I-C1

National Power Corporation vs City of Cabanatuan

G.R. No. 149110 April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

vs.

CITY OF CABANATUAN, respondent.

FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended.

For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income of P107,814,187.96 in 1992.7 Pursuant

to section 37 of Ordinance No. 165-92,8 the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of

the latter’s gross receipts for the preceding year.

Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax on government entities. Petitioner also

contended that as a non-profit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of

Rep. Act No. 6395, as amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due, plus surcharge. Respondent alleged that

petitioner’s exemption from local taxes has been repealed by section 193 of the LGC, which reads as follows:

“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently

enjoyed by all persons, whether natural or juridical, including government owned or controlled corporations, except local water districts, cooperatives

duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this

Code.”

RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that section 193, in relation to sections 137 and 151

of the LGC, expressly withdrew the exemptions granted to the petitioner.

ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose an annual tax on “businesses enjoying a

franchise

HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor endure. A principal attribute of

sovereignty, the exercise of taxing power derives its source from the very existence of the state whose social contract with its citizens obliges it to

promote public interest and common good. The theory behind the exercise of the power to tax emanates from necessity;32 without taxes, government

cannot fulfill its mandate of promoting the general welfare and well-being of the people.

Section 137 of the LGC clearly states that the LGUs can impose franchise tax “notwithstanding any exemption granted by any law or other special law.”

This particular provision of the LGC does not admit any exception. In City Government of San Pablo, Laguna v. Reyes,74 MERALCO’s exemption from

the payment of franchise taxes was brought as an issue before this Court. The same issue was involved in the subsequent case of Manila Electric

Company v. Province of Laguna.75 Ruling in favor of the local government in both instances, we ruled that the franchise tax in question is imposable

despite any exemption enjoyed by MERALCO under special laws, viz:

1
 “It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their position that MERALCO’s tax exemption

has been withdrawn. The explicit language of section 137 which authorizes the province to impose franchise tax ‘notwithstanding any exemption granted

by any law or other special law’ is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws.

Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise provided in this Code, tax exemptions or

incentives granted to or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations except (1)

local water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn

upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory

construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius

est exclusio alterius. In the absence of any provision of the Code to the contrary, and we find no other provision in point, any existing tax exemption or

incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit may now impose a local tax at a rate not

exceeding 50% of 1% of the gross annual receipts for the preceding calendar based on the incoming receipts realized within its territorial jurisdiction.

The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic) Sections 137

and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical to

attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express, albeit general,

withdrawal of such exemptions or privileges. No more unequivocal language could have been used.”76 (emphases supplied)

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government

units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the

people. As this Court observed in the Mactan case, “the original reasons for the withdrawal of tax exemption privileges granted to government-owned or

controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment

of similarly situated enterprises.” With the added burden of devolution, it is even more imperative for government entities to share in the requirements of

development, fiscal or otherwise, by paying taxes or other charges due from them.

I-C2

CIR vs. Algue Inc.

Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Facts:

 Algue Inc. is a domestic corp engaged in engineering, construction and other allied activities

 On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency income taxes from 1958-1959, amtg to P83,183.85

 A letter of protest or reconsideration was filed by Algue Inc on Jan 18

 On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its counsel, Atty. Guevara, who refused to receive it on the ground of
the pending protest

 Since the protest was not found on the records, a file copy from the corp was produced and given to BIR Agent Reyes, who deferred service of the
warrant

 On April 7, Atty. Guevara was informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of
distraint and levy earlier sought to be served

 On April 23, Algue filed a petition for review of the decision of the CIR with the Court of Tax Appeals

2
 CIR contentions:

- the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense

- payments are fictitious because most of the payees are members of the same family in control of Algue and that there is not enough substantiation
of such payments

 CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in the form of promotional fees. These were collected by the Payees
for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the
Philippine Sugar Estate Development Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business expenses in its
income tax returns

Ruling:

 Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance, made in accordance with law.

 RA 1125: the appeal may be made within thirty days after receipt of the decision or ruling challenged

 During the intervening period, the warrant was premature and could therefore not be served.

 Originally, CIR claimed that the 75K promotional fees to be personal holding company income, but later on conformed to the decision of CTA

 There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes
thereon. CTA also found, after examining the evidence, that no distribution of dividends was involved

 CIR suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction

 Algue Inc. was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. at the
end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of
P75,000.00. This arrangement was understandable in view of the close relationship among the persons in the family corporation

 The amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to Algue Inc. was
P125K. After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60%
of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of
the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties.

 Sec. 30 of the Tax Code: allowed deductions in the net income – Expenses - All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually
rendered xxx

 the burden is on the taxpayer to prove the validity of the claimed deduction

 In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in
inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of
pesos.

 Taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate
it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance their moral and material values

 Taxation must be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and
the courts will then come to his succor

Algue Inc.’s appeal from the decision of the CIR was filed on time with the CTA in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR

I_D1

CIR vs BPI
GR 134062, 17 April 2007

3
FACTS: On 28 October 1988 petitioner Commissioner of Internal Revenue (CIR) assessed respondent Bank of the Philippine
Islands’ (BPI) deficiency percentage and documentary stamp taxes in the total amount of P129,488,656.63.

In a letter dated 10 December 1988, BPI requested for the CIR to state or to inform the taxpayer why he is being assessed a deficiency,
and as to what particular percentage tax the assessment refers to.

Subsequently, BPI received a letter on 27 June 1991 dated May 8, 1991 from CIR stating that it constitutes the final decision on the
matter, and the basis of the assessments.

BPI filed a petition for review in the CTA but the latter dismissed the case for lack of jurisdiction since the subject assessments had
become final and unappealable. The CTA ruled that BPI failed to protest on time under Section 270 of the National Internal Revenue
Code (NIRC) and Section 7 in relation to Section 11 of RA 1125.

On appeal, the CA reversed the tax court’s decision and resolution and remanded the case to the CTA for a decision on the merits.
It ruled that the October 28, 1988 notices were not valid assessments because they did not inform the taxpayer of the legal and factual
bases. It declared that the proper assessments were those contained in the May 8, 1991 letter which provided the reasons for the
claimed deficiencies. Thus, it held that BPI filed the petition for review in CTA on time.

Hence, CIR filed this case.

ISSUES:

1) Were the October 28, 1988 notices valid assessments?

RULING: Yes the notices sufficiently met the requirements of a valid assessment under the old law and jurisprudence. The CIR merely
relied on the provisions of the former Section 270 prior to its amendment by RA 8424 (Tax Reform Act of 1997). Accordingly, when
the assessments were made pursuant to the former Section 270, the only requirement was for the CIR to “notify” or inform the
taxpayer of his “findings.” Nothing in the old law required a written statement to the taxpayer of the law and facts on which the
assessments were based.

Jurisprudence, on the other hand, simply required that the assessments contain a computation of tax liabilities, the amount the taxpayer
was to pay and a demand for payment within a prescribed period.

The sentence “The taxpayers shall be informed in writing of the law and the facts on which the assessments is made; otherwise, the assessments
shall be void” was not in the old Section of 270 but was later on inserted in the renumbered Section 228 in 1997. Evidently, the
legislature saw the need to modify the former Section 270 by inserting the aforequoted sentence. The fact that the amendment was
necessary showed that, prior to the introduction of the amendment, the statute had an entirely different meaning. The amendment
introduced by RA 8424 was an innovation and could not be reasonably inferred from the old law. Clearly, the legislature intended to
insert a new provision regarding the form and substance of assessments issued by the CIR.

Under the former Section 270, there were two instances when an assessment became final and unappealable: 1) when it was not
protested within 30 days and 2) when the adverse decision on the protest was not appealed to the CTA within 30 days from receipt
of the final decision.

2) Whether or not the assessments made by the CIR were valid, final, and unappealable?

Failure to protest within the 30-day period: 1)final and unappealable; 2) presumption of correctness

RULING: Yes, BPI should have protested within 30 days from receipt of the notices dated October 28, 1988. BPI’s failure to protest
meant that the assessments made are final and unappealable. The December 10, 1988 reply it sent to the CIR did not qualify as a
protest since BPI did not even consider the October 28, 1988 notices as valid or proper assessments.

Moreover, BPI was from then on barred from disputing the correctness of the assessments or invoking any defense that would reopen
the question of its liability on the merits.

Presumption of Correctness. There arose a presumption of correctness when BPI failed to protest the assessments: Tax assessments by
tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any
irregularities … an assessment duly made by a Bureau of Internal Revenue examiner and approved by his superior officers will not be disturbed.
All presumptions are in favor of the correctness of tax assessments.

Even if we consider the December 10, 1988 letter as a protest, BPI must nevertheless be deemed to have failed to appeal the CIR’s
final decision within the 30-day period. The CIR, in his May 8, 1991 response, stated that it was his “final decision on the matter.” BPI
4
therefore had 30 days from the time it received the decision on June 27, 1991 to appeal but it did not. Instead, it filed a request for
reconsideration and lodged its appeal in the CTA.

BPI is still liable under the subject tax assessments: That state will be deprived of the taxes validly due it and the public will
suffer if taxpayers will not be held liable for the proper taxes assessed against them: Taxes are the lifeblood of the government, for without
taxes, the government can neither exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the
very existence of the state whose social contract with its citizens obliges it to promote public interest and common good. The theory behind the
exercise of the power to tax emanates from necessity; without taxes, government cannot fulfill its mandate of promoting general welfare and
well-being of the people.

I_E1

CIR vs. Fortune Tobacco

September 28, 2011 G.R. No. 180006

Facts: Prior to January 1, 1997, the excises taxes on cigarettes were in the form of ad valorem taxes, pursuant to
Section 142 of the 1977 National Internal Revenue Code (1977 Tax Code). Beginning January 1, 1997, RA 8240 took
effect and a shift from ad valorem to specific taxes was made. A portion of Section 142(c) of the 1977 Tax Code, as
amended by RA 8240, reads in part:

“The specific tax from any brand of cigarettes within the next three (3) years of effectivity of this Act shall not be
lower than the tax [which] is due from each brand on October 1, 1996.

xxx

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

To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and again
pursuant to its rule-making powers, the CIR issued RR 17-99, which reads partly:

“Provided, however, that the new specific tax rate for any existing brand of cigars [and] cigarettes packed by
machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually being
paid prior to January 1, 2000.”

Pursuant to these laws, respondent Fortune Tobacco Corporation paid in advance excise taxes and filed an
administrative claim for tax refund with the CIR for erroneously and/or illegally collected taxes in the amount of
P491 million.

In its decision, the CTA First Division ruled in favor of Fortune Tobacco and granted its claim for refund. The CTA
First Divisions ruling was upheld on appeal by the CTA en banc. The CIR’s motion for reconsideration of the CTA en
banc’s decision was denied in a resolution.

Issue: Whether or not Section 1 of RR 17-99 is an unauthorized administrative legislation on the part of the CIR.

5
Ruling: Yes. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed to
implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid excise taxes collected
pursuant to this provision.

The rule on uniformity of taxation is violated by the proviso in Section 1, RR 17-99. Uniformity in taxation requires
that all subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities.
Although the brands all belong to the same category, the proviso in Section 1, RR 17-99 authorized the imposition of
different (and grossly disproportionate) tax rates. It effectively extended the qualification stated in the third
paragraph of Section 145(c) of the 1997 Tax Code that was supposed to apply only during the transition period. In
the process, the CIR also perpetuated the unequal tax treatment of similar goods that was supposed to be cured by
the shift from ad valorem to specific taxes.

The Court further said that the omission in the law in fact reveals the legislative intent not to adopt the higher tax
rule. It appears that despite its awareness of the need to protect the increase of excise taxes to increase government
revenue, Congress ultimately decided against adopting the higher tax rule.


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.

Facts:

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.

Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic corporation engaged in
the business of cement manufacturing, production, importation and exportation. Its principal
stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest
cement manufacturers in Japan.[5]

Private respondent Philippine Cement Manufacturers Corporation[6] (Philcemcor) is an association

of domestic cement manufacturers. It has eighteen (18) members,[7] per Record. While Philcemcor
heralds itself to be an association of domestic cement manufacturers, it appears that considerable
equity holdings, if not controlling interests in at least twelve (12) of its member-corporations, were
acquired by the three largest cement manufacturers in the world, namely Financiere Lafarge S.A. of
France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank
Financiere Glaris, Ltd., then Holderfin B.V.).

6
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.

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. 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.

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.

The Court of Appeals had held that based on the foregoing premises, petitioner’s prayer to set aside
the findings of the Tariff Commission in its assailed Report dated March 13, 2002 is DENIED. On the
other hand, the assailed April 5, 2002 Decision of the Secretary of the Department of Trade and
Industry is hereby SET ASIDE. Consequently, the case is REMANDED to the public respondent
Secretary of Department of Trade and Industry for a final decision in accordance with RA 8800 and
its Implementing Rules and Regulations. Hence, the appeal.

Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time 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.[41] 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.[42] 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. Hence, the appeal.

Issue:

Whether or not the decision of DTI Secretary, to impose safeguard measures is valid.

Held:

NO, due to the nature of this case, the Court found that the DTI should follow the regulations
prescribed by SMA. The Court held that he assailed Decision of the Court of Appeals is DECLARED
NULL AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also
DECLARED NULL AND VOID and SET ASIDE. No Costs.

7
Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time 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.[41] 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.[42] 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.

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.

Topic: (1) tax vs. ordinary debt, (2) purpose/objective of taxation: non-revenue / special / regulatory

Ponente: Davide, Jr. J.

DOCTRINE:

A taxpayer may not offset taxes due from the claims that he may have against the government.

QUICK FACTS: Caltex Philippines questions the decisions of COA for disallowing the offsetting of its claims for
reimbursement with its due OPSF remittance

FACTS:

The Oil Price Stabilization Fund (OPSF) was created under Sec. 8, PD 1956, as amended by EO 137 for the purpose of
minimizing frequent price changes brought about by exchange rate adjustments. It will be used to reimburse the oil
companies for cost increase and possible cost underrecovery incurred due to reduction of domestic prices.

COA sent a letter to Caltex directing the latter to remit to the OPSF its collection. Caltex requested COA for an early
release of its reimbursement certificates which the latter denied.

COA disallowed recover of financing charges, inventory losses and sales to marcopper and atlas but allowed the
recovery of product sale or those arising from export sales.

Petitioner’s Contention:

8
Department of Finance issued Circular No. 4-88 allowing reimbursement. Denial of claim for reimbursement would be
inequitable. NCC (compensation) and Sec. 21, Book V, Title I-B of the Revised Administrative Code (Retention of Money
for Satisfaction of Indebtedness to Government) allows offsetting.

Amounts due do not arise as a result of taxation since PD 1956 did not create a source of taxation, it instead established
a special fund. This lack of public purpose behind OPSF exactions distinguishes it from tax.

Respondent’s Contention:

Based on Francia v. IAC, there’s no offsetting of taxes against the 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.

ISSUE: WON Caltex is entitled to offsetting

DECISION: NO. COA AFFIRMED

HELD:

 It is settled that a taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be 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.
 Technically, 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. Their primary obligation is to account for and
remit the taxes collection to the administrator of the OPSF.
 There is not merit in Caltex’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.
 The oil industry is greatly imbued with public interest as it vitally affects the general welfare.
 PD 1956, as amended by EO No. 137 explicitly provides that the source of OPSF is taxation.

I_E4

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

Sometime in 1975 TEFASCO, a domestic corporation engaged in the business of providing port and terminal
facilities as well as arrastre, stevedoring and other port-related services 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 specialized matters intended to be captured are: (a) bananas in consideration of
9
the rate of spoilage; (b) sugar; (c) fertilizers; (d) specialized movement of beer in pallets containerized handling lumber
and plywood.

On April 21, 1976 the PPA Board of Directors passed Resolution No. 7 accepting and approving TEFASCO's project
proposal. Subsequently, the PPA Board 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. The conditions provide that the construction permit 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, In the event that the Foreshore Lease Application expires or is disapproved/canceled,
this permit shall also be rendered null and void, no general cargo shall be handled through the facility, among others.
TEFASCO heeded to this additional conditions. 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 TEFASCO’s port
operations. It contained provisions for ten percent (10%) government share out of arrastre and stevedoring gross income
and one hundred percent (100%) wharfage and berthing charges. Subsequently, TEFASCO received a cease and desist
order in a letter dated June 1, 1983. 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 TEFASCO’s port
activities. TEFASCO complied with the MOA and paid the accrued and current government share. 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 TC ruled in favor of TEFACSO. The CA reversed this decision. Hence this petition.

ISSUES/HELD:

1. Whether the authority given to TEFASCO to construct port facilities was only a privilege granted by PPA.
NO. 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. 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. 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.”

For a regulatory permit to be impressed with contractual character we held in Batchelder v. Central Bank 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.

10
 2. Whether the imposition of 10% wharfage fees and berthing charges is void.
YES. 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." 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.
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.

3. Whether the award of fifty percent (50%) and thirty percent (30%) of the wharfage dues and berthing charges to
TEFASCO as actual damages representing private port usage fees from 1977 to 1991. was proper.
YES. 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 PPA’s 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 TEFASCO’s 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, TEFASCO’s cause of action has been
sufficiently alleged and proven.
4. Whether the imposition of 10% and later reduced to 6% government share was proper.
NO. 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." 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 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,
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."

I_E5

Physical Therapy Organization vs

Municpal Board GR 10448 30
August 1957
Facts: Municipal Board of Manila enacted Ordinance 3659 regulating the operations of massage clinics in
Manila penalizing and enforcing permit fee for its operation. Petitioner appealed for the dismissal of the
ordinance. They contend that City of Manila is without authority to regulate the operation of massagists
and the operation of massage clinics and that the fee is unreasonable and unconscionable. Trial court
dismissed the petition.
Issue: Whether or not license fee enforced by the Municipal Board is valid?

11
Decision: Decision affirmed. 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. The permit fee is made payable 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. 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.

I_E6

PHILIPPINE AIRLINES, INC. vs. ROMEO F. EDU and UBALDO CARBONELL

No. L-41383. August 15, 1988.

Nature: PETITION to review the decision of the Court of First Instance

Ponente: GUTIERREZ, JR., J.

Facts:
 Under its franchise, PAL is exempt from the payment of taxes.
 Sometime in 1971, however, appellee Commissioner Romeo F. Edu, 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.
 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.
 the trial court rendered a decision dismissing the appellant’s complaint “guided by the later ruling laid down by the
Supreme Court in the case of Republic v. Philippine Rabbit Bus Lines, Inc. (supra).” From this judgment, PAL
appealed to the Court of Appeals.

Issue:
1) What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
2) May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?
Ratio:
1) TAX. 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, ed.) 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 59(b) 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 59(b) speaks of “taxes or fees x x x for the registration or operation or on the ownership of any motor
vehicle, or for the exercise of the profession of chauffeur x x x” making the intent to impose a tax more apparent.
Thus, even Rep. Act 5448 cited by the respondents, speaks 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 4136. Simply put, if the exaction under Rep. Act 4136 were merely a
12
 regulatory fee, the imposition in Rep. Act 5448 need not be an “additional” tax. x x x 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.
2) NO. 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.

I_E7

Commissioner of Internal Revenue vs. Central Luzon Drug Corporation

GR No. 159647, April 15, 2005

Facts:

Respondent is a domestic corporation engaged in the 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 20% sales discount to qualified senior citizens on their purchases of
medicines pursuant to RA 7432. For said period respondent granted a total of ₱ 904,769.

On April 15, 1997, respondent filed its annual ITR for taxable year 1996 declaring therein net losses. On Jan.
16, 1998 respondent filed with petitioner a claim for tax refund/credit of ₱ 904,769.00 alledgedly arising from the
20% sales discount. Unable to obtain affirmative response from petitioner, respondent elevated its claim to the
CTA via Petition for Review. CTA dismissed the same but on MR, CTA reversed its earlier ruling and ordered
petitioner to issue a Tax Credit Certificate in favor of respondent citing CA GR SP No. 60057 (May 31, 2001,
Central Luzon Drug Corp. vs. CIR) citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or
erroneously paid taxes but that there are other situations which may warrant a tax credit/refund.

CA affirmed CTA decision reasoning that 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.

ISSUE: W/N respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.

RULING:
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their
purchase of medicine from any private establishment in the country. The latter may then claim the cost of the
discount as a tax credit. Such credit can be claimed even if the establishment operates at a loss.

A tax credit generally refers to an amount that is “subtracted directly from one’s total tax liability.” It is an
“allowance against the tax itself” or “a deduction from what is owed” by a taxpayer to the government.

13
A tax credit should be understood in relation to other tax concepts. One of these is tax deduction – which is
subtraction “from income for tax purposes,” 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.” In other words, whereas a tax credit
reduces the tax due, tax deduction reduces the income subject to tax in order to arrive at the taxable income.

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 credit can be applied. 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. However, for the losing establishment to immediately apply such credit, where no tax is due, will
be an improvident usance.

In addition, 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.

Petition is denied.

I_F3

Roxas v. CTA, 23 SCRA 276 (1968)

G.R. No. L-25043 April 26, 1968

ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their own respective behalf and as judicial co-guardians of JOSE
ROXAS, petitioners,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

Leido, Andrada, Perez and Associates for petitioners.

Office of the Solicitor General for respondents.

BENGZON, J.P., J.:

Facts:

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession several
properties. To manage the above-mentioned properties, said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed
a partnership called Roxas y Compania. At the conclusion of the WW2, the tenants who have all been tilling the lands in Nasugbu for
14
generations expressed their desire to purchase from Roxas y Cia. the parcels which they actually occupied. For its part, the
Government, in consonance with the constitutional mandate to acquire big landed estates and apportion them among landless tenant-
farmers, persuaded the Roxas brothers to part with their landholdings. Conferences were held with the farmers in the early part of
1948 and finally the Roxas brothers agree to sell 13,500 hectares to the Government for distribution to actual occupants for a price of
P2,079,048.47 plus P300,000 for survey and distribution expenses. It turned out however that the Government did not have funds to
cover the purchase price, and so a special arrangement was made for the Rehabilitation Finance Corporation to advance to Roxas y
Cia. the amount of P1,500,000.00 as loan. Collateral for such loan were the lands proposed to be sold to the farmers. Under the
arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted with the
Rehabilitation Finance Corporation to pay its loan from the proceeds of the yearly amortizations paid by the farmers.

The CIR demanded from Roxas y Cia. the payment of deficiency income taxes resulting from the inclusion as income of Roxas y Cia.
of the unreported 50% of the net profits for 1953 and 1955 derived from the sale of the Nasugbu farmlands to the tenants, and the
disallowance of deductions from gross income of various business expenses and contributions claimed by Roxas y Cia. and the Roxas
brothers. For the reason that Roxas y CIa. subdivided its Nasugbu farmlands and sold them to the farmers on installment, the
Commissioner considered the partnership as engaged in the business of real estate, hence, 100% of the profits derived there from was
taxed. The Roxas brothers protested the assessment but inasmuch as said protest was denied, they instituted an appeal in the CTA
which sustained the assessment. Hence, this appeal.

Issue:
I. Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable? And is
Roxas y Cia liable for the payment of deficiency income for the sale of Nasugbu farmlands?

II. Are the deductions for business expenses and contributions deductible?

Ruling:
I. NO. The proposition of the CIR cannot be favorably accepted in this isolated transaction with its peculiar circumstances
inspite of the fact that there were hundreds of vendees. Although they paid for their respective holdings in installment for the period
of 10 years, it would nevertheless make the vendor Roxas y Cia. a real estate dealer during the 10-year amortization period. It should
be borne in mind that the sale of the Nasugbu farmlands to the very farmers who tilled them for generations was not only in consonance
with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless. It was the
bounden duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas, and to
subsequently subdivide them among the farmers at very reasonable terms and prices. However, the Government could not comply
with its duty for lack of funds. Obligingly, Roxas y Cia. shouldered the Government’s burden, went out of its way and sold lands
directly to the farmers in the same way and under the same terms as would have been the case had the Government done it itself.
For this magnanimous act, the municipal council of Nasugbu passed a resolution expressing the people’s gratitude.

In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to section 34 of the Tax Code,
the land sold to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to the extent
of 50%.

II. DISALLOWED DEDUCTIONS

Roxas y Cia. deducted from its gross income the amount of P40.00 for tickets to a banquet given in honor of Sergio Osmena and P28.00
for San Miguel beer given as gifts to various persons. The deduction were claimed as representation expenses. Representation expenses
are deductible from gross income as expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax Code
provided the taxpayer proves that they are reasonable in amount, ordinary and necessary, and incurred in connection with his business.
In the case at bar, the evidence does not show such link between the expenses and the business of Roxas y Cia. The findings of the
Court of Tax Appeals must therefore be sustained (disallowed deduction).

The petitioners also claim deductions for contributions to the Pasay City Police, Pasay City Firemen, and Baguio City Police Christmas
funds, Manila Police Trust Fund, Philippines Herald's fund for Manila's neediest families and Our Lady of Fatima chapel at Far Eastern
University.

The contributions to the Christmas funds of the Pasay City Police, Pasay City Firemen and Baguio City Police are not deductible
for the reason that the Christmas funds were not spent for public purposes but as Christmas gifts to the families of the members of
said entities. Under Section 39(h), a contribution to a government entity is deductible when used exclusively for public purposes. For
this reason, the disallowance must be sustained. On the other hand, the contribution to the Manila Police trust fund is an allowable
deduction for said trust fund belongs to the Manila Police, a government entity, intended to be used exclusively for its public functions.

15
The contributions to the Philippines Herald's fund for Manila's neediest families were disallowed on the ground that the Philippines
Herald is not a corporation or an association contemplated in Section 30 (h) of the Tax Code. It should be noted however that the
contributions were not made to the Philippines Herald but to a group of civic spirited citizens organized by the Philippines Herald
solely for charitable purposes. There is no question that the members of this group of citizens do not receive profits, for all the funds
they raised were for Manila's neediest families. Such a group of citizens may be classified as an association organized exclusively for
charitable purposes mentioned in Section 30(h) of the Tax Code.

Rightly, the Commissioner of Internal Revenue disallowed the contribution to Our Lady of Fatima chapel at the Far Eastern
University on the ground that the said university gives dividends to its stockholders (it should be non-profit institution. Located within
the premises of the university, the chapel in question has not been shown to belong to the Catholic Church or any religious organization.
On the other hand, the lower court found that it belongs to the Far Eastern University, contributions to which are not deductible under
Section 30(h) of the Tax Code for the reason that the net income of said university injures to the benefit of its stockholders. The
disallowance should be sustained.

Doctrines:

I. Sale of property by landowners to tenants under government policy to allocate lands to the landless subject not subject to
real estate dealer’s tax.

II. The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to
minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the “hen that lays the golden egg”.

I_H1

Abakada Guro Party List, et al vs Exec. Sec. Ermita

Facts: On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform Act. Before the
law took effect on July 1, 2005, the Court issued a TRO enjoining government from implementing the law in
response to a slew of petitions for certiorari and prohibition questioning the constitutionality of the new law.

The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6: “That the President,
upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-
added tax to 12%, after any of the following conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%);

or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent
(1½%)”

Petitioners allege that the grant of stand-by authority to the President to increase the VAT rate is an abdication
by Congress of its exclusive power to tax because such delegation is not covered by Section 28 (2), Article VI
Consti. They argue that VAT is a tax levied on the sale or exchange of goods and services which can’t be
included within the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or
tribute payable upon merchandise to the government and usually imposed on imported/exported goods. They
also said that the President has powers to cause, influence or create the conditions provided by law to bring
about the conditions precedent. Moreover, they allege that no guiding standards are made by law as to how the
Secretary of Finance will make the recommendation.
16
Issue: Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially on
account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of
legislative power? NO

Held: The powers which Congress is prohibited from delegating are those which are strictly, or inherently and
exclusively, legislative. Purely legislative power which can never be delegated is the authority to make a complete
law- complete as to the time when it shall take effect and as to whom it shall be applicable, and to determine the
expediency of its enactment. It is the nature of the power and not the liability of its use or the manner of its
exercise which determines the validity of its delegation.

The exceptions are:

(a) delegation of tariff powers to President under Constitution

(b) delegation of emergency powers to President under Constitution

(c) delegation to the people at large

(d) delegation to local governments

(e) delegation to administrative bodies

For the delegation to be valid, it must be complete and it must fix a standard. A sufficient standard is one which
defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it.

In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts upon which
enforcement and administration of the increased rate under the law is contingent. The legislature has made the
operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the
entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive.
No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the
word SHALL is used in the common proviso. The use of the word SHALL connotes a mandatory order. Its use
in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.

Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of
the conditions specified by Congress. This is a duty, which cannot be evaded by the President. It is a clear
directive to impose the 12% VAT rate when the specified conditions are present.

Congress just granted the Secretary of Finance the authority to ascertain the existence of a fact--- whether by
December 31, 2005, the VAT collection as a percentage of GDP of the previous year exceeds 2 4/5 % or the
national government deficit as a percentage of GDP of the previous year exceeds one and 1½%. If either of
these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such
information to the President.

17
In making his recommendation to the President on the existence of either of the two conditions, the Secretary of
Finance is not acting as the alter ego of the President or even her subordinate. He is acting as the agent of the
legislative department, to determine and declare the event upon which its expressed will is to take effect. The
Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and information and has a much broader
perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent
information and verify if any of the two conditions laid out by Congress is present.

Congress does not abdicate its functions or unduly delegate power when it describes what job must be done,
who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in
which the legislative process can go forward.

There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is
constitutionally permissible. Congress did not delegate the power to tax but the mere implementation of the law.

3 important keys ( in relation to Tolentino case)

1. It is not the law but the bill that should originate from the House of Representatives
2. Not allowing senate to amend, violates co-equality between two houses
3. Senate can propose, concur or amend
I_H2

Chavez v Ongpin
GR No 76778, June 6, 1990

FACTS:
Section 21 of Presidential Decree 464 provides that every 5 years starting calendar year 1978, there shall be a provincial
or city general revision of real property assessments. The general revision was completed in 1984.
On November 25, 1986, President Corazon Aquino issued EO 73 stating that beginning January 1, 1987, the 1984
assessments shall be the basis of real property taxes. Francisco Chavez, a taxpayer and landowner, questioned the
constitutionality of EO 74. He alleges that it will bring unreasonable increase in real property taxes.

ISSUE:
Is EO 73 constitutional?

RULING:
Yes. Without EO 73, the basis for collection of real property taxes will still be the 1978 revision of property values.
Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the
increases in the value of real properties that have occurred since then is not in consonance with a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenue must be
adequate to meet government expenditures and their variations.

I_K-c8

18
Randolf David vs President Gloria
Macapagal-Arroyo
November 7, 2010
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489 SCRA 160 – Political Law – The Executive Branch – Presidential Proclamation 1017 – Take Care
Clause – Take Over Power – Calling Out Power
Bill of Rights – Freedom of Speech – Overbreadth
In February 2006, due to the escape of some Magdalo members and the discovery of a plan (Oplan Hackle
I) to assassinate the president, then president Gloria Macapagal-Arroyo (GMA) issued Presidential
Proclamation 1017 (PP1017) and is to be implemented by General Order No. 5 (GO 5). The said law was
aimed to suppress lawlessness and the connivance of extremists to bring down the government.
Pursuant to such PP, GMA cancelled all plans to celebrate EDSA I and at the same time revoked all permits
issued for rallies and other public organization/meeting. Notwithstanding the cancellation of their rally permit,
Kilusang Mayo Uno (KMU) head Randolf David proceeded to rally which led to his arrest.
Later that day, the Daily Tribune, which Cacho-Olivares is the editor, was raided by the CIDG and they
seized and confiscated anti-GMA articles and write ups. Later still, another known anti-GMA news agency
(Malaya) was raided and seized. On the same day, Beltran of Anakpawis, was also arrested. His arrest was
however grounded on a warrant of arrest issued way back in 1985 for his actions against Marcos. His
supporters cannot visit him in jail because of the current imposition of PP 1017 and GO 5.
In March, GMA issued PP 1021 which declared that the state of national emergency ceased to exist. David
and some opposition Congressmen averred that PP1017 is unconstitutional for it has no factual basis and
it cannot be validly declared by the president for such power is reposed in Congress. Also such declaration
is actually a declaration of martial law. Olivares-Cacho also averred that the emergency contemplated in
the Constitution are those of natural calamities and that such is an overbreadth. Petitioners claim that PP
1017 is an overbreadth because it encroaches upon protected and unprotected rights. The Sol-Gen argued
that the issue has become moot and academic by reason of the lifting of PP 1017 by virtue of the declaration
of PP 1021. The Sol-Gen averred that PP 1017 is within the president’s calling out power, take care power
and take over power.
ISSUE: Whether or not PP 1017 and GO 5 is constitutional.
HELD: PP 1017 and its implementing GO are partly constitutional and partly unconstitutional.
The issue cannot be considered as moot and academic by reason of the lifting of the questioned PP. It is
still in fact operative because there are parties still affected due to the alleged violation of the said PP.
Hence, the SC can take cognition of the case at bar. The SC ruled that PP 1017 is constitutional in part and
at the same time some provisions of which are unconstitutional. The SC ruled in the following way;

19
Resolution by the SC on the Factual Basis of its declaration
The petitioners were not able to prove that GMA has no factual basis in issuing PP 1017 and GO 5. A
reading of the Solicitor General’s Consolidated Comment and Memorandum shows a detailed narration of
the events leading to the issuance of PP 1017, with supporting reports forming part of the
records. Mentioned are the escape of the Magdalo Group, their audacious threat of the Magdalo D-Day,
the defections in the military, particularly in the Philippine Marines, and the reproving statements from the
communist leaders. There was also the Minutes of the Intelligence Report and Security Group of the
Philippine Army showing the growing alliance between the NPA and the military. Petitioners presented
nothing to refute such events. Thus, absent any contrary allegations, the Court is convinced that the
President was justified in issuing PP 1017 calling for military aid. Indeed, judging the seriousness of the
incidents, GMA was not expected to simply fold her arms and do nothing to prevent or suppress what she
believed was lawless violence, invasion or rebellion. However, the exercise of such power or duty must
not stifle liberty.
Resolution by the SC on the Overbreadth Theory
First and foremost, the overbreadth doctrine is an analytical tool developed for testing ‘on their faces’
statutes in free speech cases. The 7 consolidated cases at bar are not primarily ‘freedom of speech’ cases.
Also, a plain reading of PP 1017 shows that it is not primarily directed to speech or even speech-related
conduct. It is actually a call upon the AFP to prevent or suppress all forms of lawless violence. Moreover,
the overbreadth doctrine is not intended for testing the validity of a law that ‘reflects legitimate state interest
in maintaining comprehensive control over harmful, constitutionally unprotected conduct.’ Undoubtedly,
lawless violence, insurrection and rebellion are considered ‘harmful’ and ‘constitutionally unprotected
conduct.’ Thus, claims of facial overbreadth are entertained in cases involving statutes which, by their terms,
seek to regulate only ‘spoken words’ and again, that ‘overbreadth claims, if entertained at all, have been
curtailed when invoked against ordinary criminal laws that are sought to be applied to protected conduct.’
Here, the incontrovertible fact remains that PP 1017 pertains to a spectrum of conduct, not free speech,
which is manifestly subject to state regulation.
Resolution by the SC on the Calling Out Power Doctrine
On the basis of Sec 17, Art 7 of the Constitution, GMA declared PP 1017. The SC considered the
President’s ‘calling-out’ power as a discretionary power solely vested in his wisdom, it stressed that ‘this
does not prevent an examination of whether such power was exercised within permissible constitutional
limits or whether it was exercised in a manner constituting grave abuse of discretion. The SC ruled that
GMA has validly declared PP 1017 for the Constitution grants the President, as Commander-in-Chief, a
‘sequence’ of graduated powers. From the most to the least benign, these are: the calling-out power, the
power to suspend the privilege of the writ of habeas corpus, and the power to declare Martial Law. The only
criterion for the exercise of the calling-out power is that ‘whenever it becomes necessary,’ the President
may call the armed forces ‘to prevent or suppress lawless violence, invasion or rebellion.’ And such criterion
has been met.
Resolution by the SC on the Take Care Doctrine
Pursuant to the 2nd sentence of Sec 17, Art 7 of the Constitution (He shall ensure that the laws be faithfully
executed.) the president declared PP 1017. David et al averred that PP 1017 however violated Sec 1, Art
6 of the Constitution for it arrogated legislative power to the President. Such power is vested in Congress.
They assail the clause ‘to enforce obedience to all the laws and to all decrees, orders and regulations
promulgated by me personally or upon my direction.’ The SC noted that such provision is similar to the
power that granted former President Marcos legislative powers (as provided in PP 1081). The SC ruled
that the assailed PP 1017 is unconstitutional insofar as it grants GMA the authority to promulgate
‘decrees.’ Legislative power is peculiarly within the province of the Legislature. Sec 1, Article 6 categorically
states that ‘[t]he legislative power shall be vested in the Congress of the Philippines which shall consist of
a Senate and a House of Representatives.’ To be sure, neither Martial Law nor a state of rebellion nor a
state of emergency can justify GMA’[s exercise of legislative power by issuing decrees. The president can
only “take care” of the carrying out of laws but cannot create or enact laws.

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Resolution by the SC on the Take Over Power Doctrine
The president cannot validly order the taking over of private corporations or institutions such as the Daily
Tribune without any authority from Congress. On the other hand, the word emergency contemplated in the
constitution is not limited to natural calamities but rather it also includes rebellion. The SC made a distinction;
the president can declare the state of national emergency but her exercise of emergency powers does not
come automatically after it for such exercise needs authority from Congress. The authority from Congress
must be based on the following:
(1) There must be a war or other emergency.
(2) The delegation must be for a limited period only.
(3) The delegation must be subject to such restrictions as the Congress may prescribe.
(4) The emergency powers must be exercised to carry out a national policy declared by Congress.
Resolution by the SC on the Issue that PP 1017 is a Martial Law Declaration
The SC ruled that PP 1017 is not a Martial Law declaration and is not tantamount to it. It is a valid exercise
of the calling out power of the president by the president.

I_k-c9

Jumamil vs. Café, et al.

Jumamil vs. Café, et al.
[GR 144570, 21 September 2005]
Third Division, Corona (J): 4 concur
Facts: In 1989, Vivencio V. Jumamil filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for
declaratory relief with prayer for preliminary injunction and writ of restraining order against Mayor Jose J. Cafe and the
members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the constitutionality of Municipal
Resolution 7, Series of 1989 (Resolution 7). Resolution 7, enacting Appropriation Ordinance 111, provided for an initial
appropriation of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Market
which was destroyed by fire. Subsequently, the petition was amended due to the passage of Resolution 49, series of 1989
(Resolution 49), denominated as Ordinance 10, appropriating a further amount of P1,515,000 for the construction of
additional stalls in the same public market. Prior to the passage of these resolutions, Mayor Cafe had already entered into
contracts with those who advanced and deposited (with the municipal treasurer) from their personal funds the sum of
P40,000 each. Some of the parties were close friends and/or relatives of Cafe, et al. The construction of the stalls which
Jumamil sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer
therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to
those who had deposited P40,000 each. Thus, the petition was amended anew to include the 57 awardees of the stalls as
private respondents. Jumamil alleges that Resolution Nos. 7 and 49 were unconstitutional because they were passed for
the business, occupation, enjoyment and benefit of private respondents, some of which were close friends and/or relative
of the mayor and the sanggunian, who deposited the amount of P40,000.00 for each stall, and with whom also the mayor
had a prior contract to award the would be constructed stalls to all private respondents; that resolutions and ordinances
did not provide for any notice of publication that the special privilege and unwarranted benefits conferred on the private
respondents may be availed of by anybody who can deposit the amount of P40,000; and that nor there were any prior
notice or publication pertaining to contracts entered into by public and private respondents for the construction of stalls to
be awarded to private respondents that the same can be availed of by anybody willing to deposit P40,000.00. The
Regional Trial Court dismissed Jumamil’s petition for declaratory relief with prayer for preliminary injunction and writ of
restraining order, and ordered Jumamil to pay attorney’s fees in the amount of P1,000 to each of the 57 private
respondents. On appeal, and on 24 July 2000 (CA GR CV 35082), the Court of Appeals affirmed the decision of the trial
court. Jumamil filed the petition for review on certiorari.
Issue [1]: Whether Jumamil had the legal standing to bring the petition for declaratory relief
Held [1]: Legal standing or locus standi is a party’s personal and substantial interest in a case such that he has sustained
or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized
grievance. The term “interest” means a material interest, an interest in issue affected by the decree, as distinguished from
mere interest in the question involved, or a mere incidental interest. Unless a person’s constitutional rights are adversely

21
affected by the statute or ordinance, he has no legal standing. Jumamil brought the petition in his capacity as taxpayer of
the Municipality of Panabo, Davao del Norte and not in his personal capacity. He was questioning the official acts of the
the mayor and the members of the Sanggunian in passing the ordinances and entering into the lease contracts with
private respondents. A taxpayer need not be a party to the contract to challenge its validity. Parties suing as taxpayers
must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation. The
expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a
misapplication of such funds. The resolutions being assailed were appropriations ordinances. Jumamil alleged that these
ordinances were “passed for the business, occupation, enjoyment and benefit of private respondents” (that is, allegedly
for the private benefit of respondents) because even before they were passed, Mayor Cafe and private respondents had
already entered into lease contracts for the construction and award of the market stalls. Private respondents admitted they
deposited P40,000 each with the municipal treasurer, which amounts were made available to the municipality during the
construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the stalls after the
public market was gutted by a series of fires. Thus, the award of the stalls was necessarily limited only to those who
advanced their personal funds for their construction. Jumamil did not seasonably allege his interest in preventing the
illegal expenditure of public funds or the specific injury to him as a result of the enforcement of the questioned resolutions
and contracts. It was only in the “Remark to Comment” he filed in the Supreme Court did he first assert that “he (was)
willing to engage in business and (was) interested to occupy a market stall.” Such claim was obviously an afterthought.
Issue [2]: Whether the rule on locus standi should be relaxed.
Held [2]: Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters.
Considering the importance to the public of a suit assailing the constitutionality of a tax law, and in keeping with the
Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the other branches of the
Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit.
There being no doctrinal definition of transcendental importance, the following determinants formulated by former
Supreme Court Justice Florentino P. Feliciano are instructive: (1) the character of the funds or other assets involved in the
case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent
agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in
raising the questions being raised. But, even if the Court disregards Jumamil’s lack of legal standing, this petition must still
fail. The subject resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public market stalls.
Jumamil alleged that these ordinances were discriminatory because, even prior to their enactment, a decision had already
been made to award the market stalls to the private respondents who deposited P40,000 each and who were either
friends or relatives of the mayor or members of the Sanggunian. Jumamil asserted that “there (was) no publication or
invitation to the public that this contract (was) available to all who (were) interested to own a stall and (were) willing to
deposit P40,000.” Respondents, however, counter that the “public respondents’ act of entering into this agreement was
authorized by the Sangguniang Bayan of Panabo per Resolution 180 dated 10 October 1988” and that “all the people
interested were invited to participate in investing their savings.” Jumamil failed to prove the subject ordinances and
agreements to be discriminatory. Considering that he was asking the Court to nullify the acts of the local political
department of Panabo, Davao del Norte, he should have clearly established that such ordinances operated unfairly
against those who were not notified and who were thus not given the opportunity to make their deposits. His
unsubstantiated allegation that the public was not notified did not suffice. Furthermore, there was the time-honored
presumption of regularity of official duty, absent any showing to the contrary.

I_K-C10

ABAYA vs. EBDANE, JR.

515 SCRA 720
GR No. 167919, February 14, 2007
"A taxpayer need not be a party to the contract to challenge its validity."

FACTS: The petitioners, Plaridel M. Abaya who claims that he filed the instant petition as a taxpayer, former lawmaker, and a
Filipino citizen, and Plaridel C. Garcia likewise claiming that he filed the suit as a taxpayer, former military officer, and a
Filipino citizen, mainly seek to nullify a DPWH resolution which recommended the award to private respondent China Road &
Bridge Corporation of the contract for the implementation of the civil works known as Contract Package No. I (CP I). They also
seek to annul the contract of agreement subsequently entered into by and between the DPWH and private respondent China
Road & Bridge Corporation pursuant to the said resolution.

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ISSUE: Has petitioners the legal standing to file the instant case against the government?

HELD: Petitioners, as taxpayers, possess locus standi to file the present suit. Briefly stated, locus standi is a right of appearance
in a court of justice on a given question. More particularly, it is a party’s personal and substantial interest in a case such that he
has sustained or will sustain direct injury as a result of the governmental act being challenged. Locus standi, however, is merely
a matter of procedure and it has been recognized that in some cases, suits are not brought by parties who have been personally
injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in
the public interest. Consequently, the Court, in a catena of cases, has invariably adopted a liberal stance on locus standi,
including those cases involving taxpayers.
The prevailing doctrine in taxpayer’s suits is to allow taxpayers to question contracts entered into by the national government or
government- owned or controlled corporations allegedly in contravention of law. A taxpayer is allowed to sue where there is a
claim that public funds are illegally disbursed, or that public money is being deflected to any improper purpose, or that there is a
wastage of public funds through the enforcement of an invalid or unconstitutional law. Significantly, a taxpayer need not be a
party to the contract to challenge its validity.

I_K-C11

III. Limitations on the Power of Taxation

16. Pascual v. Secretary of Public Works and Communications

The right of the legislature to appropriate funds is correlative with its right to tax, under the constitutional provision
against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion
thereof to another purpose as appropriation for state funds can be made for other than a public purpose.
I_K-c12

40. Lutz v. Araneta

If objectives and methods are alike constitutionally valid, no reason is seen why the state may not levy taxes
to raise funds for their prosecution and attainment. Taxation may be made with the implement of the state’s
police power. Inequalities which result from a singling out of one particular class for taxation, or exemption
infringe no constitutional limitation.

I_K-c13

Product v. Fertiphil Corp.

G.R. No. 166006 March 14, 2008
REYES, R.T., J.

Lessons Applicable: Bet. private and public suit, easier to file public suit, Apply real party in interest test for private
suit and direct injury test for public suit, Validity test varies depending on which inherent power

Laws Applicable:

FACTS:

 President Ferdinand Marcos, exercising his legislative powers, issued LOI No. 1465 which provided, among
others, for the imposition of a capital recovery component (CRC) on the domestic sale of all grades of fertilizers
which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer and Perticide Authority (FPA).
 FPA remits its collection to Far East Bank and Trust Company who applies to the payment of corporate debts of
Planters Products Inc. (PPI)
 After the Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Upon return of democracy,
Fertiphil demanded a refund but PPI refused. Fertiphil filed a complaint for collection and damages against FPA
and PPI with the RTC on the ground that LOI No. 1465 is unjust, unreaonable oppressive, invalid and unlawful
resulting to denial of due process of law.
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 FPA answered that it is a valid exercise of the police power of the state in ensuring the stability of the fertilizing
industry in the country and that Fertiphil did NOT sustain damages since the burden imposed fell on the ultimate
consumers.
 RTC and CA favored Fertiphil holding that it is an exercise of the power of taxation ad is as such because it is
NOT for public purpose as PPI is a private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather the police power

Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real party in interest" or party who stands to be
benefited or injured by the judgment in the suit. In public suits, there is the right of the ordinary citizen to petition the
courts to be freed from unlawful government intrusion and illegal official action subject to the direct injury test or
where there must be personal and substantial interest in the case such that he has sustained or will sustain direct
injury as a result. Being a mere procedural technicality, it has also been held that locus standi may be waived in the
public interest such as cases of transcendental importance or with far-reaching implications whether private or
public suit, Fertiphil has locus standi.

2. As a seller, it bore the ultimate burden of paying the levy which made its products more expensive and harm its
business. It is also of paramount public importance since it involves the constitutionality of a tax law and use of
taxes for public purpose.

3. Yes. Police power and the power of taxation are inherent powers of the state but distinct and have different tests
for validity. Police power is the power of the state to enact the legislation that may interfere with personal liberty on
property in order to promote general welfare. While, the power of taxation is the power to levy taxes as to be used
for public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is
revenue generation. The lawful subjects and lawful means tests are used to determine the validity of a law enacted
under the police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional
limitations.

In this case, it is for purpose of revenue. But it is a robbery for the State to tax the citizen and use the funds
generation for a private purpose. Public purpose does NOT only pertain to those purpose which are traditionally
viewed as essentially governmental function such as building roads and delivery of basic services, but also includes
those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal
settlers, low-cost housing and urban or agrarian reform.

I_K-c15

GONZALES VS HECHANOVA
Posted by kaye lee on 12:36 PM

G.R. No. L-21897 October 22 1963 [Executive Agreements]

FACTS:

Exec. Secretary Hechanova authorised the importation of foreign rice to be purchased from private sources. Gonzales filed a petition
opposing the said implementation because RA No. 3542 which allegedly repeals or amends RA No. 2207, prohibits the importation of
rice and corn "by the Rice and Corn Administration or any other government agency."

Respondents alleged that the importation permitted in RA 2207 is to be authorized by the President of the Philippines, and by or on
behalf of the Government of the Philippines. They add that after enjoining the Rice and Corn administration and any other government
agency from importing rice and corn, S. 10 of RA 3542 indicates that only private parties may import rice under its provisions. They
contended that the government has already constitute valid executive agreements with Vietnam and Burma, that in case of conflict
between RA 2207 and 3542, the latter should prevail and the conflict be resolved under the American jurisprudence.
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ISSUE:

W/N the executive agreements may be validated in our courts.

RULING:

No. The Court is not satisfied that the status of said tracts as alleged executive agreements has been sufficiently established. Even
assuming that said contracts may properly considered as executive agreements, the same are unlawful, as well as null and void, from a
constitutional viewpoint, said agreements being inconsistent with the provisions of Republic Acts Nos. 2207 and 3452. Although the
President may, under the American constitutional system enter into executive agreements without previous legislative authority, he
may not, by executive agreement, enter into a transaction which is prohibited by statutes enacted prior thereto.

Under the Constitution, the main function of the Executive is to enforce laws enacted by Congress. He may not interfere in the
performance of the legislative powers of the latter, except in the exercise of his veto power. He may not defeat legislative enactments
that have acquired the status of law, by indirectly repealing the same through an executive agreement providing for the performance of
the very act prohibited by said laws.

I_K-c16

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