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 RA 9334 of the classification freeze provision is unconstitutional for violating

the equal protection and uniformity provisions of the Constitution

HELD:

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.