dated 5 June 2003 was declared
null and void.

The Court likewise found it necessary to nullify the Decision of the DTI Secretary dated 25 June 2003, rendered after the filing of this present Petition.
This Decision by the DTI Secretary had cited the obligatory force of the null and void Court of Appeals Decision, notwithstanding the fact that the decision
of the appellate court was not yet final and executory. Considering that the decision of the Court of Appeals was a nullity to begin with, the inescapable
conclusion was that the new decision of the DTI Secretary, prescinding as it did from the imprimatur of the decision of the Court of Appeals, was a nullity
as well.

After the Decision was reported in the media, there was a flurry of newspaper articles citing alleged negative reactions to the ruling by the counsel
for Philcemcor, the DTI Secretary, and others.[25] Both respondents promptly filed their respective motions for reconsideration.

On 21 September 2004, the Court En Banc resolved, upon motion of respondents, to accept the petition and resolve the Motions for
Reconsideration.[26] The case was then reheard[27] on oral argument on 1 March 2005. During the hearing, the Court elicited from the parties their arguments
on the two central issues as discussed in the assailed Decision, pertaining to the jurisdictional aspect and to the substantive aspect of whether the DTI
Secretary may impose a general safeguard measure despite a negative determination by the Tariff Commission. The Court chose not to hear
argumentation on the peripheral issue of forum-shopping,[28] although this question shall be tackled herein shortly. Another point of concern emerged
during oral arguments on the exercise of quasi-judicial powers by the Tariff Commission, and the parties were required by the Court to discuss in their
respective memoranda whether the Tariff Commission could validly exercise quasi-judicial powers in the exercise of its mandate under the SMA.

The Court has likewise been notified that subsequent to the rendition of the Courts Decision, Philcemcor filed a Petition for Extension of the
Safeguard Measure with the DTI, which has been referred to the Tariff Commission.[29] In an Urgent Motion dated 21 December 2004, Southern Cross
prayed that Philcemcor, the DTI, the Bureau of Customs, and the Tariff Commission be directed to cease and desist from taking any and all actions
pursuant to or under the null and void CA Decision and DTI Decision, including proceedings to extend the safeguard measure. [30] In a Manifestation and
Motion dated 23 June 2004, the Tariff Commission informed the Court that since no prohibitory injunction or order of such nature had been issued by any
court against the Tariff Commission, the Commission proceeded to complete its investigation on the petition for extension, pursuant to Section 9 of the
SMA, but opted to defer transmittal of its report to the DTI Secretary pending guidance from this Court on the propriety of such a step considering this
pending Motion for Reconsideration. In a Resolutiondated 5 July 2005, the Court directed the parties to maintain the status quo effective of even date, and
until further orders from this Court. The denial of the pending motions for reconsideration will obviously render the pending petition for extension academic.

I. Jurisdiction of the Court of Tax Appeals

Under Section 29 of the SMA

The first core issue resolved in the assailed Decision was whether the Court of Appeals had jurisdiction over the special civil action for certiorari filed
by Philcemcor assailing the 5 April 2002 Decision of the DTI Secretary. The general jurisdiction of the Court of Appeals over special civil actions for
certiorari is beyond doubt. The Constitution itself assures that judicial review avails to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. At the same time, the special civil action of
9
certiorari is available only when there is no plain, speedy and adequate remedy in the ordinary course of law. [31] Philcemcors recourse of special civil action
before the Court of Appeals to challenge the Decision of the DTI Secretary not to impose the general safeguard measures is not based on the SMA, but
on the general rule on certiorari. Thus, the Court proceeded to inquire whether indeed there was no other plain, speedy and adequate remedy in the
ordinary course of law that would warrant the allowance of Philcemcors special civil action.

The answer hinged on the proper interpretation of Section 29 of the SMA, which reads:

Section 29. Judicial Review. Any interested party who is adversely affected by the ruling of the Secretary in connection with the imposition of a safeguard
measure may file with the CTA, a petition for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing of such petition for
review shall not in any way stop, suspend or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard
measures, as the case may be.

The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals
in connection with adverse rulings on tax matters to the Court of Appeals. [32] (Emphasis supplied)

The matter is crucial for if the CTA properly had jurisdiction over the petition challenging the DTI Secretarys ruling not to impose a safeguard
measure, then the special civil action of certiorari resorted to instead by Philcemcor would not avail, owing to the existence of a plain, speedy and adequate
remedy in the ordinary course of law.[33] The Court of Appeals, in asserting that it had jurisdiction, merely cited the general rule on certiorari jurisdiction
without bothering to refer to, or possibly even study, the import of Section 29. In contrast, this Court duly considered the meaning and ramifications of
Section 29, concluding that it provided for a plain, speedy and adequate remedy that Philcemcor could have resorted to instead of filing the special civil
action before the Court of Appeals.

Philcemcor still holds on to its hypothesis that the petition for review allowed under Section 29 lies only if the DTI Secretarys ruling imposes a
safeguard measure. If, on the other hand, the DTI Secretarys ruling is not to impose a safeguard measure, judicial review under Section 29 could not be
resorted to since the provision refers to rulings in connection with the imposition of the safeguard measure, as opposed to the non-imposition. Since
the Decision dated 5 April 2002 resolved against imposing a safeguard measure, Philcemcor claims that the proper remedial recourse is a petition for
certiorari with the Court of Appeals.

Interestingly, Republic Act No. 9282, promulgated on 30 March 2004, expressly vests unto the CTA jurisdiction over [d]ecisions of the Secretary of
Trade and Industry, in case of nonagricultural product, commodity or article . . . involving . . . safeguard measures under Republic Act No. 8800, where
either party may appeal the decision to impose or not to impose said duties.[34] It is clear that any future attempts to advance the literalist position of
the respondents would consequently fail. However, since Republic Act No. 9282 has no retroactive effect, this Court had to decide whether Section 29
vests jurisdiction on the CTA over rulings of the DTI Secretary not to impose a safeguard measure. And the Court, in its assailed Decision, ruled that the
CTA is endowed with such jurisdiction.

Both respondents reiterate their fundamentalist reading that Section 29 authorizes the petition for review before the CTA only when the DTI Secretary
decides to impose a safeguard measure, but not when he decides not to. In doing so, they fail to address what the Court earlier pointed out would be the
absurd consequences if their interpretation is followed to its logical end. But in affirming, as the Court now does, its previous holding that the CTA has
jurisdiction over petitions for review questioning the non-imposition of safeguard measures by the DTI Secretary, the Court relies on the plain reading that
Section 29 explicitly vests jurisdiction over such petitions on the CTA.

Under Section 29, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must
be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must be in
connection with the imposition of a safeguard measure. Obviously, there are differences between a ruling for the imposition of a safeguard measure, and
one issued in connection with the imposition of a safeguard measure. The first adverts to a singular type of ruling, namely one that imposes a safeguard
measure. The second does not contemplate only one kind of ruling, but a myriad of rulings issued in connection with the imposition of a safeguard measure.

Respondents argue that the Court has given an expansive interpretation to Section 29, contrary to the established rule requiring strict construction
against the existence of jurisdiction in specialized courts. [35] But it is the express provision of Section 29, and not this Court, that mandates CTA
jurisdiction to be broad enough to encompass more than just a ruling imposing the safeguard measure.

The key phrase remains in connection with. It has connotations that are obvious even to the layman. A ruling issued in connection with the imposition
of a safeguard measure would be one that bears some relation to the imposition of a safeguard measure. Obviously, a ruling imposing a safeguard
measure is covered by the phrase in connection with, but such ruling is by no means exclusive. Rulings which modify, suspend or terminate a safeguard
measure are necessarily in connection with the imposition of a safeguard measure. So does a ruling allowing for a provisional safeguard measure. So too,
a ruling by the DTI Secretary refusing to refer the application for a safeguard measure to the Tariff Commission. It is clear that there is an entire subset of
rulings that the DTI Secretary may issue in connection with the imposition of a safeguard measure, including those that are provisional, interlocutory, or
dispositive in character.[36]By the same token, a ruling not to impose a safeguard measure is also issued in connection with the imposition of a safeguard
measure.

In arriving at the proper interpretation of in connection with, the Court referred to the U.S. Supreme Court cases of Shaw v. Delta Air Lines,
Inc.[37] and New York State Blue Cross Plans v. Travelers Ins.[38] Both cases considered the interpretation of the phrase relates to as used in a federal
statute, the Employee Retirement Security Act of 1974. Respondents criticize the citations on the premise that the cases are not binding in our jurisdiction
and do not involve safeguard measures. The criticisms are off-tangent considering that our ruling did not call for the application of the Employee Retirement
Security Act of 1974 in the Philippine milieu. The American cases are not relied upon as precedents, but as guides of interpretation. Certainly, if there are
applicable local precedents pertaining to the interpretation of the phrase in connection with, then these certainly would have some binding force. But none
avail, and neither do the respondents demonstrate a countervailing holding in Philippine jurisprudence.

Yet we should consider the claim that an expansive interpretation was favored in Shaw because the law in question was an employees benefit law
that had to be given an interpretation favorable to its intended beneficiaries.[39] In the next breath, Philcemcor notes that the U.S. Supreme Court itself was
alarmed by the expansive interpretation in Shaw and thus in Blue Cross, the Shaw ruling was reversed and a more restrictive interpretation was applied
based on congressional intent.[40]

Respondents would like to make it appear that the Court acted rashly in applying a discarded precedent in Shaw, a non-binding foreign precedent
nonetheless. But the Court did make the following observation in its Decision pertaining to Blue Cross:

Now, let us determine the maximum scope and reach of the phrase in connection with as used in Section 29 of the SMA. A literalist reading or linguistic survey may not
satisfy. Even the U.S. Supreme Court in New York State Blue Cross Plans v. Travelers Ins.[41] conceded that the phrases relate to or in connection with may be extended
to the farthest stretch of indeterminacy for, universally, relations or connections are infinite and stop nowhere. [42] Thus, in the case the U.S. High Court, examining
the same phrase of the same provision of law involved in Shaw, resorted to looking at the statute and its objectives as the alternative to an uncritical literalism.
A similar inquiry into the other provisions of the SMA is in order to determine the scope of review accorded therein to the CTA.[43]

In the next four paragraphs of the Decision, encompassing four pages, the Court proceeded to inquire into the SMA and its objectives as a means
to determine the scope of rulings to be deemed as in connection with the imposition of a safeguard measure. Certainly, this Court did not resort to the
broadest interpretation possible of the phrase in connection with, but instead sought to bring it into the context of the scope and objectives of the SMA.
The ultimate conclusion of the Court was that the phrase includes all rulings of the DTI Secretary which arise from the time an application or motu
proprio initiation for the imposition of a safeguard measure is taken. [44] This conclusion was derived from the observation that the imposition of a general
safeguard measure is a process, initiated motu proprio or through application, which undergoes several stages upon which the DTI Secretary is obliged
or may be called upon to issue a ruling.

It should be emphasized again that by utilizing the phrase in connection with, it is the SMA that expressly vests jurisdiction on the CTA over petitions
questioning the non-imposition by the DTI Secretary of safeguard measures. The Court is simply asserting, as it should, the clear intent of the legislature
in enacting the SMA. Without in connection with or a synonymous phrase, the Court would be compelled to favor the respondents position that only rulings
10
imposing safeguard measures may be elevated on appeal to the CTA. But considering that the statute does make use of the phrase, there is little sense
in delving into alternate scenarios.

Respondents fail to convincingly address the absurd consequences pointed out by the Decision had their proposed interpretation been adopted.
Indeed, suffocated beneath the respondents legalistic tinsel is the elemental questionwhat sense is there in vesting jurisdiction on the CTA over a decision
to impose a safeguard measure, but not on one choosing not to impose. Of course, it is not for the Court to inquire into the wisdom of legislative acts,
hence the rule that jurisdiction must be expressly vested and not presumed. Yet ultimately, respondents muddle the issue by making it appear that
the Decision has uniquely expanded the jurisdictional rules. For the respondents, the proper statutory interpretation of the crucial phrase in connection
with is to pretend that the phrase did not exist at all in the statute. The Court, in taking the effort to examine the meaning and extent of the phrase, is merely
giving breath to the legislative will.

The Court likewise stated that the respondents position calls for split jurisdiction, which is judicially abhorred. In rebuttal, the public respondents cite
Sections 2313 and 2402 of the Tariff and Customs Code (TCC), which allegedly provide for a splitting of jurisdiction of the CTA. According to public
respondents, under Section 2313 of the TCC, a decision of the Commissioner of Customs affirming a decision of the Collector of Customs adverse to the
government is elevated for review to the Secretary of Finance. However, under Section 2402 of the TCC, a ruling of the Commissioner of the Bureau of
Customs against a taxpayer must be appealed to the Court of Tax Appeals, and not to the Secretary of Finance.

Strictly speaking, the review by the Secretary of Finance of the decision of the Commissioner of Customs is not judicial review, since the Secretary
of Finance holds an executive and not a judicial office. The contrast is apparent with the situation in this case, wherein the interpretation favored by the
respondents calls for the exercise of judicial review by two different courts over essentially the same questionwhether the DTI Secretary should impose
general safeguard measures. Moreover, as petitioner points out, the executive department cannot appeal against itself. The Collector of Customs, the
Commissioner of Customs and the Secretary of Finance are all part of the executive branch. If the Collector of Customs rules against the government, the
executive cannot very well bring suit in courts against itself. On the other hand, if a private person is aggrieved by the decision of the Collector of Customs,
he can have proper recourse before the courts, which now would be called upon to exercise judicial review over the action of the executive branch.

More fundamentally, the situation involving split review of the decision of the Collector of Customs under the TCC is not apropos to the case at bar.
The TCC in that instance is quite explicit on the divergent reviewing body or official depending on which party prevailed at the Collector of Customs level.
On the other hand, there is no such explicit expression of bifurcated appeals in Section 29 of the SMA.

Public respondents likewise cite Fabian v. Ombudsman[45] as another instance wherein the Court purportedly allowed split jurisdiction. It is argued
that the Court, in ruling that it was the Court of Appeals which possessed appellate authority to review decisions of the Ombudsman in administrative
cases while the Court retaining appellate jurisdiction of decisions of the Ombudsman in non-administrative cases, effectively sanctioned split jurisdiction
between the Court and the Court of Appeals.[46]

Nonetheless, this argument is successfully undercut by Southern Cross, which points out the essential differences in the power exercised by the
Ombudsman in administrative cases and non-administrative cases relating to criminal complaints. In the former, the Ombudsman may impose an
administrative penalty, while in acting upon a criminal complaint what the Ombudsman undertakes is a preliminary investigation. Clearly, the capacity in
which the Ombudsman takes on in deciding an administrative complaint is wholly different from that in conducting a preliminary investigation. In contrast,
in ruling upon a safeguard measure, the DTI Secretary acts in one and the same role. The variance between an order granting or denying an application
for a safeguard measure is polar though emanating from the same equator, and does not arise from the distinct character of the putative actions involved.

Philcemcor imputes intelligent design behind the alleged intent of Congress to limit CTA review only to impositions of the general safeguard
measures. It claims that there is a necessary tax implication in case of an imposition of a tariff where the CTAs expertise is necessary, but there is no such
tax implication, hence no need for the assumption of jurisdiction by a specialized agency, when the ruling rejects the imposition of a safeguard measure.
But of course, whether the ruling under review calls for the imposition or non-imposition of the safeguard measure, the common question for resolution still
is whether or not the tariff should be imposed an issue definitely fraught with a tax dimension. The determination of the question will call upon the same
kind of expertise that a specialized body as the CTA presumably possesses.

In response to the Courts observation that the setup proposed by respondents was novel, unusual, cumbersome and unwise, public respondents
invoke the maxim that courts should not be concerned with the wisdom and efficacy of legislation.[47] But this prescinds from the bogus claim that the CTA
may not exercise judicial review over a decision not to impose a safeguard measure, a prohibition that finds no statutory support. It is likewise settled in
statutory construction that an interpretation that would cause inconvenience and absurdity is not favored. Respondents do not address the particular illogic
that the Court pointed out would ensue if their position on judicial review were adopted. According to the respondents, while a ruling by the DTI Secretary
imposing a safeguard measure may be elevated on review to the CTA and assailed on the ground of errors in fact and in law, a ruling denying the imposition
of safeguard measures may be assailed only on the ground that the DTI Secretary committed grave abuse of discretion. As stressed in the Decision,
[c]ertiorari is a remedy narrow in its scope and inflexible in its character. It is not a general utility tool in the legal workshop.[48]

It is incorrect to say that the Decision bars any effective remedy should the Tariff Commission act or conclude erroneously in making its determination
whether the factual conditions exist which necessitate the imposition of the general safeguard measure. If the Tariff Commission makes a negative final
determination, the DTI Secretary, bound as he is by this negative determination, has to render a decision denying the application for safeguard measures
citing the Tariff Commissions findings as basis. Necessarily then, such negative determination of the Tariff Commission being an integral part of the DTI
Secretarys ruling would be open for review before the CTA, which again is especially qualified by reason of its expertise to examine the findings of the
Tariff Commission. Moreover, considering that the Tariff Commission is an instrumentality of the government, its actions (as opposed to those undertaken
by the DTI Secretary under the SMA) are not beyond the pale of certiorari jurisdiction. Unfortunately for Philcemcor, it hinged its cause on the claim that
the DTI Secretarys actions may be annulled on certiorari, notwithstanding the explicit grant of judicial review over that cabinet members actions under the
SMA to the CTA.

Finally on this point, Philcemcor argues that assuming this Courts interpretation of Section 29 is correct, such ruling should not be given retroactive
effect, otherwise, a gross violation of the right to due process would be had. This erroneously presumes that it was this Court, and not Congress, which
vested jurisdiction on the CTA over rulings of non-imposition rendered by the DTI Secretary. We have repeatedly stressed that Section 29 expressly
confers CTA jurisdiction over rulings in connection with the imposition of the safeguard measure, and the reassertion of this point in the Decision was a
matter of emphasis, not of contrivance. The due process protection does not shield those who remain purposely blind to the express rules that ensure the
sporting play of procedural law.

Besides, respondents claim would also apply every time this Court is compelled to settle a novel question of law, or to reverse precedent. In such
cases, there would always be litigants whose causes of action might be vitiated by the application of newly formulated judicial doctrines. Adopting their
claim would unwisely force this Court to treat its dispositions in unprecedented, sometimes landmark decisions not as resolutions to the live cases or
controversies, but as legal doctrine applicable only to future litigations.

II. Positive Final Determination

By the Tariff Commission an
Indispensable Requisite to the
Imposition of General Safeguard Measures

The second core ruling in the Decision was that contrary to the holding of the Court of Appeals, the DTI Secretary was barred from imposing a
general safeguard measure absent a positive final determination rendered by the Tariff Commission. The fundamental premise rooted in this ruling is
based on the acknowledgment that the required positive final determination of the Tariff Commission exists as a properly enacted constitutional limitation
imposed on the delegation of the legislative power to impose tariffs and imposts to the President under Section 28(2), Article VI of the Constitution.

Congressional Limitations Pursuant

11
To Constitutional Authority on the
Delegated Power to Impose
Safeguard Measures

The safeguard measures imposable under the SMA generally involve duties on imported products, tariff rate quotas, or quantitative restrictions on
the importation of a product into the country. Concerning as they do the foreign importation of products into the Philippines, these safeguard measures fall
within the ambit of Section 28(2), Article VI of the Constitution, which states:

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates,
import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.[49]

The Court acknowledges the basic postulates ingrained in the provision, and, hence, governing in this case. They are:

(1) It is Congress which authorizes the President to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts. Thus, the authority cannot come from the Finance Department, the National Economic Development Authority, or the World Trade
Organization, no matter how insistent or persistent these bodies may be.

(2) The authorization granted to the President must be embodied in a law. Hence, the justification cannot be supplied simply by inherent
executive powers. It cannot arise from administrative or executive orders promulgated by the executive branch or from the wisdom or whim of the President.

(3) The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations
and restrictions which Congress may impose. Consequently, if Congress specifies that the tariff rates should not exceed a given amount, the President
cannot impose a tariff rate that exceeds such amount. If Congress stipulates that no duties may be imposed on the importation of corn, the President
cannot impose duties on corn, no matter how actively the local corn producers lobby the President. Even the most picayune of limits or restrictions imposed
by Congress must be observed by the President.

There is one fundamental principle that animates these constitutional postulates. These impositions under Section 28(2), Article VI fall within
the realm of the power of taxation, a power which is within the sole province of the legislature under the Constitution.

Without Section 28(2), Article VI, the executive branch has no authority to impose tariffs and other similar tax levies involving the
importation of foreign goods. Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA by Congress would be voided on the ground
that it would constitute an undue delegation of the legislative power to tax. The constitutional provision shields such delegation from constitutional infirmity,
and should be recognized as an exceptional grant of legislative power to the President, rather than the affirmation of an inherent executive power.

This being the case, the qualifiers mandated by the Constitution on this presidential authority attain primordial consideration. First, there must be a
law, such as the SMA. Second, there must be specified limits, a detail which would be filled in by the law. And further, Congress is further empowered to
impose limitations and restrictions on this presidential authority. On this last power, the provision does not provide for specified conditions, such as that
the limitations and restrictions must conform to prior statutes, internationally accepted practices, accepted jurisprudence, or the considered opinion of
members of the executive branch.

The Court recognizes that the authority delegated to the President under Section 28(2), Article VI may be exercised, in accordance with legislative
sanction, by the alter egos of the President, such as department secretaries. Indeed, for purposes of the Presidents exercise of power to impose tariffs
under Article VI, Section 28(2), it is generally the Secretary of Finance who acts as alter ego of the President. The SMA provides an exceptional instance
wherein it is the DTI or Agriculture Secretary who is tasked by Congress, in their capacities as alter egos of the President, to impose such measures.
Certainly, the DTI Secretary has no inherent power, even as alter ego of the President, to levy tariffs and imports.

Concurrently, the tasking of the Tariff Commission under the SMA should be likewise construed within the same context as part and parcel of the
legislative delegation of its inherent power to impose tariffs and imposts to the executive branch, subject to limitations and restrictions. In that regard, both
the Tariff Commission and the DTI Secretary may be regarded as agents of Congress within their limited respective spheres, as ordained in the SMA, in
the implementation of the said law which significantly draws its strength from the plenary legislative power of taxation. Indeed, even the President may
be considered as an agent of Congress for the purpose of imposing safeguard measures. It is Congress, not the President, which possesses
inherent powers to impose tariffs and imposts. Without legislative authorization through statute, the President has no power, authority or right
to impose such safeguard measures because taxation is inherently legislative, not executive.

When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President
or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature.
It is basic agency law that the agent may not act beyond the specifically delegated powers or disregard the restrictions imposed by the principal. In short,
Congress may establish the procedural framework under which such safeguard measures may be imposed, and assign the various offices in the
government bureaucracy respective tasks pursuant to the imposition of such measures, the task assignment including the factual determination of whether
the necessary conditions exists to warrant such impositions. Under the SMA, Congress assigned the DTI Secretary and the Tariff Commission their
respective functions[50] in the legislatures scheme of things.

There is only one viable ground for challenging the legality of the limitations and restrictions imposed by Congress under Section 28(2) Article VI,
and that is such limitations and restrictions are themselves violative of the Constitution. Thus, no matter how distasteful or noxious these limitations and
restrictions may seem, the Court has no choice but to uphold their validity unless their constitutional infirmity can be demonstrated.

What are these limitations and restrictions that are material to the present case? The entire SMA provides for a limited framework under which the
President, through the DTI and Agriculture Secretaries, may impose safeguard measures in the form of tariffs and similar imposts. The limitation most
relevant to this case is contained in Section 5 of the SMA, captioned Conditions for the Application of General Safeguard Measures, and stating:

The Secretary shall apply a general safeguard measure upon a positive final determination of the [Tariff] Commission that a product is being imported into the
country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic
industry; however, in the case of non-agricultural products, the Secretary shall first establish that the application of such safeguard measures will be in the public
interest.[51]

Positive Final Determination

By Tariff Commission Plainly
Required by Section 5 of SMA

There is no question that Section 5 of the SMA operates as a limitation validly imposed by Congress on the presidential [52] authority under the SMA
to impose tariffs and imposts. That the positive final determination operates as an indispensable requisite to the imposition of the safeguard measure, and
that it is the Tariff Commission which makes such determination, are legal propositions plainly expressed in Section 5 for the easy comprehension for
everyone but respondents.

Philcemcor attributes this Courts conclusion on the indispensability of the positive final determination to flawed syllogism in that we read the
proposition if A then B as if it stated if A, and only A, then B.[53] Translated in practical terms, our conclusion, according to Philcemcor, would have only
been justified had Section 5 read shall apply a general safeguard measure upon, and only upon, a positive final determination of the Tariff Commission.

12
 Statutes are not designed for the easy comprehension of the five-year old child. Certainly, general propositions laid down in statutes need not be
expressly qualified by clauses denoting exclusivity in order that they gain efficacy. Indeed, applying this argument, the President would, under the
Constitution, be authorized to declare martial law despite the absence of the invasion, rebellion or public safety requirement just because the first paragraph
of Section 18, Article VII fails to state the magic word only. [54]

But let us for the nonce pursue Philcemcors logic further. It claims that since Section 5 does not allegedly limit the circumstances upon which the
DTI Secretary may impose general safeguard measures, it is a worthy pursuit to determine whether the entire context of the SMA, as discerned by all the
other familiar indicators of legislative intent supplied by norms of statutory interpretation, would justify safeguard measures absent a positive final
determination by the Tariff Commission.

The first line of attack employed is on Section 5 itself, it allegedly not being as clear as it sounds. It is advanced that Section 5 does not relate to the
legal ability of either the Tariff Commission or the DTI Secretary to bind or foreclose review and reversal by one or the other. Such relationship should
instead be governed by domestic administrative law and remedial law. Philcemcor thus would like to cast the proposition in this manner: Does it run
contrary to our legal order to assert, as the Court did in its Decision, that a body of relative junior competence as the Tariff Commission can bind an
administrative superior and cabinet officer, the DTI Secretary? It is easy to see why Philcemcor would like to divorce this DTI Secretary-Tariff Commission
interaction from the confines of the SMA. Shorn of context, the notion would seem radical and unjustifiable that the lowly Tariff Commission can bind the
hands and feet of the DTI Secretary.

It can be surmised at once that respondents preferred interpretation is based not on the express language of the SMA, but from implications derived
in a roundabout manner. Certainly, no provision in the SMA expressly authorizes the DTI Secretary to impose a general safeguard measure despite the
absence of a positive final recommendation of the Tariff Commission. On the other hand, Section 5 expressly states that the DTI Secretary shall apply a
general safeguard measure upon a positive final determination of the [Tariff] Commission. The causal connection in Section 5 between the imposition by
the DTI Secretary of the general safeguard measure and the positive final determination of the Tariff Commission is patent, and even respondents do not
dispute such connection.

As stated earlier, the Court in its Decision found Section 5 to be clear, plain and free from ambiguity so as to render unnecessary resort to the
congressional records to ascertain legislative intent. Yet respondents, on the dubitable premise that Section 5 is not as express as it seems, again latch
on to the record of legislative deliberations in asserting that there was no legislative intent to bar the DTI Secretary from imposing the general safeguard
measure anyway despite the absence of a positive final determination by the Tariff Commission.

Let us take the bait for a moment, and examine respondents commonly cited portion of the legislative record. One would presume, given the intense
advocacy for the efficacy of these citations, that they contain a smoking gun express declarations from the legislators that the DTI Secretary may impose
a general safeguard measure even if the Tariff Commission refuses to render a positive final determination. Such smoking gun, if it exists, would
characterize our Decision as disingenuous for ignoring such contrary expression of intent from the legislators who enacted the SMA. But as with many
things, the anticipation is more dramatic than the truth.

The excerpts cited by respondents are derived from the interpellation of the late Congressman Marcial Punzalan Jr., by then (and still is)
Congressman Simeon Datumanong.[55]Nowhere in these records is the view expressed that the DTI Secretary may impose the general safeguard
measures if the Tariff Commission issues a negative final determination or otherwise is unable to make a positive final determination. Instead, respondents
hitch on the observations of Congressman Punzalan Jr., that the results of the [Tariff] Commissions findings . . . is subsequently submitted to [the DTI
Secretary] for the [DTI Secretary] to impose or not to impose; and that the [DTI Secretary] here iswho would make the final decision on the recommendation
that is made by a more technical body [such as the Tariff Commission]. [56]

There is nothing in the remarks of Congressman Punzalan which contradict our Decision. His observations fall in accord with the respective roles of
the Tariff Commission and the DTI Secretary under the SMA. Under the SMA, it is the Tariff Commission that conducts an investigation as to whether the
conditions exist to warrant the imposition of the safeguard measures. These conditions are enumerated in Section 5, namely; that a product is being
imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or
threat thereof to the domestic industry. After the investigation of the Tariff Commission, it submits a report to the DTI Secretary which states, among others,
whether the above-stated conditions for the imposition of the general safeguard measures exist. Upon a positive final determination that these conditions
are present, the Tariff Commission then is mandated to recommend what appropriate safeguard measures should be undertaken by the DTI Secretary.
Section 13 of the SMA gives five (5) specific options on the type of safeguard measures the Tariff Commission recommends to the DTI Secretary.

At the same time, nothing in the SMA obliges the DTI Secretary to adopt the recommendations made by the Tariff Commission. In fact, the SMA
requires that the DTI Secretary establish that the application of such safeguard measures is in the public interest, notwithstanding the Tariff Commissions
recommendation on the appropriate safeguard measure upon its positive final determination. Thus, even if the Tariff Commission makes a positive final
determination, the DTI Secretary may opt not to impose a general safeguard measure, or choose a different type of safeguard measure other than that
recommended by the Tariff Commission.

Congressman Punzalan was cited as saying that the DTI Secretary makes the decision to impose or not to impose, which is correct since the DTI
Secretary may choose not to impose a safeguard measure in spite of a positive final determination by the Tariff Commission. Congressman Punzalan also
correctly stated that it is the DTI Secretary who makes the final decision on the recommendation that is made [by the Tariff Commission], since the DTI
Secretary may choose to impose a general safeguard measure different from that recommended by the Tariff Commission or not to impose a safeguard
measure at all. Nowhere in these cited deliberations was Congressman Punzalan, or any other member of Congress for that matter, quoted as saying that
the DTI Secretary may ignore a negative determination by the Tariff Commission as to the existence of the conditions warranting the imposition of general
safeguard measures, and thereafter proceed to impose these measures nonetheless. It is too late in the day to ascertain from the late Congressman
Punzalan himself whether he had made these remarks in order to assure the other legislators that the DTI Secretary may impose the general safeguard
measures notwithstanding a negative determination by the Tariff Commission. But certainly, the language of Section 5 is more resolutory to that question
than the recorded remarks of Congressman Punzalan.

Respondents employed considerable effort to becloud Section 5 with undeserved ambiguity in order that a proper resort to the legislative
deliberations may be had. Yet assuming that Section 5 deserves to be clarified through an inquiry into the legislative record, the excerpts cited by the
respondents are far more ambiguous than the language of the assailed provision regarding the key question of whether the DTI Secretary may impose
safeguard measures in the face of a negative determination by the Tariff Commission. Moreover, even Southern Cross counters with its own excerpts of
the legislative record in support of their own view.[57]

It will not be difficult, especially as to heavily-debated legislation, for two sides with contrapuntal interpretations of a statute to highlight their respective
citations from the legislative debate in support of their particular views. [58] A futile exercise of second-guessing is happily avoided if the meaning of the
statute is clear on its face. It is evident from the text of Section 5 that there must be a positive final determination by the Tariff Commission that
a product is being imported into the country in increased quantities (whether absolute or relative to domestic production), as to be a substantial
cause of serious injury or threat to the domestic industry. Any disputation to the contrary is, at best, the product of wishful thinking.

For the same reason that Section 5 is explicit as regards the essentiality of a positive final determination by the Tariff Commission, there is no need
to refer to the Implementing Rules of the SMA to ascertain a contrary intent. If there is indeed a provision in the Implementing Rules that allows the DTI
Secretary to impose a general safeguard measure even without the positive final determination by the Tariff Commission, said rule is void as it cannot
supplant the express language of the legislature. Respondents essentially rehash their previous arguments on this point, and there is no reason to consider
them anew. The Decision made it clear that nothing in Rule 13.2 of the Implementing Rules, even though captioned Final Determination by the Secretary,
authorizes the DTI Secretary to impose a general safeguard measure in the absence of a positive final determination by the Tariff Commission.[59] Similarly,
the Rules and Regulations to Govern the Conduct of Investigation by the Tariff Commission Pursuant to Republic Act No. 8800 now cited by the respondent
does not contain any provision that the DTI Secretary may impose the general safeguard measures in the absence of a positive final determination by the
Tariff Commission.

Section 13 of the SMA further bolsters the interpretation as argued by Southern Cross and upheld by the Decision. The first paragraph thereof states
that [u]pon its positive determination, the [Tariff] Commission shall recommend to the Secretary an appropriate definitive measure, clearly referring to the
Tariff Commission as the entity that makes the positive determination. On the other hand, the penultimate paragraph of the same provision states that [i]n
the event of a negative final determination, the DTI Secretary is to immediately issue through the Secretary of Finance, a written instruction to the
Commissioner of Customs authorizing the return of the cash bonds previously collected as a provisional safeguard measure. Since the first paragraph of
13
the same provision states that it is the Tariff Commission which makes the positive determination, it necessarily follows that it, and not the DTI Secretary,
makes the negative final determination as referred to in the penultimate paragraph of Section 13. [60]

The Separate Opinion considers as highly persuasive of former Tariff Commission Chairman Abon, who stated that the Commissions findings are
merely recommendatory.[61] Again, the considered opinion of Chairman Abon is of no operative effect if the statute plainly states otherwise, and Section 5
bluntly does require a positive final determination by the Tariff Commission before the DTI Secretary may impose a general safeguard measure.[62]Certainly,
the Court cannot give controlling effect to the statements of any public officer in serious denial of his duties if the law otherwise imposes the duty on the
public office or officer.

Nonetheless, if we are to render persuasive effect on the considered opinion of the members of the Executive Branch, it bears noting that the
Secretary of the Department of Justice rendered an Opinion wherein he concluded that the DTI Secretary could not impose a general safeguard measure
if the Tariff Commission made a negative final determination.[63] Unlike Chairman Abons impromptu remarks made during a hearing, the DOJ Opinion was
rendered only after a thorough study of the question after referral to it by the DTI. The DOJ Secretary is the alter ego of the President with a stated mandate
as the head of the principal law agency of the government. [64] As the DOJ Secretary has no denominated role in the SMA, he was able to render his
Opinion from the vantage of judicious distance. Should not his Opinion, studied and direct to the point as it is, carry greater weight than the spontaneous
remarks of the Tariff Commissions Chairman which do not even expressly disavow the binding power of the Commissions positive final determination?

III. DTI Secretary has No Power of Review

Over Final Determination of the Tariff Commission

We should reemphasize that it is only because of the SMA, a legislative enactment, that the executive branch has the power to impose safeguard
measures. At the same time, by constitutional fiat, the exercise of such power is subjected to the limitations and restrictions similarly enforced by the SMA.
In examining the relationship of the DTI and the Tariff Commission as established in the SMA, it is essential to acknowledge and consider these predicates.

It is necessary to clarify the paradigm established by the SMA and affirmed by the Constitution under which the Tariff Commission and the DTI
operate, especially in light of the suggestions that the Courts rulings on the functions of quasi-judicial power find application in this case. Perhaps the
reflexive application of the quasi-judicial doctrine in this case, rooted as it is in jurisprudence, might allow for some convenience in ruling, yet doing so
ultimately betrays ignorance of the fundamental power of Congress to reorganize the administrative structure of governance in ways it sees fit.

The Separate Opinion operates from wholly different premises which are incomplete. Its main stance, similar to that of respondents, is that the DTI
Secretary, acting as alter ego of the President, may modify and alter the findings of the Tariff Commission, including the latters negative final determination
by substituting it with his own negative final determination to pave the way for his imposition of a safeguard measure. [65] Fatally, this conclusion is arrived
at without considering the fundamental constitutional precept under Section 28(2), Article VI, on the ability of Congress to impose restrictions and limitations
in its delegation to the President to impose tariffs and imposts, as well as the express condition of Section 5 of the SMA requiring a positive final
determination of the Tariff Commission.

Absent Section 5 of the SMA, the President has no inherent, constitutional, or statutory power to impose a general safeguard measure.
Tellingly, the Separate Opinion does not directly confront the inevitable question as to how the DTI Secretary may get away with imposing a general
safeguard measure absent a positive final determination from the Tariff Commission without violating Section 5 of the SMA, which along with Section 13
of the same law, stands as the only direct legal authority for the DTI Secretary to impose such measures. This is a constitutionally guaranteed limitation of
the highest order, considering that the presidential authority exercised under the SMA is inherently legislative.

Nonetheless, the Separate Opinion brings to fore the issue of whether the DTI Secretary, acting either as alter ego of the President or in his capacity
as head of an executive department, may review, modify or otherwise alter the final determination of the Tariff Commission under the SMA. The succeeding
discussion shall focus on that question.

Preliminarily, we should note that none of the parties question the designation of the DTI or Agriculture secretaries under the SMA as the imposing
authorities of the safeguard measures, even though Section 28(2) Article VI states that it is the President to whom the power to impose tariffs and imposts
may be delegated by Congress. The validity of such designation under the SMA should not be in doubt. We recognize that the authorization made by
Congress in the SMA to the DTI and Agriculture Secretaries was made in contemplation of their capacities as alter egos of the President.

Indeed, in Marc Donnelly & Associates v. Agregado[66] the Court upheld the validity of a Cabinet resolution fixing the schedule of royalty rates on
metal exports and providing for their collection even though Congress, under Commonwealth Act No. 728, had specifically empowered the President and
not any other official of the executive branch, to regulate and curtail the export of metals. In so ruling, the Court held that the members of the Cabinet were
acting as alter egos of the President.[67] In this case, Congress itself authorized the DTI Secretary as alter ego of the President to impose the safeguard
measures. If the Court was previously willing to uphold the alter egos tariff authority despite the absence of explicit legislative grant of such authority on
the alter ego, all the more reason now when Congress itself expressly authorized the alter ego to exercise these powers to impose safeguard measures.

Notwithstanding, Congress in enacting the SMA and prescribing the roles to be played therein by the Tariff Commission and the DTI Secretary did
not envision that the President, or his/her alter ego, could exercise supervisory powers over the Tariff Commission. If truly Congress intended to allow the
traditional alter ego principle to come to fore in the peculiar setup established by the SMA, it would have assigned the role now played by the DTI Secretary
under the law instead to the NEDA. The Tariff Commission is an attached agency of the National Economic Development Authority,[68] which in turn is the
independent planning agency of the government.[69]

The Tariff Commission does not fall under the administrative supervision of the DTI. [70] On the other hand, the administrative relationship between
the NEDA and the Tariff Commission is established not only by the Administrative Code, but similarly affirmed by the Tariff and Customs Code.

Justice Florentino Feliciano, in his ponencia in Garcia v. Executive Secretary[71], acknowledged the interplay between the NEDA and the Tariff
Commission under the Tariff and Customs Code when he cited the relevant provisions of that law evidencing such setup. Indeed, under Section 104 of
the Tariff and Customs Code, the rates of duty fixed therein are subject to periodic investigation by the Tariff Commission and may be revised by the
President upon recommendation of the NEDA.[72] Moreover, under Section 401 of the same law, it is upon periodic investigations by the Tariff Commission
and recommendation of the NEDA that the President may cause a gradual reduction of protection levels granted under the law. [73]

At the same time, under the Tariff and Customs Code, no similar role or influence is allocated to the DTI in the matter of imposing tariff duties. In
fact, the long-standing tradition has been for the Tariff Commission and the DTI to proceed independently in the exercise of their respective functions.
Only very recently have our statutes directed any significant interplay between the Tariff Commission and the DTI, with the enactment in 1999 of Republic
Act No. 8751 on the imposition of countervailing duties and Republic Act No. 8752 on the imposition of anti-dumping duties, and of course the promulgation
a year later of the SMA. In all these three laws, the Tariff Commission is tasked, upon referral of the matter by the DTI, to determine whether the factual
conditions exist to warrant the imposition by the DTI of a countervailing duty, an anti-dumping duty, or a general safeguard measure, respectively. In all
three laws, the determination by the Tariff Commission that these required factual conditions exist is necessary before the DTI Secretary may impose the
corresponding duty or safeguard measure. And in all three laws, there is no express provision authorizing the DTI Secretary to reverse the factual
determination of the Tariff Commission.[74]

In fact, the SMA indubitably establishes that the Tariff Commission is no mere flunky of the DTI Secretary when it mandates that the positive final
recommendation of the former be indispensable to the latters imposition of a general safeguard measure. What the law indicates instead is a relationship
of interdependence between two bodies independent of each other under the Administrative Code and the SMA alike. Indeed, even the ability of the DTI
Secretary to disregard the Tariff Commissions recommendations as to the particular safeguard measures to be imposed evinces the independence from
each other of these two bodies. This is properly so for two reasons the DTI and the Tariff Commission are independent of each other under the
Administrative Code; and impropriety is avoided in cases wherein the DTI itself is the one seeking the imposition of the general safeguard measures,
pursuant to Section 6 of the SMA.

14
 Thus, in ascertaining the appropriate legal milieu governing the relationship between the DTI and the Tariff Commission, it is imperative to apply
foremost, if not exclusively, the provisions of the SMA. The argument that the usual rules on administrative control and supervision apply between the
Tariff Commission and the DTI as regards safeguard measures is severely undercut by the plain fact that there is no long-standing tradition of administrative
interplay between these two entities.

Within the administrative apparatus, the Tariff Commission appears to be a lower rank relative to the DTI. But does this necessarily mean that the
DTI has the intrinsic right, absent statutory authority, to reverse the findings of the Tariff Commission? To insist that it does, one would have to concede
for instance that, applying the same doctrinal guide, the Secretary of the Department of Science and Technology (DOST) has the right to reverse the
rulings of the Civil Aeronautics Board (CAB) or the issuances of the Philippine Coconut Authority (PCA). As with the Tariff Commission-DTI, there is no
statutory authority granting the DOST Secretary the right to overrule the CAB or the PCA, such right presumably arising only from the position of
subordinacy of these bodies to the DOST. To insist on such a right would be to invite department secretaries to interfere in the exercise of functions by
administrative agencies, even in areas wherein such secretaries are bereft of specialized competencies.

The Separate Opinion notes that notwithstanding above, the Secretary of Department of Transportation and Communication may review the findings
of the CAB, the Agriculture Secretary may review those of the PCA, and that the Secretary of the Department of Environment and Natural Resources may
pass upon decisions of the Mines and Geosciences Board.[75] These three officers may be alter egos of the President, yet their authority to review is limited
to those agencies or bureaus which are, pursuant to statutes such as the Administrative Code of 1987, under the administrative control and supervision
of their respective departments. Thus, under the express provision of the Administrative Code expressly provides that the CAB is an attached agency of
the DOTC[76], and that the PCA is an attached agency of the Department of Agriculture.[77] The same law establishes the Mines and Geo-Sciences Bureau
as one of the Sectoral Staff Bureaus[78] that forms part of the organizational structure of the DENR.[79]

As repeatedly stated, the Tariff Commission does not fall under the administrative control of the DTI, but under the NEDA, pursuant to the
Administrative Code. The reliance made by the Separate Opinion to those three examples are thus misplaced.

Nonetheless, the Separate Opinion asserts that the SMA created a functional relationship between the Tariff Commission and the DTI Secretary,
sufficient to allow the DTI Secretary to exercise alter ego powers to reverse the determination of the Tariff Commission. Again, considering that the power
to impose tariffs in the first place is not inherent in the President but arises only from congressional grant, we should affirm the congressional prerogative
to impose limitations and restrictions on such powers which do not normally belong to the executive in the first place. Nowhere in the SMA does it state
that the DTI Secretary may impose general safeguard measures without a positive final determination by the Tariff Commission, or that the DTI Secretary
may reverse or even review the factual determination made by the Tariff Commission.

Congress in enacting the SMA and prescribing the roles to be played therein by the Tariff Commission and the DTI Secretary did not envision that
the President, or his/her alter egocould exercise supervisory powers over the Tariff Commission. If truly Congress intended to allow the traditional alter
ego principle to come to fore in the peculiar setup established by the SMA, it would have assigned the role now played by the DTI Secretary under the law
instead to the NEDA, the body to which the Tariff Commission is attached under the Administrative Code.

The Court has no issue with upholding administrative control and supervision exercised by the head of an executive department, but only over those
subordinate offices that are attached to the department, or which are, under statute, relegated under its supervision and control. To declare that a
department secretary, even if acting as alter ego of the President, may exercise such control or supervision over all executive offices below cabinet rank
would lead to absurd results such as those adverted to above. As applied to this case, there is no legal justification for the DTI Secretary to exercise
control, supervision, review or amendatory powers over the Tariff Commission and its positive final determination. In passing, we note that there is,
admittedly, a feasible mode by which administrative review of the Tariff Commissions final determination could be had, but it is not the procedure adopted
by respondents and now suggested for affirmation. This mode shall be discussed in a forthcoming section.

The Separate Opinion asserts that the President, or his/her alter ego cannot be made a mere rubber stamp of the Tariff Commission since Section
17, Article VII of the Constitution denominates the Chief Executive exercises control over all executive departments, bureaus and offices.[80] But let us be
clear that such executive control is not absolute. The definition of the structure of the executive branch of government, and the corresponding degrees of
administrative control and supervision, is not the exclusive preserve of the executive. It may be effectively be limited by the Constitution, by law, or by
judicial decisions.

The Separate Opinion cites the respected constitutional law authority Fr. Joaquin Bernas, in support of the proposition that such plenary power of
executive control of the President cannot be restricted by a mere statute passed by Congress. However, the cited passage from Fr. Bernas actually states,
Since the Constitution has given the President the power of control, with all its awesome implications, it is the Constitution alone which can curtail such
power.[81] Does the President have such tariff powers under the Constitution in the first place which may be curtailed by the executive power of control? At
the risk of redundancy, we quote Section 28(2), Article VI: The Congress may, by law, authorize the President to fix within specified limits, and subject to
such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within
the framework of the national development program of the Government. Clearly the power to impose tariffs belongs to Congress and not to the President.

It is within reason to assume the framers of the Constitution deemed it too onerous to spell out all the possible limitations and restrictions on this
presidential authority to impose tariffs. Hence, the Constitution especially allowed Congress itself to prescribe such limitations and restrictions itself, a
prudent move considering that such authority inherently belongs to Congress and not the President. Since Congress has no power to amend the
Constitution, it should be taken to mean that such limitations and restrictions should be provided by mere statute. Then again, even the presidential
authority to impose tariffs arises only by mere statute. Indeed, this presidential privilege is both contingent in nature and legislative in origin. These
characteristics, when weighed against the aspect of executive control and supervision, cannot militate against Congresss exercise of its
inherent power to tax.

The bare fact is that the administrative superstructure, for all its unwieldiness, is mere putty in the hands of Congress. The functions and mandates
of the particular executive departments and bureaus are not created by the President, but by the legislative branch through the Administrative Code. [82] The
President is the administrative head of the executive department, as such obliged to see that every government office is managed and maintained properly
by the persons in charge of it in accordance with pertinent laws and regulations, and empowered to promulgate rules and issuances that would ensure a
more efficient management of the executive branch, for so long as such issuances are not contrary to law.[83] Yet the legislature has the concurrent power
to reclassify or redefine the executive bureaucracy, including the relationship between various administrative agencies, bureaus and departments, and
ultimately, even the power to abolish executive departments and their components, hamstrung only by constitutional limitations. The DTI itself can be
abolished with ease by Congress through deleting Title X, Book IV of the Administrative Code. The Tariff Commission can similarly be abolished through
legislative enactment. [84]

At the same time, Congress can enact additional tasks or responsibilities on either the Tariff Commission or the DTI Secretary, such as their
respective roles on the imposition of general safeguard measures under the SMA. In doing so, the same Congress, which has the putative authority
to abolish the Tariff Commission or the DTI, is similarly empowered to alter or expand its functions through modalities which do not align with
established norms in the bureaucratic structure. The Court is bound to recognize the legislative prerogative to prescribe such modalities, no matter
how atypical they may be, in affirmation of the legislative power to restructure the executive branch of government.

There are further limitations on the executive control adverted to by the Separate Opinion. The President, in the exercise of executive control, cannot
order a subordinate to disobey a final decision of this Court or any courts. If the subordinate chooses to disobey, invoking sole allegiance to the President,
the judicial processes can be utilized to compel obeisance. Indeed, when public officers of the executive department take their oath of office, they swear
allegiance and obedience not to the President, but to the Constitution and the laws of the land. The invocation of executive control must yield when under
its subsumption includes an act that violates the law.

The Separate Opinion concedes that the exercise of executive control and supervision by the President is bound by the Constitution and law. [85] Still,
just three sentences after asserting that the exercise of executive control must be within the bounds of the Constitution and law, the Separate
Opinion asserts, the control power of the Chief Executive emanates from the Constitution; no act of Congress may validly curtail it. [86] Laws are acts of
Congress, hence valid confusion arises whether the Separate Opinion truly believes the first proposition that executive control is bound by law. This is a
quagmire for the Separate Opinion to resolve for itself

The Separate Opinion unduly considers executive control as the ne plus ultra constitutional standard which must govern in this case. But while the
President may generally have the power to control, modify or set aside the actions of a subordinate, such powers may be constricted by the Constitution,
15
the legislature, and the judiciary. This is one of the essences of the check-and-balance system in our tri-partite constitutional democracy. Not one head of
a branch of government may operate as a Caesar within his/her particular fiefdom.

Assuming there is a conflict between the specific limitation in Section 28 (2), Article VI of the Constitution and the general executive power of control
and supervision, the former prevails in the specific instance of safeguard measures such as tariffs and imposts, and would thus serve to qualify the general
grant to the President of the power to exercise control and supervision over his/her subalterns.

Thus, if the Congress enacted the law so that the DTI Secretary is bound by the Tariff Commission in the sense the former cannot impose general
safeguard measures absent a final positive determination from the latter the Court is obliged to respect such legislative prerogative, no matter how such
arrangement deviates from traditional norms as may have been enshrined in jurisprudence. The only ground under which such legislative determination
as expressed in statute may be successfully challenged is if such legislation contravenes the Constitution. No such argument is posed by the respondents,
who do not challenge the validity or constitutionality of the SMA.

Given these premises, it is utterly reckless to examine the interrelationship between the Tariff Commission and the DTI Secretary beyond the context
of the SMA, applying instead traditional precepts on administrative control, review and supervision. For that reason, the Decision deemed inapplicable
respondents previous citations of Cario v. Commissioner on Human Rights and Lamb v. Phipps, since the executive power adverted to in those cases had
not been limited by constitutional restrictions such as those imposed under Section 28(2), Article VI.[87]

A similar observation can be made on the case of Sharp International Marketing v. Court of Appeals,[88] now cited by Philcemcor, wherein the Court
asserted that the Land Bank of the Philippines was required to exercise independent judgment and not merely rubber-stamp deeds of sale entered into by
the Department of Agrarian Reform in connection with the agrarian reform program. Philcemcor attempts to demonstrate that the DTI Secretary, as with
the Land Bank of the Philippines, is required to exercise independent discretion and is not expected to just merely accede to DAR-approved compensation
packages. Yet again, such grant of independent discretion is expressly called for by statute, particularly Section 18 of Rep. Act No. 6657 which specifically
requires the joint concurrence of the landowner and the DAR and the [Land Bank of the Philippines] on the amount of compensation. Such power of review
by the Land Bank is a consequence of clear statutory language, as is our holding in the Decision that Section 5 explicitly requires a positive final
determination by the Tariff Commission before a general safeguard measure may be imposed. Moreover, such limitations under the SMA are coated by
the constitutional authority of Section 28(2), Article VI of the Constitution.

Nonetheless, is this administrative setup, as envisioned by Congress and enshrined into the SMA, truly noxious to existing legal standards?
The Decision acknowledged the internal logic of the statutory framework, considering that the DTI cannot exercise review powers over an agency such as
the Tariff Commission which is not within its administrative jurisdiction; that the mechanism employed establishes a measure of check and balance involving
two government offices with different specializations; and that safeguard measures are the exception rather than the rule, pursuant to our treaty
obligations.[89]

We see no reason to deviate from these observations, and indeed can add similarly oriented comments. Corollary to the legislative power to decree
policies through legislation is the ability of the legislature to provide for means in the statute itself to ensure that the said policy is strictly implemented by
the body or office tasked so tasked with the duty. As earlier stated, our treaty obligations dissuade the State for now from implementing default protectionist
trade measures such as tariffs, and allow the same only under specified conditions. [90]The conditions enumerated under the GATT Agreement on
Safeguards for the application of safeguard measures by a member country are the same as the requisites laid down in Section 5 of the SMA.[91] To
insulate the factual determination from political pressure, and to assure that it be conducted by an entity especially qualified by reason of its general
functions to undertake such investigation, Congress deemed it necessary to delegate to the Tariff Commission the function of ascertaining whether or not
the those factual conditions exist to warrant the atypical imposition of safeguard measures. After all, the Tariff Commission retains a degree of relative
independence by virtue of its attachment to the National Economic Development Authority, an independent planning agency of the government,[92] and
also owing to its vaunted expertise and specialization.

The matter of imposing a safeguard measure almost always involves not just one industry, but the national interest as it encompasses other industries
as well. Yet in all candor, any decision to impose a safeguard measure is susceptible to all sorts of external pressures, especially if the domestic industry
concerned is well-organized. Unwarranted impositions of safeguard measures may similarly be detrimental to the national interest. Congress could not be
blamed if it desired to insulate the investigatory process by assigning it to a body with a putative degree of independence and traditional expertise in
ascertaining factual conditions. Affected industries would have cause to lobby for or against the safeguard measures. The decision-maker is in the
unenviable position of having to bend an ear to listen to all concerned voices, including those which may speak softly but carry a big stick. Had the law
mandated that the decision be made on the sole discretion of an executive officer, such as the DTI Secretary, it would be markedly easier for safeguard
measures to be imposed or withheld based solely on political considerations and not on the factual conditions that are supposed to predicate the decision.

Reference of the binding positive final determination to the Tariff Commission is of course, not a fail-safe means to ensure a bias-free determination.
But at least the legislated involvement of the Commission in the process assures some measure of measure of check and balance involving two different
governmental agencies with disparate specializations. There is no legal or constitutional demand for such a setup, but its wisdom as policy should be
acknowledged. As prescribed by Congress, both the Tariff Commission and the DTI Secretary operate within limited frameworks, under which nobody
acquires an undue advantage over the other.

We recognize that Congress deemed it necessary to insulate the process in requiring that the factual determination to be made by an ostensibly
independent body of specialized competence, the Tariff Commission. This prescribed framework, constitutionally sanctioned, is intended to prevent the
baseless, whimsical, or consideration-induced imposition of safeguard measures. It removes from the DTI Secretary jurisdiction over a matter beyond his
putative specialized aptitude, the compilation and analysis of picayune facts and determination of their limited causal relations, and instead vests in the
Secretary the broad choice on a matter within his unquestionable competence, the selection of what particular safeguard measure would assist the duly
beleaguered local industry yet at the same time conform to national trade policy. Indeed, the SMA recognizes, and places primary importance on the DTI
Secretarys mandate to formulate trade policy, in his capacity as the Presidents alter ego on trade, industry and investment-related matters.

At the same time, the statutory limitations on this authorized power of the DTI Secretary must prevail since the Constitution itself demands the
enforceability of those limitations and restrictions as imposed by Congress. Policy wisdom will not save a law from infirmity if the statutory provisions violate
the Constitution. But since the Constitution itself provides that the President shall be constrained by the limits and restrictions imposed by Congress and
since these limits and restrictions are so clear and categorical, then the Court has no choice but to uphold the reins.

Even assuming that this prescribed setup made little sense, or seemed uncommonly silly, [93] the Court is bound by propriety not to dispute the
wisdom of the legislature as long as its acts do not violate the Constitution. Since there is no convincing demonstration that the SMA contravenes the
Constitution, the Court is wont to respect the administrative regimen propounded by the law, even if it allots the Tariff Commission a higher degree of
puissance than normally expected. It is for this reason that the traditional conceptions of administrative review or quasi-judicial power cannot control in this
case.

Indeed, to apply the latter concept would cause the Court to fall into a linguistic trap owing to the multi-faceted denotations the term quasi-judicial
has come to acquire.

Under the SMA, the Tariff Commission undertakes formal hearings,[94] receives and evaluates testimony and evidence by interested parties, [95] and
renders a decision is rendered on the basis of the evidence presented, in the form of the final determination. The final determination requires a conclusion
whether the importation of the product under consideration is causing serious injury or threat to a domestic industry producing like products or directly
competitive products, while evaluating all relevant factors having a bearing on the situation of the domestic industry. [96] This process aligns conformably
with definition provided by Blacks Law Dictionary of quasi-judicial as the action, discretion, etc., of public administrative officers or bodies, who are required
to investigate facts, or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them, as a basis for their official action,
and to exercise discretion of a judicial nature.[97]

However, the Tariff Commission is not empowered to hear actual cases or controversies lodged directly before it by private parties. It does not have
the power to issue writs of injunction or enforcement of its determination. These considerations militate against a finding of quasi-judicial powers attributable
to the Tariff Commission, considering the pronouncement that quasi-judicial adjudication would mean a determination of rights privileges and duties
resulting in a decision or order which applies to a specific situation.[98]

16
 Indeed, a declaration that the Tariff Commission possesses quasi-judicial powers, even if ascertained for the limited purpose of exercising its
functions under the SMA, may have the unfortunate effect of expanding the Commissions powers beyond that contemplated by law. After all, the Tariff
Commission is by convention, a fact-finding body, and its role under the SMA, burdened as it is with factual determination, is but a mere continuance of
this tradition. However, Congress through the SMA offers a significant deviation from this traditional role by tying the decision by the DTI Secretary to
impose a safeguard measure to the required positive factual determination by the Tariff Commission. Congress is not bound by past traditions, or even by
the jurisprudence of this Court, in enacting legislation it may deem as suited for the times. The sole benchmark for judicial substitution of congressional
wisdom is constitutional transgression, a standard which the respondents do not even attempt to match.

Respondents Suggested Interpretation

Of the SMA Transgresses Fair Play

Respondents have belabored the argument that the Decisions interpretation of the SMA, particularly of the role of the Tariff Commission vis--vis the
DTI Secretary, is noxious to traditional notions of administrative control and supervision. But in doing so, they have failed to acknowledge the congressional
prerogative to redefine administrative relationships, a license which falls within the plenary province of Congress under our representative system of
democracy. Moreover, respondents own suggested interpretation falls wayward of expectations of practical fair play.

Adopting respondents suggestion that the DTI Secretary may disregard the factual findings of the Tariff Commission and investigatory process that
preceded it, it would seem that the elaborate procedure undertaken by the Commission under the SMA, with all the attendant guarantees of due process,
is but an inutile spectacle. As Justice Garcia noted during the oral arguments, why would the DTI Secretary bother with the Tariff Commission and instead
conduct the investigation himself.[99]

Certainly, nothing in the SMA authorizes the DTI Secretary, after making the preliminary determination, to personally oversee the investigation, hear
out the interested parties, or receive evidence. [100] In fact, the SMA does not even require the Tariff Commission, which is tasked with the custody of the
submitted evidence,[101] to turn over to the DTI Secretary such evidence it had evaluated in order to make its factual determination. [102] Clearly, as Congress
tasked it to be, it is the Tariff Commission and not the DTI Secretary which acquires the necessary intimate acquaintance with the factual conditions and
evidence necessary for the imposition of the general safeguard measure. Why then favor an interpretation of the SMA that leaves the findings of the Tariff
Commission bereft of operative effect and makes them subservient to the wishes of the DTI Secretary, a personage with lesser working familiarity with the
relevant factual milieu? In fact, the bare theory of the respondents would effectively allow the DTI Secretary to adopt, under the subterfuge of his discretion,
the factual determination of a private investigative group hired by the industry concerned, and reject the investigative findings of the Tariff Commission as
mandated by the SMA. It would be highly irregular to substitute what the law clearly provides for a dubious setup of no statutory basis that would be readily
susceptible to rank chicanery.

Moreover, the SMA guarantees the right of all concerned parties to be heard, an elemental requirement of due process, by the Tariff Commission in
the context of its investigation. The DTI Secretary is not similarly empowered or tasked to hear out the concerns of other interested parties, and if he/she
does so, it arises purely out of volition and not compulsion under law.

Indeed, in this case, it is essential that the position of other than that of the local cement industry should be given due consideration, cement being
an indispensable need for the operation of other industries such as housing and construction. While the general safeguard measures may operate to the
better interests of the domestic cement industries, its deprivation of cheaper cement imports may similarly work to the detriment of these other domestic
industries and correspondingly, the national interest. Notably, the Tariff Commission in this case heard the views on the application of representatives of
other allied industries such as the housing, construction, and cement-bag industries, and other interested parties such as consumer groups and foreign
governments.[103] It is only before the Tariff Commission that their views had been heard, and this is because it is only the Tariff Commission which is
empowered to hear their positions. Since due process requires a judicious consideration of all relevant factors, the Tariff Commission, which is in a better
position to hear these parties than the DTI Secretary, is similarly more capable to render a determination conformably with the due process requirements
than the DTI Secretary.

In a similar vein, Southern Cross aptly notes that in instances when it is the DTI Secretary who initiates motu proprio the application for the safeguard
measure pursuant to Section 6 of the SMA, respondents suggested interpretation would result in the awkward situation wherein the DTI Secretary would
rule upon his own application after it had been evaluated by the Tariff Commission. Pertinently cited is our ruling in Corona v. Court of Appeals[104] that no
man can be at once a litigant and judge.[105] Certainly, this anomalous situation is avoided if it is the Tariff Commission which is tasked with arriving at the
final determination whether the conditions exist to warrant the general safeguard measures. This is the setup provided for by the express provisions of the
SMA, and the problem would arise only if we adopt the interpretation urged upon by respondents.

The Possibility for Administrative Review

Of the Tariff Commissions Determination

The Court has been emphatic that a positive final determination from the Tariff Commission is required in order that the DTI Secretary may impose
a general safeguard measure, and that the DTI Secretary has no power to exercise control and supervision over the Tariff Commission and its final
determination. These conclusions are the necessary consequences of the applicable provisions of the Constitution, the SMA, and laws such as the
Administrative Code. However, the law is silent though on whether this positive final determination may otherwise be subjected to administrative review.

There is no evident legislative intent by the authors of the SMA to provide for a procedure of administrative review. If ever there is a procedure for
administrative review over the final determination of the Tariff Commission, such procedure must be done in a manner that does not contravene or
disregard legislative prerogatives as expressed in the SMA or the Administrative Code, or fundamental constitutional limitations.

In order that such procedure of administrative review would not contravene the law and the constitutional scheme provided by Section 28(2), Article
VI, it is essential to assert that the positive final determination by the Tariff Commission is indispensable as a requisite for the imposition of a general
safeguard measure. The submissions of private respondents and the Separate Opinion cannot be sustained insofar as they hold that the DTI Secretary
can peremptorily ignore or disregard the determinations made by the Tariff Commission. However, if the mode of administrative review were in such a
manner that the administrative superior of the Tariff Commission were to modify or alter its determination, then such reversal may still be valid within the
confines of Section 5 of the SMA, for technically it is still the Tariff Commissions determination, administratively revised as it may be, that would serve as
the basis for the DTI Secretarys action.

However, and fatally for the present petitions, such administrative review cannot be conducted by the DTI Secretary. Even if conceding that the
Tariff Commissions findings may be administratively reviewed, the DTI Secretary has no authority to review or modify the same. We have been emphatic
on the reasons such as that there is no traditional or statutory basis placing the Commission under the control and supervision of the DTI; that to allow
such would contravene due process, especially if the DTI itself were to apply for the safeguard measures motu proprio. To hold otherwise would destroy
the administrative hierarchy, contravene constitutional due process, and disregard the limitations or restrictions provided in the SMA.

Instead, assuming administrative review were available, it is the NEDA that may conduct such review following the principles of administrative law,
and the NEDAs decision in turn is reviewable by the Office of the President. The decision of the Office of the President then effectively substitutes as the
determination of the Tariff Commission, which now forms the basis of the DTI Secretarys decision, which now would be ripe for judicial review by the CTA
under Section 29 of the SMA. This is the only way that administrative review of the Tariff Commissions determination may be sustained without violating
the SMA and its constitutional restrictions and limitations, as well as administrative law.

In bare theory, the NEDA may review, alter or modify the Tariff Commissions final determination, the Commission being an attached agency of the
NEDA. Admittedly, there is nothing in the SMA or any other statute that would prevent the NEDA to exercise such administrative review, and successively,
for the President to exercise in turn review over the NEDAs decision.

17
 Nonetheless, in acknowledging this possibility, the Court, without denigrating the bare principle that administrative officers may exercise control and
supervision over the acts of the bodies under its jurisdiction, realizes that this comes at the expense of a speedy resolution to an application for a safeguard
measure, an application dependent on fluctuating factual conditions. The further delay would foster uncertainty and insecurity within the industry concerned,
as well as with all other allied industries, which in turn may lead to some measure of economic damage. Delay is certain, since judicial review authorized
by law and not administrative review would have the final say. The fact that the SMA did not expressly prohibit administrative review of the final
determination of the Tariff Commission does not negate the supreme advantages of engendering exclusive judicial review over questions arising from the
imposition of a general safeguard measure.

In any event, even if we conceded the possibility of administrative review of the Tariff Commissions final determination by the NEDA, such would
not deny merit to the present petition. It does not change the fact that the Court of Appeals erred in ruling that the DTI Secretary was not bound by the
negative final determination of the Tariff Commission, or that the DTI Secretary acted without jurisdiction when he imposed general safeguard measures
despite the absence of the statutory positive final determination of the Commission.

IV. Courts Interpretation of SMA

In Harmony with Other
Constitutional Provisions

In response to our citation of Section 28(2), Article VI, respondents elevate two arguments grounded in constitutional law. One is based on another
constitutional provision, Section 12, Article XIII, which mandates that [t]he State shall promote the preferential use of Filipino labor, domestic materials and
locally produced goods and adopt measures that help make them competitive. By no means does this provision dictate that the Court favor the domestic
industry in all competing claims that it may bring before this Court. If it were so, judicial proceedings in this country would be rendered a mockery, resolved
as they would be, on the basis of the personalities of the litigants and not their legal positions.

Moreover, the duty imposed on by Section 12, Article XIII falls primarily with Congress, which in that regard enacted the SMA, a law designed to
protect domestic industries from the possible ill-effects of our accession to the global trade order. Inconveniently perhaps for respondents, the SMA also
happens to provide for a procedure under which such protective measures may be enacted. The Court cannot just impose what it deems as the spirit of
the law without giving due regard to its letter.

In like-minded manner, the Separate Opinion loosely states that the purpose of the SMA is to protect or safeguard local industries from increased
importation of foreign products.[106]This inaccurately leaves the impression that the SMA ipso facto unravels a protective cloak that shelters all local
industries and producers, no matter the conditions. Indeed, our country has knowingly chosen to accede to the world trade regime, as expressed in the
GATT and WTO Agreements, despite the understanding that local industries might suffer ill-effects, especially with the easier entry of competing foreign
products. At the same time, these international agreements were designed to constrict protectionist trade policies by its member-countries. Hence, the
median, as expressed by the SMA, does allow for the application of protectionist measures such as tariffs, but only after an elaborate process of
investigation that ensures factual basis and indispensable need for such measures. More accurately, the purpose of the SMA is to provide a process for
the protection or safeguarding of domestic industries that have duly established that there is substantial injury or threat thereof directly caused by the
increased imports. In short, domestic industries are not entitled to safeguard measures as a matter of right or influence.

Respondents also make the astounding argument that the imposition of general safeguard measures should not be seen as a taxation measure, but
instead as an exercise of police power. The vain hope of respondents in divorcing the safeguard measures from the concept of taxation is to exclude from
consideration Section 28(2), Article VI of the Constitution.

This argument can be debunked at length, but it deserves little attention. The motivation behind many taxation measures is the implementation of
police power goals. Progressive income taxes alleviate the margin between rich and poor; the so-called sin taxes on alcohol and tobacco manufacturers
help dissuade the consumers from excessive intake of these potentially harmful products. Taxation is distinguishable from police power as to the means
employed to implement these public good goals. Those doctrines that are unique to taxation arose from peculiar considerations such as those especially
punitive effects of taxation,[107] and the belief that taxes are the lifeblood of the state. [108] These considerations necessitated the evolution of taxation as a
distinct legal concept from police power. Yet at the same time, it has been recognized that taxation may be made the implement of the states police
power.[109]

Even assuming that the SMA should be construed exclusively as a police power measure, the Court recognizes that police power is lodged primarily
in the national legislature, though it may also be exercised by the executive branch by virtue of a valid delegation of legislative power.[110] Considering
these premises, it is clear that police power, however illimitable in theory, is still exercised within the confines of implementing legislation. To declare
otherwise is to sanction rule by whim instead of rule of law. The Congress, in enacting the SMA, has delegated the power to impose general safeguard
measures to the executive branch, but at the same time subjected such imposition to limitations, such as the requirement of a positive final determination
by the Tariff Commission under Section 5. For the executive branch to ignore these boundaries imposed by Congress is to set up an ignoble clash between
the two co-equal branches of government. Considering that the exercise of police power emanates from legislative authority, there is little question that
the prerogative of the legislative branch shall prevail in such a clash.

V. Assailed Decision Consistent

With Ruling in Taada v. Angara

Public respondents allege that the Decision is contrary to our holding in Taada v. Angara,[111] since the Court noted therein that the GATT itself
provides built-in protection from unfair foreign competition and trade practices, which according to the public respondents, was a reason why the Honorable
[Court] ruled the way it did. On the other hand, the Decision eliminates safeguard measures as a mode of defense.

This is balderdash, as with any and all claims that the Decision allows foreign industries to ride roughshod over our domestic enterprises.
The Decision does not prohibit the imposition of general safeguard measures to protect domestic industries in need of protection. All it affirms is that the
positive final determination of the Tariff Commission is first required before the general safeguard measures are imposed and implemented, a neutral
proposition that gives no regard to the nationalities of the parties involved. A positive determination by the Tariff Commission is hardly the elusive Shangri-
la of administrative law. If a particular industry finds it difficult to obtain a positive final determination from the Tariff Commission, it may be simply because
the industry is still sufficiently competitive even in the face of foreign competition. These safeguard measures are designed to ensure salvation, not avarice.

Respondents well have the right to drape themselves in the colors of the flag. Yet these postures hardly advance legal claims, or nationalism for
that matter. The fineries of the costume pageant are no better measure of patriotism than simple obedience to the laws of the Fatherland. And even
assuming that respondents are motivated by genuine patriotic impulses, it must be remembered that under the setup provided by the SMA, it is the facts,
and not impulse, that determine whether the protective safeguard measures should be imposed. As once orated, facts are stubborn things; and whatever
may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence. [112]

It is our goal as judges to enforce the law, and not what we might deem as correct economic policy. Towards this end, we should not construe the
SMA to unduly favor or disfavor domestic industries, simply because the law itself provides for a mechanism by virtue of which the claims of these industries
are thoroughly evaluated before they are favored or disfavored. What we must do is to simply uphold what the law says. Section 5 says that the DTI
Secretary shall impose the general safeguard measures upon the positive final determination of the Tariff Commission. Nothing in the whereas clauses or
the invisible ink provisions of the SMA can magically delete the words positive final determination and Tariff Commission from Section 5.

VI. On Forum-Shopping
18
 We remain convinced that there was no willful and deliberate forum-shopping in this case by Southern Cross. The causes of action that animate this
present petition for review and the petition for review with the CTA are distinct from each other, even though they relate to similar factual antecedents. Yet
it also appears that contrary to the undertaking signed by the President of Southern Cross, Hironobu Ryu, to inform this Court of any similar action or
proceeding pending before any court, tribunal or agency within five (5) days from knowledge thereof, Southern Cross informed this Court only on 12 August
2003 of the petition it had filed with the CTA eleven days earlier. An appropriate sanction is warranted for such failure, but not the dismissal of the petition.

VII. Effects of Courts Resolution

Philcemcor argues that the granting of Southern Crosss Petition should not necessarily lead to the voiding of the Decision of the DTI Secretary dated
5 August 2003 imposing the general safeguard measures. For Philcemcor, the availability of appeal to the CTA as an available and adequate remedy
would have made the Court of Appeals Decision merely erroneous or irregular, but not void. Moreover, the said Decision merely required the DTI Secretary
to render a decision, which could have very well been a decision not to impose a safeguard measure; thus, it could not be said that the annulled decision
resulted from the judgment of the Court of Appeals.

The Court of Appeals Decision was annulled precisely because the appellate court did not have the power to rule on the petition in the first place.
Jurisdiction is necessarily the power to decide a case, and a court which does not have the power to adjudicate a case is one that is bereft of jurisdiction.
We find no reason to disturb our earlier finding that the Court of Appeals Decision is null and void.

At the same time, the Court in its Decision paid particular heed to the peculiarities attaching to the 5 August 2003 Decision of the DTI Secretary. In
the DTI Secretarys Decision, he expressly stated that as a result of the Court of Appeals Decision, there is no legal impediment for the Secretary to decide
on the application. Yet the truth remained that there was a legal impediment, namely, that the decision of the appellate court was not yet final and executory.
Moreover, it was declared null and void, and since the DTI Secretary expressly denominated the Court of Appeals Decision as his basis for deciding to
impose the safeguard measures, the latter decision must be voided as well. Otherwise put, without the Court of Appeals Decision, the DTI
Secretarys Decision of 5 August 2003 would not have been rendered as well.

Accordingly, the Court reaffirms as a nullity the DTI Secretarys Decision dated 5 August 2003. As a necessary consequence, no further action can
be taken on Philcemcors Petition for Extension of the Safeguard Measure. Obviously, if the imposition of the general safeguard measure is void as we
declared it to be, any extension thereof should likewise be fruitless. The proper remedy instead is to file a new application for the imposition of safeguard
measures, subject to the conditions prescribed by the SMA. Should this step be eventually availed of, it is only hoped that the parties involved would
content themselves in observing the proper procedure, instead of making a mockery of the rule of law.

WHEREFORE, respondents Motions for Reconsideration are DENIED WITH FINALITY.

Respondent DTI Secretary is hereby ENJOINED from taking any further action on the pending Petition for Extension of the Safeguard Measure.

Hironobu Ryu, President of petitioner Southern Cross Cement Corporation, and Angara Abello Concepcion Regala & Cruz, counsel petitioner, are
hereby given FIVE (5) days from receipt of this Resolution to EXPLAIN why they should not be meted disciplinary sanction for failing to timely inform the
Court of the filing of Southern Crosss Petition for Review with the Court of Tax Appeals, as adverted to earlier in this Resolution.

SO ORDERED.

I_E3

G.R. No. 92585 May 8, 1992

CALTEX PHILIPPINES, INC., petitioner,

vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE COMMISSIONER
ALBERTO P. CRUZ, respondents.

DAVIDE, JR., J.:

This is a petition erroneously brought under Rule 44 of the Rules of Court 1 questioning the authority of the Commission on Audit (COA) in disallowing
petitioner's claims for reimbursement from the Oil Price Stabilization Fund (OPSF) and seeking the reversal of said Commission's decision denying its
claims for recovery of financing charges from the Fund and reimbursement of underrecovery arising from sales to the National Power Corporation, Atlas
Consolidated Mining and Development Corporation (ATLAS) and Marcopper Mining Corporation (MAR-COPPER), preventing it from exercising the right
to offset its remittances against its reimbursement vis-a-vis the OPSF and disallowing its claims which are still pending resolution before the Office of
Energy Affairs (OEA) and the Department of Finance (DOF).

Pursuant to the 1987 Constitution, 2 any decision, order or ruling of the Constitutional Commissions 3 may be brought to this Court on certiorari by the
aggrieved party within thirty (30) days from receipt of a copy thereof. The certiorari referred to is the special civil action for certiorari under Rule 65 of the
Rules of Court. 4

Considering, however, that the allegations that the COA acted with:
(a) total lack of jurisdiction in completely ignoring and showing absolutely no respect for the findings and rulings of the administrator of the fund itself and
in disallowing a claim which is still pending resolution at the OEA level, and (b) "grave abuse of discretion and completely without jurisdiction" 5 in
declaring that petitioner cannot avail of the right to offset any amount that it may be required under the law to remit to the OPSF against any amount that
it may receive by way of reimbursement therefrom are sufficient to bring this petition within Rule 65 of the Rules of Court, and, considering further the
importance of the issues raised, the error in the designation of the remedy pursued will, in this instance, be excused.

The issues raised revolve around the OPSF created under Section 8 of Presidential Decree (P.D.) No. 1956, as amended by Executive Order (E.O.) No.
137. As amended, said Section 8 reads as follows:

Sec. 8 . There is hereby created a Trust Account in the books of accounts of the Ministry of Energy to be designated as Oil Price
Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or
changes in world market prices of crude oil and imported petroleum products. The Oil Price Stabilization Fund may be sourced from
any of the following:

a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products
subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister
of Finance in consultation with the Board of Energy;

19
 b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as
may be determined by the Minister of Finance in consultation with the Board of Energy;

c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through
an appropriate Order that may be issued by the Board of Energy requiring payment by persons or companies
engaged in the business of importing, manufacturing and/or marketing petroleum products;

d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of
crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange
rate as fixed by the Board of Energy.

The Fund herein created shall be used for the following:

1) To reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting
from exchange rate adjustment and/or increase in world market prices of crude oil;

2) To reimburse the oil companies for possible cost under-recovery incurred as a result of the reduction of
domestic prices of petroleum products. The magnitude of the underrecovery, if any, shall be determined by the
Ministry of Finance. "Cost underrecovery" shall include the following:

i. Reduction in oil company take as directed by the Board of Energy without the
corresponding reduction in the landed cost of oil inventories in the possession of the oil
companies at the time of the price change;

ii. Reduction in internal ad valorem taxes as a result of foregoing government mandated

price reductions;

iii. Other factors as may be determined by the Ministry of Finance to result in cost
underrecovery.

The Oil Price Stabilization Fund (OPSF) shall be administered by the Ministry of Energy.

The material operative facts of this case, as gathered from the pleadings of the parties, are not disputed.

On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred to as Petitioner, directing the latter to remit to the OPSF
its collection, excluding that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized under the aforesaid Section
8 of P.D. No. 1956 which, as of 31 December 1987, amounted to P335,037,649.00 and informing it that, pending such remittance, all of its claims for
reimbursement from the OPSF shall be held in abeyance. 6

On 9 March 1989, the COA sent another letter to petitioner informing it that partial verification with the OEA showed that the grand total of its unremitted
collections of the above tax is P1,287,668,820.00, broken down as follows:

1986 — P233,190,916.00
1987 — 335,065,650.00
1988 — 719,412,254.00;

directing it to remit the same, with interest and surcharges thereon, within sixty (60) days from receipt of the letter; advising it that the COA will hold in
abeyance the audit of all its claims for reimbursement from the OPSF; and directing it to desist from further offsetting the taxes collected against
outstanding claims in 1989 and subsequent periods. 7

In its letter of 3 May 1989, petitioner requested the COA for an early release of its reimbursement certificates from the OPSF covering claims with the
Office of Energy Affairs since June 1987 up to March 1989, invoking in support thereof COA Circular No. 89-299 on the lifting of pre-audit of government
transactions of national government agencies and government-owned or controlled corporations. 8

In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the reimbursement certificates from the OPSF and repeated
its earlier directive to petitioner to forward payment of the latter's unremitted collections to the OPSF to facilitate COA's audit action on the
reimbursement claims. 9

By way of a reply, petitioner, in a letter dated 31 May 1989, submitted to the COA a proposal for the payment of the collections and the recovery of
claims, since the outright payment of the sum of P1.287 billion to the OEA as a prerequisite for the processing of said claims against the OPSF will
cause a very serious impairment of its cash position. 10 The proposal reads:

We, therefore, very respectfully propose the following:

(1) Any procedural arrangement acceptable to COA to facilitate monitoring of payments and reimbursements
will be administered by the ERB/Finance Dept./OEA, as agencies designated by law to administer/regulate
OPSF.

(2) For the retroactive period, Caltex will deliver to OEA, P1.287 billion as payment to OPSF, similarly OEA will
deliver to Caltex the same amount in cash reimbursement from OPSF.

(3) The COA audit will commence immediately and will be conducted expeditiously.

(4) The review of current claims (1989) will be conducted expeditiously to preclude further accumulation of
reimbursement from OPSF.

On 7 June 1989, the COA, with the Chairman taking no part, handed down Decision No. 921 accepting the above-stated proposal but prohibiting
petitioner from further offsetting remittances and reimbursements for the current and ensuing years. 11 Decision No. 921 reads:

20
 This pertains to the within separate requests of Mr. Manuel A. Estrella, President, Petron Corporation, and Mr. Francis Ablan,
President and Managing Director, Caltex (Philippines) Inc., for reconsideration of this Commission's adverse action embodied in its
letters dated February 2, 1989 and March 9, 1989, the former directing immediate remittance to the Oil Price Stabilization Fund of
collections made by the firms pursuant to P.D. 1956, as amended by E.O. No. 137, S. 1987, and the latter reiterating the same
directive but further advising the firms to desist from offsetting collections against their claims with the notice that "this Commission
will hold in abeyance the audit of all . . . claims for reimbursement from the OPSF."

It appears that under letters of authority issued by the Chairman, Energy Regulatory Board, the aforenamed oil companies were
allowed to offset the amounts due to the Oil Price Stabilization Fund against their outstanding claims from the said Fund for the
calendar years 1987 and 1988, pending with the then Ministry of Energy, the government entity charged with administering the
OPSF. This Commission, however, expressing serious doubts as to the propriety of the offsetting of all types of reimbursements
from the OPSF against all categories of remittances, advised these oil companies that such offsetting was bereft of legal basis.
Aggrieved thereby, these companies now seek reconsideration and in support thereof clearly manifest their intent to make
arrangements for the remittance to the Office of Energy Affairs of the amount of collections equivalent to what has been previously
offset, provided that this Commission authorizes the Office of Energy Affairs to prepare the corresponding checks representing
reimbursement from the OPSF. It is alleged that the implementation of such an arrangement, whereby the remittance of collections
due to the OPSF and the reimbursement of claims from the Fund shall be made within a period of not more than one week from
each other, will benefit the Fund and not unduly jeopardize the continuing daily cash requirements of these firms.

Upon a circumspect evaluation of the circumstances herein obtaining, this Commission perceives no further objectionable feature in
the proposed arrangement, provided that 15% of whatever amount is due from the Fund is retained by the Office of Energy Affairs,
the same to be answerable for suspensions or disallowances, errors or discrepancies which may be noted in the course of audit and
surcharges for late remittances without prejudice to similar future retentions to answer for any deficiency in such surcharges, and
provided further that no offsetting of remittances and reimbursements for the current and ensuing years shall be allowed.

Pursuant to this decision, the COA, on 18 August 1989, sent the following letter to Executive Director Wenceslao R. De la Paz of the Office of Energy
Affairs: 12

Dear Atty. dela Paz:

Pursuant to the Commission on Audit Decision No. 921 dated June 7, 1989, and based on our initial verification of documents
submitted to us by your Office in support of Caltex (Philippines), Inc. offsets (sic) for the year 1986 to May 31, 1989, as well as its
outstanding claims against the Oil Price Stabilization Fund (OPSF) as of May 31, 1989, we are pleased to inform your Office that
Caltex (Philippines), Inc. shall be required to remit to OPSF an amount of P1,505,668,906, representing remittances to the OPSF
which were offset against its claims reimbursements (net of unsubmitted claims). In addition, the Commission hereby authorize (sic)
the Office of Energy Affairs (OEA) to cause payment of P1,959,182,612 to Caltex, representing claims initially allowed in audit, the
details of which are presented hereunder: . . .

As presented in the foregoing computation the disallowances totalled P387,683,535, which included P130,420,235 representing
those claims disallowed by OEA, details of which is (sic) shown in Schedule 1 as summarized as follows:

Disallowance of COA
Particulars Amount

Recovery of financing charges P162,728,475 /a

Product sales 48,402,398 /b
Inventory losses
Borrow loan arrangement 14,034,786 /c
Sales to Atlas/Marcopper 32,097,083 /d
Sales to NPC 558
——————
P257,263,300

Disallowances of OEA 130,420,235

————————— ——————
Total P387,683,535

The reasons for the disallowances are discussed hereunder:

a. Recovery of Financing Charges

Review of the provisions of P.D. 1596 as amended by E.O. 137 seems to indicate that recovery of financing charges by oil
companies is not among the items for which the OPSF may be utilized. Therefore, it is our view that recovery of financing charges
has no legal basis. The mechanism for such claims is provided in DOF Circular 1-87.

b. Product Sales –– Sales to International Vessels/Airlines

BOE Resolution No. 87-01 dated February 7, 1987 as implemented by OEA Order No. 87-03-095 indicating that (sic) February 7,
1987 as the effectivity date that (sic) oil companies should pay OPSF impost on export sales of petroleum products. Effective
February 7, 1987 sales to international vessels/airlines should not be included as part of its domestic sales. Changing the effectivity
date of the resolution from February 7, 1987 to October 20, 1987 as covered by subsequent ERB Resolution No. 88-12 dated
November 18, 1988 has allowed Caltex to include in their domestic sales volumes to international vessels/airlines and claim the
corresponding reimbursements from OPSF during the period. It is our opinion that the effectivity of the said resolution should be
February 7, 1987.

c. Inventory losses –– Settlement of Ad Valorem

We reviewed the system of handling Borrow and Loan (BLA) transactions including the related BLA agreement, as they affect the
claims for reimbursements of ad valorem taxes. We observed that oil companies immediately settle ad valorem taxes for BLA
transaction (sic). Loan balances therefore are not tax paid inventories of Caltex subject to reimbursements but those of the
borrower. Hence, we recommend reduction of the claim for July, August, and November, 1987 amounting to P14,034,786.

d. Sales to Atlas/Marcopper

21
 LOI No. 1416 dated July 17, 1984 provides that "I hereby order and direct the suspension of payment of all taxes, duties, fees,
imposts and other charges whether direct or indirect due and payable by the copper mining companies in distress to the national
and local governments." It is our opinion that LOI 1416 which implements the exemption from payment of OPSF imposts as effected
by OEA has no legal basis.

Furthermore, we wish to emphasize that payment to Caltex (Phil.) Inc., of the amount as herein authorized shall be subject to
availability of funds of OPSF as of May 31, 1989 and applicable auditing rules and regulations. With regard to the disallowances, it is
further informed that the aggrieved party has 30 days within which to appeal the decision of the Commission in accordance with law.

On 8 September 1989, petitioner filed an Omnibus Request for the Reconsideration of the decision based on the following grounds: 13

A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER EXISTING RULES, ORDERS, RESOLUTIONS, CIRCULARS
ISSUED BY THE DEPARTMENT OF FINANCE AND THE ENERGY REGULATORY BOARD PURSUANT TO EXECUTIVE
ORDER NO. 137.

xxx xxx xxx

B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF EXERCISE OF EXECUTIVE POWER BY DEPARTMENT OF

FINANCE AND ENERGY REGULATORY BOARD ARE LEGAL AND SHOULD BE RESPECTED AND APPLIED UNLESS
DECLARED NULL AND VOID BY COURTS OR REPEALED BY LEGISLATION.

xxx xxx xxx

C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT, AS AUTHORIZED BY THE EXECUTIVE BRANCH OF
GOVERNMENT, REMAINS VALID.

xxx xxx xxx

14
On 6 November 1989, petitioner filed with the COA a Supplemental Omnibus Request for Reconsideration.

On 16 February 1990, the COA, with Chairman Domingo taking no part and with Commissioner Fernandez dissenting in part, handed down Decision
No. 1171 affirming the disallowance for recovery of financing charges, inventory losses, and sales to MARCOPPER and ATLAS, while allowing the
recovery of product sales or those arising from export sales. 15 Decision No. 1171 reads as follows:

Anent the recovery of financing charges you contend that Caltex Phil. Inc. has the .authority to recover financing charges from the
OPSF on the basis of Department of Finance (DOF) Circular 1-87, dated February 18, 1987, which allowed oil companies to
"recover cost of financing working capital associated with crude oil shipments," and provided a schedule of reimbursement in terms
of peso per barrel. It appears that on November 6, 1989, the DOF issued a memorandum to the President of the Philippines
explaining the nature of these financing charges and justifying their reimbursement as follows:

As part of your program to promote economic recovery, . . . oil companies (were authorized) to refinance their
imports of crude oil and petroleum products from the normal trade credit of 30 days up to 360 days from date of
loading . . . Conformably . . ., the oil companies deferred their foreign exchange remittances for purchases by
refinancing their import bills from the normal 30-day payment term up to the desired 360 days. This refinancing
of importations carried additional costs (financing charges) which then became, due to government mandate, an
inherent part of the cost of the purchases of our country's oil requirement.

We beg to disagree with such contention. The justification that financing charges increased oil costs and the schedule of
reimbursement rate in peso per barrel (Exhibit 1) used to support alleged increase (sic) were not validated in our independent
inquiry. As manifested in Exhibit 2, using the same formula which the DOF used in arriving at the reimbursement rate but using
comparable percentages instead of pesos, the ineluctable conclusion is that the oil companies are actually gaining rather than losing
from the extension of credit because such extension enables them to invest the collections in marketable securities which have
much higher rates than those they incur due to the extension. The Data we used were obtained from CPI (CALTEX) Management
and can easily be verified from our records.

With respect to product sales or those arising from sales to international vessels or airlines, . . ., it is believed that export sales
(product sales) are entitled to claim refund from the OPSF.

As regard your claim for underrecovery arising from inventory losses, . . . It is the considered view of this Commission that the OPSF
is not liable to refund such surtax on inventory losses because these are paid to BIR and not OPSF, in view of which CPI (CALTEX)
should seek refund from BIR. . . .

Finally, as regards the sales to Atlas and Marcopper, it is represented that you are entitled to claim recovery from the OPSF
pursuant to LOI 1416 issued on July 17, 1984, since these copper mining companies did not pay CPI (CALTEX) and OPSF imposts
which were added to the selling price.

Upon a circumspect evaluation, this Commission believes and so holds that the CPI (CALTEX) has no authority to claim
reimbursement for this uncollected OPSF impost because LOI 1416 dated July 17, 1984, which exempts distressed mining
companies from "all taxes, duties, import fees and other charges" was issued when OPSF was not yet in existence and could not
have contemplated OPSF imposts at the time of its formulation. Moreover, it is evident that OPSF was not created to aid distressed
mining companies but rather to help the domestic oil industry by stabilizing oil prices.

Unsatisfied with the decision, petitioner filed on 28 March 1990 the present petition wherein it imputes to the COA the commission of the following
errors: 16

RESPONDENT COMMISSION ERRED IN DISALLOWING RECOVERY OF FINANCING CHARGES FROM THE OPSF.

II

22
 RESPONDENT COMMISSION ERRED IN DISALLOWING
CPI's 17 CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY ARISING FROM SALES TO NPC.

III

RESPONDENT COMMISSION ERRED IN DENYING CPI's CLAIMS FOR REIMBURSEMENT ON SALES TO ATLAS AND
MARCOPPER.

IV

RESPONDENT COMMISSION ERRED IN PREVENTING CPI FROM EXERCISING ITS LEGAL RIGHT TO OFFSET ITS
REMITTANCES AGAINST ITS REIMBURSEMENT VIS-A-VIS THE OPSF.

RESPONDENT COMMISSION ERRED IN DISALLOWING CPI's CLAIMS WHICH ARE STILL PENDING RESOLUTION BY (SIC)
THE OEA AND THE DOF.

In the Resolution of 5 April 1990, this Court required the respondents to comment on the petition within ten (10) days from notice. 18

On 6 September 1990, respondents COA and Commissioners Fernandez and Cruz, assisted by the Office of the Solicitor General, filed their
Comment. 19

This Court resolved to give due course to this petition on 30 May 1991 and required the parties to file their respective Memoranda within twenty (20)
days from notice. 20

In a Manifestation dated 18 July 1991, the Office of the Solicitor General prays that the Comment filed on 6 September 1990 be considered as the
Memorandum for respondents. 21

Upon the other hand, petitioner filed its Memorandum on 14 August 1991.

I. Petitioner dwells lengthily on its first assigned error contending, in support thereof, that:

(1) In view of the expanded role of the OPSF pursuant to Executive Order No. 137, which added a second purpose, to wit:

2) To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of
petroleum products. The magnitude of the underrecovery, if any, shall be determined by the Ministry of Finance. "Cost
underrecovery" shall include the following:

i. Reduction in oil company take as directed by the Board of Energy without the corresponding reduction in the
landed cost of oil inventories in the possession of the oil companies at the time of the price change;

ii. Reduction in internal ad valorem taxes as a result of foregoing government mandated price reductions;

iii. Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.

the "other factors" mentioned therein that may be determined by the Ministry (now Department) of Finance may include financing charges for "in
essence, financing charges constitute unrecovered cost of acquisition of crude oil incurred by the oil companies," as explained in the 6 November 1989
Memorandum to the President of the Department of Finance; they "directly translate to cost underrecovery in cases where the money market placement
rates decline and at the same time the tax on interest income increases. The relationship is such that the presence of underrecovery or overrecovery is
directly dependent on the amount and extent of financing charges."

(2) The claim for recovery of financing charges has clear legal and factual basis; it was filed on the basis of Department of Finance Circular No.
1-87, dated 18 February 1987, which provides:

To allow oil companies to recover the costs of financing working capital associated with crude oil shipments, the following guidelines
on the utilization of the Oil Price Stabilization Fund pertaining to the payment of the foregoing (sic) exchange risk premium and
recovery of financing charges will be implemented:

1. The OPSF foreign exchange premium shall be reduced to a flat rate of one (1) percent for the first (6) months
and 1/32 of one percent per month thereafter up to a maximum period of one year, to be applied on crude oil'
shipments from January 1, 1987. Shipments with outstanding financing as of January 1, 1987 shall be charged
on the basis of the fee applicable to the remaining period of financing.

2. In addition, for shipments loaded after January 1987, oil companies shall be allowed to recover financing
charges directly from the OPSF per barrel of crude oil based on the following schedule:

Financing Period
Reimbursement
Rate
Pesos per Barrel

Less than 180 days None

180 days to 239 days 1.90
241 (sic) days to 299 4.02
300 days to 369 (sic) days 6.16
360 days or more 8.28

The above rates shall be subject to review every sixty

days. 22
23
Pursuant to this circular, the Department of Finance, in its letter of 18 February 1987, advised the Office of Energy Affairs as follows:

HON. VICENTE T. PATERNO

Deputy Executive Secretary
For Energy Affairs
Office of the President
Makati, Metro Manila

Dear Sir:

This refers to the letters of the Oil Industry dated December 4, 1986 and February 5, 1987 and subsequent discussions held by the
Price Review committee on February 6, 1987.

On the basis of the representations made, the Department of Finance recognizes the necessity to reduce the foreign exchange risk
premium accruing to the Oil Price Stabilization Fund (OPSF). Such a reduction would allow the industry to recover partly associated
financing charges on crude oil imports. Accordingly, the OPSF foreign exchange risk fee shall be reduced to a flat charge of 1% for
the first six (6) months plus 1/32% of 1% per month thereafter up to a maximum period of one year, effective January 1, 1987. In
addition, since the prevailing company take would still leave unrecovered financing charges, reimbursement may be secured from
the OPSF in accordance with the provisions of the attached Department of Finance circular. 23

Acting on this letter, the OEA issued on 4 May 1987 Order No. 87-05-096 which contains the guidelines for the computation of the foreign exchange risk
fee and the recovery of financing charges from the OPSF, to wit:

B. FINANCE CHARGES

1. Oil companies shall be allowed to recover financing charges directly from the OPSF for both crude and
product shipments loaded after January 1, 1987 based on the following rates:

Financing Period
Reimbursement
Rate
(PBbl.)

Less than 180 days None

180 days to 239 days 1.90
240 days to 229 (sic) days 4.02
300 days to 359 days 6.16
360 days to more 8.28

24
2. The above rates shall be subject to review every sixty days.

Then on 22 November 1988, the Department of Finance issued Circular No. 4-88 imposing further guidelines on the recoverability of financing charges,
to wit:

Following are the supplemental rules to Department of Finance Circular No. 1-87 dated February 18, 1987 which allowed the
recovery of financing charges directly from the Oil Price Stabilization Fund. (OPSF):

1. The Claim for reimbursement shall be on a per shipment basis.

2. The claim shall be filed with the Office of Energy Affairs together with the claim on peso cost differential for a
particular shipment and duly certified supporting documents providedfor under Ministry of Finance No. 11-85.

3. The reimbursement shall be on the form of reimbursement certificate (Annex A) to be issued by the Office of
Energy Affairs. The said certificate may be used to offset against amounts payable to the OPSF. The oil
companies may also redeem said certificates in cash if not utilized, subject to availability of funds. 25

The OEA disseminated this Circular to all oil companies in its Memorandum Circular No. 88-12-017. 26

The COA can neither ignore these issuances nor formulate its own interpretation of the laws in the light of the determination of executive agencies. The
determination by the Department of Finance and the OEA that financing charges are recoverable from the OPSF is entitled to great weight and
consideration. 27 The function of the COA, particularly in the matter of allowing or disallowing certain expenditures, is limited to the promulgation of
accounting and auditing rules for, among others, the disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or
uses of government funds and properties. 28

(3) Denial of petitioner's claim for reimbursement would be inequitable. Additionally, COA's claim that petitioner is gaining, instead of losing, from the
extension of credit, is belatedly raised and not supported by expert analysis.

In impeaching the validity of petitioner's assertions, the respondents argue that:

1. The Constitution gives the COA discretionary power to disapprove irregular or unnecessary government expenditures and as the
monetary claims of petitioner are not allowed by law, the COA acted within its jurisdiction in denying them;

2. P.D. No. 1956 and E.O. No. 137 do not allow reimbursement of financing charges from the OPSF;

3. Under the principle of ejusdem generis, the "other factors" mentioned in the second purpose of the OPSF pursuant to E.O. No.
137 can only include "factors which are of the same nature or analogous to those enumerated;"

4. In allowing reimbursement of financing charges from OPSF, Circular No. 1-87 of the Department of Finance violates P.D. No.
1956 and E.O. No. 137; and

24
 5. Department of Finance rules and regulations implementing P.D. No. 1956 do not likewise allow reimbursement of financing
charges. 29

We find no merit in the first assigned error.

As to the power of the COA, which must first be resolved in view of its primacy, We find the theory of petitioner –– that such does not extend to the
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or use of government funds and properties, but only to
the promulgation of accounting and auditing rules for, among others, such disallowance –– to be untenable in the light of the provisions of the 1987
Constitution and related laws.

Section 2, Subdivision D, Article IX of the 1987 Constitution expressly provides:

Sec. 2(l). The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to
the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned and controlled corporations with
original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal
autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or
through the government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or
equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such
measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the
general accounts, of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting
papers pertaining thereto.

(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and
examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or,
unconscionable expenditures, or uses of government funds and properties.

30
These present powers, consistent with the declared independence of the Commission, are broader and more extensive than that conferred by the
1973 Constitution. Under the latter, the Commission was empowered to:

Examine, audit, and settle, in accordance with law and regulations, all accounts pertaining to the revenues, and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities including government-owned or controlled corporations, keep the general accounts of the Government
and, for such period as may be provided by law, preserve the vouchers pertaining thereto; and promulgate accounting and auditing
rules and regulations including those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or uses of
funds and property. 31

Upon the other hand, under the 1935 Constitution, the power and authority of the COA's precursor, the General Auditing Office, were, unfortunately,
limited; its very role was markedly passive. Section 2 of Article XI thereofprovided:

Sec. 2. The Auditor General shall examine, audit, and settle all accounts pertaining to the revenues and receipts from whatever
source, including trust funds derived from bond issues; and audit, in accordance with law and administrative regulations, all
expenditures of funds or property pertaining to or held in trust by the Government or the provinces or municipalities thereof. He shall
keep the general accounts of the Government and the preserve the vouchers pertaining thereto. It shall be the duty of the Auditor
General to bring to the attention of the proper administrative officer expenditures of funds or property which, in his opinion, are
irregular, unnecessary, excessive, or extravagant. He shall also perform such other functions as may be prescribed by law.

As clearly shown above, in respect to irregular, unnecessary, excessive or extravagant expenditures or uses of funds, the 1935 Constitution did not
grant the Auditor General the power to issue rules and regulations to prevent the same. His was merely to bring that matter to the attention of the proper
administrative officer.

The ruling on this particular point, quoted by petitioner from the cases of Guevarra vs. Gimenez 32 and Ramos vs.Aquino, 33 are no longer controlling as
the two (2) were decided in the light of the 1935 Constitution.

There can be no doubt, however, that the audit power of the Auditor General under the 1935 Constitution and the Commission on Audit under the 1973
Constitution authorized them to disallow illegal expenditures of funds or uses of funds and property. Our present Constitution retains that same power
and authority, further strengthened by the definition of the COA's general jurisdiction in Section 26 of the Government Auditing Code of the
Philippines 34 and Administrative Code of 1987. 35 Pursuant to its power to promulgate accounting and auditing rules and regulations for the prevention of
irregular, unnecessary, excessive or extravagant expenditures or uses of funds, 36 the COA promulgated on 29 March 1977 COA Circular No. 77-55.
Since the COA is responsible for the enforcement of the rules and regulations, it goes without saying that failure to comply with them is a ground for
disapproving the payment of the proposed expenditure. As observed by one of the Commissioners of the 1986 Constitutional Commission, Fr. Joaquin
G. Bernas: 37

It should be noted, however, that whereas under Article XI, Section 2, of the 1935 Constitution the Auditor General could not correct
"irregular, unnecessary, excessive or extravagant" expenditures of public funds but could only "bring [the matter] to the attention of
the proper administrative officer," under the 1987 Constitution, as also under the 1973 Constitution, the Commission on Audit can
"promulgate accounting and auditing rules and regulations including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties." Hence, since
the Commission on Audit must ultimately be responsible for the enforcement of these rules and regulations, the failure to comply
with these regulations can be a ground for disapproving the payment of a proposed expenditure.

Indeed, when the framers of the last two (2) Constitutions conferred upon the COA a more active role and invested it with broader and more extensive
powers, they did not intend merely to make the COA a toothless tiger, but rather envisioned a dynamic, effective, efficient and independent watchdog of
the Government.

The issue of the financing charges boils down to the validity of Department of Finance Circular No. 1-87, Department of Finance Circular No. 4-88 and
the implementing circulars of the OEA, issued pursuant to Section 8, P.D. No. 1956, as amended by E.O. No. 137, authorizing it to determine "other
factors" which may result in cost underrecovery and a consequent reimbursement from the OPSF.

The Solicitor General maintains that, following the doctrine of ejusdem generis, financing charges are not included in "cost underrecovery" and,
therefore, cannot be considered as one of the "other factors." Section 8 of P.D. No. 1956, as amended by E.O. No. 137, does not explicitly define what
"cost underrecovery" is. It merely states what it includes. Thus:

25
 . . . "Cost underrecovery" shall include the following:

i. Reduction in oil company takes as directed by the Board of Energy without the corresponding reduction in the landed cost of oil
inventories in the possession of the oil companies at the time of the price change;

ii. Reduction in internal ad valorem taxes as a result of foregoing government mandated price reductions;

iii. Other factors as may be determined by the Ministry of Finance to result in cost underrecovery.

These "other factors" can include only those which are of the same class or nature as the two specifically enumerated in subparagraphs (i) and (ii). A
common characteristic of both is that they are in the nature of government mandated price reductions. Hence, any other factor which seeks to be a part
of the enumeration, or which could qualify as a cost underrecovery, must be of the same class or nature as those specifically enumerated.

Petitioner, however, suggests that E.O. No. 137 intended to grant the Department of Finance broad and unrestricted authority to determine or define
"other factors."

Both views are unacceptable to this Court.

The rule of ejusdem generis states that "[w]here general words follow an enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent, but are held to be as applying only to persons or things of the same kind or
class as those specifically mentioned. 38 A reading of subparagraphs (i) and (ii) easily discloses that they do not have a common characteristic. The first
relates to price reduction as directed by the Board of Energy while the second refers to reduction in internal ad valoremtaxes. Therefore, subparagraph
(iii) cannot be limited by the enumeration in these subparagraphs. What should be considered for purposes of determining the "other factors" in
subparagraph (iii) is the first sentence of paragraph (2) of the Section which explicitly allows cost underrecovery only if such were incurred as a result of
the reduction of domestic prices of petroleum products.

Although petitioner's financing losses, if indeed incurred, may constitute cost underrecovery in the sense that such were incurred as a result of the
inability to fully offset financing expenses from yields in money market placements, they do not, however, fall under the foregoing provision of P.D. No.
1956, as amended, because the same did not result from the reduction of the domestic price of petroleum products. Until paragraph (2), Section 8 of the
decree, as amended, is further amended by Congress, this Court can do nothing. The duty of this Court is not to legislate, but to apply or interpret the
law. Be that as it may, this Court wishes to emphasize that as the facts in this case have shown, it was at the behest of the Government that petitioner
refinanced its oil import payments from the normal 30-day trade credit to a maximum of 360 days. Petitioner could be correct in its assertion that owing
to the extended period for payment, the financial institution which refinanced said payments charged a higher interest, thereby resulting in higher
financing expenses for the petitioner. It would appear then that equity considerations dictate that petitioner should somehow be allowed to recover its
financing losses, if any, which may have been sustained because it accommodated the request of the Government. Although under Section 29 of the
National Internal Revenue Code such losses may be deducted from gross income, the effect of that loss would be merely to reduce its taxable income,
but not to actually wipe out such losses. The Government then may consider some positive measures to help petitioner and others similarly situated to
obtain substantial relief. An amendment, as aforestated, may then be in order.

Upon the other hand, to accept petitioner's theory of "unrestricted authority" on the part of the Department of Finance to determine or define "other
factors" is to uphold an undue delegation of legislative power, it clearly appearing that the subject provision does not provide any standard for the
exercise of the authority. It is a fundamental rule that delegation of legislative power may be sustained only upon the ground that some standard for its
exercise is provided and that the legislature, in making the delegation, has prescribed the manner of the exercise of the delegated authority. 39

Finally, whether petitioner gained or lost by reason of the extensive credit is rendered irrelevant by reason of the foregoing disquisitions. It may
nevertheless be stated that petitioner failed to disprove COA's claim that it had in fact gained in the process. Otherwise stated, petitioner failed to
sufficiently show that it incurred a loss. Such being the case, how can petitioner claim for reimbursement? It cannot have its cake and eat it too.

II. Anent the claims arising from sales to the National Power Corporation, We find for the petitioner. The respondents themselves admit in their Comment
that underrecovery arising from sales to NPC are reimbursable because NPC was granted full exemption from the payment of taxes; to prove this,
respondents trace the laws providing for such exemption. 40 The last law cited is the Fiscal Incentives Regulatory Board's Resolution No. 17-87 of 24
June 1987 which provides, in part, "that the tax and duty exemption privileges of the National Power Corporation, including those pertaining to its
domestic purchases of petroleum and petroleum products . . . are restored effective March 10, 1987." In a Memorandum issued on 5 October 1987 by
the Office of the President, NPC's tax exemption was confirmed and approved.

Furthermore, as pointed out by respondents, the intention to exempt sales of petroleum products to the NPC is evident in the recently passed Republic
Act No. 6952 establishing the Petroleum Price Standby Fund to support the OPSF. 41 The pertinent part of Section 2, Republic Act No. 6952 provides:

Sec. 2. Application of the Fund shall be subject to the following conditions:

(1) That the Fund shall be used to reimburse the oil companies for (a) cost increases of imported crude oil and
finished petroleum products resulting from foreign exchange rate adjustments and/or increases in world market
prices of crude oil; (b) cost underrecovery incurred as a result of fuel oil sales to the National Power Corporation
(NPC); and (c) other cost underrecoveries incurred as may be finally decided by the Supreme
Court; . . .

Hence, petitioner can recover its claim arising from sales of petroleum products to the National Power Corporation.

III. With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER, petitioner relies on Letter of Instruction (LOI) 1416, dated 17 July
1984, which ordered the suspension of payments of all taxes, duties, fees and other charges, whether direct or indirect, due and payable by the copper
mining companies in distress to the national government. Pursuant to this LOI, then Minister of Energy, Hon. Geronimo Velasco, issued Memorandum
Circular No. 84-11-22 advising the oil companies that Atlas Consolidated Mining Corporation and Marcopper Mining Corporation are among those
declared to be in distress.

In denying the claims arising from sales to ATLAS and MARCOPPER, the COA, in its 18 August 1989 letter to Executive Director Wenceslao R. de la
Paz, states that "it is our opinion that LOI 1416 which implements the exemption from payment of OPSF imposts as effected by OEA has no legal
basis;" 42 in its Decision No. 1171, it ruled that "the CPI (CALTEX) (Caltex) has no authority to claim reimbursement for this uncollected impost because
LOI 1416 dated July 17, 1984, . . . was issued when OPSF was not yet in existence and could not have contemplated OPSF imposts at the time of its
formulation." 43 It is further stated that: "Moreover, it is evident that OPSF was not created to aid distressed mining companies but rather to help the
domestic oil industry by stabilizing oil prices."

In sustaining COA's stand, respondents vigorously maintain that LOI 1416 could not have intended to exempt said distressed mining companies from
the payment of OPSF dues for the following reasons:

26
 a. LOI 1416 granting the alleged exemption was issued on July 17, 1984. P.D. 1956 creating the OPSF was promulgated on
October 10, 1984, while E.O. 137, amending P.D. 1956, was issued on February 25, 1987.

b. LOI 1416 was issued in 1984 to assist distressed copper mining companies in line with the government's effort to prevent the
collapse of the copper industry. P.D No. 1956, as amended, was issued for the purpose of minimizing frequent price changes
brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum product's;
and

c. LOI 1416 caused the "suspension of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and
payable by the copper mining companies in distress to the Notional and Local Governments . . ." On the other hand, OPSF dues are
not payable by (sic) distressed copper companies but by oil companies. It is to be noted that the copper mining companies do not
pay OPSF dues. Rather, such imposts are built in or already incorporated in the prices of oil products. 44

Lastly, respondents allege that while LOI 1416 suspends the payment of taxes by distressed mining companies, it does not accord petitioner the same
privilege with respect to its obligation to pay OPSF dues.

We concur with the disquisitions of the respondents. Aside from such reasons, however, it is apparent that LOI 1416 was never published in the Official
Gazette 45 as required by Article 2 of the Civil Code, which reads:

Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette, unless it is
otherwise provided. . . .

In applying said provision, this Court ruled in the case of Tañada vs. Tuvera: 46

WHEREFORE, the Court hereby orders respondents to publish in the Official Gazette all unpublished presidential issuances which
are of general application, and unless so published they shall have no binding force and effect.

47
Resolving the motion for reconsideration of said decision, this Court, in its Resolution promulgated on 29 December 1986, ruled:

We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their
effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative
powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution.
Administrative rules and regulations must also be published if their purpose is to enforce or implement existing laws pursuant also to
a valid delegation.

xxx xxx xxx

WHEREFORE, it is hereby declared that all laws as above defined shall immediately upon their approval, or as soon thereafter as
possible, be published in full in the Official Gazette, to become effective only after fifteen days from their publication, or on another
date specified by the legislature, in accordance with Article 2 of the Civil Code.

LOI 1416 has, therefore, no binding force or effect as it was never published in the Official Gazette after its issuance or at any time after the decision in
the abovementioned cases.

Article 2 of the Civil Code was, however, later amended by Executive Order No. 200, issued on 18 June 1987. As amended, the said provision now
reads:

Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper
of general circulation in the Philippines, unless it is otherwise provided.

We are not aware of the publication of LOI 1416 in any newspaper of general circulation pursuant to Executive Order No. 200.

Furthermore, even granting arguendo that LOI 1416 has force and effect, petitioner's claim must still fail. Tax exemptions as a general rule are construed
strictly against the grantee and liberally in favor of the taxing authority. 48The burden of proof rests upon the party claiming exemption to prove that it is in
fact covered by the exemption so claimed. The party claiming exemption must therefore be expressly mentioned in the exempting law or at least be
within its purview by clear legislative intent.

In the case at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to ATLAS and MARCOPPER, to claim reimbursement from
the OPSF under LOI 1416. Though LOI 1416 may suspend the payment of taxes by copper mining companies, it does not give petitioner the same
privilege with respect to the payment of OPSF dues.

IV. As to COA's disallowance of the amount of P130,420,235.00, petitioner maintains that the Department of Finance has still to issue a final and
definitive ruling thereon; accordingly, it was premature for COA to disallow it. By doing so, the latter acted beyond its jurisdiction. 49 Respondents, on the
other hand, contend that said amount was already disallowed by the OEA for failure to substantiate it. 50 In fact, when OEA submitted the claims of
petitioner for pre-audit, the abovementioned amount was already excluded.

An examination of the records of this case shows that petitioner failed to prove or substantiate its contention that the amount of P130,420,235.00 is still
pending before the OEA and the DOF. Additionally, We find no reason to doubt the submission of respondents that said amount has already been
passed upon by the OEA. Hence, the ruling of respondent COA disapproving said claim must be upheld.

V. The last issue to be resolved in this case is whether or not the amounts due to the OPSF from petitioner may be offset against petitioner's outstanding
claims from said fund. Petitioner contends that it should be allowed to offset its claims from the OPSF against its contributions to the fund as this has
been allowed in the past, particularly in the years 1987 and 1988. 51

Furthermore, petitioner cites, as bases for offsetting, the provisions of the New Civil Code on compensation and Section 21, Book V, Title I-B of the
Revised Administrative Code which provides for "Retention of Money for Satisfaction of Indebtedness to Government." 52 Petitioner also mentions
communications from the Board of Energy and the Department of Finance that supposedly authorize compensation.

27
Respondents, on the other hand, citing Francia vs. IAC and Fernandez, 53 contend that there can be no offsetting of taxes against the claims that a
taxpayer may have against the government, as taxes do not arise from contracts or depend upon the will of the taxpayer, but are imposed by law.
Respondents also allege that petitioner's reliance on Section 21, Book V, Title I-B of the Revised Administrative Code, is misplaced because "while this
provision empowers the COA to withhold payment of a government indebtedness to a person who is also indebted to the government and apply the
government indebtedness to the satisfaction of the obligation of the person to the government, like authority or right to make compensation is not given
to the private person." 54 The reason for this, as stated in Commissioner of Internal Revenue vs. Algue, Inc., 55 is that money due the government, either
in the form of taxes or other dues, is its lifeblood and should be collected without hindrance. Thus, instead of giving petitioner a reason for compensation
or set-off, the Revised Administrative Code makes it the respondents' duty to collect petitioner's indebtedness to the OPSF.

Refuting respondents' contention, petitioner claims that the amounts due from it do not arise as a result of taxation because "P.D. 1956, amended, did
not create a source of taxation; it instead established a special fund . . .," 56 and that the OPSF contributions do not go to the general fund of the state
and are not used for public purpose, i.e., not for the support of the government, the administration of law, or the payment of public expenses. This
alleged lack of a public purpose behind OPSF exactions distinguishes such from a tax. Hence, the ruling in the Francia case is inapplicable.

Lastly, petitioner cites R.A. No. 6952 creating the Petroleum Price Standby Fund to support the OPSF; the said law provides in part that:

Sec. 2. Application of the fund shall be subject to the following conditions:

xxx xxx xxx

(3) That no amount of the Petroleum Price Standby Fund shall be used to pay any oil company which has an
outstanding obligation to the Government without said obligation being offset first, subject to the requirements of
compensation or offset under the Civil Code.

We find no merit in petitioner's contention that the OPSF contributions are not for a public purpose because they go to a special fund of the government.
Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of the government; taxes may be levied with a
regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within
the police power of the state. 57 There can be no doubt that the oil industry is greatly imbued with public interest as it vitally affects the general welfare.
Any unregulated increase in oil prices could hurt the lives of a majority of the people and cause economic crisis of untold proportions. It would have a
chain reaction in terms of, among others, demands for wage increases and upward spiralling of the cost of basic commodities. The stabilization then of
oil prices is of prime concern which the state, via its police power, may properly address.

Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that the source of OPSF is taxation. No amount of semantical juggleries could dim
this fact.

It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government. 58Taxes cannot be the subject of
compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off. 59

We may even further state that technically, in respect to the taxes for the OPSF, the oil companies merely act as agents for the Government in the
latter's collection since the taxes are, in reality, passed unto the end-users –– the consuming public. In that capacity, the petitioner, as one of such
companies, has the primary obligation to account for and remit the taxes collected to the administrator of the OPSF. This duty stems from the fiduciary
relationship between the two; petitioner certainly cannot be considered merely as a debtor. In respect, therefore, to its collection for the OPSF vis-a-
vis its claims for reimbursement, no compensation is likewise legally feasible. Firstly, the Government and the petitioner cannot be said to be mutually
debtors and creditors of each other. Secondly, there is no proof that petitioner's claim is already due and liquidated. Under Article 1279 of the Civil Code,
in order that compensation may be proper, it is necessary that:

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

(2) both debts consist in a sum of :money, or if the things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;

(3) the two (2) debts be due;

(4) they be liquidated and demandable;

(5) over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the
debtor.

That compensation had been the practice in the past can set no valid precedent. Such a practice has no legal basis. Lastly, R.A. No. 6952 does not
authorize oil companies to offset their claims against their OPSF contributions. Instead, it prohibits the government from paying any amount from the
Petroleum Price Standby Fund to oil companies which have outstanding obligations with the government, without said obligation being offset first subject
to the rules on compensation in the Civil Code.

WHEREFORE, in view of the foregoing, judgment is hereby rendered AFFIRMING the challenged decision of the Commission on Audit, except that
portion thereof disallowing petitioner's claim for reimbursement of underrecovery arising from sales to the National Power Corporation, which is hereby
allowed.

With costs against petitioner.

SO ORDERED.

I_E4

SECOND DIVISION

[G.R. No. 135639. February 27, 2002]

28
TERMINAL FACILITIES AND SERVICES CORPORATION, petitioner, vs. PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT
DISTRICT OFFICER OF DAVAO CITY, respondents.

[G.R. No. 135826. February 27, 2002]

PHILIPPINE PORTS AUTHORITY and PORT MANAGER, and PORT DISTRICT OFFICER OF DAVAO CITY, petitioners, vs. TERMINAL FACILITIES
AND SERVICES CORPORATION, respondent.

DECISION

DE LEON, JR., J.:

Before us are two (2) consolidated petitions for review, one filed by the Terminal Facilities and Services Corporation (TEFASCO) (G.R. No. 135639)
and the other by the Philippine Ports Authority (PPA) (G.R. No. 135826), of the Amended Decision[1] dated September 30, 1998 of the former Special
Second Division of the Court of Appeals in CA-G.R. CV No. 47318 ordering the PPA to pay TEFASCO: (1) Fifteen Million Eight Hundred Ten Thousand
Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage dues and Three Million Nine Hundred Sixty-One
Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing thirty percent (30%) berthing fees from 1977 to 1991, which
amounts TEFASCO could have earned had not PPA illegally imposed one hundred percent (100%) wharfage and berthing fees, and (2) the sum of Five
Hundred Thousand Pesos (P500,000.00) as attorneys fees. No pronouncement was made as to costs of suit.

In G.R. No. 135639 TEFASCO assails the declaration of validity of the government share and prays for reinstatement in toto of the decision of the
trial court. In G.R. No. 135826 PPA impugns the Amended Decision for awarding the said two (2) amounts for loss of private port usage fees as actual
damages, plus attorney's fees.

TEFASCO is a domestic corporation organized and existing under the laws of the Philippines with principal place of business at Barrio
Ilang, Davao City. It is engaged in the business of providing port and terminal facilities as well as arrastre, stevedoring and other port-related services at
its own private port at Barrio Ilang.

Sometime in 1975 TEFASCO submitted to PPA a proposal for the construction of a specialized terminal complex with port facilities and a provision
for port services in Davao City. To ease the acute congestion in the government ports at Sasa and Sta. Ana, Davao City, PPA welcomed the proposal and
organized an inter-agency committee to study the plan. The committee recommended approval thereof and its report stated that -

TEFASCO Terminal is a specialized terminal complex. The specialized matters intended to be captured are: (a) bananas in consideration of the rate of spoilage; (b)
sugar; (c) fertilizers; (d) specialized movement of beer in pallets containerized handling lumber and plywood.

3.2 Limitations of the government facilities -

The government port facilities are good for general cargoes only. Both ports are not equipped to handle specialized cargoes like bananas and container cargoes. Besides
the present capacity, as well as the planned improvements, cannot cope with the increasing volume of traffic in the area. Participation of the private sector, therefore,
involving private financing should be encouraged in the area.

3.3 Project Viability -

3.3.1 Technical Aspect - From the port operations point of view, the project is technically feasible. It is within a well-protected harbor and it has a sufficient depth of
water for berthing the ships it will service.The lack of back up area can be supplied by the 21-hectare industrial land which will be established out of the hilly land area
which is to be scrapped and leveled to be used to fill the area for reclamation.

3.3.2 Economic Aspect - The international port of Sasa and the domestic port of Sta. Ana are general cargo type ports. They are facing serious ship and cargo
congestion problems brought about mainly by the faster growth of shipping industry than the development of the ports. They do not possess the special cargo handling
facilities which TFSC plans to put up at the proposed terminal.

xxx The proposed project expects to get a 31% market slice. It will service domestic and foreign vessels. Main products to be handled initially will be bananas in the
export trade and beer in the domestic traffic. Banana exporters in Davao, like Stanfilco and Philippine Packing Corporation have signified their intentions to use the
port. Negotiations between TFSC and banana exporters on whether the former or the latter should purchase the mechanical loading equipment have not yet been formed
up xxx.

Easing the problems at these two ports would result in savings on cost of the operation as cargo storage and on damages and losses. It would also give relief to
passengers from time-delay, inconvenience and exposure to hazards in commuting between the pier and ship at anchor.

Furthermore, it would redound to better utilization of the government piers, therefore greater revenue from port operations.

At the bigger scale, more economic benefits in terms of more employment, greater productivity, increased per capita income in the Davao region, and in light of the
limited financial resources of the government for port development the TFSC proposal would be beneficial to the country.

On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's project proposal. PPA resolved to -

xxx [a]pprove, xxx the project proposal of the Terminal Facilities and Services Corporation, Inc. for the construction of specialized port facilities and provision of port
services in Davao City, subject to the terms and conditions set forth in the report of the Technical Committee created by the Board in its meeting of January 30, 1975,
and to the usual government rules and regulations.

PPA relayed its acceptance of the project terms and conditions to TEFASCO in the letter[2] dated May 7, 1976 of Acting General Manager Mariano
Nicanor which affirmed that -

We are pleased to inform you that the Board of Directors, Philippine Ports Authority, approved the project proposal of the Terminal Facilities and Services Corporation
to construct a specialized port facilities and provision of port services in Davao City as follows:

1) Docking Facilities for Ocean Going and Interisland vessels with containerized cargo.

29
2) Stevedoring and Arrastre for above.

3) Warehousing;

4) Container yard and warehouse for containerizing cargoes or breaking up cargoes for containers.

5) Bulk handling and silos for corn, in cooperation with the NGA.

6) Bulk handling for fertilizer.

7) Bulk handling or conveyor system for banana exports.

8) Bulk handling for sugar.

9) Bonded warehousing.

The approval is subject to the terms and conditions set forth at enclosure.

You are hereby authorized to start work immediately taking into account national and local laws and regulations pertaining to the project construction and operation.

The enclosure referred to in the letter above-quoted stipulated the "Terms and Conditions of PPA Board Approval of the Project
Proposal,"[3] particularly -

(1) That all fees and/or permits pertinent to the construction and operation of the proposed project shall be paid to and/or secured from the proper
authorities.

(2) That the plans shall not be altered without the prior approval of the Bureau of Public Works in coordination with the PPA.

(3) That [any] damage to public and private property arising from the construction and operation of the project shall be the sole responsibility of the
applicant-company.

(4) That the Director of Public Works shall be notified five (5) days before the start of the construction works and that the Director of Public Works or his
representative shall be authorized to inspect the works and premises while the work is in progress and even after the completion thereof.

(5) That the applicant shall construct and complete the structure under the proposed project within eighteen (18) months after the approval of the permit,
otherwise the permit shall be null and void.

(6) That the facility shall handle general cargoes that are loaded as filler cargoes on bulk/container ships calling at the facility.

(7) That the applicant shall build up its banana export traffic to replace the probable loss of its container traffic five (5) years from now because of the plan
of PPA to put up a common user type container terminal at the port of Sasa.

(8) That all charges payable to the Bureau of Customs will continue to apply upon take over of port operations by the PPA of the Port of Davao from the
Bureau of Customs and direct control and regulations of operations of private port facilities in the general area of that port.

Under the foregoing terms and conditions, TEFASCO contracted dollar loans from private commercial institutions abroad to construct its specialized
terminal complex with port facilities and thereafter poured millions worth of investments in the process of building the port. Long after TEFASCO broke
ground with massive infrastructure work, the PPA Board curiously passed on October 1, 1976 Resolution No. 50 under which TEFASCO, without asking
for one, was compelled to submit an application for construction permit. Without the consent of TEFASCO, the application imposed additional significant
conditions -

(1) This Permit to Construct (PTC) will entitle the applicant to operate the facility for a period of fifteen (15) years, without jeopardy to negotiation for a renewal for a
period not exceeding ten (10) years. At the expiration of the permit, all improvements shall automatically become the property of the Authority. Thereafter, any
interested party, including the applicant, may lease it under new conditions; (2) In the event that the Foreshore Lease Application expires or is disapproved/canceled,
this permit shall also be rendered null and void; xxx (7) All other fees and/or permits pertinent to the construction and operation of the proposed project shall be paid to
and/or secured from the proper authorities; xxx (9) Unless specifically authorized, no general cargo shall be handled through the facility; (10) All rates and charges to
be derived from the use of said facility or facilities shall be approved by the Authority; xxx (12) An application fee in the amount of one-tenth or one percent of the total
estimated cost of the proposed improvement/structure shall be paid upon advice; (13) Other requirements of the law shall be complied by the applicant.

NOTE: Subject further to the terms and conditions as approved by PPA Board under Resolution No. 7 of 21 April 1976, except that PPA shall take over the role of the
Bureau of Public Works and of the Bureau of Customs stipulated in the said approval.

TEFASCO played along with this needless exercise as PPA approved the awkward application in a letter stating -

We are returning herewith your application for Permit to Construct No. 77-19 dated 18 October 1977, duly approved (validation of the original permit to construct
approved by the PPA Board under Resolution No. 7 of 21 April 1976), for the construction of your port facilities in Bo. Ilang, Davao City, subject to the conditions
stipulated under the approved permit and in accordance with the attached approved set of plans and working drawings.

It is understood that this permit is still subject to the terms and conditions under the original permit except that this Authority takes over the role of the Bureau of Public
Works and of the Bureau of Customs as stipulated thereon.

The series of PPA impositions did not stop there. Two (2) years after the completion of the port facilities and the commencement of TEFASCO's
port operations, or on June 10, 1978, PPA again issued to TEFASCO another permit, designated as Special Permit No. CO/CO-1-067802, under which
more onerous conditions were foisted on TEFASCOs port operations. [4] In the purported permit appeared for the first time the contentious provisions for
ten percent (10%) government share out of arrastre and stevedoring gross income and one hundred percent (100%) wharfage and berthing charges, thus
-

Pursuant to the provisions of Presidential Decree No. 857, otherwise known as the Revised Charter of the Philippine Ports Authority, and upon due consideration of the
formal written application and its enclosures in accordance with PPA Memorandum Order No. 21 dated May 27, 1977, PPA Administrative Order No. 22-77

30
dated December 9, 1977, and other pertinent policies and guidelines, a Special Permit is hereby granted to TERMINAL FACILITIES AND SERVICES
CORPORATION (TEFASCO), with address at Slip 3, Pier 4, North Harbor, Manila to provide its arrastre/stevedoring services at its own private wharf located at
Barrio Ilang, Davao City, subject to the following conditions:

xxx xxx xxx

2. Grantee shall render arrastre/stevedoring services on cargoes of vessels under the agency of Retla Shipping/Transcoastal Shipping, Solid Shipping, Sea
Transport and other commercial vessels which cannot be accommodated in government piers at PMU-Davao due to port congestion which shall
be determined by the Port Manager/Harbor Master/Port Operations Officer whose decision shall be conclusive;

3. Grantee shall promptly submit its latest certified financial statement and all statistical and other data required by the Authority from time to time;

4. Grantee shall strictly comply with all applicable PPA rules and regulations now in force or to be promulgated hereafter and other pertinent rules and
regulations promulgated by other agency of the government and other applicable laws, orders or decrees;

5. Grantee shall remit to the government an amount equivalent to ten (10%) percentum of the handling rates chargeable on similar cargo in government
piers/wharves within the jurisdiction of PMU-Davao on or before the 5th working day of every month provided, however, that in case of delay,
grantee shall pay a penalty of one (1%) percentum of the accumulated total amount due for every day of delay; provided, further, that said rate
shall be reasonably adjusted if and when warranted by the financial conditions of the Grantee;

6. Grantee shall settle with the Authority its back accounts on the 10% government share from the start of its arrastre/stevedoring operation plus 6% legal
interest per annum as provided by law;

7. That cargoes and vessels diverted to TEFASCO wharf shall be subject to 100% wharfage and berthing charges respectively;

8. Grantee shall hold the Authority free from any liability arising out of the maintenance and operation thereof;

9. Grantee shall not in any manner pose a competition with any port or port facility owned by the government. Rates of charges shall in no case be lower
than those prevailing at the Government Port of Davao.

xxx xxx xxx

This Special Permit is non-transferable and shall remain valid from the date of issuance hereof until December 31, 1978; provided, however, that at any time prior to the
expiration thereof, the same may be revoked for violation of any of the conditions herein set forth or for cause at the discretion of the PPA General Manager or his duly
authorized representative.

Subsequent exactions of PPA included: (a) Admin. Order 09-81, s. 1981,[5] notifying all arrastre and stevedoring operators, whether they do business
in government owned port facilities, that special services income be subjected to "government share" equivalent to ten percent (10%) thereof; and, (b)
Memo. Circ. 36-82, s. 1982,[6] mandating an assessment of one hundred percent (100%) wharfage dues on commercial and third-party cargoes regardless
of extent of use of private port facilities and one hundred percent (100%) berthing charges on every foreign vessel docking at private wharves loading or
discharging commercial or third-party cargoes. TEFASCO repeatedly asked PPA for extensions to pay these additional obligations and for reduction in
the rates. But the PPA's response was final and non-negotiable statements of arrears and current accounts and threats of business closure in case of
failure to pay them.[7] The trial court summed up the documentary evidence on this point -

xxx [w]hen TEFASCO requested for the structuring of its account of P3.5 million, resulting to a memorandum, issued by PPA General Manager to its internal control,
to verify the specific assessment of TEFASCO, coming out in the specific amount of P3,143,425.67 which became a subject of TEFASCO various and series of letters-
protest to PPA, for reconsideration of its ultimatum, to enforce TEFASCOs back account, dated June 1, 1983, marked Exh. 32 for defendant, after a series of letters for
reconsideration of TEFASCO and reply of PPA, marked Exh. 26 to 31 for the defendants, an ultimatum letter of PPA was issued followed by another series of letters of
protest, reconsideration and petition of TEFASCO and reply of PPA, correspondingly marked Exh. 40 51 for the defendants, until ultimately, the execution of a
memorandum of agreement, marked Exh. 52 for the defendant, dated February 10, 1984.

Most alarming was the receipt of defendants communication by TEFASCO, in its letter dated June 1, 1983, a cease and desist order of PPA for TEFASCO, to stop its
commercial port operation xxx.[8]

On February 10, 1984 TEFASCO and PPA executed a Memorandum of Agreement (MOA) providing among others for (a) acknowledgment of
TEFASCO's arrears in government share at Three Million Eight Hundred Seven Thousand Five Hundred Sixty-Three Pesos and Seventy-Five Centavos
(P3,807,563.75) payable monthly, with default penalized by automatic withdrawal of its commercial private port permit and permit to operate cargo handling
services; (b) reduction of government share from ten percent (10%) to six percent (6%) on all cargo handling and related revenue (or arrastre and
stevedoring gross income); (c) opening of its pier facilities to all commercial and third-party cargoes and vessels for a period coterminous with its foreshore
lease contract with the National Government; and, (d) tenure of five (5) years extendible by five (5) more years for TEFASCO's permit to operate cargo
handling in its private port facilities. In return PPA promised to issue the necessary permits for TEFASCOs port activities. TEFASCO complied with the
MOA and paid the accrued and current government share.[9]

On August 30, 1988 TEFASCO sued PPA and PPA Port Manager, and Port Officer in Davao City for refund of government share it had paid and for
damages as a result of alleged illegal exaction from its clients of one hundred percent (100%) berthing and wharfage fees. The complaint also sought to
nullify the February 10, 1984 MOA and all other PPA issuances modifying the terms and conditions of the April 21, 1976 Resolution No. 7 above-
mentioned.[10]

The RTC, Branch 17, Davao City, in its decision dated July 15, 1992 in Civil Case No. 19216-88, ruled for TEFASCO, (a) nullifying the MOA and all
PPA issuances imposing government share and one hundred percent (100%) berthing and wharfage fees or otherwise modifying PPA Resolution No. 7,
and, (b) awarding Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) for reimbursement of government share and
Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) for thirty percent (30%) berthing
charges and Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) for fifty percent (50%) wharfage fees
which TEFASCO could have earned as private port usage fee from 1977 to 1991 had PPA not collected one hundred percent (100%) of these fees; Two
Hundred Forty-Eight Thousand Seven Hundred Twenty-Seven Pesos (P248,727.00) for dredging and blasting expenses; One Million Pesos
(P1,000,000.00) in damages for blatant violation of PPA Resolution No. 7; and, Five Hundred Thousand Pesos (P500,000.00) for attorneys fees, with
twelve percent (12%) interest per annum on the total amount awarded. [11]

PPA appealed the decision of the trial court to the Court of Appeals. The appellate court in its original decision recognized the validity of the
impositions and reversed in toto the decision of the trial court.[12] TEFASCO moved for reconsideration which the Court of Appeals found partly
meritorious. Thus the Court of Appeals in its Amended Decision partially affirmed the RTC decision only in the sense that PPA was directed to pay
TEFASCO (1) the amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty
percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06)
representing thirty percent (30%) berthing fees which TEFASCO could have earned as private port usage fee from 1977 to 1991 had PPA not illegally
imposed and collected one hundred percent (100%) ofwharfage and berthing fees and (2) Five Hundred Thousand Pesos (P500,000.00) for attorneys
fees. The Court of Appeals held that the one hundred percent (100%) berthing and wharfage fees were unenforceable because they had not been approved
31
by the President under Secs. 19 and 20, P.D. No. 857, and discriminatory since much lower rates were charged in other private ports as shown by PPA
issuances effective 1995 to 1997. Both PPA and TEFASCO were unsatisfied with this disposition hence these petitions.

In G.R. No. 135639 TEFASCO prays to reinstate in toto the decision of the trial court. Its grounds are: (a) PPA Resolution No. 7 and the terms and
conditions thereunder constitute a contract that PPA could not change at will; (b) the MOA between PPA and TEFASCO indicating the schedule of
TEFASCO arrears and reducing the rate of government share is void for absence of consideration; and, (c) government share is neither authorized by
PPA Resolution No. 7 nor by any law, and in fact, impairs the obligation of contracts.

In G.R. No. 135826 PPA seeks to set aside the award of actual damages for wharfage and berthing fees and for attorneys fees. PPA anchors its
arguments on the following: (a) that its collection of one hundred percent (100%) wharfage and berthing fees is authorized by Secs. 6 (b, ix) and 39 (a),
P.D. No. 857, under which the imposable rates for such fees are within the sole power and authority of PPA; (b) that absence of evidentiary relevance of
PPA issuances effective 1995 to 1997 reducing wharfage, berthing and port usage fees in private ports; (c) that TEFASCO's lack of standing to claim
alleged overpayments of wharfage and berthing fees; and, (d) that lack of legal basis for the award of fifty percent (50%) wharfage and thirty percent (30%)
berthing fees as actual damages in favor of TEFASCO for the period from 1977 to 1991, and for attorneys fees.

In a nutshell, the issues in the two (2) consolidated petitions are centered on: (a) the character of the obligations between TEFASCO and PPA; (b)
the validity of the collection by PPA of one hundred percent (100%) wharfage fees and berthing charges; (c) the propriety of the award of fifty percent
(50%) wharfage fees and thirty percent (30%) berthing charges as actual damages in favor of TEFASCO for the period from 1977 to 1991; (d) the legality
of the imposed government share and the MOA stipulating a schedule of TEFASCO's arrears for and imposing a reduced rate of government share; and,
(e) the propriety of the award of attorneys fees and damages.

Firstly, it was not a mere privilege that PPA bestowed upon TEFASCO to construct a specialized terminal complex with port facilities and provide
port services in Davao City under PPA Resolution No. 7 and the terms and conditions thereof. Rather, the arrangement was envisioned to be mutually
beneficial, on one hand, to obtain business opportunities for TEFASCO, and on the other, enhance PPA's services -

The international port of Sasa and the domestic port of Sta. Ana are general cargo type ports. They are facing serious ship and cargo congestion problems brought about
mainly by the faster growth of shipping industry than the development of the ports. They do not possess the special cargo handling facilities which TFSC plans to put
up at the proposed terminal.[13]

It is true that under P.D. No. 857 (1975) as amended, [14] the construction and operation of ports are subject to licensing regulations of the PPA as
public utility.[15] However, the instant case did not arise out of pure beneficence on the part of the government where TEFASCO would be compelled to pay
ordinary license and permit fees. TEFASCO accepted and performed definite obligations requiring big investments that made up the valuable consideration
of the project. The inter-agency committee report that recommended approval of TEFASCO port construction and operation estimated investments at
Sixteen Million Pesos (P16,000,000.00) (1975/1976 price levels) disbursed within a construction period of one year[16] and covered by foreign loans of Two
Million Four Hundred Thirty-Four Thousand US Dollars (US$2,434,000.00) with interests of up to Ten Million Nine Hundred Sixty-Five Thousand Four
Hundred Sixty-Five Pesos (P10,965,465.00) for the years 1979 to 1985.[17] In 1987 the total investment of TEFASCO in the project was valued at One
Hundred Fifty-Six Million Two Hundred Fifty-One Thousand Seven Hundred Ninety-Eight Pesos (P156,251,798.00).[18] The inter-agency committee report
also listed the costly facilities TEFASCO would build, and which in fact it has already built -

xxx The terminal complex will provide specialized mechanical cargo handling facilities for bananas, sugar, beer, grain and fertilizer, and containerized cargo
operations. The marginal wharf could accommodate two ocean-going ships and one inter-island vessel at a time. The essential structures and facilities to be provided
are: (1) 400-meter concrete wharf; (2) Back-up area (3.8 hectare reclaimed area plus a 21-hectare inland industrial zone); (3) Two warehouses with total floor area of
5,000 sq. meters; (4) mechanized banana loading equipment; (5) container yard.[19]

With such considerable amount of money spent in reliance upon the promises of PPA under Resolution No. 7 and the terms and conditions thereof,
the authorization for TEFASCO to build and operate the specialized terminal complex with port facilities assumed the character of a truly binding
contract between the grantor and the grantee.[20] It was a two-way advantage for both TEFASCO and PPA, that is, the business opportunities for the
former and the decongestion of port traffic in Davao City for the latter, which is also the cause of consideration for the existence of the contract. The cases
of Ramos v. Central Bank of the Philippines[21] and Commissioner of Customs v. Auyong Hian[22] are deemed precedents. In Ramos, the Central Bank
(CB) committed itself to support the Overseas Bank of Manila (OBM) and avoid its liquidation in exchange for the execution of a voting trust agreement
turning over the management of OBM to CB and a mortgage of its properties to CB to cover OBMs overdraft balance. This agreement was reached in
CBs capacity as the regulatory agency of banking operations. After OBM accepted and performed in good faith its obligations, we deemed as perfected
contract the relation between CB and OBM from which CB could not retreat and in the end prejudice OBM and its depositors and creditors -

Bearing in mind that the communications, xxx as well as the voting trust agreement xxx had been prepared by the CB, and the well-known rule that ambiguities therein
are to be construed against the party that caused them, the record becomes clear that, in consideration of the execution of the voting trust agreement by the petitioner
stockholders of OBM, and of the mortgage or assignment of their personal properties to the CB, xxx the CB had agreed to announce its readiness to support the new
management in order to allay the fears of depositors and creditors xxx and to stave off liquidation by providing adequate funds for the rehabilitation, normalization and
stabilization of the OBM, in a manner similar to what the CB had previously done with the Republic Bank xxx. While no express terms in the documents refer to the
provision of funds by CB for the purpose, the same is necessarily implied, for in no other way could it rehabilitate, normalize and stabilize a distressed bank. xxx

The deception practiced by the Central Bank, not only on petitioners but on its own management team, was in violation of Articles 1159 and 1315 of the Civil Code of
the Philippines:

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.[23]

Auyong Hian involved an importation of old newspapers in four (4) shipments under a "no-dollar" arrangement pursuant to a license issued by the
Import Control Commission. When the last shipment arrived in Manila, the customs authorities seized the importation on the ground that it was made
without the license required by Central Bank Circular No. 45. While the seizure proceedings were pending before the Collector of Customs, the President
of the Philippines through its Cabinet canceled the aforesaid license for the reason that it was illegally issued "in that no fixed date of expiration is
stipulated." On review, this Court held -

xxx [W]hile the Cabinet, acting for the President, can pass on the validity of a license issued by the Import Control Commission, that power cannot be arbitrarily
exercised. The action must be founded on good ground or reason and must not be capricious or whimsical. This principle is so clear to require further elaboration.

xxx In fact, if the cancellation were to prevail, the importer would stand to lose the license fee he paid amounting to P12,000.00, plus the value of the shipment
amounting to P21,820.00. This is grossly inequitable. Moreover, "it has been held in a great number of cases that a permit or license may not arbitrarily be revoked xxx
where, on the faith of it, the owner has incurred material expense."

It has also been held that where the licensee has acted under the license in good faith, and has incurred expense in the execution of it, by making valuable improvements
or otherwise, it is regarded in equity as an executed contract and substantially an easement, the revocation of which would be a fraud on the licensee, and therefore the
licensor is estopped to revoke it xxx It has also been held that the license cannot be revoked without reimbursing the licensee for his expenditures or otherwise placing
him in status quo.[24]

32
 For a regulatory permit to be impressed with contractual character we held in Batchelder v. Central Bank[25] that the administrative agency in issuing
the permit must have assumed such obligation on itself. The facts certainly bear out the conclusion that PPA passed Resolution No. 7 and the terms and
conditions thereof with a view to decongesting port traffic in government ports in Davao City and engaging TEFASCO to infuse its own funds and skills to
operate another port therein. As acceptance of these considerations and execution thereof immediately followed, it is too late for PPA to change the rules
of engagement with TEFASCO as expressed in the said Resolution and other relevant documents.

The terms and conditions binding TEFASCO are only those enumerated or mentioned in the inter-agency committee report, PPA Resolution No. 7
and PPA letter dated May 7, 1976and its enclosure. With due consideration for the policy that laws of the land are written into every contract, [26] the said
documents stand to be the only source of obligations between the parties. That being the case, it was arbitrary, unreasonable and unfair for PPA to add
new burdens and uncertainties into their agreement of which TEFASCO had no prior knowledge even in the context of regulation.

Lowell v. Archambault[27] is persuasive on this issue. In that case, the defendant was engaged in the business of an undertaker who wanted to erect
on his land a stable to be used in connection therewith. He then applied to the board of health for a license to permit him to occupy and use the building
when completed for the stabling of eight (8) horses. His application was granted and a license was issued to him permitting the exercise of this
privilege. Upon receiving it, he at once had plans prepared and began the erection of a stable on a site from which he had, at a pecuniary loss, removed
another building. After the work had begun but before its completion, the board of health acting on a petition of residents in the immediate vicinity rescinded
their former vote and canceled the license. The court held -

xxxUpon application for permission to erect a stable, which, in the absence of a restricting statute, would be a legitimate improvement in the enjoyment of his property,
the applicant is entitled to know the full measure of immunity that can be granted to him before making the expenditure of money required to carry out his purpose. A
resort to the general laws relating to the subject, or to ordinances or regulations made pursuant to them, should furnish him with the required information. When this has
been obtained, he has a right to infer that he can safely act, with the assurance that, so long as he complies with the requirements under which it is proposed to grant the
privilege, he has a constitutional claim to protection, until the legislature further restricts or entirely abolishes the right bestowed. A license should not be subjected to
the uncertainties that constantly would arise if unauthorized limitations, of which he can have no knowledge, are subsequently and without notice to be read into his
license, at the pleasure of the licensing board. Besides, all reasonable police regulations enacted for the preservation of the public health or morality, where a penalty is
provided for their violation, while they may limit or prevent the use or enjoyment of property except under certain restrictions, and are constitutional, create statutory
misdemeanors, which are not to be extended by implication. xxx. It was not within the power of the board of health, even after a hearing, in the absence of an authority
conferred upon them by legislative sanction, to deprive him of the privilege they had unreservedly granted.[28]

The record shows that PPA made express representations to TEFASCO that it would authorize and support its port project under clear and
categorical terms and conditions of an envisioned contract. TEFASCO complied with its obligation which ultimately resulted to the benefit of PPA. And the
PPA accepted the project as completed and authorized TEFASCO to operate the same. Under these circumstances, PPA is estopped from reneging on
its commitments and covenants as exclusively contained in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and
its enclosure. As this Court explained in Ramos v. Central Bank of the Philippines - [29]

xxx[A]n estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was
relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice. In this respect, the reliance by the
promisee is generally evidenced by action or forbearance on his part, and the idea has been expressed that such action or forbearance would reasonably have been
expected by the promisor. xxx

But even assuming arguendo that TEFASCO relied upon a mere privilege granted by PPA, still the terms and conditions between them as written
in the documents approving TEFASCO's project proposal should indubitably remain the same. Under traditional form of property ownership, recipients of
privileges or largesses from the government could be said to have no property rights because they possessed no traditionally recognized proprietary
interest therein. The cases of Vinco v. Municipality of Hinigaran[30] and Pedro v. Provincial Board of Rizal[31] holding that a license to operate cockpits would
be a mere privilege belonged to this vintage. But the right-privilege dichotomy came to an end when courts realized that individuals should not be subjected
to the unfettered whims of government officials to withhold privileges previously given them. [32] Indeed to perpetuate such distinction would leave the
citizens at the mercy of State functionaries, and worse, threaten the liberties protected by the Bill of Rights. Thus in Kisner v. Public Service
Commission[33] wherein the US Public Service Commission reduced the number of vehicles which appellant Kisner was authorized to operate under his
certificate of convenience and necessity when no limit was stipulated therein, it was ruled -

It appears from the record in this case that after the issuance of the initial certificate the appellant took steps to procure vehicles in addition to the one he already
owned. He changed his position in reliance upon the original certificate authorizing him to operate an unlimited number of vehicles. xxx For the purpose of due process
analysis, a property interest includes not only the traditional notions of real and personal property, but also extends to those benefits to which an individual may be
deemed to have a legitimate claim of entitlement under existing rules and regulations. xxx The right of the appellant in the case at bar to operate more than one vehicle
under the certificate of convenience and necessity, as originally issued, clearly constituted a benefit to the appellant and that benefit may be deemed to be a legitimate
claim of entitlement under existing rules and regulations.

Even if PPA granted TEFASCO only a license to construct and operate a specialized complex terminal with port facilities, the fact remains that PPA
cannot unilaterally impose conditions that find no basis in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and
its enclosure.

Secondly, we hold that PPA's imposition of one hundred percent (100%) wharfage fees and berthing charges is void. It is very clear from P.D.
No. 857 as amended that wharfage and berthing rates collectible by PPA "upon the coming into operation of this Decree shall be those now provided
under Parts 1, 2, 3 and 6 of Title VII of Book II of The Tariff and Customs Code, until such time that the President upon recommendation of the Board may
order that the adjusted schedule of dues are in effect." [34] PPA cannot unilaterally peg such rates but must rely on either The Tariff and Customs Code or
the quasi-legislative issuances of the President in view of the legislative prerogative of rate-fixing.[35]

Accordingly, P.D. No. 441 (1974) amending The Tariff and Customs Code fixed wharfage dues at fixed amounts per specified quantity brought into
or involving national ports or at fifty percent (50%) of the rates provided for herein in case the articles imported or exported from or transported within the
Philippines are loaded or unloaded offshore, in midstream, or in private wharves where no loading or unloading facilities are owned and maintained by the
government. Inasmuch as the TEFASCO port is privately owned and maintained, we rule that the applicable rate for imported or exported articles loaded
or unloaded thereat is not one hundred percent (100%) but only fifty percent (50%) of the rates specified in P.D. No. 441.

As regard berthing charges, this Court has ruled in Commissioner of Customs v. Court of Tax Appeals[36] that "subject vessels, not having berthed
at a national port but at the Port of Kiwalan, which was constructed, operated, and continues to be maintained by private respondent xxx are not subject
to berthing charges, and petitioner should refund the berthing fees paid by private respondent." The berthing facilities at Port of Kiwalan were constructed,
improved, operated and maintained solely by and at the expense of a private corporation, the Iligan Express. On various dates, vessels using the berthing
facilities therein were assessed berthing fees by the Collector of Customs which were paid by private respondent under protest. We nullified the collection
and ordered their refund -

The only issue involved in this petition for review is: Whether a vessel engaged in foreign trade, which berths at a privately owned wharf or pier, is liable to the
payment of the berthing charge under Section 2901 of the Tariff and Customs Code, which, as amended by Presidential Decree No. 34, reads:

Sec. 2901. Definition. - Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulk-head-wharf, river or channel marginal
wharf at any national port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or
canal under the jurisdiction of any national port of the Philippines: Provided, however, That in the last instance, the charge shall be fifty (50%) per cent of rates
provided for in cases of piers without cargo shed in the succeeding sections. The owner, agent, operator or master of the vessel is liable for this charge.

33
Petitioner Commissioner of Customs contends that the government has the authority to impose and collect berthing fees whether a vessel berths at a private pier or at a
national port. On the other hand, private respondent argues that the right of the government to impose berthing fees is limited to national ports only.

The governing law classifying ports into national ports and municipal ports is Executive Order No. 72, Series of 1936 (O.G. Vol. 35, No. 6, pp. 65-66). A perusal of
said executive order discloses the absence of the port of Kiwalan in the list of national ports mentioned therein.

Furthermore, Paragraph 1 of Executive Order No. 72 expressly provides that the improvement and maintenance of national ports shall be financed by the
Commonwealth Government, and their administration and operation shall be under the direct supervision and control of the Insular Collector of Customs. It is
undisputed that the port of Kiwalan was constructed and improved and is operated and maintained solely by and at the expense of the Iligan Express Corporation, and
not by the National Government of the Republic or any of its agencies or instrumentalities. xxx The port of Kiwalan not being included in the list of national ports
appended to Customs Memorandum Circular No. 33-73 nor in Executive Order No. 72, it follows inevitably as a matter of law and legal principle that this Court may
not properly consider said port as a national port. To do otherwise would be to legislate on our part and to arrogate unto ourselves powers not conferred on us by the
Constitution. xxx

Plainly, therefore, the port of Kiwalan is not a national port. xxx

Section 2901 of the Tariff and Customs Code prior to its amendment and said section as amended by Presidential Decree No. 34 are hereunder reproduced with the
amendments duly highlighted:

Sec. 2901. Definition. - Berthing charge is the amount assessed against a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal
wharf at any port in the Philippines; or for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or canal under
the jurisdiction of any port of the Philippines (old TCC).

Sec. 2901. Definition. - Berthing charge is the amount assessed a vessel for mooring or berthing at a pier, wharf, bulkhead-wharf, river or channel marginal wharf AT
ANY NATIONAL PORT IN THE PHILIPPINES; for mooring or making fast to a vessel so berthed; or for coming or mooring within any slip, channel, basin, river or
canal under the jurisdiction of ANY NATIONAL port of the Philippines; Provided, HOWEVER, THAT IN THE LAST INSTANCE, THE CHARGE SHALL BE
FIFTY (50%) PER CENT OF RATES PROVIDED FOR IN CASES OF PIERS WITHOUT CARGO SHED IN THE SUCCEEDING SECTIONS. (emphasis in the
original).

It will thus be seen that the word national before the word port is inserted in the amendment. The change in phraseology by amendment of a provision of law indicates a
legislative intent to change the meaning of the provision from that it originally had (Agpalo, supra, p. 76). The insertion of the word national before the word port is a
clear indication of the legislative intent to change the meaning of Section 2901 from what it originally meant, and not a mere surplusage as contended by petitioner, in
the sense that the change merely affirms what customs authorities had been observing long before the law was amended (p. 18, Petition). It is the duty of this Court to
give meaning to the amendment. It is, therefore, our considered opinion that under Section 2901 of The Tariff and Customs Code, as amended by Presidential Decree
No. 34, only vessels berthing at national ports are liable for berthing fees. It is to be stressed that there are differences between national ports and municipal ports,
namely: (1) the maintenance of municipal ports is borne by the municipality, whereas that of the national ports is shouldered by the national government; (2) municipal
ports are created by executive order, while national ports are usually created by legislation; (3) berthing fees are not collected by the government from vessels berthing
at municipal ports, while such berthing fees are collected by the government from vessels moored at national ports. The berthing fees imposed upon vessels berthing at
national ports are applied by the national government for the maintenance and repair of said ports. The national government does not maintain municipal ports which
are solely maintained by the municipalities or private entities which constructed them, as in the case at bar. Thus, no berthing charges may be collected from vessels
moored at municipal ports nor may berthing charges be imposed by a municipal council xxx. [37]

PPA has not cited - nor have we found - any law creating the TEFASCO Port as a national port or converting it into one. Hence, following case law,
we rule that PPA erred in collecting berthing fees from vessels that berthed at the privately funded port of petitioner TEFASCO.

It also bears stressing that one hundred percent (100%) wharfage dues and berthing charges are void for failing to comply with Sec. 19, P.D. No.
857[38] as amended, requiring presidential approval of any increase or decrease of such dues.

In Philippine Interisland Shipping Association of the Philippines v. CA[39] we ruled that PPA cannot override the statutory rates for dues by lowering
rates of pilotage fees and leaving the fees to be paid for pilotage to agreement of parties, and further stated that -

There is, therefore, no legal basis for PPA's intransigence, after failing to get the new administration of President Aquino to revoke the order by issuing its own order in
the form of A.O. NO. 02-88. It is noteworthy that if President Marcos had legislative power under Amendment No. 6 of the 1973 Constitution so did President Aquino
under the Provisional (Freedom) Constitution who could, had she thought E.O. No. 1088 to be a mere political gimmick, have just as easily revoked her predecessor's
order. It is tempting to ask if the administrative agency would have shown the same act of defiance of the President's order had there been no change of administration.
What this Court said in La Perla Cigar and Cigarette Factory v. Capapas, mutatis mutandis, - may be applied to the cases at bar:

Was it within the powers of the then Collector Ang-angco to refuse to collect the duties that must be paid? That is the crucial point of inquiry. We hold that it was not.

Precisely, he had to give the above legal provisions, quite explicit in character, force and effect. His obligation was to collect the revenue for the government in
accordance with existing legal provisions, executive agreements and executive orders certainly not excluded. He would not be living up to his official designation if he
were permitted to act otherwise. He was not named Collector of Customs for nothing

Certainly, if the President himself were called upon to execute the laws faithfully, a Collector of Customs, himself a subordinate executive official, cannot be considered
as exempt in any wise from such an obligation of fealty. Similarly, if the President cannot suspend the operation of any law, it would be presumptuous in the extreme
for one in the position of then Collector Ang-angco to consider himself as possessed of such a prerogative[40]

Thirdly, PPA argues that the courts a quo wrongly awarded to TEFASCO fifty percent (50%) and thirty percent (30%) of the wharfage dues and
berthing charges, respectively, as actual damages representing private port usage fees from 1977 to 1991. It claims that TEFASCO has no cause of action
to ask for a portion of these fees since they were collected from "the owner, agent, operator or master of the vessel" for the berthing charge and "the owner
or consignee of the article, or the agent of either" for the wharfage dues.

We find no merit in this argument. The cause of action of TEFASCO is the injury it suffered as a result of the illegal imposition on its clientele of such
dues and charges that should have otherwise gone to it as private port usage fee. TEFASCO is asserting injury to its right to collect valuable consideration
for the use of its facilities and wrongdoing on the part of PPA prejudicing such right. This is especially true in the light of PPAs practice of collecting one
hundred percent (100%) of the wharfage and berthing dues by cornering the cargoes and vessels, as it were, even before they were landed and berthed
at TEFASCOs privately owned port. It is aggravated by the fact that these unlawful rates were collected by PPA long after the port facilities of TEFASCO
had been completed and functioning. Considering these pleaded facts, TEFASCOs cause of action has been sufficiently alleged and proven. We quote
with approval the following ruling of the Court of Appeals -

xxx As earlier stated, TEFASCO is only trying to recover income it has to forego because of the excessive collections imposed by PPA. By doing what it was
prohibited to do under an existing law, PPA cannot be allowed to enjoy the fruits of its own illegal act. To be sure, TEFASCO suffered real damage as a result of such
illegal act requiring indemnification xxx.[41]

There is also no basis for PPAs assertion that there was lack of evidence to support the award in favor of TEFASCO of Fifteen Million Eight Hundred
Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) representing fifty percent (50%) wharfage dues and Three Million Nine Hundred
34
Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) for thirty percent (30%) berthing charges from 1977 to
1991. According to the appellate court, the determination was based on the "actual summarized list of cargoes and vessels which went through TEFASCOs
port, which were under obligation to pay usage fees, multiplied by the applicable tariff rates." [42] The trial court explained in more detail the preponderant
evidence for the judgment -

Another harassment is the issuance of Memorandum Circular No. 36-82, authorizing collection of 100% wharfage fees, instead of only 50% and also 100% berthing
fees, instead of only 70% as provided for in PD 441, marked Exh. LL for plaintiff, and a copy of Letter of Instruction No. 8001-A, marked Exh. NN for plaintiff, in the
process, the total collection of PPA for wharfage fees, amounted to P10,582,850.00 and berthing fee, amounted to P6,997,167.00 in the latter case, berthing fee
collected was marked Exh. PP for plaintiff, otherwise if PPA collected only 70% as provided, it could have collected only P4,898,018.03, equally TEFASCO could
have earned the remainder of P2,099,150.90 while in the case of wharfage fee, if PPA collected only 50%, TEFASCO would have earned the other half
of P5,291,042.00, 50% by way of rentals. xxx

In cases of berthing and wharfage fees prior to the issuance of the injunction order from this court, PPA charges 100% the totality or summary of claims from PPA,
from 1977 to 1991, was shown and marked Exhibit KKK and submarkings, showing TEFASCO is supposed to collect, if PPA collects only 50% wharfage, the other
50% goes with TEFASCO in case of berthing 70%, the remainder of 30% could have been collected by TEFASCO. [43]

Under Arts. 2199 and 2200 of the Civil Code, actual or compensatory damages are those awarded in satisfaction of or in recompense for loss or
injury sustained.[44] They proceed from a sense of natural justice and are designed to repair the wrong done. In Producers Bank of the Philippines v.
CA[45] we succinctly explain the kinds of actual damages, thus-

There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses, and the other is the failure to receive as a benefit that which
would have pertained to him x x x. In the latter instance, the familiar rule is that damages consisting of unrealized profits, frequently referred as ganacias
frustradas or lucrum cessans, are not to be granted on the basis of mere speculation, conjecture, or surmise, but rather by reference to some reasonably definite standard
such as market value, established experience, or direct inference from known circumstances xxx.

It is not necessary to prove with absolute certainty the amount of ganacias frustradas or lucrum cessans. In Producers Bank of the Philippines we
ruled that -

xxx the benefit to be derived from a contract which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the
injured party is not to be denied for this reason alone. He must produce the best evidence of which his case is susceptible and if that evidence warrants the inference that
he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for the defendants wrongful act, he is entitled to recover.[46]

Applying the test aforequoted, we find that TEFASCO has proved with clear and convincing evidence its loss of wharfage and berthing fees. There
was basis for the courts a quo in awarding to TEFASCO, as actual damages, the sums equivalent to fifty percent (50%) and thirty percent (30%) of the
wharfage dues and berthing charges, respectively. It has not been denied that TEFASCO was forced to reluctantly let go of such fees to avoid the unwise
business practice of financially overburdening the users of its port by requiring them to pay beyond one hundred percent (100%) of such dues. It has not
also been disproved that this loss of TEFASCO was the direct result of the collection of one hundred percent (100%) wharfage and berthing dues by PPA,
an imposition that left nothing more for TEFASCO to charge for the use of its port and terminal facilities. Consequently, there is merit in TEFASCO's claim
that had the PPA imposition been limited to the fifty percent (50%) wharfage dues and seventy percent (70%) berthing charges, TEFASCO could have
received the remainder as port usage feessince the amounts were disbursed by its clients for that purpose. Significantly, in regard to berthing charges,
TEFASCO's cause of action and evidence presented before the trial court as well as its assigned error on appeal on that point were limited to thirty percent
(30%) of such charges.

Fourthly, we also declare void the imposition by PPA of ten percent (10%), later reduced to six percent (6%), government share out of arrastre and
stevedoring gross income of TEFASCO. This exaction was never mentioned in the contract, much less is it a binding prestation, between TEFASCO and
PPA. What was clearly stated in the terms and conditions appended to PPA Resolution No. 7 was for TEFASCO to pay and/or secure from the proper
authorities "all fees and/or permits pertinent to the construction and operation of the proposed project." The government share demanded and collected
from the gross income of TEFASCO from its arrastre and stevedoring activities in TEFASCO's wholly owned port is certainly not a fee or in any event a
proper condition in a regulatory permit. Rather it is an onerous "contractual stipulation"[47] which finds no root or basis or reference even in the contract
aforementioned.

We stress that the cause of the contract between TEFASCO and PPA was, on the part of the former, to engage in the business of operating its
privately owned port facilities, and for the latter, to decongest port traffic in Davao City and concomitantly to enhance regional trade. The records of the
project acceptance made by PPA indicate that the contract was executed not to earn income for PPA or the government as justification for the subsequent
and unfair imposition of government share in the arrastre and stevedoring gross income of TEFASCO. Hence this charge was obviously an after-thought
conceived by PPA only after the TEFASCO port had already begun its operations. The sharing scheme only meant that PPA would piggy back
unreasonably on the substantial investment and labor of TEFASCO. As the scheme was subsequently stipulated on percentage of gross income, it actually
penalized TEFASCO for its hand work and substantial capital expenditures in the TEFASCO port and terminal.

Moreover, PPA is bereft of any authority to impose whatever amount it pleases as government share in the gross income of TEFASCO from its
arrastre and stevedoring operations. As an elementary principle of law, license taxation must not be "so unreasonable to show a purpose to prohibit a
business which is not itself injurious to public health or morals."[48] In the case at bar, the absurd and confiscatory character of government share is
convincingly proved by PPA's decision itself to abandon the disadvantageous scheme through Administrative Order No. 06-95 dated 4 December
1995, Liberalized Regulation on Private Ports Construction, Development, and Operation.[49] The PPA issuance scrapped government share in the income
of private ports where no government facilities had been installed and in place thereof imposed a one-time privilege fee of P20,000.00 per annum for
commercial ports and P10,000.00 yearly for non-commercial ports. In passing, we believe that this impost is more in consonance with the description of
government share as consideration for the "supervision inherent in the upgrading and improvement of port operations, of which said services are an
integral part."[50]

We do not also agree that TEFASCO subsequently acceded to paying the government share in its gross income from its arrastre and stevedoring
operations, and in recognizing arrears for such charge. The Memorandum of Agreement (MOA) which it subsequently signed with PPA did not give
TEFASCO any benefit so that we cannot conclude that there was indeed a voluntary settlement between them. Rather it could be described aptly as an
imposition under actual threats of closure of TEFASCO's port. Verily the MOA was meant to cloak semblance of validity upon that particular charge since
there was nothing in the original TEFASCO-PPA contract authorizing the PPA to collect any share in the gross income of TEFASCO in its arrastre and
stevedoring operations.

The MOA is invalid for want of consideration and consent.[51] As such, it is an invalid novation[52] of the original agreement between TEFASCO and
PPA as embodied in the inter-agency committee report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure. Truly, the MOA was
a set of stipulations executed under undue pressure on TEFASCO of permanent closure of its port and terminal. As the TEFASCO investment was worth
millions of dollars in loans and equities, PPA's posture of prohibiting it from engaging in the bulk of its business presented it with no reasonable freedom
of choice but to accept and sign the MOA. Furthermore, the MOA suffers from utter want of consideration since nothing more could have been stipulated
in the agreement when every detail of port operation had already been previously spelled out and sanctioned in the original contract. The belated MOA
citations of PPAs recognition of TEFASCO's facility as a private port and provision of arrastre and stevedoring and repair services were all part of the
agreement from 1976 when the project proposal was approved by the PPA Board. Under these circumstances, it cannot be said that TEFASCO embraced
voluntarily the unfair imposition in the MOA that inevitably would cause, as it did, its own bankruptcy.

In sum, TEFASCO is entitled to Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) for reimbursement of
what PPA illegally collected as"government share" in the gross income of TEFASCO's arrastre and stevedoring operations for 1977 to 1991.

Fifthly, we affirm the award of Five Hundred Thousand Pesos (P500,000.00) as attorneys fees. Attorneys fees may be awarded when a party is
compelled to litigate or incur expenses to protect his interest by reason of an unjustified act of the other party. [53] In the instant case, attorneys fees were
35
warranted by PPA's unfair exaction of exorbitant wharfage and berthing dues from TEFASCO and threats to close its port. These adverse actions correctly
drove the latter to institute the present proceedings to protect its rights and remedy the unfair situation.

However, we set aside the award of Two Hundred Forty-Eight Thousand Seven Hundred Twenty-Seven Pesos (P248,727.00) for dredging and
blasting expenses. The trial court justified the award on the ground that this activity was allegedly the responsibility of PPA under Sec. 37 of P.D. No.
857[54] as amended which TEFASCO in good faith undertook. This is not correct. More precisely, the law obliged PPA to fund construction and dredging
works only in "public ports vested in the Authority." Clearly the construction of the TEFASCO port was not the responsibility of the PPA and does not fall
under Sec. 37 of P.D. No. 857. The dredging and blasting done by TEFASCO augmented the viability of its port, and therefore the same were part and
parcel of the contractual obligations it agreed to undertake when it accepted the terms and conditions of the project.

It is also erroneous to set legal interest on the damages awarded herein at twelve percent (12%) yearly computed from the filing of the
complaint. In Crismina Garments, Inc. v. CA[55], it was held that interest on damages, other than loan or forbearance of money, is six percent (6%) annually
computed from determination with reasonable certainty of the amount demanded.Thus, applying that rule in the case at bar, the interest would be six
percent (6%) per annum from the date of promulgation of the decision of the trial court in Civil Cases Nos. 19216-88 onJuly 15, 1992.

To recapitulate: PPA is liable to TEFASCO for Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07)
representing fifty percent (50%) wharfage fees and Three Million Nine Hundred Sixty-One Thousand Nine Hundred Sixty-Four Pesos and Six Centavos
(P3,961,964.06) for thirty percent (30%) berthing charges from 1977 to 1991 and Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos
(P5,095,030.17) for reimbursement of the unlawfully collected government share in TEFASCOs gross income from its arrastre and stevedoring operations
during the same period. The said principal amounts herein ordered shall earn interest at six percent (6%) annually from July 15, 1992, date of promulgation
of the Decision of the Regional Trial Court of Davao in Civil Cases Nos. 19216-88. The PPA shall also pay TEFASCO the amount of Five Hundred
Thousand Pesos (P500,000.00) for and as attorneys fees.

Henceforth, PPA shall collect only such dues and charges as are duly authorized by the applicable provisions of The Tariff and Customs Code and
presidential issuances pursuant to Sec. 19, P.D. No. 857. PPA shall strictly observe only the legally imposable rates. Furthermore, PPA has no authority
to charge government share in the gross income of TEFASCO from its arrastre and stevedoring operations within its subject private port in Davao City.

TEFASCO's port operations including cargo handling services shall be co-terminous with its foreshore lease contract with the National Government
and any extension of the said foreshore lease contract shall similarly lengthen the duration of its port operations. It is clear from the inter-agency committee
report, PPA Resolution No. 7 and PPA letter dated May 7, 1976 and its enclosure that the intention of the parties under their contract is to integrate port
operations of TEFASCO so that all services therein, including arrastre and stevedoring operations, shall end at the same time. The subsequent and
onerous MOA did not change the tenure of its port operations, there being no clear and convincing showing of TEFASCO's free and voluntary amenability
thereto. In no case, however, shall such port operations of TEFASCO exceed fifty (50) years which is the maximum period of foreshore lease contracts
with the National Government.

WHEREFORE, the Amended Decision of the Court of Appeals dated September 30, 1998 in case CA-G.R. CV No. 47318 is MODIFIED as follows:

1. The Philippine Ports Authority (PPA) is held liable and hereby ordered to pay and reimburse to Terminal Facilities and Services Corporation (TEFASCO) the
amounts of Fifteen Million Eight Hundred Ten Thousand Thirty-Two Pesos and Seven Centavos (P15,810,032.07) and Three Million Nine Hundred Sixty-One
Thousand Nine Hundred Sixty-Four Pesos and Six Centavos (P3,961,964.06) representing fifty percent (50%) wharfage fees and thirty percent (30%) berthing charges
respectively, from 1977 to 1991, and the sum of Five Million Ninety-Five Thousand Thirty Pesos and Seventeen Centavos (P5,095,030.17) representing PPAs
unlawfully collected government share in the gross income of TEFASCO's arrastre and stevedoring operations during the said period;

2. The said principal amounts herein ordered to be paid by PPA to TEFASCO shall earn interest at six percent (6%) per annum from July 15, 1992, date of
promulgation of the Decision of the Regional Trial Court, Branch 17 of Davao City in Civil Case No. 19216-88; and

3. The PPA is also ordered to pay TEFASCO the sum of Five Hundred Thousand Pesos (P500,000.00) for and as attorneys fees.

Costs against the Philippine Ports Authority.

SO ORDERED.

I_E5

G.R. No. L-10448 August 30, 1957

IN THE MATTER OF A PETITION FOR DECLARATORY JUDGMENT REGARDING THE VALIDITY OF MUNICIPAL ORDINANCE NO. 3659 OF THE
CITY OF MANILA. PHYSICAL THERAPY ORGANIZATION OF THE PHILIPPINES, INC., petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA and ARSENIO H. LACSON, as Mayor of the City of Manila, respondents-appellees.

Mariano M. de Joya for appellant.

City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Nañawa for appellees.

MONTEMAYOR, J.:

The petitioner-appellant, an association of registered massagists and licensed operators of massage clinics in the City of Manila and other parts of the
country, filed an action in the Court of First Instance of Manila for declaratory judgment regarding the validity of Municipal Ordinance No. 3659,
promulgated by the Municipal Board and approved by the City Mayor. To stop the City from enforcing said ordinance, the petitioner secured an
injunction upon filing of a bond in the sum of P1,000.00. A hearing was held, but the parties without introducing any evidence submitted the case for
decision on the pleadings, although they submitted written memoranda. Thereafter, the trial court dismissed the petition and later dissolved the writ of
injunction previously issued.

The petitioner appealed said order of dismissal directly to this Court. In support of its appeal, petitioner-appellant contends among other things that the
trial court erred in holding that the Ordinance in question has not restricted the practice of massotherapy in massage clinics to hygienic and aesthetic
massage, that the Ordinance is valid as it does not regulate the practice of massage, that the Municipal Board of Manila has the power to enact the
Ordinance in question by virtue of Section 18, Subsection (kk), Republic Act 409, and that permit fee of P100.00 is moderate and not unreasonable.
Inasmuch as the appellant assails and discuss certain provisions regarding the ordinance in question, and it is necessary to pass upon the same, for
purposes of ready reference, we are reproducing said ordinance in toto.

ORDINANCE No. 3659

AN ORDINANCE REGULATING THE OPERATION OF MASSAGE CLINICS IN THE CITY OF MANILA AND PROVIDING PENALTIES FOR
VIOLATIONS THEREOF.

Be it ordained by the Municipal Board of the City of Manila, that:

36
 Section 1. Definition. — For the purpose of this Ordinance the following words and phrases shall be taken in the sense hereinbelow indicated:

(a) Massage clinic shall include any place or establishment used in the practice of hygienic and aesthetic massage;

(b) Hygienic and aesthetic massage shall include any system of manipulation of treatment of the superficial parts of the human body of
hygienic and aesthetic purposes by rubbing, stroking, kneading, or tapping with the hand or an instrument;

(c) Massagist shall include any person who shall have passed the required examination and shall have been issued a massagist certificate by
the Committee of Examiners of Massagist, or by the Director of Health or his authorized representative;

(d) Attendant or helper shall include any person employed by a duly qualified massagist in any message clinic to assist the latter in the
practice of hygienic and aesthethic massage;

(e) Operator shall include the owner, manager, administrator, or any person who operates or is responsible for the operation of a message
clinic.

SEC. 2. Permit Fees. — No person shall engage in the operation of a massage clinic or in the occupation of attendant or helper therein
without first having obtained a permit therefor from the Mayor. For every permit granted under the provisions of this Ordinance, there shall be
paid to the City Treasurer the following annual fees:

(a) Operator of a massage P100.00

(b) Attendant or helper 5.00

Said permit, which shall be renewed every year, may be revoked by the Mayor at any time for the violation of this Ordinance.

SEC. 3. Building requirement. — (a) In each massage clinic, there shall be separate rooms for the male and female customers. Rooms where
massage operations are performed shall be provided with sliding curtains only instead of swinging doors. The clinic shall be properly
ventilated, well lighted and maintained under sanitary conditions at all times while the establishment is open for business and shall be provided
with the necessary toilet and washing facilities.

(b) In every clinic there shall be no private rooms or separated compartment except those assigned for toilet, lavatories, dressing room, office
or kitchen.

(c) Every massage clinic shall "provided with only one entrance and it shall have no direct or indirect communication whatsoever with any
dwelling place, house or building.

SEC. 4. Regulations for the operation of massage clinics. — (a) It shall be unlawful for any operator massagist, attendant or helper to use, or
allow the use of, a massage clinic as a place of assignation or permit the commission therein of any incident or immoral act. Massage clinics
shall be used only for hygienic and aesthetic massage.

(b) Massage clinics shall open at eight o'clock a.m. and shall close at eleven o'clock p.m.

(c) While engaged in the actual performance of their duties, massagists, attendants and helpers in a massage clinic shall be as properly and
sufficiently clad as to avoid suspicion of intent to commit an indecent or immoral act;

(d) Attendants or helpers may render service to any individual customer only for hygienic and aesthetic purposes under the order, direction,
supervision, control and responsibility of a qualified massagist.

SEC. 5. Qualifications — No person who has previously been convicted by final judgment of competent court of any violation of the provisions
of paragraphs 3 and 5 of Art. 202 and Arts. 335, 336, 340 and 342 of the Revised Penal Code, or Secs. 819 of the City of Manila, or who is
suffering from any venereal or communicable disease shall engage in the occupation of massagist, attendant or helper in any massage clinic.
Applicants for Mayor's permit shall attach to their application a police clearance and health certificate duly issued by the City Health Officers as
well as a massagist certificate duly issued by the Committee or Examiners for Massagists or by the Director of Health or his authorized
representatives, in case of massagists.

SEC. 6. Duty of operator of massage clinic. — No operator of massage clinic shall allow such clinic to operate without a duly qualified
massagist nor allow, any man or woman to act as massagist, attendant or helper therein without the Mayor's permit provided for in the
preceding sections. He shall submit whenever required by the Mayor or his authorized representative the persons acting as massagists,
attendants or helpers in his clinic. He shall place the massage clinic open to inspection at all times by the police, health officers, and other law
enforcement agencies of the government, shall be held liable for anything which may happen with the premises of the massage clinic.

SEC. 7. Penalty. — Any person violating any of the provisions of this Ordinance shall upon conviction, be punished by a fine of not less than
fifty pesos nor more than two hundred pesos or by imprisonment for not less than six days nor more than six months, or both such fine and
imprisonment, at the discretion of the court.

SEC. 8. Repealing Clause. — All ordinances or parts of ordinances, which are inconsistent herewith, are hereby repealed.

SEC. 9. Effectivity. — This Ordinance shall take effect upon its approval.

Enacted, August 27, 1954.

Approved, September 7, 1954.

The main contention of the appellant in its appeal and the principal ground of its petition for declaratory judgment is that the City of Manila is without
authority to regulate the operation of massagists and the operation of massage clinics within its jurisdiction; that whereas under the Old City Charter,
particularly, Section 2444 (e) of the Revised Administrative Code, the Municipal Board was expressly granted the power to regulate and fix the license
fee for the occupation of massagists, under the New Charter of Manila, Republic Act 409, said power has been withdrawn or omitted and that now the
Director of Health, pursuant to authority conferred by Section 938 of the Revised Administrative Code and Executive Order No. 317, series of 1941, as
amended by Executive Order No. 392, series, 1951, is the one who exercises supervision over the practice of massage and over massage clinics in the

37
Philippines; that the Director of Health has issued Administrative Order No. 10, dated May 5, 1953, prescribing "rules and regulations governing the
examination for admission to the practice of massage, and the operation of massage clinics, offices, or establishments in the Philippines", which order
was approved by the Secretary of Health and duly published in the Official Gazette; that Section 1 (a) of Ordinance No. 3659 has restricted the practice
of massage to only hygienic and aesthetic massage prohibits or does not allow qualified massagists to practice therapeutic massage in their massage
clinics. Appellant also contends that the license fee of P100.00 for operator in Section 2 of the Ordinance is unreasonable, nay, unconscionable.

If we can ascertain the intention of the Manila Municipal Board in promulgating the Ordinance in question, much of the objection of appellant to its
legality may be solved. It would appear to us that the purpose of the Ordinance is not to regulate the practice of massage, much less to restrict the
practice of licensed and qualified massagists of therapeutic massage in the Philippines. The end sought to be attained in the Ordinance is to prevent the
commission of immorality and the practice of prostitution in an establishment masquerading as a massage clinic where the operators thereof offer to
massage or manipulate superficial parts of the bodies of customers for hygienic and aesthetic purposes. This intention can readily be understood by the
building requirements in Section 3 of the Ordinance, requiring that there be separate rooms for male and female customers; that instead of said rooms
being separated by permanent partitions and swinging doors, there should only be sliding curtains between them; that there should be "no private rooms
or separated compartments, except those assigned for toilet, lavatories, dressing room, office or kitchen"; that every massage clinic should be provided
with only one entrance and shall have no direct or indirect communication whatsoever with any dwelling place, house or building; and that no operator,
massagists, attendant or helper will be allowed "to use or allow the use of a massage clinic as a place of assignation or permit the commission therein of
any immoral or incident act", and in fixing the operating hours of such clinic between 8:00 a.m. and 11:00 p.m. This intention of the Ordinance was
correctly ascertained by Judge Hermogenes Concepcion, presiding in the trial court, in his order of dismissal where he said: "What the Ordinance tries to
avoid is that the massage clinic run by an operator who may not be a masseur or massagista may be used as cover for the running or maintaining a
house of prostitution."

Ordinance No. 3659, particularly, Sections 1 to 4, should be considered as limited to massage clinics used in the practice of hygienic and aesthetic
massage. We do not believe that Municipal Board of the City of Manila and the Mayor wanted or intended to regulate the practice of massage in general
or restrict the same to hygienic and aesthetic only.

As to the authority of the City Board to enact the Ordinance in question, the City Fiscal, in representation of the appellees, calls our attention to Section
18 of the New Charter of the City of Manila, Act No. 409, which gives legislative powers to the Municipal Board to enact all ordinances it may deem
necessary and proper for the promotion of the morality, peace, good order, comfort, convenience and general welfare of the City and its inhabitants. This
is generally referred to as the General Welfare Clause, a delegation in statutory form of the police power, under which municipal corporations, are
authorized to enact ordinances to provide for the health and safety, and promote the morality, peace and general welfare of its inhabitants. We agree
with the City Fiscal.

As regards the permit fee of P100.00, it will be seen that said fee is made payable not by the masseur or massagist, but by the operator of a massage
clinic who may not be a massagist himself. Compared to permit fees required in other operations, P100.00 may appear to be too large and rather
unreasonable. However, much discretion is given to municipal corporations in determining the amount of said fee without considering it as a tax for
revenue purposes:

The amount of the fee or charge is properly considered in determining whether it is a tax or an exercise of the police power. The amount may
be so large as to itself show that the purpose was to raise revenue and not to regulate, but in regard to this matter there is a marked distinction
between license fees imposed upon useful and beneficial occupations which the sovereign wishes to regulate but not restrict, and those which
are inimical and dangerous to public health, morals or safety. In the latter case the fee may be very large without necessarily being a tax.
(Cooley on Taxation, Vol. IV, pp. 3516-17; underlining supplied.)

Evidently, the Manila Municipal Board considered the practice of hygienic and aesthetic massage not as a useful and beneficial occupation which will
promote and is conducive to public morals, and consequently, imposed the said permit fee for its regulation.

In conclusion, we find and hold that the Ordinance in question as we interpret it and as intended by the appellees is valid. We deem it unnecessary to
discuss and pass upon the other points raised in the appeal. The order appealed from is hereby affirmed. No costs.

I_E6

G.R. No. L- 41383 August 15, 1988

PHILIPPINE AIRLINES, INC., plaintiff-appellant,

vs.
ROMEO F. EDU in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National
Treasurer, defendants-appellants.

Ricardo V. Puno, Jr. and Conrado A. Boro for plaintiff-appellant.

GUTIERREZ, JR., J.:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?

This question has been brought before this Court in the past. The parties are, in effect, asking for a re-examination of the latest decision on this issue.

This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where the then Court of First Instance of Rizal
dismissed the portion-about complaint for refund of registration fees paid under protest.

The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to Section 8, Republic Act No. 4136, otherwise
known as the Land Transportation and Traffic Code.

The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and engaged in the air transportation business
under a legislative franchise, Act No. 42739, as amended by Republic Act Nos. 25). and 269.1 Under its franchise, PAL is exempt from the payment of
taxes. The pertinent provision of the franchise provides as follows:

Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National Government during the
life of this franchise a tax of two per cent of the gross revenue or gross earning derived by the grantee from its operations under this
franchise. Such tax shall be due and payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied,
established or collected by any municipal, provincial or national automobiles, Provided, that if, after the audit of the accounts of the

38
 grantee by the Commissioner of Internal Revenue, a deficiency tax is shown to be due, the deficiency tax shall be payable within the
ten days from the receipt of the assessment. The grantee shall pay the tax on its real property in conformity with existing law.

On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle registration
fees.

Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax exempt entities, among them PAL to pay
motor vehicle registration fees.

Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts imposed under Republic Act 4136 were
paid. The appellant thus paid, under protest, the amount of P19,529.75 as registration fees of its motor vehicles.

After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu demanding a refund of the amounts paid,
invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it was held that motor vehicle registration fees are in reality taxes from the
payment of which PAL is exempt by virtue of its legislative franchise.

Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30,
1970) to the effect that motor vehicle registration fees are regulatory exceptional. and not revenue measures and, therefore, do not come within the
exemption granted to PAL? under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National
Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862.

Appellee Romeo F. Elevate in his capacity as LTC Commissioner, and LOI Carbonell in his capacity as National Treasurer, filed a motion to dismiss
alleging that the complaint states no cause of action. In support of the motion to dismiss, defendants repatriation the ruling in Republic v. Philippine
Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the
police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or
earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss was
deferred by the Court until after trial on the merits.

On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later ruling laid down by the Supreme Court in
the case or Republic v. Philippine Rabbit Bus Lines, Inc., (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to
us.

Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively,
discuss the main points of contention in the case at bar.

Resolving the issue in the Philippine Rabbit case, this Court held:

"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic
Act No. 587 [1950]). Its heading speaks of "registration fees." The term is repeated four times in the body thereof. Equally so,
mention is made of the "fee for registration." (Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be
charged." (lbid.,Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a
tax but of a registration fee under the police power. Hence the incipient, of the section relied upon by defendant-appellee under the
Back Pay Law, It is not held liable for a tax but for a registration fee. It therefore cannot make use of a backpay certificate to meet
such an obligation.

Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act No. 5448. ([1968].
Section 3 thereof as to the imposition of additional tax on privately-owned passenger automobiles, motorcycles and scooters was
amended by Republic Act No. 5470 which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its
title expressly sets forth that a tax on privately-owned passenger automobiles, motorcycles and scooters was imposed. The rates
thereof were provided for in its Section 3 which clearly specifies the" Philippine tax."(Cooley to be paid as distinguished from the
registration fee under the Motor Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even on the
assumption that the earlier legislation could by subdivision the point be susceptible of the interpretation that a tax rather than a fee
was levied. What is thus most apparent is that where the legislative body relies on its authority to tax it expressly so states, and
where it is enacting a regulatory measure, it is equally exploded (at p. 22,1969

In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand, held:

The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section 8 of that law called
"fees". But the appellation is no impediment to their being considered taxes if taxes they really are. For not the name but the object
of the charge determines whether it is a tax or a fee. Geveia speaking, taxes are for revenue, whereas fees are exceptional. for
purposes of regulation and inspection and are for that reason limited in amount to what is necessary to cover the cost of the
services rendered in that connection. Hence, a charge fixed by statute for the service to be person,-When by an officer, where the
charge has no relation to the value of the services performed and where the amount collected eventually finds its way into the
treasury of the branch of the government whose officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on
Taxation, Vol. 1, 4th ed., p. 110.)

From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are but a small portion—
about 5 per centum—of the total collections from motor vehicle registration fees. And as proof that the money collected is not
intended for the expenditures of that office, the law itself provides that all such money shall accrue to the funds for the construction
and maintenance of public roads, streets and bridges. It is thus obvious that the fees are not collected for regulatory purposes, that
is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their
express object is to provide revenue with which the Government is to discharge one of its principal functions—the construction and
maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.

As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides that "no other taxes or fees
than those prescribed in this Act shall be imposed," thus implying that the charges therein imposed—though called fees—are of the
category of taxes. The provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of Republic Act
587, which reads:

Sec. 70(b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or
operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any
municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however,
That any provincial board, city or municipal council or board, or other competent authority may exact and collect
such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective

39
 jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and
also for the use of such public roads, as may be authorized by the President of the Philippines upon the
recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any
toll fee." be charged or collected until and unless the approved schedule of tolls shall have been posted levied,
in a conspicuous place at such toll station. (at pp. 213-214)

Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992 [19511) as amended by Commonwealth
Act 123 and Republic Acts Nos. 587 and 1621.

Today, the matter is governed by Rep. Act 4136 [1968]), otherwise known as the Land Transportation Code, (as amended by Rep. Acts Nos. 5715 and
64-67, P.D. Nos. 382, 843, 896, 110.) and BP Blg. 43, 74 and 398).

Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unsegregated, by Rep. Act Nos. 587 and 1603) states:

Section 73. Disposal of moneys collected.—Twenty per centum of the money collected under the provisions of this Act shall accrue
to the road and bridge funds of the different provinces and chartered cities in proportion to the centum shall during the next previous
year and the remaining eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the construction
and maintenance of national and provincial roads and bridges. as well as the streets and bridges in the chartered cities to be alloted
by the Secretary of Public Works and Communications for projects recommended by the Director of Public Works in the different
provinces and chartered cities. ....

Presently, Sec. 61 of the Land Transportation and Traffic Code provides:

Sec. 61. Disposal of Mortgage. Collected—Monies collected under the provisions of this Act shall be deposited in a special trust
account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and expended in accordance
with the provisions of the" Philippine Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip
the Land Transportation Commission but not to exceed twenty per cent of the total collection during one year, shall be set aside for
the purpose. (As amended by RA 64-67, approved August 6, 1971).

It appears clear from the above provisions that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration
is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the
administering agency. On the other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees," which appears to
have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 which reads:

Sec. 13. Payment of taxes upon registration.—No original registration of motor vehicles subject to payment of taxes, customs s
duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been presented to the Commission.

referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec. 59, b, Rep. Act 4136, as amended).

Fees may be properly regarded as taxes even though they also serve as an instrument of regulation, As stated by a former presiding judge of the Court
of Tax Appeals and writer on various aspects of taxpayers

It is possible for an exaction to be both tax arose. regulation. License fees are changes. looked to as a source of revenue as well as
a means of regulation (Sonzinky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. Isabela such case, the
fees may properly be regarded as taxes even though they also serve as an instrument of regulation. If the purpose is primarily
revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax. (1955 CCH
Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo. 97 Phil. 213-214) Lutz v. Araneta 98
Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S.
Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali, Reviewer in Taxation,
1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).

Indeed, taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil. 148).

If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax (Umali,
Id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in
the Calalang case. The same provision appears as Section 591-593). in the Land Transportation code. It is patent therefrom that the legislators had in
mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere
in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 591-593). speaks of "taxes." or fees ... for the registration or
operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more
apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional" tax," where the law could have referred to an original tax and not
one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the
exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks
of other "fees," such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11).
These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 591-593). of
the Code as taxes like the motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land Transportation
Commission as provided for in the last proviso of see. 61, aforequoted.

It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly purposes in the exercise of the State's police
powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modem life as
we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the
earlier deputy. of registration payments as "fees," their nature has become that of "taxes."

In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are
actually taxes intended for additional revenues. of government even if one fifth or less of the amount collected is set aside for the operating expenses of
the agency administering the program.

May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?

The answer is NO.

The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have
ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968, repealed all earlier tax exemptions Of corporate taxpayers found in legislative
franchises similar to that invoked by PAL in this case.

40
In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, et al. (G.R. No. 615)." July 11, 1985), this Court ruled:

Under its original franchise, Republic Act No. 21); enacted in 1957, petitioner Radio Communications of the Philippines, Inc., was
subject to both the franchise tax and income tax. In 1964, however, petitioner's franchise was amended by Republic Act No. 41-42).
to the effect that its franchise tax of one and one-half percentum (1-1/2%) of all gross receipts was provided as "in lieu of any and all
taxes of any kind, nature, or description levied, established, or collected by any authority whatsoever, municipal, provincial, or
national from which taxes the grantee is hereby expressly exempted." The issue raised to this Court now is the validity of the
respondent court's decision which ruled that the exemption under Republic Act No. 41-42). was repealed by Section 24 of Republic
Act No. 5448 dated June 27, 1968 which reads:

"(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers
not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates provided in this section. All
corporations, agencies, or instrumentalities owned or controlled by the government, including the Government
Service Insurance System and the Social Security System but excluding educational institutions, shall pay such
rate of tax upon their taxable net income as are imposed by this section upon associations or corporations
engaged in a similar business or industry. "

An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to
pay income tax as provided by the statute. There can be no doubt as to the power of Congress to repeal the earlier exemption it
granted. Article XIV, Section 8 of the 1935 Constitution and Article XIV, Section 5 of the Constitution as amended in 1973 expressly
provide that no franchise shall be granted to any individual, firm, or corporation except under the condition that it shall be subject to
amendment, alteration, or repeal by the legislature when the public interest so requires. There is no question as to the public interest
involved. The country needs increased revenues. The repealing clause is clear and unambiguous. There is a listing of entities
entitled to tax exemption. The petitioner is not covered by the provision. Considering the foregoing, the Court Resolved to DENY the
petition for lack of merit. The decision of the respondent court is affirmed.

Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL was
repealed during the period. However, an amended franchise was given to PAL in 1979. Section 13 of Presidential Decree No. 1590, now provides:

In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine Government during the lifetime of
this franchise whichever of subsections (a) and (b) hereunder will result in a lower taxes.)

(a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance
with the provisions of the Internal Revenue Code; or

(b) A franchise tax of two per cent (2%) of the gross revenues. derived by the grantees from all specific. without
distinction as to transport or nontransport corporations; provided that with respect to international airtransport
service, only the gross passengers, mail, and freight revenues. from its outgoing flights shall be subject to this
law.

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties, registration,
license and other fees and charges of any kind, nature or description imposed, levied, established, assessed, or collected by any
municipal, city, provincial, or national authority or government, agency, now or in the future, including but not limited to the following:

xxx xxx xxx

(5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of airtransport equipment, motor vehicles,
and all other personal or real property of the gravitates (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979).

PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now exempt from the payment of any tax, fee,
or other charge on the registration and licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax provided in
Subsections (a) and (b) of Section 13, P.D. 1590, and may no longer be exacted.

WHEREFORE, the petition is hereby partially GRANTED. The prayed for refund of registration fees paid in 1971 is DENIED. The Land Transportation
Franchising and Regulatory Board (LTFRB) is enjoined functions-the collecting any tax, fee, or other charge on the registration and licensing of the
petitioner's motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.

SO ORDERED.

I_E7

THIRD DIVISION

COMMISSIONER OF INTERNAL G.R. No. 159647

REVENUE,

Petitioner, Present:

Panganiban, J.,

Chairman,

Sandoval-Gutierrez,

- versus - Corona,

Carpio Morales, and

Garcia, JJ

41
CENTRAL LUZON DRUG Promulgated:

CORPORATION,

Respondent. April 15, 2005

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

DECISION

PANGANIBAN, J.:

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

T
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.

42
 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]

43
 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] by a taxpayer to the government. Examples of tax credits are withheld taxes, payments of estimated tax, and investment

tax credits.[17]

44
Tax credit should be understood in relation to other tax concepts. One of these is tax deduction -- defined as a subtraction from income for tax purposes,[18] or an amount that is

allowed by law to reduce income prior to [the] application of the tax rate to compute the amount of tax which is due. [19] An example of a tax deduction is any of the allowable

deductions enumerated in Section 34[20] of the Tax Code.

A tax credit differs from a tax deduction. On the one hand, a tax credit reduces the tax due, including -- whenever applicable -- the income tax that is determined after applying the

corresponding tax rates to taxable income.[21] A tax deduction, on the other, reduces the income that is subject to tax[22] in order to arrive at taxable income.[23] To think of the former

as the latter is to avoid, if not entirely confuse, the issue. A tax credit is used only after the tax has been computed; a tax deduction, before.

Tax Liability Required

for Tax Credit

Since a tax credit is used to reduce directly the tax that is due, there ought to be a tax liability before the tax credit can be applied. Without that liability, any tax credit application

will be useless. There will be no reason for deducting the latter when there is, to begin with, no existing obligation to the government. However, as will be presented shortly,

the existence of a tax credit or its grant by law is not the same as the availment or use of such credit. While the grant is mandatory, the availment or use is not.

If a net loss is reported by, and no other taxes are currently due from, a business establishment, there will obviously be no tax liability against which any tax creditcan be

applied.[24] For the establishment to choose the immediate availment of a tax credit will be premature and impracticable. Nevertheless, the irrefutable fact remains that, under RA

7432, Congress has granted without conditions a tax credit benefit to all covered establishments.

Although this tax credit benefit is available, it need not be used by losing ventures, since there is no tax liability that calls for its application. Neither can it be reduced to nil by

the quick yet callow stroke of an administrative pen, simply because no reduction of taxes can instantly be effected. By its nature, the tax creditmay still be deducted from a future,

not a present, tax liability, without which it does not have any use. In the meantime, it need not move. But it breathes.

Prior Tax Payments Not

Required for Tax Credit

While a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On the contrary, for the existence or grant solely of such credit, neither a tax

liability nor a prior tax payment is needed. The Tax Code is in fact replete with provisions granting or allowing tax credits, even though no taxes have been previously paid.

45
For example, in computing the estate tax due, Section 86(E) allows a tax credit -- subject to certain limitations -- for estate taxes paid to a foreign country. Also found in Section

101(C) is a similar provision for donors taxes -- again when paid to a foreign country -- in computing for the donors tax due. The tax credits in both instances allude to the prior

payment of taxes, even if not made to our government.

Under Section 110, a VAT (Value-Added Tax)- registered person engaging in transactions -- whether or not subject to the VAT -- is also allowed a tax credit that includes a

ratable portion of any input tax not directly attributable to either activity. This input tax may either be the VAT on the purchase or importation of goods or services that is merely

due from -- not necessarily paid by -- such VAT-registered person in the course of trade or business; or the transitional input tax determined in accordance with Section 111(A).

The latter type may in fact be an amount equivalent to only eight percent of the value of a VAT-registered persons beginning inventory of goods, materials and supplies, when

such amount -- as computed -- is higher than the actual VAT paid on the said items.[25]Clearly from this provision, the tax credit refers to an input tax that is either due only or

given a value by mere comparison with the VAT actually paid -- then later prorated. No tax is actually paid prior to the availment of such credit.

In Section 111(B), a one and a half percent input tax credit that is merely presumptive is allowed. For the purchase of primary agricultural products used as inputs -- either in the

processing of sardines, mackerel and milk, or in the manufacture of refined sugar and cooking oil -- and for the contract price of public work contracts entered into with the

government, again, no prior tax payments are needed for the use of the tax credit.

More important, a VAT-registered person whose sales are zero-rated or effectively zero-rated may, under Section 112(A), apply for the issuance of a tax creditcertificate for the

amount of creditable input taxes merely due -- again not necessarily paid to -- the government and attributable to such sales, to the extent that the input taxes have not been

applied against output taxes.[26] Where a taxpayer

is engaged in zero-rated or effectively zero-rated sales and also in taxable or exempt sales, the amount of creditable input taxes due that are not directly and entirely attributable

to any one of these transactions shall be proportionately allocated on the basis of the volume of sales. Indeed, in availing of such tax credit for VAT purposes, this provision --

as well as the one earlier mentioned -- shows that the prior payment of taxes is not a requisite.

It may be argued that Section 28(B)(5)(b) of the Tax Code is another illustration of a tax credit allowed, even though no prior tax payments are not required. Specifically, in this

provision, the imposition of a final withholding tax rate on cash and/or property dividends received by a nonresident foreign corporation from a domestic corporation is

subjected to the condition that a foreign tax credit will be given by the domiciliary country in an amount equivalent to taxes that are merely deemed paid.[27] Although true, this

provision actually refers to the tax credit as a condition only for the imposition of a lower tax rate, not as a deductionfrom the corresponding tax liability. Besides, it is not our

government but the domiciliary country that credits against the income tax payable to the latter by the foreign corporation, the tax to be foregone or spared.[28]

46
In contrast, Section 34(C)(3), in relation to Section 34(C)(7)(b), categorically allows as credits, against the income tax imposable under Title II, the amount of income taxes

merely incurred -- not necessarily paid -- by a domestic corporation during a taxable year in any foreign country. Moreover, Section 34(C)(5) provides that for such taxes incurred

but not paid, a tax credit may be allowed, subject to the condition precedent that the taxpayer shall simply give a bond with sureties satisfactory to and approved by petitioner,

in such sum as may be required; and further conditioned upon payment by the taxpayer of any tax found due, upon petitioners redetermination of it.

In addition to the above-cited provisions in the Tax Code, there are also tax treaties and special laws that grant or allow tax credits, even though no prior tax payments have been

made.

Under the treaties in which the tax credit method is used as a relief to avoid double taxation, income that is taxed in the state of source is also taxable in the state of residence, but the

tax paid in the former is merely allowed as a credit against the tax levied in the latter.[29] Apparently, payment is made to the state of source, not the state of residence. No tax, therefore,

has been previously paid to the latter.

Under special laws that particularly affect businesses, there can also be tax credit incentives. To illustrate, the incentives provided for in Article 48 of Presidential Decree No.

(PD) 1789, as amended by Batas Pambansa Blg. (BP) 391, include tax credits equivalent to either five percent of the net value earned, or five or ten percent of the net local

content of exports.[30] In order to avail of such credits under the said law and still achieve its objectives, no prior tax payments are necessary.

From all the foregoing instances, it is evident that prior tax payments are not indispensable to the availment of a tax credit. Thus, the CA correctly held that the availment under

RA 7432 did not require prior tax payments by private establishments concerned.[31] However, we do not agree with its finding[32] that the carry-over of tax credits under the said

special law to succeeding taxable periods, and even their application against internal revenue taxes, did not necessitate the existence of a tax liability.

The examples above show that a tax liability is certainly important in the availment or use, not the existence or grant, of a tax credit. Regarding this matter, a private establishment

reporting a net loss in its financial statements is no different from another that presents a net income. Both are entitled to the tax credit provided for under RA 7432, since the law

itself accords that unconditional benefit. However, for the losing establishment to immediately apply such credit, where no tax is due, will be an improvident usance.

Sections 2.i and 4 of Revenue

Regulations No. 2-94 Erroneous

RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts they grant.[33] In turn, the Implementing Rules and Regulations, issued pursuant

thereto, provide the procedures for its availment.[34] To deny such credit, despite the plain mandate of the law and the regulations carrying out that mandate, is indefensible.

47
First, the definition given by petitioner is erroneous. It refers to tax credit as the amount representing the 20 percent discount that shall be deducted by the said establishments

from their gross income for income tax purposes and from their gross sales for value-added tax or other percentage tax purposes.[35] In ordinary business language, the tax

credit represents the amount of such discount. However, the manner by which the discount shall be credited against taxes has not been clarified by the revenue regulations.

By ordinary acceptation, a discount is an abatement or reduction made from the gross amount or value of anything.[36] To be more precise, it is in business parlance a deduction

or lowering of an amount of money;[37] or a reduction from the full amount or value of something, especially a price. [38] In business there are many kinds of discount, the most

common of which is that affecting the income statement[39] or financial report upon which the income tax is based.

Business Discounts

Deducted from Gross Sales

A cash discount, for example, is one granted by business establishments to credit customers for their prompt payment.[40] It is a reduction in price offered to the purchaser if payment

is made within a shorter period of time than the maximum time specified.[41] Also referred to as a sales discount on the part of the seller and a purchase discount on the part of the

buyer, it may be expressed in such

terms as 5/10, n/30.[42]

A quantity discount, however, is a reduction in price allowed for purchases made in large quantities, justified by savings in packaging, shipping, and handling.[43] It is also called

a volume or bulk discount.[44]

A percentage reduction from the list price x x x allowed by manufacturers to wholesalers and by wholesalers to retailers[45] is known as a trade discount. No entry for it need be

made in the manual or computerized books of accounts, since the purchase or sale is already valued at the net price actually charged the buyer.[46] The purpose for the discount is

to encourage trading or increase sales, and the prices at which the purchased goods may be resold are also suggested. [47] Even a chain discount -- a series of discounts from one

list price -- is recorded at net.[48]

Finally, akin to a trade discount is a functional discount. It is a suppliers price discount given to a purchaser based on the [latters] role in the [formers] distribution system.[49] This role

usually involves warehousing or advertising.

48
Based on this discussion, we find that the nature of a sales discount is peculiar. Applying generally accepted accounting principles (GAAP) in the country, this type of discount is

reflected in the income statement[50] as a line item deducted -- along with returns, allowances, rebates and other similar expenses -- from gross sales to arrive at net sales.[51] This type

of presentation is resorted to, because the accounts receivable and sales figures that arise from sales discounts, -- as well as from quantity, volume or bulk discounts -- are recorded in the

manual and computerized books of accounts and reflected in the financial statements at the gross amounts of the invoices.[52] This manner of recording credit sales -- known as

the gross method -- is most widely used, because it is simple, more convenient to apply than the net method, and produces no material errors over time.[53]

However, under the net method used in recording trade, chain or functional discounts, only the net amounts of the invoices -- after the discounts have been deducted -- are recorded

in the books of accounts[54] and reflected in the financial statements. A separate line item cannot be shown,[55] because the transactions themselves involving both accounts

receivable and sales have already been entered into, net of the said discounts.

The term sales discounts is not expressly defined in the Tax Code, but one provision adverts to amounts whose sum -- along with sales returns, allowances and cost of goods sold[56] -- is

deducted from gross sales to come up with the gross income, profit or margin[57] derived from business.[58] In another provision therein, sales discounts that are granted and indicated in

the invoices at the time of sale -- and that do not depend upon the happening of any future event -- may be excluded from the gross sales within the same quarter they were

given.[59] While determinative only of the VAT, the latter provision also appears as a suitable reference point for income tax purposes already embraced in the former. After all,

these two provisions affirm that sales discounts are amounts that are always deductible from gross sales.

Reason for the Senior Citizen Discount:

The Law, Not Prompt Payment

A distinguishing feature of the implementing rules of RA 7432 is the private establishments outright deduction of the discount from the invoice price of the medicine sold to

the senior citizen.[60] It is, therefore, expected that for each retail sale made under this law, the discount period lasts no more than a day, because such discount is given -- and

the net amount thereof collected -- immediately upon perfection of the sale.[61] Although prompt payment is made for an arms-length transaction by the senior citizen, the real

and compelling reason for the private establishment giving the discount is that the law itself makes it mandatory.

What RA 7432 grants the senior citizen is a mere discount privilege, not a sales discount or any of the above discounts in particular. Prompt payment is not the reason for (although

a necessary consequence of) such grant. To be sure, the privilege enjoyed by the senior citizen must be equivalent to the tax credit benefit enjoyed by the private establishment

granting the discount. Yet, under the revenue regulations promulgated by our tax authorities, this benefit has been erroneously likened and confined to a sales discount.

49
To a senior citizen, the monetary effect of the privilege may be the same as that resulting from a sales discount. However, to a private establishment, the effect is different from a

simple reduction in price that results from such discount. In other words, the tax credit benefit is not the same as a sales discount. To repeat from our earlier discourse, this benefit

cannot and should not be treated as a tax deduction.

To stress, the effect of a sales discount on the income statement and income tax return of an establishment covered by RA 7432 is different from that resulting from the availment or use of

its tax credit benefit. While the former is a deduction before, the latter is a deduction after, the income tax is computed. As mentioned earlier, a discount is not necessarily a sales

discount, and a tax credit for a simple discount privilege should not be automatically treated like a sales discount. Ubi lex non distinguit, nec nos distinguere debemus. Where the law does

not distinguish, we ought not to distinguish.

Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent discount deductible from gross income for income tax purposes, or from gross sales for

VAT or other percentage tax purposes. In effect, the tax credit benefit under RA 7432 is related to a sales discount. This contrived definition is improper, considering that the latter

has to be deducted from gross sales in order to compute the gross income in the income statement and cannot be deducted again, even for purposes of computing the income tax.

When the law says that the cost of the discount may be claimed as a tax credit, it means that the amount -- when claimed -- shall be treated as a reduction from any tax liability,

plain and simple. The option to avail of the tax credit benefit depends upon the existence of a tax liability, but to limit the benefit to a sales discount-- which is not even identical

to the discount privilege that is granted by law -- does not define it at all and serves no useful purpose. The definition must, therefore, be stricken down.

Laws Not Amended

by Regulations

Second, the law cannot be amended by a mere regulation. In fact, a regulation that operates to create a rule out of harmony with

the statute is a mere nullity;[62] it cannot prevail.

It is a cardinal rule that courts will and should respect the contemporaneous construction placed upon a statute by the executive officers whose duty it is to enforce it x x x.[63] In

the scheme of judicial tax administration, the need for certainty and predictability in the implementation of tax laws is crucial. [64] Our tax authorities fill in the details that

Congress may not have the opportunity or competence to provide.[65] The regulations these authorities issue are relied upon by taxpayers, who are certain that these will be

followed by the courts.[66] Courts, however, will not uphold these authorities interpretations when clearly absurd, erroneous or improper.

50
In the present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation

has muddled up the intent of Congress in granting a mere discount privilege, not a sales discount. The administrative agency issuing these regulations may not enlarge, alter or

restrict the provisions of the law it administers; it cannot engraft additional requirements not contemplated by the legislature.[67]

In case of conflict, the law must prevail.[68] A regulation adopted pursuant to law is law.[69] Conversely, a regulation or any portion thereof not adopted pursuant to law is no law

and has neither the force nor the effect of law.[70]

Availment of Tax

Credit Voluntary

Third, the word may in the text of the statute[71] implies that the

availability of the tax credit benefit is neither unrestricted nor mandatory.[72] There is no absolute right conferred upon respondent, or any similar taxpayer, to avail itself of the tax

credit remedy whenever it chooses; neither does it impose a duty on the part of the government to sit back and allow an important facet of tax collection to be at the sole control

and discretion of the taxpayer.[73] For the tax authorities to compel respondent to deduct the 20 percent discount from either its gross income or its gross sales[74] is, therefore, not

only to make an imposition without basis in law, but also to blatantly contravene the law itself.

What Section 4.a of RA 7432 means is that the tax credit benefit is merely permissive, not imperative. Respondent is given two options -- either to claim or not to claim the cost

of the discounts as a tax credit. In fact, it may even ignore the credit and simply consider the gesture as an act of beneficence, an expression of its social conscience.

Granting that there is a tax liability and respondent claims such cost as a tax credit, then the tax credit can easily be applied. If there is none, the credit cannot be used and will just

have to be carried over and revalidated[75] accordingly. If, however, the business continues to operate at a loss and no other taxes are due, thus compelling it to close shop, the

credit can never be applied and will be lost altogether.

In other words, it is the existence or the lack of a tax liability that determines whether the cost of the discounts can be used as a tax credit. RA 7432 does not give respondent

the unfettered right to avail itself of the credit whenever it pleases. Neither does it allow our tax administrators to expand or contract the legislative mandate. The plain meaning

rule or verba legis in statutory construction is thus applicable x x x. Where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and

applied without attempted interpretation.[76]

Tax Credit Benefit

Deemed Just Compensation

51
Fourth, Sections 2.i and 4 of RR 2-94 deny the exercise by the State of its power of eminent domain. Be it stressed that the privilege enjoyed by senior citizens does not

come directly from the State, but rather from the private establishments concerned. Accordingly, the tax credit benefit granted to these establishments can be deemed as their just

compensation for private property taken by the State for public use.[77]

The concept of public use is no longer confined to the traditional notion of use by the public, but held synonymous with public interest, public benefit, public welfare, and public

convenience.[78] The discount privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens belong. The discounts

given would have entered the coffers and formed part of the gross sales of the private establishments concerned, were it not for RA 7432. The permanent reduction in their total

revenues is a forced subsidy corresponding to the taking of private property for public use or benefit.

As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to a just compensation. This term refers not only to the issuance of a tax credit certificate

indicating the correct amount of the discounts given, but also to the promptness in its release. Equivalent to the payment of property taken by the State, such issuance -- when

not done within a reasonable time from the grant of the discounts -- cannot be considered as just compensation. In effect, respondent is made to suffer the consequences of being

immediately deprived of its revenues while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with the reduction in its revenues.[79]

Besides, the taxation power can also be used as an implement for the exercise of the power of eminent domain.[80] Tax measures are but enforced contributions exacted on pain

of penal sanctions[81] and clearly imposed for a public purpose.[82] In recent years, the power to tax has indeed become a most effective tool to realize social justice, public welfare,

and the equitable distribution of wealth.[83]

While it is a declared commitment under Section 1 of RA 7432, social justice cannot be invoked to trample on the rights of property owners who under our Constitution and

laws are also entitled to protection. The social justice consecrated in our [C]onstitution [is] not intended to take away rights from a person and give them to another who is not

entitled thereto.[84] For this reason, a just compensation for income that is taken away from respondent becomes necessary. It is in the tax credit that our legislators find support

to realize social justice, and no administrative body can alter that fact.

To put it differently, a private establishment that merely breaks even[85] -- without the discounts yet -- will surely start to incur losses because of such discounts. The same effect

is expected if its mark-up is less than 20 percent, and if all its sales come from retail purchases by senior citizens. Aside from the observation we have already raised earlier, it

will also be grossly unfair to an establishment if the discounts will be treated merely as deductions from either its gross income or its gross sales. Operating at a loss through no fault

of its own, it will realize that the tax credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-generating businesses will be put in a better position if they avail

themselves of tax credits denied those that are losing, because no taxes are due from the latter.

52
Grant of Tax Credit

Intended by the Legislature

Fifth, RA 7432 itself seeks to adopt measures whereby senior citizens are assisted by the community as a whole and to establish a program beneficial to them.[86]These objectives

are consonant with the constitutional policy of making health x x x services available to all the people at affordable cost[87] and of giving priority for the needs of the x x x

elderly.[88] Sections 2.i and 4 of RR 2-94, however, contradict these constitutional policies and statutory objectives.

Furthermore, Congress has allowed all private establishments a simple tax credit, not a deduction. In fact, no cash outlay is required from the government for the availment or use of

such credit. The deliberations on February 5, 1992 of the Bicameral Conference Committee Meeting on Social Justice, which finalized RA 7432, disclose the true intent of our

legislators to treat the sales discounts as a tax credit, rather than as a deduction from gross income. We quote from those deliberations as follows:

"THE CHAIRMAN (Rep. Unico). By the way, before that ano, about deductions from taxable income. I think we incorporated there a
provision na - on the responsibility of the private hospitals and drugstores, hindi ba?

SEN. ANGARA. Oo.

THE CHAIRMAN. (Rep. Unico), So, I think we have to put in also a provision here about the deductions from taxable income of that
private hospitals, di ba ganon 'yan?

MS. ADVENTO. Kaya lang po sir, and mga discounts po nila affecting government and public institutions, so, puwede na po nating
hindi isama yung mga less deductions ng taxable income.

THE CHAIRMAN. (Rep. Unico). Puwede na. Yung about the private hospitals. Yung isiningit natin?

MS. ADVENTO. Singit na po ba yung 15% on credit. (inaudible/did not use the microphone).

SEN. ANGARA. Hindi pa, hindi pa.

THE CHAIRMAN. (Rep. Unico) Ah, 'di pa ba naisama natin?

SEN. ANGARA. Oo. You want to insert that?

THE CHAIRMAN (Rep. Unico). Yung ang proposal ni Senator Shahani, e.

SEN. ANGARA. In the case of private hospitals they got the grant of 15% discount, provided that, the private hospitals can claim the
expense as a tax credit.

REP. AQUINO. Yah could be allowed as deductions in the perpetrations of (inaudible) income.

SEN. ANGARA. I-tax credit na lang natin para walang cash-out ano?

REP. AQUINO. Oo, tax credit. Tama, Okay. Hospitals ba o lahat ng establishments na covered.

53
 THE CHAIRMAN. (Rep. Unico). Sa kuwan lang yon, as private hospitals lang.

REP. AQUINO. Ano ba yung establishments na covered?

SEN. ANGARA. Restaurant lodging houses, recreation centers.

REP. AQUINO. All establishments covered siguro?

SEN. ANGARA. From all establishments. Alisin na natin 'Yung kuwan kung ganon. Can we go back to Section 4 ha?

REP. AQUINO. Oho.

SEN. ANGARA. Letter A. To capture that thought, we'll say the grant of 20% discount from all establishments et cetera, et cetera,
provided that said establishments - provided that private establishments may claim the cost as a tax
credit. Ganon ba 'yon?

REP. AQUINO. Yah.

SEN. ANGARA. Dahil kung government, they don't need to claim it.

THE CHAIRMAN. (Rep. Unico). Tax credit.

SEN. ANGARA. As a tax credit [rather] than a kuwan - deduction, Okay.

REP. AQUINO Okay.

SEN. ANGARA. Sige Okay. Di subject to style na lang sa Letter A".[89]

Special Law

Over General Law

Sixth and last, RA 7432 is a special law that should prevail over the Tax Code -- a general law. x x x [T]he rule is that on a specific matter the special law shall prevail over the

general law, which shall

be resorted to only to supply deficiencies in the former.[90] In addition, [w]here there are two statutes, the earlier special and the later general -- the terms of the general broad

enough to include the matter provided for in the special -- the fact that one is special and the other is general creates a presumption that the special is to be considered as

remaining an exception to the general,[91] one as a general law of the land, the other as the law of a particular case.[92] It is a canon of statutory construction that a later statute, general

in its terms and not expressly repealing a prior special statute, will ordinarily not affect the special provisions of such earlier statute.[93]

54
RA 7432 is an earlier law not expressly repealed by, and therefore remains an exception to, the Tax Code -- a later law. When the former states that a tax creditmay be claimed,

then the requirement of prior tax payments under certain provisions of the latter, as discussed above, cannot be made to apply. Neither can the instances of or references to

a tax deduction under the Tax Code[94] be made to restrict RA 7432. No provision of any revenue regulation can supplant or modify the acts of Congress.

WHEREFORE, the Petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals AFFIRMED. No pronouncement as to costs.

SO ORDERED.

I_E8

SECOND DIVISION

[G.R. No. 152675. April 28, 2004]

BATANGAS POWER CORPORATION, petitioner, vs. BATANGAS CITY and NATIONAL POWER CORPORATION, respondents.

[G.R. No. 152771. April 28, 2004]

NATIONAL POWER CORPORATION, petitioner, vs. HON. RICARDO R. ROSARIO, in his capacity as Presiding Judge, RTC, Br. 66, Makati City;
BATANGAS CITY GOVERNMENT; ATTY. TEODULFO DEGUITO, in his capacity as Chief Legal Officer, Batangas City; and BENJAMIN
PARGAS, in his capacity as City Treasurer, Batangas City, respondents.

DECISION

PUNO, J.:

Before us are two (2) consolidated petitions for review under Rule 45 of the Rules of Civil Procedure, seeking to set aside the rulings of the Regional
Trial Court of Makati in its February 27, 2002 Decision in Civil Case No. 00-205.

The facts show that in the early 1990s, the country suffered from a crippling power crisis. Power outages lasted 8-12 hours daily and power
generation was badly needed. Addressing the problem, the government, through the National Power Corporation (NPC), sought to attract investors in
power plant operations by providing them with incentives, one of which was through the NPCs assumption of payment of their taxes in the Build Operate
and Transfer (BOT) Agreement.

On June 29, 1992, Enron Power Development Corporation (Enron) and petitioner NPC entered into a Fast Track BOT Project. Enron agreed to
supply a power station to NPC and transfer its plant to the latter after ten (10) years of operation. Section 11.02 of the BOT Agreement provided that NPC
shall be responsible for the payment of all taxes that may be imposed on the power station, except income taxes and permit fees. Subsequently, Enron
assigned its obligation under the BOT Agreement to petitioner Batangas Power Corporation (BPC).

On September 13, 1992, BPC registered itself with the Board of Investments (BOI) as a pioneer enterprise. On September 23, 1992, the BOI issued
a certificate of registration[1] to BPC as a pioneer enterprise entitled to a tax holiday for a period of six (6) years. The construction of the power station in
respondent Batangas City was then completed. BPC operated the station.

On October 12, 1998, Batangas City (the city, for brevity), thru its legal officer Teodulfo A. Deguito, sent a letter to BPC demanding payment of
business taxes and penalties, commencing from the year 1994 as provided under Ordinance XI or the 1992 Batangas City Tax Code.[2] BPC refused to
pay, citing its tax-exempt status as a pioneer enterprise for six (6) years under Section 133 (g) of the Local Government Code (LGC). [3]

On April 15, 1999, city treasurer Benjamin S. Pargas modified the citys tax claim[4] and demanded payment of business taxes from BPC only for the
years 1998-1999. He acknowledged that BPC enjoyed a 6-year tax holiday as a pioneer industry but its tax exemption period expired on September 22,
1998, six (6) years after its registration with the BOI on September 23, 1992. The city treasurer held that thereafter BPC became liable to pay its business
taxes.

BPC still refused to pay the tax. It insisted that its 6-year tax holiday commenced from the date of its commercial operation on July 16, 1993, not
from the date of its BOI registration in September 1992.[5] It furnished the city with a BOI letter[6] wherein BOI designated July 16, 1993 as the start of BPCs
income tax holiday as BPC was not able to immediately operate due to force majeure. BPC claimed that the local tax holiday is concurrent with the income
tax holiday. In the alternative, BPC asserted that the city should collect the tax from the NPC as the latter assumed responsibility for its payment under
their BOT Agreement.

The matter was not put to rest. The city legal officer insisted[7] that BPCs tax holiday has already expired, while the city argued that it directed its tax
claim to BPC as it is the entity doing business in the city and hence liable to pay the taxes. The city alleged that it was not privy to NPCs assumption of
BPCs tax payment under their BOT Agreement as the only parties thereto were NPC and BPC.

BPC adamantly refused to pay the tax claims and reiterated its position. [8] The city was likewise unyielding on its stand.[9] On August 26, 1999, the
NPC intervened.[10] While admitting assumption of BPCs tax obligations under their BOT Agreement, NPC refused to pay BPCs business tax as it allegedly
constituted an indirect tax on NPC which is a tax-exempt corporation under its Charter.[11]

55
 In view of the deadlock, BPC filed a petition for declaratory relief [12] with the Makati Regional Trial Court (RTC) against Batangas City and NPC,
praying for a ruling that it was not bound to pay the business taxes imposed on it by the city. It alleged that under the BOT Agreement, NPC is responsible
for the payment of such taxes but as NPC is exempt from taxes, both the BPC and NPC are not liable for its payment. NPC and Batangas City filed their
respective answers.

On February 23, 2000, while the case was still pending, the city refused to issue a permit to BPC for the operation of its business unless it paid the
assessed business taxes amounting to close to P29M.

In view of this supervening event, BPC, whose principal office is in Makati City, filed a supplemental petition [13] with the Makati RTC to convert its
original petition into an action for injunction to enjoin the city from withholding the issuance of its business permit and closing its power plant. The city
opposed on the grounds of lack of jurisdiction and lack of cause of action. [14] The Supplemental Petition was nonetheless admitted by the Makati RTC.

On February 27, 2002, the Makati RTC dismissed the petition for injunction. It held that: (1) BPC is liable to pay business taxes to the city; (2) NPCs
tax exemption was withdrawn with the passage of R.A. No. 7160 (The Local Government Code); and, (3) the 6-year tax holiday granted to pioneer business
enterprises starts on the date of registration with the BOI as provided in Section 133 (g) of R.A. No. 7160, and not on the date of its actual business
operations. [15]

BPC and NPC filed with this Court a petition for review on certiorari[16] assailing the Makati RTC decision. The petitions were consolidated as they
impugn the same decision, involve the same parties and raise related issues.[17]

In G.R. No. 152771, the NPC contends:

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
ARBITRARILY AND CAPRICIOUSLY RULED THAT PETITIONER NPC HAS LOST ITS TAX EXEMPTION PRIVILEGE BECAUSE SECTION 193 OF R.A.
7160 (LOCAL GOVERNMENT CODE) HAS WITHDRAWN SUCH PRIVILEGE DESPITE THE SETTLED JURISPRUDENCE THAT THE ENACTMENT OF A
LEGISLATION, WHICH IS A GENERAL LAW, CANNOT REPEAL A SPECIAL LAW AND THAT SECTION 13 OF R.A. 6395 (NPC LAW) WAS NOT
SPECIFICALLY MENTIONED IN THE REPEALING CLAUSE IN SECTION 534 OF R.A. 7160, AMONG OTHERS.

II

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
ARBITRARILY AND CAPRICIOUSLY OMITTED THE CLEAR PROVISION OF SECTION 133, PARAGRAPH (O) OF R.A. 7160 WHICH EXEMPTS
NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES FROM THE IMPOSITION OF TAXES, FEES OR CHARGES OF ANY KIND.

III

RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
ERRONEOUSLY AND CAPRICIOUSLY ADMITTED BPCs SUPPLEMENTAL PETITION FOR INJUNCTION NOTWITHSTANDING THAT IT HAD NO
JURISDICTION OVER THE PARTY (CITY GOVERNMENT OF BATANGAS) SOUGHT TO BE ENJOINED.

In G.R. No. 152675, BPC also contends that the trial court erred: 1) in holding it liable for payment of business taxes even if it is undisputed that
NPC has already assumed payment thereof; and, 2) in ruling that BPCs 6-year tax holiday commenced on the date of its registration with the BOI as a
pioneer enterprise.

The issues for resolution are:

1. whether BPCs 6-year tax holiday commenced on the date of its BOI registration as a pioneer enterprise or on the date of its actual
commercial operation as certified by the BOI;

2. whether the trial court had jurisdiction over the petition for injunction against Batangas City; and,

3. whether NPCs tax exemption privileges under its Charter were withdrawn by Section 193 of the Local Government Code (LGC).

We find no merit in the petition.

On the first issue, petitioners BPC and NPC contend that contrary to the impugned decision, BPCs 6-year tax holiday should commence on the
date of its actual commercial operations as certified to by the BOI, not on the date of its BOI registration.

We disagree. Sec. 133 (g) of the LGC, which proscribes local government units (LGUs) from levying taxes on BOI-certified pioneer enterprises for
a period of six years from the date of registration, applies specifically to taxes imposed by the local government, like the business tax imposed
by Batangas City on BPC in the case at bar. Reliance of BPC on the provision of Executive Order No. 226,[18] specifically Section 1, Article 39, Title
III, is clearly misplaced as the six-year tax holiday provided therein which commences from the date of commercial operation refers to income
taxes imposed by the national government on BOI-registered pioneer firms. Clearly, it is the provision of the Local Government Code that should apply
to the tax claim of Batangas City against the BPC. The 6-year tax exemption of BPC should thus commence from the date of BPCs registration with the
BOI on July 16, 1993 and end on July 15, 1999.

Anent the second issue, the records disclose that petitioner NPC did not oppose BPCs conversion of the petition for declaratory relief to a petition
for injunction or raise the issue of the alleged lack of jurisdiction of the Makati RTC over the petition for injunction before said court. Hence, NPC is estopped
from raising said issue before us. The fundamental rule is that a party cannot be allowed to participate in a judicial proceeding, submit the case for decision,
accept the judgment only if it is favorable to him but attack the jurisdiction of the court when it is adverse. [19]

Finally, on the third issue, petitioners insist that NPCs exemption from all taxes under its Charter had not been repealed by the LGC. They argue
that NPCs Charter is a special law which cannot be impliedly repealed by a general and later legislation like the LGC. They likewise anchor their claim of
tax-exemption on Section 133 (o) of the LGC which exempts government instrumentalities, such as the NPC, from taxes imposed by local government
units (LGUs), citing in support thereof the case of Basco v. PAGCOR.[20]

We find no merit in these contentions. The effect of the LGC on the tax exemption privileges of the NPC has already been extensively discussed
and settled in the recent case of National Power Corporation v. City of Cabanatuan.[21] In said case, this Court recognized the removal of the blanket
exclusion of government instrumentalities from local taxation as one of the most significant provisions of the 1991 LGC. Specifically, we stressed
that Section 193 of the LGC,[22] an express and general repeal of all statutes granting exemptions from local taxes, withdrew the sweeping tax
privileges previously enjoyed by the NPC under its Charter. We explained the rationale for this provision, thus:

In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the
equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. Taxation assumes even greater
significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution, viz:

Section 5.- Each Local Government unit shall have the power to create its own sources of revenue, to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local
Governments.

56
This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of
governance. For a long time, the countrys highly centralized government structure has bred a culture of dependence among local government leaders upon the national
leadership. It has also dampened the spirit of initiative, innovation and imaginative resilience in matters of local development on the part of local government
leaders. The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to
generate their own sources for the purpose. To achieve this goal, x x x the 1987 Constitution mandates Congress to enact a local government code that will, consistent
with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing powers x x x.

To recall, prior to the enactment of the x x x Local Government Code x x x, various measures have been enacted to promote local autonomy. x x x Despite these
initiatives, however, the shackles of dependence on the national government remained. Local government units were faced with the same problems that hamper their
capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external sources of
income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e) limited supervisory control
over personnel of national line agencies.

Considered as the most revolutionary piece of legislation on local autonomy, the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base
of LGUs to include taxes which were prohibited by previous laws x x x.

Neither can the NPC successfully rely on the Basco case[23] as this was decided prior to the effectivity of the LGC, when there was still no law
empowering local government units to tax instrumentalities of the national government.

Consequently, when NPC assumed the tax liabilities of the BPC under their 1992 BOT Agreement, the LGC which removed NPCs tax exemption
privileges had already been in effect for six (6) months. Thus, while BPC remains to be the entity doing business in said city, it is the NPC that is ultimately
liable to pay said taxes under the provisions of both the 1992 BOT Agreement and the 1991 Local Government Code.

IN VIEW WHEREOF, the petitions are DISMISSED. No costs.

SO ORDERED.

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