City of Manila, Hon. Alfredo S. Lim, as mayor of the City of Manila vs. Hon.

Angel
Valera Colet, Presiding Judge, RTC Manila
(NOTE: there are 10 consolidated cases in this case. The important facts are in
the first 3 cases. take note of the headings)
Facts:
The Manila Revenue Code was enacted on June 22, 1993 by the CIty Council of
Manila and approved on June 29, 1993 by then Mayor Lim.
Section 21(B) of said Code originally provided
Section 21. Tax on Businesses Subject to the Excise, Value-Added or Percentage
Taxes Under the NIRC. On any of the following businesses and articles of
commerce subject to the excise, value-added or percentage taxes under the
National Internal Revenue Code, hereinafter referred to as NIRC, as amended, a
tax of three percent (3%) per annum on the gross sales or receipts of the
preceding calendar year is hereby imposed:
B) On the gross receipts of keepers of garages, cars for rent or hire driven by the
lessee, transportation contractors, persons who transport passenger or freight for
hire, and common carriers by land, air or water, except owners of bancas and
owners of animal-drawn two-wheel vehicle.
Shortly thereafter, Ordinance No. 7807 was enacted by the City Council of Manila
on September 27, 1993 and approved by Mayor Lim on September 29, 1993,
already amending several provisions of the Manila Revenue Code. Section 21 of
the Manila Revenue Code, as amended, imposed a lower tax rate on the
businesses that fell under it, and paragraph (B) thereof read as follows
Section 21. Tax on Business Subject to the Excise, Value-Added or Percentage
Taxes Under the NIRC On any of the following businesses and articles of
commerce subject to the excise, value-added or percentage taxes under the
National Internal Revenue Code hereinafter referred to as NIRC, as amended, a
tax of FIFTY PERCENT (50%) OF ONE PERCENT (1%) per annum on the gross sales
or receipts of the preceding calendar year is hereby imposed:
B) On the gross receipts of keepers of garages, cars for rent or hire driven by the
lessee, transportation contractors, persons who transport passenger or freight for
hire, and common carriers by land, air or water, except owners of bancas and
owners of animal-drawn two-wheel vehicle.
The City of Manila, through its City Treasurer, began imposing and collecting the

business tax under Section 21(B) of the Manila Revenue Code, as amended,
beginning January 1994.
CASE 1: Malaysian Airline System (MAS) is a foreign corporation organized and
existing under the laws of Malaysia. It is licensed with the SEC in the airline
business which involves the transportation of passengers and cargo for hire. Its
principal office and place of business in the Philippines is located in the City of
Manila.
When MAS renewed its business permit for 1994, it was assessed by the City
Treasurer of Manila on Jan. 17, 1994 for the amount of P1,110,307.50
MAS believed it was exempt from the municipal license tax or business tax and
tendered via Far East Bank and Trust Company only the amount of P10,307.50 for
Mayor's fees and regulatory fees.
On Jan. 20, 1994 MAS filed a civil case to:
1. consign with the trial court the amount of P10,307.50 for mayor's permit and
regulatory fees
2. challenge the assessment against it by the City Treasurer in the amount of
P1,100,000 for the municipal tax or business tax
3. and to have section 21(B) of the Manila Revenue Code declared invalid or null
and void
RTC DECISION:
1. Consignation was valid and made in accordance with law;
2. defendants ordered to issue to plaintiff the mayor's permit or permit to operate
for 1994
3. declared section 21 (B) of ordinance no. 7794 as invalid or null and void insofar
as the business tax on transportation.
4. declared plaintiffs obligation to the defendant City of Manila for the mayor's
permit fee and other regulatory fees for 1994 as having been paid and
extinguished.
City of Manila, Mayor Lim, and City Treasurer filed with the Court a Petition for
Review on Certiorari
ISSUE OF CASE 1: Constitutionality of sec 21(B)

CASE 2: Meanwhile, several more corporations with principal offices in Manila and
engaged inthe same line of business as the petitioner filed petitions in the
pending cases, seeking the 1.) declaration of section 21(B) of the Manila Revenue
Code as void; and 2.) refund of the business taxes that the petitioner and

intervenor paid under protest; and 3.) the issuance of a TRO to enjoin
implementation of Section 21(B).
RTC ordered the TRO, but subsequently upheld the power of the respondent City
of Manila to levy the business tax.
Maersk and the other companies filed a petition for review on certiorari before
the SC.
ISSUE IN THE CASE OF MAERSK (CASE 2): whether or not Section 21(B) of the
Revenue Code of the City of Manila is valid and Constitutional.
HELD (CASE 2): SC dismissed the petition for non compliance with the
requirement to remit the amount of P202.00 as payment of legal fees

CASE 3:
Eastern Shipping was the petitioner in a civil cases concerning the same facts
and the same issues. RTC rendered a decision against Eastern Shipping and the
latter appealed on a petition for review before the SC.
CASE 4:
William Lines, Negros Navigation, et al. are domestic corporations principally
engaged in the business of operating domestic shipping vessals for the transpo of
cargo and passengers. They all paid the aforesaid taxes under protest. The
petitioners here were intervenors in CASE 3 and they assailed the decision of the
RTC in that case on grounds of constitutionality and for a TRO as well.
CASE 5:
PSTC is a GOCC engaged inthe business of shipping, tinkering, etc. They were
assessed under Sec 21(B) of 2 million. PSTC were also intervenors in CASE 3.
They also filed a petition for review on certiorari with prayer for a TRO.
CASES 6 - 10 are basically the same but with different petitioners

CONSOLIDATION OF THE 10 PETITIONS

By the time the SC consolidated the cases, took cognizance of the petitions, and
notified Atty. Renato G. Dela Cruz, Legal Officer of Manila, the original lawyers
were already deceased and Atty. Dela Cruz could not find the records of the
cases. Atty. Tajonera took over when Atty. Dela Cruz failed to comply with the
Show Cause Order of the SC.
RULING OF THE SC:
SC dismissed case 1 for having become moot and academic, case 2 for failure of
the petitioners to file the proper legal fees.

On the merits of the 10 Petitions:

The Court ruled in favor of the petitioners and held that section 21(B) is
unconstitutional. It is a well-settled rule that although the power to tax is inherent
in the State, the same is not true for the LGUs to whome the power must be
delegated by Congress and must be exercised within the guidelines and
limitations that Congress may provide. Among the common limitations on the
taxing power of LGUs is Sec. 133 (j) of the LGC which states that unless otherwise
provdied, the taxing power of LGUs shall not extend to taxes on the gross
receipts of transportation contractors and persons engaged in the transportation
in the transportation of passengers or freight by hire and common carriers by air,
land or water, except as provided by in this Code.

SILKAIR VS. COMMISSIONER OF INTERNAL REVENUE

Facts:
Petitioner, Silkair (Singapore) Pte. Ltd. (Silkair), a corporation organized under the
laws of Singapore which has a Philippine representative office, is an online
international air carrier operating the Singapore-Cebu-Davao-Singapore,
Singapore-Davao-Cebu-Singapore, and Singapore-Cebu-Singapore routes.
On December 19, 2001, Silkair filed with the Bureau of Internal Revenue (BIR) a
written application for the refund of P4,567,450.79 excise taxes it claimed to
have paid on its purchases of jet fuel from Petron Corporation from January to
June 2000.
As the BIR had not yet acted on the application as of December 26, 2001, Silkair
filed a Petition for Review before the CTA following Commissioner of Internal
Revenue v. Victorias Milling Co., Inc., et al.
The Second Division of the CTA denied Silkair's petition on the ground that as the
exicse tax was imposed on Petron Corporation as the manufacturer of petroleum
products, any claim from refund should be filed by the latter; and when the
burden of tax is shifted to the purchaser, the amount passed on to it is no longer
a tax but becomes an added cost of the goods purchased. CTA denied the motion
for reconsideration of SILKAIR and the latter filed a petition for review with the
SC.
HELD:
The petition must fail. Silkair bases its claim for refund or tax credit on Section
135 (b) of the NIRC of 1997 which reads
Sec. 135. Petroleum Products sold to International Carriers and Exempt Entities of
Agencies. Petroleum products sold to the following are exempt from excise tax:

(b) Exempt entities or agencies covered by tax treaties, conventions, and other
international agreements for their use and consumption: Provided, however, That
the country of said foreign international carrier or exempt entities or agencies
exempts from similar taxes petroleum products sold to Philippine carriers, entities
or agencies;
The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another.
The proper party to question, or seek a refund of, an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another.
The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2)
of the Air Transport Agreement between RP and Singapore cannot, without a clear
showing of legislative intent, be construed as including indirect taxes. Statutes
granting tax exemptions must be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority.