American Tobacco v.

Camacho (2008)
G.R. No. 163583 August 20, 2008
YNARES-SANTIAGO, J.

Lessons Applicable: Court of Tax Appeals Jurisdiction, Regional Trial Court Jurisdiction, Equal
Protection and Uniformity of Taxation (constitutional issue), BIR Power to Conduct Resurvey and
Reclassification (delegated by express legislation)

Laws Applicable:

FACTS:
 June 2001, petitioner British American Tobacco introduced and sold Lucky Strike, Lucky Strike
Lights and Lucky Strike Menthol Lights cigarettes w/ SRP P 9.90/pack - Initial assessed excise tax: P
8.96/pack (Sec. 145 [c])
 February 17, 2003: RR 9-2003: Periodic review every 2 years or earlier of the current net retail price
of new brands and variants thereof for the purpose of the establishing and updating their tax
classification
 March 11, 2003: RMO 6-2003: Guidelines and procedures in establishing current net retail prices of
new brands of cigarettes and alcohol products
 August 8, 2003: RR 22-2003: Implement the revised tax classification of certain new brands
introduced in the market after January 1, 1997 based on the survey of their current net retail
prices. This increased the excise tax to P13.44 since the average net retail price is above P
10/pack. This cause petitioner to file before the RTC of Makati a petition for injunction with prayer
for issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction sought to enjoin
the implementation of Sec. 145 of the NIRC, RR No. 1-97, 9-2003, 22-2003 and 6-2003 on the
ground that they discriminate against new brands of cigarettes in violation of the equal protection and
uniformity provisions of the Constitution
 RTC: Dismissed
 While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997 NIRC among other
took effect on January 1, 2005 which in effect increased petitioners excise tax to P25/pack
 Petitioner filed a Motion to Admit attached supplement and a supplement to the petition for review
assailing the constitutionality of RA 9334 and praying a downward classification of Lucky Strike
products at the bracket taxable at P 8.96/pack since existing brands are still taxed based on their price
as of October 1996 eventhough they are equal or higher than petitioner's product price.
 Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp., Mighty Corp. and JT
International Intervened.
 Fortune Tobacco claimed that the CTA should have the exclusive appellate jurisdiction over the
decision of the BIR in tax disputes
ISSUE:
1. W/N the RTC rather than the CTA has jurisdiction.
2. W/N RA 9334 of the classification freeze provision is unconstitutional for violating the equal
protection and uniformity provisions of the Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its amendment by RA 9334 can
authorize the BIR to conduct resurvey and reclassification.
HELD:
1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on the CTA jurisdiction to
resolve tax disputes in general. BUT does NOT include cases where the constitutionality of a law or rule
is challenged which is a judicial power belonging to regular courts.

2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that the laws operate equally and
uniformly on all persons under similar circumstances or that all persons must be treated in the same
manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. If
the law be looked upon in tems of burden on charges, those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in the group equally binding on the rest. xxx" Thus,
classification if rational in character is allowable. In Lutz v. Araneta: "it is inherent in the power to tax
that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities
which result from a singling out of one particular class for taxation, or exemption infringe no
constitutional limitation" SC previously held: "Equality and uniformity in taxation means that all taxable
articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation"

Under the the rational basis test, a legislative classification, to survive an equal protection challenge, must
be shown to rationally further a legitimate state interest. The classifications must be reasonable and rest
upon some ground of difference having a fair and substantial relation to the object of the legislation

A legislative classification that is reasonable does not offend the constitutional guaranty of the equal
protection of the laws. The classification is considered valid and reasonable provided that: (1) it rests on
substantial distinctions; (2) it is germane to the purpose of the law; (3) it applies, all things being equal, to
both present and future conditions; and (4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such impact as the price is not the
only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify cigarette brands remains a prerogative
of the legislature which cannot be usurped by the former. These are however modified by RA 9334.