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GARCIA V EXECUTIVE SECRETARY BASTIDA V CUSTOMS COLLECTOR 35 SCRA 448 Castro; October 24, 1970

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that the WTO proviso derogates from the Legislatures power to tax. [Note: While the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts, such authority is subject to specified limits and . . . such limitations and restrictions as Congress may provide (e.g., through Sec. 401 of the Tariff and Customs Code).] ISSUE WON the provisions of the WTO Agreement unduly limit, restrict and impair Philippine sovereignty (legislative power) HELD: NO -While sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the family of nations. Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are considered to be automatically part of our own laws. One of the oldest and most fundamental rules in international law is pacta sunt servanda international agreements must be performed in good faith. -By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. The sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. -The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its
rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures that help make them competitive.

FACTS -Layug, a customs examiner discovered in the airport in the two Minifons (wire recorder) of Bastida consigned to a certain priest in Italy various checks, money orders, and traveler's checks all payable in US dollars amounting to a total of $13,780 and $3,149.50 and several US dollar bills of different denominations in the total amount of P630. The Customs authorities seized the two cardboard boxes and all the contents thereof, alleging violation of Section 1363(f) and (m) sub-paragraphs 3 and 4, of the Revised Administrative Code, 1 as well as Central Bank Circular 20 as implemented by Circular 42 2 (in relation to Section 1363 [f] of the same Code) because although an Export Control Committee permit and Central Bank export license covered the exportation of the Minifons, the various checks, money orders and dollar bills were not covered by any Central Bank license. Central Bank, promulgated Circular 133 permitting any person to buy US dollars at the prevailing market rate and export the same without prior specific licensing from the Central Bank. Circular furthermore repealed all previous circulars inconsistent therewith. Bastida contended that the bulk of the property seized consists of checks which are not subject to forfeiture because they are not "merchandise" as contemplated by Sections 1363 and 1419 of the Revised Administrative Code, and that even assuming arguendo that the properties seized fall within the meaning of "merchandise" as defined by the said Code, their forfeiture has become academic in view of the repeal of Central Bank Circulars 20 and 42 by Circular 133. CTA affirmed. ISSUES What is a Merchandise? HELD The Revised Administrative Code defines merchandise when used with reference to importations or exportations, includes goods, wares, and in general anything that may be made the subject of importation or exportation. Checks, money orders and dollar bills

properly fall within the concept of "merchandise" as used in the Revised Administrative Code. US Dollars are merchandise. Checks as bills of exchange, are negotiable instruments and may be bought and sold like a commodity. Money orders, also considered as bills of exchange of limited negotiability, possess the same attributes as other negotiable instruments. Thus, they may be bought and sold like checks. Disposition ACCORDINGLY, the decision of the Court of Tax Appeals appealed from is affirmed, at petitioner's cost.

GARCIA V EXECUTIVE SECRETARY

TAADA V ANGARA Panganiban; 272 SCRA 18; May 2, 1997

NATURE Petition for certiorari, prohibition and mandamus praying (1) for the nullification, on constitutional grounds, of the Phil. Senates concurrence in the Presidential ratification of the WTO Agreement and (2) for the prohibition of its implementation and enforcement FACTS -Like many other developing countries, the Philippines joined WTO as a founding member with the goal of improving Philippine access to foreign markets, especially its major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products. -Arguing mainly (1) that the WTO requires the Philippines to place nationals and products of membercountries on the same footing as Filipinos and local products and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of both Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of the 1987 Constitution.1 Petitioners claim
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Article II, Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos. Article XII, Sec. 10. xxx The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of

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- The white lead referred to was imported into the Philippine Islands directly from the US in one bottom without transshipment en route; that same was produced in the United States from pig lead imported into the United States from Spain, and that no duty was paid upon said pig lead upon its importation into US, notwithstanding the fact that the tariff law of the United States in force at the time of its importation imposed a tax thereon. - The same was put into a bonded warehouse upon its arrival in the US, and was then subjected to what is known as the "Dutch" of "Stack" process. - No duty was paid upon any of the foreign material (used in the Dutch of Stack process) imported into the United States, and which was used in the production of the white lead as imported into the Philippine Islands. - The duty prescribed by the US Tariff Law of 1909 was not applied to the pig lead in question because the importers took advantage of the provisions of section 23 (quoted post) of the said law. This section permits of the importation of foreign materials for the manufacture of articles in the United States without the payment of duty, provided the finished article is exported directly to foreign countries or to the Philippine Islands. - The white lead was manufactured under these conditions, and the pig lead entering into its composition thereby escaped the imposition of the duty prescribed for that article by paragraph 182 of the United States Tariff Law. ISSUE(S) 1. WON the manufactured article is to be admitted into Philippine Islands free of duty under the above facts. HELD Ratio Reasoning Section 5 of the United States Tariff Law: That in consideration of the exemption aforesaid, all articles, the growth, product, or manufacture of the United States, upon which no drawback of customs duties has been allowed therein, shall be admitted to the Philippine Islands from the United States free of duty. Section 12 of Philippine Tariff Law: That all articles, except rice, the growth, product, or manufacture of the United States and its possessions to which the customs tariff in

citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT. Other Relevant Statements of the Court: The WTO Agreement grants developing countries a more lenient treatment, giving their domestic industries some protection from the rush of foreign competition. -With respect to tariffs in general, preferential treatment is given to developing countries in terms of the amount of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries including the Philippines are required to effect an average tariff reduction of only 24% within ten (10) years. -In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years. -In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays for export subsidy by 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing countries, however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) years within which to effect such reduction. -Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. -There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in other economic policies.

-The constitutional policy of a "self-reliant and independent national economy" does not necessarily rule out the entry of foreign investments, goods and services. It contemplates neither "economic seclusion" nor "mendicancy in the international community." The WTO reliance on "most favored nation," "national treatment," and "trade without discrimination" cannot be struck down as unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Epilogue -It is true that broad constitutional principles require the State to develop an independent national economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally produced goods. But it is equally true that such principles while serving as judicial and legislative guides are not in themselves sources of causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate which mandate the pursuit of a "trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of equality and reciprocity" and the promotion of industries "which are competitive in both domestic and foreign markets," thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and judicial powers is balanced by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations. Disposition Petition is dismissed for lack of merit.

UY CHACO SONS V COLLECTOR OF CUSTOMS G.R. No. L-7618 TRENT; March 27, 1913
NATURE An appeal from a judgment of the CFI of Manila confirming a decision of the Collector of Customs to the effect that white lead manufactured in a bounded warehouse in the United States from pig lead imported from Spain without the payment of duty is not entitled to free entry into the Philippine Islands. FACTS

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that no drawback of the duty collected has been allowed. - In this case, the shipment of white lead, which is the subject of this controversy, although in one sense an article of American manufacture, is not comprehended within any of these three classes.

force in the United States is applied and upon which no drawback of custom duties had been allowed therein, going into the Philippine Islands shall hereafter be admitted therein free of customs duty when the same are shipped directly from the country of origin to the country of destination. - Uy Chaco claims these provisions are harmonious with each other, while the Collector claims that Sec. 12 of the Philippine Tariff law prevails over Sec. 5. - It is a well-recognized rule of construction that a statute repeals prior enactments in so far as the same are inconsistent and irreconcilable with it. If by no construction can both provisions stand together, the later Act must prevail as expressing the latest will of the Legislature. US Tariff Law: August 5, 1909, at 5:05 PM effective August 6, 1909. Phil Tariff Law: August 5, 1909, 5:08 PM, effective after sixty days (subsequent both as the time of passage and the time of taking effect). - In this regard, Sec. 12 prevails over Sec. 5. - Uy Chaco claims that the to which clause qualifies the term possessions. Collector on the other hand claims that it limits the term articles. - This provision does not limit the term articles because it must be considered that such construction of the section imposes two conditions upon an article which would enter the Philippine Islands free of duty: (1) It must be an article of American growth, product, or manufacture "to which the customs tariff in force in the United States is applied;" and (2) "upon which no drawback of customs duties has been allowed. The tariff in force in the United States is not applied to any article of purely domestic origin. As American articles of purely domestic origin would fail to comply with the first condition, it would be unnecessary to consider whether they could comply with the second. Clearly, by the addition of the words "and its possessions" it was desired to further extend the privilege of free entry into Philippine Islands of American articles by including not only what might be called the United States proper, but something additional. So the words "and its possessions" were added to avoid any doubt that it was the intention of Congress that not only articles from the mainland should be permitted to enter the Philippine Islands

free, but also articles from other territories within the jurisdiction of the United States. - Unrestricted, the phrase "the United States and its possessions" would include the Philippine Islands themselves, as well as the Islands of Guam and Tutuila, which were meant to be excluded. But if we allow the "to which" clause to modify "possessions" all ambiguity immediately disappears. - Articles of American origin coming from the mainland or from any territory under the jurisdiction of the United States, to which the tariff in force in the United States is applied, are to be admitted free, provided only there is no drawback of customs duties. (The preamble of that Act provides that it shall apply to the United States and all of its possessions except the Philippine Islands and the Islands of Guam and Tutuila.) - Again, it will be noted that the words "is applied" are used in the "to which" clause, while in the "upon which" clause the verb is "has been allowed." Now, while we are ready to concede that the United States Tariff is applied to every article of American growth, product, or manufacture containing foreign material, in the sense that the tariff was applied to the foreign material contained in such article upon its importation into the country, we cannot assent to the statement that the tariff is applied to the finished article which seeks entrance into the Philippine Islands. - The tariff spends its force when the foreign material contained in the finished article enters the country as raw material, and has nothing further to do with it. In point of time, the application of the tariff to the article occurs before a drawback of duties, and there is therefore more reason to place the verb of the "to which" clause in the past than there is for expressing the action of the "upon which" clause in the past. American articles wholly of domestic origin cannot possibly labor under the disqualification of a drawback of United States customs duties, as none are ever assessed. American articles made wholly or in part of foreign materials which foreign materials enter the United States without the payment of duty by reason of their being on the free list may enter the Philippines free of duty for the same reason. American articles made wholly or in part of foreign materials, which foreign materials paid the regular duty upon entering the United States, may also enter the Philippines free, provided they can show

DRAWBACK - a device resorted to for enabling a commodity affected by taxes to be exported and sold in the foreign markets upon the same terms as if it had not been taxed at all.

- Any materials used in the manufacture of such goods, and any packages, coverings, vessels, brands, and labels used in putting up the same may, under the regulations of the Secretary of the Treasury, be conveyed without the payment of revenue tax or duty into any bonded manufacturing warehouse, and imported goods may, under the aforesaid regulations, be transferred without the exaction of duty from any bonded warehouse into any bonded manufacturing warehouse; but this privilege shall not be held to apply to implements, machinery, or apparatus to be used in the construction or repair of any bonded manufacturing warehouse or for the prosecution of the business carried on therein. - if we accede to the proposition that articles so manufactured are admitted free into the Philippines under section 12, is not only to afford these bonded manufacturing warehousemen a better market in the Philippine Islands than is allowed to foreign manufacturers, but to give them a preference in that market over those American industries which manufacture the same article of materials have paid duty. And this advantage over legitimate manufacturers may be greater than might at first be supposed. - It is clear that under the proposed exemption from Philippine customs duties of articles manufactured in bond, those American manufacturers who are not conducting their business under bond are placed at a distinct disadvantage in competing with their bonded brothers in the Philippine market. If the manufactured article (white lead in this case) produced under bond in the United States is to be allowed free entry into the Philippines, it is subject to no duty at all. - By section 5 of its own customs tariff, the United States remits the duty upon certain articles coming from the Philippine Islands. In the same section, and "in consideration" for the exemptions provided, it is set

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by Customs asked the respondent to explain the discrepancy. The respondent said that it was the shipper was the one who provided the particulars of the subject shipment, including the weight thereof. - The Bureau of Customs was not satisfied with the explanation and initiated an administrative proceeding against the respondent. The Collector of customs rendered a decision finding the "Fernando Everett" or its owner liable for a fine of P22,617.00 representing fifteen percent (15%) of the total value of the shipment, for violation of Section 2523 of the Tariff and Customs Code. Section 2523 reads as follows: Sec. 2523. Discrepancy between actual & declared weight of manifested article. ? If the gross weight of any article or package described in the manifest exceed by more than twenty per centum the gross weight as declared in the manifest or bill of lading thereof, and the Collector shall be of the opinion that such discrepancy was due to the carelessness or incompetency of the master or pilot in command, owner or employee of the vessel or aircraft, a fine of not more than fifteen per centum of the value of the package or article in respect to which the discrepancy exists, may be imposed upon the importing vessel or aircraft. - The Commissioner of Customs affirmed the decision of the collector. Upon appeal by the respondent to the CTA, the CTA affirmed the decision but reduced the fine to P5000. The petitioner herein wants to reinstate the fine imposed by the Commissioner. ISSUE/S 1. WON there is a duty on the part of the captain of a vessel or of a shipowner to determine the true weight of cargo to be loaded on board the vessel 2. WON the discrepancy in the instant case between the actual and the declared weight of the shipment involved was due to the carelessness or incompetency of the captain of the vessel 3. WON the reduction of the fine was proper HELD 1. YES Ratio A vessel's master, owner or employees are indeed burdened with the duty "to check and verify the

forth that all articles of American growth, product, or manufacture upon which no drawback of customs duties has been allowed in the United States shall be admitted to the Philippines free of duty. - Upon examination of the registration placed upon the free entry of American merchandise into the Philippine Islands, i.e., that there shall be no drawback of customs duties thereon, there appears the further indication of the view Congress took upon this question. - A drawback of customs duty presupposes a collection of customs duty, and a customs duty can only be collected upon imports. - Every article imported into the Philippines and from which revenue is obtained for the support of our Government could escape the payment of this revenue by simply being subjected to a manufacturing process under bond in the United States. Not only would this pro tanto deprive the Philippine Government of its revenues make its revenue tariff a "vain and useless thing," but in exact proportion to the magnitude of such a movement it would deprive the United States of a preferential market in the Philippines, which was the "consideration" for the exemption from duty coming into the United States of certain Philippine products. DISPOSITION Judgment is affirmed.

decision reduced the fine originally imposed petitioner from P58,400.00 to only P18,000.00. ISSUE/S 1. WON CTA erred in reducing the fine

HELD 1. YES Ratio Section 2523 of the Tariff and Customs Code reads: If the gross weight of any article described in the manifest exceeds by more than 20% the gross weight as declared in the manifest or bill of lading thereof, and the Collector shall be of the opinion that such discrepancy was due to the carelessness or incompetency of the master or pilot in command, owner or employee of the vessel or aircraft, a fine of not more than 15% of the value of the article may be imposed upon the importing vessel. Reasoning Respondent court itself found there was inexcusable laxity on the part of the master or owner of the vessel, resulting in the excessive discrepancy in the declared weight of the cargo, and held that the fine imposed by petitioner was not really unjust, oppressive and confiscatory and not more than 15% of the value of the merchandise. Disposition The decision of respondent court is hereby MODIFIED by setting aside the reduction in fine therein ordered, and REINSTATING the administrative fine of P58,400.00 imposed in the petitioner's decision. NOTE: A cargo manifest is a bill of lading; a list of the cargo and passengers being transported in a vessel.

COMMISSIONER V DELGADO 184 SCRA 579 PADILLA, J.; April 26, 1990
NATURE Petition for Review from decision of the CTA FACTS - The vessel SS Eurygenes arrived in the port of Manila and discharged a shipment of 123 bales of assorted textile remnants The gross weight of the shipment as declared in the Bill of Lading was 61,500 pounds. But upon examination and appraisal by customs authorities, it was found that the actual weight thereof was 136,343 pounds. - Respondent CTA found the vessel, represented by its agent, private respondent Delgado Shipping Agency, to have violated Sec. 2523 of the Tariff and Customs Code. But respondent Court of Tax Appeals in its said

RODRIGUEZ V CA Infra COMMISSIONER V CTA

188 SCRA 61 FELICIANO; July 30, 1990 FACTS - Fernando Everett", a vessel owned by private respondent Everett Steamship Corporation arrived in the port of Manila, discharging assorted textile remnants. In its Bill of Lading, it declared that its shipment was 17,500 lbs. Upon examination by custom authorities, the actual weight of the shipment was found to be 62,869 lbs. - The Chief of the Law Division of the Bureau of

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or immovable property to which the tax liens have attached. Article 2243 is quite explicit: "[T]axes mentioned in number 1, Article 2241 and number 1, Article 2242 shall first be satisfied. " The claims listed in numbers 2 to 13 in Article 2241 and in numbers 2 to 10 in Articles 2242, all come after taxes in order of precedence; such claims enjoy their privileged character as liens and may be paid only to the extent that taxes have been paid from the proceeds of the specific property involved (or from any other sources) and only in respect of the remaining balance of such proceeds. BUT -the claim of the Bureau of Customs for unpaid customs duties and taxes enjoys the status of a specially preferred credit under Article 2241, No. 1, of the Civil Code only in respect of the articles importation of which by the Insolvent resulted in the assessment of the unpaid taxes and duties, and which are still in the custody or subject to the control of the Bureau of Customs. The goods imported on one occasion are not subject to a lien for customs duties and taxes assessed upon other importations though also effected by the Insolvent. Customs duties and taxes which remain unsatisfied after levy upon the imported articles on which such duties and taxes are due, would have to be paid out of the Insolvent's "free property" in accordance with the order of preference embodied in Article 2244 of the Civil Code. Such unsatisfied customs duties and taxes would fall within Article 2244, No. 9, of the Civil Code and hence would be ninth in priority

correct weight of its cargo Reasoning In Commissioner of Customs v. Court of Tax Appeals and Delgado Shipping Agencies, 1 this Court held that a duty of verifying the correct weight of a cargo shipment is imposed by Section 2523 of the Tariff and Customs Code itself: 5. Finally, contrary to respondent's contention, the vessel's master, owner or employee are duty bound under the cited codal section under pain of the penalty of fine therein provided to check and verify the correct weight of the cargo or shipment so as to prevent a misdeclaration or underdeclaration of weight. The vessel master's discharge of such obligation imposed by law to properly determine and verify the weight of cargos carried by it is certaintly pertinent to and important for the proper assessment of the collectible custom duties and taxes, and is not a burdensome task in the present era of containerized cargos 2. YES Reasoning A difference of more than twenty percent (20%) between the actual gross weight of a shipment and its declared gross weight is not a de minimis matter; on the contrary, it is sufficiently substantial so as reasonably to give rise to a presumption juris tantum that some negligence or failure to exercise some technical duty had occurred. The actual practice of the Commissioner of Customs in cases of this kind may be seen to be based upon such presumption; where a discrepancy of more than twenty percent (20%) of the stated weight is shown, the Collector of Customs requires, as noted earlier, the vessel, its captain or owner to show cause why an administrative fine should not be imposed upon the offending vessel under Section 2523 of the Tariff and Customs Code. The greater the discrepancy between declared gross weight and actual gross weight of a shipment, the stronger that presumption becomes until at some point it is well-nigh conclusive. In the case of the "Fernando Everett", the discrepancy amounted to 259 per centum of the declared gross weight. Given that level of discrepancy, there must have been either gross negligence amounting to bad faith, or obvious

incompetence, on the part of the captain of the vessel or the shipowner or its employees in failing to detect the gross underdeclaration of the weight of the shipment. 3. No. Reasoning The authority is lodged in the Collector of Customs and the Commissioner of Customs and not either in the Court of Tax Appeals or this Court. The public respondent Court of Tax Appeals was not warranted in substituting its judgment for that of the Commissioner of Customs as to the amount of the fine properly imposable in the circumstances of this case, unless, of course, a grave abuse of discretion. There was no showing of such abuse. The CTA merely reduced the fine since it felt that the 15% fine was "harsh and unreasonable" stating that this was the first offense of the "Fernando Everett". Disposition Petition is granted. COMM V DELGADO supra

REPUBLIC V PERALTA 150 SCRA 37 Feliciano J; May 20, 1987

FACTS: -Quality Tobacco Corporation (Insolvent) filed for voluntary insolvency. In the voluntary insolvency proceedings commenced in May 1977 several claims of creditors were filed which included separation pays for employee unions, inspection fees of the BOC and Customs Duties and Taxes. -the trial court ruled that the separation pay claims of the NLRC were preferred over the claims of the BOC and BIR based on Art.110 of the Labor Code. -The BOC and BIR questioned such preference. ISSUE: WON separation pay claims are preferred over duties and taxes in insolvency proceedings. Held: YES -"duties, taxes and fees due [on specific movable property of the insolvent] to the State or any subdivision thereof" (Article 2241 [1]) and "taxes due upon the [insolvent's] land or building (2242 [1])"stand first in preference in respect of the particular movable

RODRIGUEZ V CA
248 SCRA 288 PUNO; September 18, 1995 FACTS - Petitioners Angel, Eulogio, Jose (all surnamed Rodriguez) and Tomas Ngo, together with Manuel Pena (deceased) and Alfredo Fiesta (at large) were charged with a violation of Sec 3602 in relation to Sec 3601 of the Tariff and Customs Code. - Sep 9, 1983: the S/S Neptune Agate arrived at the Manila International Port from HK carrying, among others, a 40-foot container van containing 29,000 kilos consisting of 44,885,015 yards of 100% cotton-dyed fabric. The fabric had a home consumption value of U.S. $93,809.68 and a dutiable value of P1,032,047.10

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yards to him in Divisoria. Rolly allegedly assured him that he got the textile from an auction sale at the Bureau of Customs and that all customs duties and taxes thereon had already been paid. - TC found them guilty. CA affirmed. MFR denied. ISSUES 1. WON the CA erred in convicting petitioners of smuggling. HELD 1. NO. Ratio While it is true that the evidence does not show their participation in the release of the smuggled cargo, petitioners were actually found to have been in possession of the textile after its release. Petitioners have never disputed but in fact admitted their possession of the textile and as a result of this admission, they are presumed to have been engaged in smuggling pursuant to the last paragraph of Section 3601 of the Code. The burden of proof shifted to them. To rebut this presumption, it is not enough for petitioners to claim good faith and lack of knowledge of the unlawful source of textile. Petitioners should have presented evidence to support their claim. Reasoning Petitioners ascribe all their acts to Pena who has long since died and to Rolly who has since disappeared, if he ever existed. Their testimony is hearsay and self-serving. On the contrary, the evidence shows that the truck carrying the textile left the container port for Pena's residence. The truck was allowed to enter the private subdivision because Pena was a registered homeowner and he sought permission for it to go to his house. Clearly, the container was actually intended for delivery at Pena's compound. It is difficult to comprehend why the Rodriguez brothers went out of their way to help Rolly whom they never knew when Pena provided the delivery van and Rolly himself had some helpers to load and unload the cargo. The brothers were businessmen. Eulogio and Angel were engaged in general merchandise and had their own stores at the Zaragosa Shopping Center in Tondo, Manila. Eulogio said that Pena gave him the job because he wanted him to earn extra money. This claim he made incredible by the fact that the brothers were to transport the textile for a fee of P4,000.00. If they needed the extra money, they never bothered to ask for it or any portion thereof from Rolly or Pena. Rolly

and was consigned to "Philippine Inter-Fashion, Inc.," a domestic corporation engaged in the manufacture of garments for export. - Meanwhile, Ernesto Ereno filed with the Bureau of Customs a Special Permit to Transfer seeking to transfer the said container van from the Manila International Container Port to Customs Bonded Warehouse No. 725 of the Philippine Inter-Fashion, Inc. at Bagong Bayan, Dasmarias, Cavite. The permit appeared to have been approved and signed by the proper Customs authorities on the basis of which said container was released. The container was loaded on a truck to be escorted by Customs guard (Fiesta) until its receipt at the Customs Bonded Warehouse at Cavite. Once outside the Customs zone, the truck didnt go to Cavite but went to White Plains Subdivision in QC. - The truck entered the subdivision towards the direction of Pena's residence. The vehicle was maneuvering when it hit the perimeter wall at the other end of the subdivision. Forthwith, Pena informed son-in-law, Eulogio Rodriguez, who lived in the same compound, to remove the cargo from the stalled vehicle and transfer the same to their compound. Eulogio acceded to this request. - The following morning, Eulogio called his brothers, Angel and Jose, to help him transport the textile to Paranaque. They were delivered some 80 rolls of the textile to the residence of Tomas Ngo. They made another delivery in the afternoon. - The next day, Jose and Angel were on their way to make a 3rd delivery when they were intercepted by agents of the Customs Intelligence and Investigation Division. - Earlier, Col. Guillermo Parayno, Jr., then Chief of the Customs Intelligence and Investigation Division, noticed that the container van consigned to the Philippine Inter-Fashion, Inc., was missing from the container yard. On inquiry, the Pres of the said company denied ordering any shipment from abroad and claimed that they were not expecting any such cargo. Immediately, Col. Parayno formed teams to trace the movement of the container. - A team of agents was on its way to White Plains subdivision when they spotted the delivery van. They ordered the driver to stop. The agents found petitioners Angel and Jose Rodriguez, a driver and a helper. They opened the van and found it full of textile. The driver and helper disclosed that they came from the residence of Pena and that they were taking them to Paranaque.

- The team proceeded to Pena 's residence where Col. Parayno informed Pena that they were going to search his house for the textile. Pena denied possessing or keeping any textile and invited Col. Parayno and his men inside his house. The Customs agents looked around and found behind Pena's house a structure that appeared to be a stock room. They opened the room and found nothing. They noticed another room behind, opened it and found it full of the same textile as those they saw in the delivery van. - Pena informed them that the stock room belonged to Eulogio who also owned the house behind it. Pena likewise claimed that the textile belonged to a certain "Rolly" whose truck hit the subdivision wall near his house and that the textile was being stored in his compound until delivery to Paranaque. - The next day, Customs agents, armed with search warrant, went to Ngo's residence in Paranaque. They discovered in his bodega several rolls of the same textile they found in the delivery van and in Pena's compound. The agents seized all the textile they found in the delivery van, in Pena's compound and in Ngo's residence. They conducted an investigation and discovered that the container van did not belong to the consignee and that it was released from the container port by virtue of a Special Permit to Transfer in which all signatures of the approving Customs personnel, except for one, were forged. - Rodriguez brothers claim that the textile belonged to one "Rolly" who asked Pena for help to transport it after his truck met an accident near Pena's residence. Eulogio claimed that Pena in turn asked him to transfer the textile from the stalled truck and keep them safe in his servants' quarters. Rolly returned the following morning and again requested him, through Pena, to transport the textile to Paranaque for a consideration of P4k. Eulogio agreed. He however was not feeling very well, so he called up Jose and requested him to deliver the cargo to Paranaque. Angel happened to be in Jose's house and so they proceeded to White Plains and with some of their helpers loaded textile into one of Pena's vans. They followed Rolly, who was in his car, to the residence of Ngo in Paranaque. Ngo met them and the cargo was unloaded in his house. The brother and their helpers returned to White Plains without Rolly and made another delivery in the afternoon. They were on their way to make a 3rd delivery the following day when they were intercepted by the Customs agents. - Ngo, for his defense, claimed that he merely purchased the textile from Rolly who offered 30,000

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- In the case of La Compaa General de Tobacos de Filipinas v. United States, 8 Phil. 438, it was ruled that: The general purpose for which an article is used must govern the assessment of duty; any other rule would lead to confusion and injustice. It is the general use to which articles are chiefly adopted and for which they are chiefly used that determine their character within the meaning of the Tariff laws. It is the predominating use to which articles are generally applied or used that determines their character for the purpose of fixing the duty, and not the specific or special use which any particular importer may make of the articles imported (Hartranft v. Langfeld, 125 U.S., 128).

did not return to White Plains after the first delivery but Jose and Angel continued to work and even intended to finish the job without exerting any effort to ensure payment therefor. Ngo's claim likewise cannot be given credence. He testified that he asked Rolly if the taxes on the textile had been paid, and that Rolly answered in the affirmative and in fact assured him that he would present the tax receipts later. After the first delivery, Rolly said that he needed the receipts to show the authorities during the delivery. And yet Ngo, who was engaged in the buy and sell business of plastic materials and textile, never bothered to check or glance at these tax receipts. Rolly disappeared without leaving any receipts with Jose and Angel and neither did the brothers ask for said receipts. Indeed, petitioners' claim of good faith and lack of knowledge of the origin of the textile cannot stand in the light of contrary evidence. As the lower courts well found, petitioners have miserably failed to rebut the presumption that they were engaged in smuggling at the time they were apprehended. Disposition IN VIEW WHEREOF, the petition is DENIED and the Decision dated February 28, 1990 and the Resolution dated November 9, 1993 of the Court of Appeals in CA-G.R. CR No. 06220 are hereby affirmed. Costs against petitioners.

30% ad valorem or under Tariff Heading No. 8-5.19 at 50% ad valorem, both under the Tariff and Customs Code. (Simply WON refund was correct) HELD: YES - Tariff Heading No. 85.09 of the Tariff and Customs Code provides: 85.09. Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor vehicles ad val. 30%. On the other hand, the same Code provides under Tariff Heading No. 85.19: 85.19. Electrical apparatus for making and breaking electrical circuits, for the protection of electrical circuits, or for making connections to or in electric circuits (for example, switches, relays, fuses, lighting arresters, surge suppressors, plugs, lamp-holders and junction boxes); resistors, fixed or variable (including potentiometers), other than heating resistors, printed circuits, switch boards (other than telephone switchboards) and control panels -Petitioner contends that the imported flashers should be classified under Tariff Heading No. 85.19. The documents covering the importation of the goods show that they are "electrical lighting and signalling parts." Hence, being parts only of a whole signalling equipment, the flashers by themselves cannot function as a signalling equipment. The imported article can be considered merely as electrical apparatus for making and breaking electrical circuits falling under Tariff Heading No. 85.19 of the Tariff and Customs Code. -Private respondent Campos Rueda Corporation, on the other hand, contends that the imported flashers should be classified under Tariff Heading No.85.09 contending that the subject importations are electrical apparatus used on motor vehicles for signalling purposes, that is, to signal right or left hand turn by means of electrical flashers in front and at the rear of motor vehicles. -SC: Parts of machines, apparatus of appliances which are suitable for use solely or principally with a particular kind of machine or with a number of machines falling within a specific heading, as a rule, are to be classified with the machines in the same heading There being a clear showing that the subject imported flashers are to he used solely and principally to signal or indicate a right or left hand turn in front and at the rear of motor vehicles, they should be classified under Tariff Heading No. 85.09 as electrical lighting and signalling equipment.

COCONUT OIL REFINERS ASSOCIATION V TORRES G.R. No. 132527 AZCUNA; July 29, 2005
FACTS - On March 13, 1992, RA 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones. - Sec12 of RA 7227 provides: [a] that the Subic Special Economic Zone (SSEZ) shall be developed into a selfsustaining, industrial, commercial, financial and investment center, [b] that SSEZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital w/in, into and exported out of SSEZ, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. But, exportation or removal of goods from SSEZ to other parts of Phils. shall be subject to customs duties and taxes under the TCCP and other relevant tax laws of the Phils. - Sec 15 (On Clark and other economic zones) authorizes the Pres. to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions. - On April 3, 1993, Pres. Ramos issued EO 80, which declared, among others, that Clark shall have all the applicable incentives granted to SSEZ under RA 7227. Pursuant to EO 80, the BCDA passed Board Resolution No. 93-05-034, allowing the tax and duty-free sale at retail of consumer goods imported via Clark for consumption outside the CSEZ

COMM V CAMPOS RUEDA 188 SCRA 613 Medialdea; August 20, 1990
FACTS: -Campos Rueda Corporation imported 46 cartons (consisting of 27,000 pieces) of Tungsol flashers. Before the goods arrived at the port of Manila, Campos Rueda filed with the Collector of Customs of Manila a request for value information for the declaration of the imported flashers under Tariff Heading No. 85.09 of the Tariff and Customs Code at 30% ad valorem duty, for classification purpose. The Customs appraiser however, re-classified the goods under Tariff Heading No. 85.19 of the Tariff and Customs Code at 50% ad valorem. -Campos Rueda paid duties and taxes in protest. The refund of which was granted by the CTA -Commissioner of Customs appealed decision ISSUE: WON the classification of the imported Tungsol flashers should fall under Tariff Heading No. 85.09 at

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tax and duty-free privileges to the CSEZ in RA 7227, there would be no legal basis to uphold the questioned portions of two issuances: Sec 5 of EO 80 and Sec 4 of BCDA Board Resolution No. 93-05-034, which both pertain to the CSEZ. In a similar case John Hay v Lim, SC sustained the argument and ruled that the incentives under RA 7227 are exclusive only to the SSEZ. The President, therefore, had no authority to extend their application to John Hay. 3. MOOT and ACADEMIC. The removal of goods from SSEZ w/out payment of customs duties and taxes is not authorized by RA 7227 - On Sept. 26, 1997, EO 444 was issued, curtailing the duty-free shopping privileges in the SSEZ and the CSEZ to prevent abuse of duty-free privilege and to protect local industries from unfair competition. A perusal provisions of EO 444 indicates that effective January 1, 1999, the grant of duty-free shopping privileges to domestic tourists and to residents living adjacent to SSEZ and the CSEZ had been revoked. - Oct. 20, 2000, EO 303 was issued, amending EO 444. Sec 2 of EO 303 declared that all special shopping privileges as granted under Section 3 of EO 444 are hereby deemed terminated. The grant of duty free shopping privileges shall be restricted to qualified individuals as provided by law. At that point, the shopping privileges currently being enjoyed by OFWs, Balikbayans, and tourists traveling to and from foreign destinations, draw authority not from the issuances being assailed herein, but from EO 46 and RA 6768, both enacted prior to promulgation of RA 7227. - Thus, it appears that petitioners objection to the allowance of tax-free removal of goods from the special economic zones as previously authorized by the questioned issuances has become moot and academic. In any event, Sec 12 (b) of RA. 7227, clearly provides that exportation or removal of goods from SSEZ territory to other parts of the Phil. territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. Thus, the removal of goods from the SSEZ to other parts of the Philippine territory without payment of said customs duties and taxes is not authorized by RA 7227. Re Other Issues: [a] No violation of equal protection clause: It satisfies the requisites for reasonable classification. [b] No unfair competition: The mere fact

- President then issued EO 97, Clarifying the Tax and Duty Free Incentive Within the SSEZ Pursuant to RA. 7227. In part it says that: [a] Tax and duty-free importations shall apply only to raw materials, capital goods and equipment [b]The exportation or removal of tax and duty-free goods from SSEZ to other parts of Phils shall be subject to duties and taxes under relevant Phil laws. - EO 97-A was also issued. Sec.1 says: The ff. guidelines shall govern the tax and duty-free privilege w/in the Secured Area of SSEZ: 1.1 The Secured Area shall be the only completely tax and duty-free area in the SSEFPZ. Business enterprises and individuals (Filipinos and foreigners) residing w/in the Secured Area are free to import raw materials, capital goods, equipment, and consumer items tax and duty-free. Consumption items, however, must be consumed within the Secured Area. Removal of raw materials, capital goods, equipment and consumer items out of the Secured Area for sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties.... 1.2. Residents of the SSEFPZ living outside the Secured Area can purchase and bring out of the Secured Area to other parts of the Philippine territory consumer items worth not exceeding US$100 per month per person. Only residents age 15 and over are entitled to this privilege. 1.3. Filipinos not residing within the SSEFPZ can purchase and bring out of the Secured Area to other parts of Phils consumer items worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this privilege. - Petitioners filed the petition against Exec. Sec. Torres, the Bases Conversion Development Authority (BCDA), the Clark Development Corporation (CDC) and the Subic Bay Metropolitan Authority (SBMA), from continuing with, the operation of tax and duty-free shops located at the SSEZ and CSEZ, and to declare the following issuances as unconstitutional, illegal, and void: EO 80, Sec5; EO 97-A, and the Board Resolution of BCDA, Sec. 4. ISSUES 1 WON RA 7227 allowed only tax and duty-free importation of raw materials, capital and equipment, thus EO 97-A constitutes executive legislation 2 WON Sec.5 EO 80, and Sec. 4 of BCDA Board Resolution No. 93-05-034 constitute executive

legislation in providing for tax and duty free privileges, contrary to RA 7227. 3 WON the questioned issuances constitute executive legislation for allowing the removal of consumer goods and items from the zones w/o payment duties and taxes in violation of RA 7227 as Sec 12 provides for the taxation of goods that are exported or removed from the SSEZ to other parts of the Phils. HELD 1 NO. - While it is true that Sec 12 (b) of RA 7227 mentions only raw materials, capital and equipment, this does not necessarily mean that the tax and duty-free buying privilege is limited to these types of articles to the exclusion of consumer goods. In construing statutes, the true intent of the Legislature must be considered. - There appears to be no logic in following the narrow interpretation petitioners urge. To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the free flow of goods or capital within, into, and out of the zones is insured. - The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. The Senate proceedings clearly negate the narrow interpretation of petitioners. - HOWEVER, the second sentences of paragraphs 1.2 and 1.3 of EO 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Sec. 12 of RA 7227 which clearly provides that exportation or removal of goods from the territory of SSEZ to other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Phils. 2 YES. - While Sec. 12 of RA7227 expressly provides for the grant of incentives to the SSEZ, it fails to make any similar grant in favor of other economic zones, including the CSEZ. Tax and duty-free incentives being in the nature of tax exemptions, the basis thereof should be categorically and unmistakably expressed from the language of the statute. Consequently, in the absence of any express grant of

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Code, is one of the 2 principal traditional generators or producers of governmental revenue, the other being the Bureau of Internal Revenue. There is a third agency, non-traditional in character that generates lower but still comparable levels of revenue for the government - PAGCOR. - In the third place, customs duties which are assessed at the prescribed tariff rates are very much like taxes which are frequently imposed for both revenue-raising and for regulatory purposes. It is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country. - The levying of customs duties on imported goods may have in some measure the effect of protecting local industries where such local industries actually exist and are producing comparable goods. Simultaneously, however, the very same customs duties inevitably have the effect of producing governmental revenues. Customs duties like internal revenue taxes are rarely, if ever, designed to achieve one policy objective only. Most commonly, customs duties, which constitute taxes in the sense of exactions the proceeds of which become public funds have either or both the generation of revenue and the regulation of economic or social activity as their moving purposes and frequently, it is very difficult to say which, in a particular instance, is the dominant or principal objective. - In the instant case, since the Philippines in fact produces 10% - 15% of the crude oil consumed here, the imposition of increased tariff rates and a special duty on imported crude oil and imported oil products may be seen to have some "protective" impact upon indigenous oil production. For the effective price of imported crude oil and oil products is increased. At the same time, it cannot be gainsaid that substantial revenues for the government are raised by the imposition of such increased tariff rates or special duty. - In the fourth place, petitioner's concept is a stiflingly narrow one. Section 401 of the Tariff and Customs Code establishes general standards with which the exercise of the authority delegated by that provision to the President must be consistent: that authority must be exercised in "the interest of national economy, general welfare and/or national security." The protection of consumers, who after all constitute the very great bulk of our population, is at the very least

that incentives and privileges are granted to certain enterprises to the exclusion of others does not render the issuance unconstitutional for espousing unfair competition. Suffice it to say that Congress had justifiable reasons in granting incentives to the private respondents, in accordance RA 7227s policy of developing the SSEZ into a self-sustaining entity that will generate employment and attract foreign and local investment. [c] No violation of preferential use of Filipino labor: While the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair.

continued to be subject to the additional duty of 9% ad valorem. - EO 478 levied in addition to the additional duty of 9% ad valorem and all other existing ad valorem duties a special duty of P0.95 per liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products. - Petitioner assails the validity of EOs 475 and 478. ISSUES 1. WON the EOs 475 & 478 violate Section 24, Article VI of the 1987 Constitution 2. WON the EOs 475 & 478 contravene Section 401 of the Tariff and Customs Code HELD 1. NO. Under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff bills, like all other bills is, of course, within the province of the Legislative rather than the Executive Department. It does not follow, however, that therefore EOs 475 and 478, assuming they may be characterized as revenue measures, are prohibited to the President, that they must be enacted instead by the Congress of the Philippines. - Section 28(2) of Article VI of the Constitution gives explicit constitutional permission to Congress to authorize the President "subject to such limitations and restrictions as [Congress] may impose" to fix "within specific limits" "tariff rates . . . and other duties or imposts . . . ." - The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401, the pertinent provisions thereof. These are the provisions which the President explicitly invoked in promulgating Executive Orders Nos. 475 and 478. 2. NO. In the first place, there is nothing in the language of either Section 104 or of 401 of the Tariff and Customs Code that suggest that the President is authorized to act under the Tariff and Customs Code only "to protect local industries and products for the sake of the national economy, general welfare and/or national security." The words "protective" and "protection" are simply not enough to support the very broad and encompassing limitation which petitioner seeks to rest on those two (2) words. - In the second place, petitioner's singular theory collides with a very practical fact - that the Bureau of Customs which administers the Tariff and Customs

GARCIA V EXECUTIVE SECRETARY July 3, 1992; FELICIANO

FACTS - EO 438 imposed, in addition to any other duties, taxes and charges imposed by law on all articles imported into the Philippines, an additional duty of 5% ad valorem. This additional duty was imposed across the board on all imported articles, including crude oil and other oil products imported into the Philippines. - EO 443 increased the additional duty from 5% to 9% ad valorem. - EO 475 reduced the rate of additional duty on all imported articles from 9% to 5% ad valorem, except in the cases of crude oil and other oil products which

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separated therefrom without breaking the material or deterioration of the object. - The pipeline system is indubitably a construction adhering to the soil. It is attached to the land in such a way that it cannot be separated therefrom without dismantling the steel pipes which were welded to form the pipeline. - Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a sense machinery within the meaning of the Real Property Tax Code. - Note that what are being characterized as real property are not the steel pipes but the pipeline system as a whole. - A pipeline for conveying petroleum has been regarded as real property for tax purposes. - Meralco Securities contends that the Petroleum Law exempts it from the payment of realty taxes, as predicated on Art 102 of that law exempting Meralco Securities from local taxes and making it liable for taxes of general application. Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general application. - Realty tax has always been imposed by the lawmaking body and later by the President of the Philippines in the exercise of his lawmaking powers, as shown in section 342 et seq. of the Revised Admin Code, Act No. 3995, Commonwealth Act No. 470 and PD 464. - The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the proceeds of the tax accrue to the province, city, municipality and barrio where the realty taxed is situated (Sec. 86, PD 464). In contrast, a local tax is imposed by the municipal or city council by virtue of the Local Tax Code, PD 231. Dispositive Petition dismissed; questioned decision and resolution affirmed.

as important a dimension of "the national economy, general welfare and national security" as the protection of local industries. And so customs duties may be reduced or even removed precisely for the purpose of protecting consumers from the high prices and shoddy quality and inefficient service that tariffprotected and subsidized local manufacturers may otherwise impose upon the community. - It seems also important to note that tariff rates are commonly established and the corresponding customs duties levied and collected upon articles and goods which are not found at all and not produced in the Philippines. In such cases, customs duties may be seen to be imposed either for revenue purposes purely or perhaps, in certain cases, to discourage any importation of the items involved. In either case, it is clear that customs duties are levied and imposed entirely apart from whether or not there are any competing local industries to protect. Disposition Petition DISMISSED

the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land. - However, segments of the pipeline can be moved from one place to another as shown in the permit issued by the Secretary of Public Works and Communications which provides that the government reserves the right to require the removal or transfer of the pipes by and at the concessionaire's expense should they be affected by any road repair or improvement. - Pursuant to the Assessment Law, the provincial assessor of Laguna treated the pipeline as real property. - Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna which upheld the assessments. - Meralco Securities brought the case to the Central Board of Assessment Appeals, which ruled that the pipeline is subject to realty tax. ISSUES WON the pipeline is subject to real property tax HELD YES. - Sec 2 of the Assessment Law: realty tax is due "on real property, including land, buildings, machinery, and other improvements" not specifically exempted in section 3 thereof. - Sec 38 Real Property Tax Code: Incidence of Real Property Tax. There shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted. - The pipeline of Meralco Securities does not fall within any of the classes of exempt real property enumerated in Sec 3 of the Assessment Law and Sec 40 of the Real Property Tax Code. - Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of the soil in which it is placed. - Article 415[l] and [3] CC provides that real property may consist of constructions of all kinds adhered to the soil and everything attached to an immovable in a fixed manner, in such a way that it cannot be

PART I - LOCAL TAXATION

MERALCO V. CBAA MERALCO SECURITIES INDUSTRIAL CORP. v CBAA 114 SCRA 261 AQUINO; May 31, 1982
NATURE Special Civil Action for certiorari FACTS - Pursuant to a pipeline concession issued under the Petroleum Act of 1949 (RA 387), Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and buried not less than 1 meter below the surface along the shoulder of the public highway. - The pipes are embedded in the soil and are firmly and solidly welded together. The valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end. In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where they are buried. In points where the pipeline traversed rivers or creeks,

CALTEX V. CBAA AND CITY ASSESSOR OF PASAY 114 SCRA 196 May 31, 1982
FACTS - Caltex was assessed realty tax on machinery & equipment installed in its gas stations on leased lands. (underground tanks, elevanted tanks, elevated water tanks, water tanks, gasoline pumps, etc.)

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classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a character of permanency. The LBAA also pointed out that the owner of the barges, FELS, a private corporation is the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. -Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA). -In1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by Distraint over the power barges, seeking to collect real property taxes amounting to P232,602,125.91. FELS then filed a Motion to Lift Levy, praying that the Provincial Assessor be further restrained by the CBAA from enforcing the disputed assessment during the pendency of the appeal which was granted by CBAA. -Meantime, the NPC filed a Motion for Intervention in the proceedings before the CBAA w/c was approved by the CBAA. -During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event that the judgment be unfavorable to them). The bonds were duly approved by the CBAA. -the CBAA found the power barges exempt from real property tax and that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Sec 234(c) of R.A. No. 7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Sec 206 of R.A. No. 7160. -The Provincial Assessor filed a MFR. CBAA reversed its earlier decision affirming that of the LBAAs. FELS and NPC filed separate MFRs, which were timely opposed by the Provincial Assessor. The CBAA denied the said motions. Both appealed to the CA. - CA held that the right to question the assessment of the Provincial Assessor had already prescribed upon the failure of FELS to appeal the disputed assessment to the LBAA within the period prescribed by law. Since FELS had lost the right to question the assessment, the

- Those are loaned by Caltex to gas station operators under lease agreement. The operators must return them. The lessor of the land doesnt become the owner of the machines & equipment. - City Assessor of Pasay said those are taxable realty. City Board of Tax Appeals said theyre personalty. - Assessor appealed to Central Board of Assessment Appeals. - Central Board of Assessment Appeals said theyre real prop. - Caltex filed this certiorari petition. ISSUE WON the equipment / machineries are real or personal property HELD REAL PROP - bec as appurtenances to the gas station, theyre necessary to the operation of the gas station. - bec improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty. Standard Oil v. Jaramillo

FELS ENERGY, INC v. THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS G.R. No. 168557 and NPC v. LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor G.R. No. 170628 Callejo, Sr. / February 16, 2007
Nature: Certiorari Facts: -These are consolidated cases assailing CA decisions that were dismissed on the ground of prescription. -In 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The

Energy Conversion Agreement was for a period of 5 years. Article 10 of which reads: 10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees, charges and other levies imposed by the National Government of the Republic of the Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to or in relation to the performance of their obligations under this agreement (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges. -Subsequently, Polar Energy, Inc. assigned its rights under the agreement to FELS. The NPC initially opposed the assignment of rights. -In 1995, FELS received an assessment of real property taxes on the power barges from Provincial Assessor Andaya of Batangas City. The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. -NPC sought reconsideration of Andayas decision to assess real property taxes on the power barges. However, the motion was denied on and the Provincial Assessor advised NPC to pay the assessment. This prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as nontaxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections. -In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of taxation under Sec. 199(c) of RA No. 7160. -Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of Finance (DOF) had rendered an opinion where it is clearly stated that power barges are not real property subject to real property assessment. -the LBAA rendered a Resolution denying the petition and ordered FELS to pay the real estate tax. The LBAA ruled that the power plant facilities, while they may be

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the payment of realty taxes by invoking its exemption in Sec. 234 (c) of R.A. No. 7160 (LGC). - The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas. -It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. -This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. Dispositive: Petition DENIED.

right of the Provincial Government to collect the tax was already absolute. (NPC and FELS filed several other MFRs but those were denied as well.) Issues: 1. WON the appeal before the LBAA was timebarred 2. WON the power barges are real property thus subject to real property taxes HELD: 1. Yes. - FELS argued that when NPC moved to have the assessment reconsidered, the running of the period to file an appeal with the LBAA was tolled. NPC posits that the 60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for reconsideration. - SC citing Callanta case: The last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a MFR before the local assessor. -Sec 226 of LGC provides: SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. -The notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained the following statement: If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt hereof, appeal to the Board of Assessment Appeals of the province by filing a petition under oath on the form prescribed for the purpose, together with copies of ARP/Tax Declaration and such affidavits or documents submitted in support of the appeal. -Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a

motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law. -The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property. It follows then that the determination made by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess properties for taxation purposes subject to appeal before the LBAA. -SC quoting CA decision: (citing Meralco v. Barlis) If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due with respect to the taxpayers property becomes absolute upon the expiration of the period to appeal.It also bears stressing that the taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits. - Elementary is the rule that the perfection of an appeal within the period therefore is both mandatory and jurisdictional, and failure in this regard renders the decision final and executory. 2. YES. As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject to real property tax. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court. -Art. 415 (9) NCC provides that "[d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast" are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work. -SC affirmed the findings of the LBAA and CBAA that the owner of the taxable properties is FELS, which in fine, is the entity being taxed by the local government. It follows then that FELS cannot escape liability from

REYES V ALMANZOR 196 SCRA 322 PARAS; APRIL 26, 1991

FACTS Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said tenants were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. -On July 14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby

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Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. At this point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with no end to it in sight. -Verily, taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue Inc., et al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.

disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. On October 12, 1972, Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. Consequently, the Reyeses, petitioners herein, were precluded from raising the rentals and from ejecting the tenants. -In 1973, respondent City Assessor of Manila reclassified and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance. The revision, as expected, entailed an increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They averred that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties. They argued that the income approach should have been used in determining the land values instead of the comparable sales approach which the City Assessor adopted. The Boardof Tax Assessment Appeals, however, considered the assessments valid. -The Reyeses appealed to the Central Board of Assessment Appeals, which subsequently affirmed the decision. Petitioner's subsequent motion for reconsideration was denied. Hence, this petition. ISSUE WON the board erred in adopting the comparable sales approach method in fixing the assessed value of appellants properties HELD YES. Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only be uniform, but must also be equitable and progressive. Uniformity has been defined as that principle by which all taxable articles or kinds of property of the same class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]). Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is progressive when its rate goes up depending on the resources of the person affected (Ibid.). The power to tax "is an

attribute of sovereignty". In fact, it is the strongest of all the powers of government. -But for all its plenitude the power to tax is not unconfined as there are restrictions. Adversely effecting as it does property rights, both the due process and equal protection clauses of the Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy." The web or unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes pen, thus: "The power to tax is not the power to destroy while this Court sits. So it is in the Philippines " (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439 [1985]). -In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to confiscation of property. That would be a clear abuse of power (Sison v. Ancheta, supra). The taxing power has the authority to make a reasonable and natural classification for purposes of taxation but the government's act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason. 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 (Ibid., p. 662). -Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental Principle to guide the appraisal and assessment of real property for taxation purposes is that the property must be "appraised at its current and fair market value." By no strength of the imagination can the market value of properties covered by P.D. No. 20 be equated with the market value of properties not so covered. The former has naturally a much lesser market value in view of the rental restrictions. -Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property.

SESBRENO v. CBAA GR 106588 Panganiban; March 24, 1997

FACTS -Petitioner bought land with improvements in Cebu in 1980. He declared the property on the land as a residential house of strong materials with floor area of 60sqm. Effective 1980, the declared property was assessed by the City Assessor of Cebu City at a market value of P60,000.00 and an assessed value of P36,900.00. -During a tax-mapping operation conducted in February 1989, the field inspectors of the Cebu City Assessor discovered that the real property was actually

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as "the price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure." (Sec 3(n), PD 464) -Contrary to petitioner's contention, acquisition cost cannot be and is not the sole basis of the current and fair market value of a property. The current value of like properties and their actual or potential uses, among others, are also considered. Unscrupulous sellers of real estate often understate the selling price in the deed of sale to minimize their tax liability. Moreover, the value of real property does not remain stagnant; it is unrealistic to expect that the current market value of a property is the same as its cost of acquisition ten years ago. In this light, a general revision of real property assessment is required by law every five (5) years to ensure that real properties are assessed at their current and fair market values. c) Petitioner argues that the CBAA erred in refusing to apply Section 23 of PD 464 which provides: Section 23. Certification of Revised Values to the Secretary of Finance. When the provincial or city assessor shall have finished a general revision of property assessments for any province, municipality or city, he shall so certify to the Secretary of Finance and the assessments shall become effective and taxes shall accrue and be payable thereunder in accordance with the provisions of this Code. -Petitioner claims that Respondent City Assessor of Cebu City has not yet completed the general revision of property assessments for years 1981-1984 and has not yet submitted the certification required by Section 23 of PD 464 to the Secretary of Finance; hence, he may not yet be held liable to pay any assessment. He was wrong, of course, because the general revision in question was approved by the Sec Fin on May 22, 984, effective July 1, 1987. (hello, 1989 na!)

a residential building consisting of 4 storeys with a fifth storey used as a roof deck. The building had a total floor area of 500.20 sqm. The area for each floor was 100.04 sqm. The building was found to have been made of Type II-A materials. On October 17, 1990, these findings were confirmed by the Board of Commissioners in an ocular inspection conducted on the subject property. -Based on the findings of the field inspectors, Respondent City Assessor of Cebu City issued a new tax declaration effective in the year 1989, canceling the old one, and assessing the building therein at a net market value of P499,860.00 and an assessed value of P374,900.00. The 1981-1984 Schedule of Market Value was applied in the assessment. -Petitioner protested the new assessment for being "excessive and unconscionable," contending that it was increased by more than 1,000%. The CBAA dismissed his protest. His appeal was met with an additional assessment of back taxes. ISSUES 1) WON the raising of the issue of back taxes on appeal to the CBAA was proper 2) WON petitioner is liable for back taxes a) applicability of Sec 24, PD 464 (interpretation of for the first time) b) definition of market value (petitioner is contending that the market value of the property, including the land was P100,000, the amount he paid when he bought it) c) applicability of Sec 23, PD 464 HELD 1) YES. An appelate court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. -Although the foregoing specifically referred to "appellate courts," there appears no reason why these should not apply to appellate administrative agencies, where rules of procedure are liberally construed. 2) YES. a) Arguing that he should not be liable for back taxes, petitioner states that Respondent CBAA should have applied Section 24, instead of Section 25, of PD 464.

These statutory provisions read: "Section 24. Date of effectivity of Assessment or Reassessment. All assessments or reassessments made after the first day of January of any year shall take effect on the first day of January of the succeeding year: Provided, however, That the reassessment of real property due to its (1) partial or total destruction, or to (2) a major change in its actual use, or to any (3) great and sudden inflation or deflation of real property values, (4) or to the gross illegality of the assessment when made or to any other abnormal cause, shall be made within ninety days from the date any such cause or causes occurred, the same to take effect at the beginning of the quarter next following the reassessment. Section 25. Assessment of Property Subject to Back Taxes. Real property declared for the first time shall have back taxes assessed against it for the period during which it would have been liable if assessed from the first in proper course but in no case for more than ten years prior to the year of initial assessment; Provided, however, that the back taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period. -If said taxes are paid before the expiration of the tax collection period next ensuing, no penalty for delinquency shall be imposed, otherwise the taxes shall be subject to all the penalties to which they would have been liable had they originally become delinquent after assessment of the property in the usual course." -Petitioner says that CBAA was wrong in applying Sec 25 because the property has been declared for assessment as early as 1980 (and before that by the previous owner) and not for the first time in 1989. He is of course wrong in his interpretation of for the first time. In a similar case, it was held that it should not be understood to apply only to real estate that have (sic) never been declared; as within the meaning of such phrase, the excess areas resulting from the revision must be understood as never having been declared before. b) Market Value is defined as "the highest price estimated in terms of money which the property will buy if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all uses to which it is adapted and for which it is capable of being used." It is also referred to

ALLIED BANKING CORPORATION V QUEZON CITY GOVERNMENT G.R. No. 154126 CARPIO-MORALES; October 15, 2005
NATURE Appeal by certiorari under Rule 45 FACTS

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No. 1-92 and unduly interferes with the duties statutorily placed upon the local assessor by completely dispensing with his analysis and discretion which the Code and the regulations require to be exercised. An ordinance that contravenes any statute is ultra vires and void. -Using the consideration appearing in the deed of conveyance to assess or appraise real properties is not only illegal since the appraisal, assessment, levy and collection of real property tax shall not be let to any private person, but it will completely destroy the fundamental principle in real property taxation that real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. Necessarily, allowing the parties to a private sale to dictate the fair market value of the property will dispense with the distinctions of actual use stated in the Code and in the regulations. -The invalidity of the assessment or appraisal system adopted by the proviso is not cured even if the proviso mandates the comparison of the stated consideration as against the prevailing BIR zonal value, whichever is higher, because an integral part of that system still permits valuing real property in disregard of its actual use. -The provision is null and void ab initio for being ultra vires and for contravening the provisions of the Local Government Code, its implementing regulations and the Local Assessment Regulations No. 1-92. As such, it acquired no legal effect and conferred no rights from its inception. Disposition Petition granted (Petitioners claim for refund, however, must be lodged with the Local Board of Assessment Appeals, if it is not barred by the statute of limitations *non-exhaustion of admin remedies)

-On December 19, 1995, the Quezon City government enacted City Ordinance No. 357, Series of 1995, Section 3 of which reads: Section 3. The City Assessor shall undertake a general revision of real property assessments using as basis the newly approved schedule specified in Sections 1 and 2 hereof. He shall apply the new assessment level of 15% for residential and 40% for commercial and industrial classification, respectively as prescribed in Section 8 (a) of the 1993 Quezon City Revenue Code to determine the assessed value of the land. Provided; however, that parcels of land sold, ceded, transferred and conveyed for remuneratory consideration after the effectivity of this revision shall be subject to real estate tax based on the actual amount reflected in the deed of conveyance or the current approved zonal valuation of the Bureau of Internal Revenue prevailing at the time of sale, cession, transfer and conveyance, whichever is higher, as evidenced by the certificate of payment of the capital gains tax issued therefor. -Petitioner purchased from Liwanag C. Natividad a 1,000 square meter parcel of land in the amount of P38,000,000.00. -Prior to the sale, Natividad had been paying P85,050.00 as annual real property tax based on the propertys fair market value of P4,500,000.00 and assessed value of P1,800,000.00. -After its acquisition of the property, petitioner was, in accordance with Section 3 of the ordinance, required to pay P102,600.00 as quarterly real estate tax (or P410,400.00 annually), with the market value of the property pegged at P38,000,000.00 the consideration appearing in the Deed of Absolute Sale, and its assessed value at P15,200,000.00. -Petitioner paid the quarterly real estate tax under protest. In its protest with the City Treasurer, petitioner assailed Section 3 of the ordinance as null and void -Petitioner later sent a demand letter to the QC Treasurers Office seeking a refund of the real estate taxes it erroneously collected from it. It was denied on the ground that the ordinance is presumed valid and legal unless otherwise declared by a court of competent jurisdiction. -Petitioner filed on August 11, 2000 a petition for prohibition and declaratory relief before the Quezon City RTC for the declaration of nullity of Section 3 of the ordinance; the enjoining of respondents Quezon City Treasurer, Quezon City Assessor, and City Mayor

of Quezon City from further implementing the ordinance; for the Quezon City Treasurer to be ordered to refund the amount representing the real property tax erroneously collected and paid under protest; and for respondents to pay attorneys fees and costs of the suit. -On March 6, 2001, respondent Quezon City Government enacted Ordinance No. SP-1032, S-2001 which repealed the assailed proviso in Section 3 of the 1995 Ordinance. -Respondents moved to dismiss the petition, averring that the passage of the repealing ordinance had rendered the petition moot and academic. -Petitioner opposed the motion, alleging that while its action for the declaration of nullity of the proviso was rendered moot and academic by its repeal, its claim for refund and attorneys fees had not been mooted, and the trial court still had to determine if Section 3 of the ordinance is null and void ab initio and perforce, may not be enforced during the intervening period from the time of its enactment until the time of its repeal. -TC granted respondents motion to dismiss -MFR denied, hence, this appeal ISSUE WON Section 3, Quezon City Ordinance No. 357, Series of 1995, which was abrogated for being UNCONSTITUTIONAL can be the basis of collecting real estate taxes prior to its repeal HELD No. -The proviso in question is invalid as it adopts a method of assessment or appraisal of real property contrary to the Local Government Code, its Implementing Rules and Regulations and the Local Assessment Regulations No. 1-92 issued by the Department of Finance. -Under these immediately stated authorities, real properties shall be appraised at the current and fair market value prevailing in the locality where the property is situated and classified for assessment purposes on the basis of its actual use. -This Court holds that the proviso directing that the real property tax be based on the actual amount reflected in the deed of conveyance or the prevailing BIR zonal value is invalid not only because it mandates an exclusive rule in determining the fair market value but more so because it departs from the established procedures stated in the Local Assessment Regulations

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY V MARCOS QUIMPO V. MENDOZA 107 SCRA 73 GUERRERO, AUGUST 31, 1981
NATURE petition to review on certiorari

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may find justification under the concept of incidental use, which is complimentary to the main or primary purpose educational, the lease of the first floor thereof to the Northern Marketing Corporation cannot by any stretch of the imagination be considered incidental to the purpose of education. - The trial court correctly arrived at the conclusion that the school building as well as the lot where it is built, should be taxed, not because the second floor of the same is being used by the Director and his family for residential purposes, but because the first floor thereof is being used for commercial purposes. However, since only a portion is used for purposes of commerce, it is only fair that half of the assessed tax be returned to the school involved.

FACTS -Quimpo, an owner of a building in CDO, was assessed P20k for 1969, P400 annual realty tax payable in 4 equal installments. Quimpo was able to pay the first 3 monthly installments but was not able to pay the last installment. -On August the following year, he wanted to pay P124.00 (P100 tax due + P24 penalty) to Mendoza, the City Treasurer of CDO, but Mendoza required him to pay P196 (P100 + P96 penalty based on City Charter of CDO). Quimpo consigned P124 with Clerk of Court then instituted mandamus with damages against Mendoza in CFI -CFI: dismissed based on Padilla v. City of Pasay and City Treasurer 1. Pay P96 penalty = 2% of original tax which is P400 2. no authority to entertain suit for failure of Quimpo to comply with provisions of Charter of CDO on payment of tax ISSUE (relevant lang, ung iba remedies and damages na eh) WON the basis for computing the tax penalty should be the tax payable for the said year or only the installment unpaid HELD Only base deficiency on unpaid installment Ratio. We rule for the petitioner, following the general rule in the interpretation of tax statutes that such statutes are construed most strongly against the government and in favor of the taxpayer. Moreover, simple logic, fairness and reason cannot countenance an exaction or a penalty for an act faithfully done in compliance with the law. Since petitioner is allowed by law to pay his real estate tax in four equal installments due and payable on four specified dates and having paid the first three (3) installments faithfully and religiously, it is manifest injustice, sheer arbitrariness and abuse of power to penalize him for doing so when he fails to pay the fourth and last installment. Reasoning. Padilla v. City of Pasay not applicable to the case as the said case was decide before RA 5447 took effect in January 1, 1969. Petitioner was being assessed real property tax for 1969 so RA 5447 applies to the petitioner already. RA 5447 amends city charters by providing that real property tax is due and payable in 4 equal installments. Thus, each installment is due and payable on or before a specified statutory

limit. Default in 1 installment, the penalty for delinquency should be computed starting the day after the due date when the tax payer should have paid. Disposition. WHEREFORE, judgment is hereby rendered ordering petitioner to pay to the City Treasurer of Cagayan de Oro City the amount of P116.00 representing full payment of the last installment of P100.00 on the realty tax for the year 1969 and the tax penalty of P16.00 for eight months of his delinquency from January, 1970 to August, 1970; and ordering said City Treasurer to accept the aforesaid payment, issue the official receipt therefor and a tax clearance certificate covering the aforementioned real estate tax and penalty. No costs. Judgment modified. SO ORDERED.

ABRA VALLEY COLLEGE, INC. v AQUINO June 15,1988 ; Paras

FACTS - Petitioner filed a complaint in the CFI of Abra to annul and declare void the "Notice of Seizure" and the "Notice of Sale" and sale in a public auction of its lot and building located in Bangued, Abra for non-payment of real estate taxes and penalties. The ground floor of the said building is being used and rented by a commercial establishment (Northern Marketing Corp.), while the second floor is the permanent residence of the Director of the college and his family. - Petitioner argues that the primary use of the school lot and building is the basic and controlling guide, norm and standard to determine tax exemption, and not the mere incidental use thereof. ISSUE WON the entire building is used exclusively for educational purposes ( hence exempt from property tax) HELD NO ( 1st floor taxable, 2nd floor tax exempt) - In the phrase "exclusively used for educational purposes" as provided for in Article VI, Section 22 of the 1935 Constitution, reasonable emphasis has always been made that exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes. Otherwise stated, the use of the school building or lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while the use of the second floor of the main building in the case at bar for residential purposes of the Director and his family,

NAPOCOR V PRESIDING JUDGE 190 SCRA 477 FERNAN; October 16, 1990
FACTS -the province of Misamis Oriental filed a complaint with the RTC of Cagayan de Oro against NAPOCOR for the collection of real property tax and special education fund tax amounting to P11,105,008.10 and P11,104,658.10 respectively. Petitioner, citing PD 242, moved to dismiss on the ground that the court had no jurisdiction since disputes between government agencies (and GOCCs) should be adjudicated by the Secretary of Justice. The court denied the motion. Petitioner filed a supplemental motion to dismiss, citing Fiscal Incentive Review Board (FIRB) Resolution 10-85, restoring petitioners tax and duty exemption privileges. The court denied petitioners second motion to dismiss. Barangay Aplaya, Misamis Oriental filed a complaint in intervention, contending that since under law, 10% of the real property taxes collected within its jurisdiction accrue to its general funds, petitioners non-payment adversely affects its interests. ISSUE WON NAPOCOR is exempt from real property taxes HELD 1. NO. Sec. 23 of PD 1177 provides that all units of government, including GOCCs shall pay income taxes, customs duties and other taxes and fees as imposed under revenue laws. Petitioner contends that only its exemptions from taxes payable to the national

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3. withdrew the tax exemption enjoyed by Bayantel under its franchise, as amended WON Congress actually did exempt Bayantels properties at all by virtue of Section 11 of Rep. Act No. 7633

government was withdrawn and not those payable to government branches. Clearly, the law makes no such distinction and the provision should be taken in its plain meaningthat is, that all exemptions have been lifted. This is echoed in PD 1931 which affirms that all such tax privileges have been repealed. -In NAPOCOR v Albay, the Court held that the State had no reason to decry the taxation of NAPOCORs properties since the real property taxes would in any case be used to finance development and nationbuilding, particularly in the local government level. Such proceeds are divided among the province, city or municipality where the subject property is located and applied to that LGU for its own use and benefit (including barrios like Barangay Aplaya). The 1% tax for the Special Education Fund is likewise divided among the LGUs. Disposition WHEREFORE, the petition is DISMISSED

THE CITY GOVERNMENT OF QUEZON CITY vs. BAYAN TELECOMMUNICATIONS, INC GARCIA; March 6, 2006
NATURE Petition for review on certiorari FACTS - Respondent Bayan Telecommunications, Inc. (Bayantel) is a legislative franchise holder under RA 3259 to establish and operate radio stations for domestic telecommunications, radiophone, broadcasting and telecasting. - Section 14 of RA 3259 provides for realty tax exemption of Bayantel but it shall be liable to pay the same taxes on its real estate, buildings and personal property, exclusive of the franchise, as other persons or corporations may be required by law to pay. - RA 7160 (Local Government Code of 1991) took effect. Section 232 of the Code grants local government units within the Metro Manila Area the power to levy tax on real properties such as land, building, machinery and other improvements not specifically exempted. - Complementing the above provision is the second paragraph of Section 234 the same Code which withdrew any exemption from realty tax heretofore granted to or enjoyed by all persons, natural or juridical.

- Few months after the LGC took effect, Congress enacted RA 7633, amending Bayantels original franchise. The amendatory law restored the realty tax exemption of Bayantel. - Bayantel owned several real properties on which it maintained various telecommunications facilities in QC (head office and Operations Center, land, building equipment, Exchange Center) - In 1993, the government of Quezon City, pursuant to the taxing power vested on local government units by Section 5, Article X of the 1987 Constitution in relation to Section 232 of the LGC, enacted City Ordinance, otherwise known as the Quezon City Revenue Code (QCRC), imposing, under Section 5 thereof, a real property tax on all real properties in Quezon City, and, reiterating in its Section 6, the withdrawal of exemption from real property tax under Section 234 of the LGC. Furthermore, much like the LGC, the QCRC, under its Section 230, withdrew tax exemption privileges in general. - Conformably with the Citys Revenue Code, new tax declarations for Bayantels real properties in Quezon City were issued by the City Assessor and were received by Bayantel. - Meanwhile, on March 16, 1995, RA 7925 (Public Telecommunications Policy Act of the Philippines) envisaged to level the playing field among telecommunications companies, took effect. - Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in the city from the roll of taxable real properties. DENIED. - Appeal with the Local Board of Assessment Appeals (LBAA). And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property taxes assessed against it by the Quezon City government. - On account thereof, the Quezon City Treasurer sent out notices of delinquency for the total amount of P43,878,208.18, followed by the issuance of several warrants of levy against Bayantels properties preparatory to their sale at a public auction. ISSUES 1. WON Bayantels real properties in Quezon City are exempt from real property taxes under its legislative franchise 2. WON the Citys Revenue Code pursuant to which the city treasurer of Quezon City levied real property taxes against Bayantels real properties located within the City effectively

HELD 1. YES. The legislative intent expressed in the phrase exclusive of this franchise cannot be construed other than distinguishing between two (2) sets of properties, be they real or personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used in its radio or telecommunications business, and (b) those properties which are not so used. It is worthy to note that the properties subject of the present controversy are only those which are admittedly falling under the first category. To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or delegate to local governments of Congress inherent power to tax the franchisees properties belonging to the second group of properties indicated above, that is, all properties which, exclusive of this franchise, are not actually and directly used in the pursuit of its franchise. As may be recalled, the taxing power of local governments under both the 1935 and the 1973 Constitutions solely depended upon an enabling law. Absent such enabling law, local government units were without authority to impose and collect taxes on real properties within their respective territorial jurisdictions. While Section 14 of Rep. Act No. 3259 may be validly viewed as an implied delegation of power to tax, the delegation under that provision, as couched, is limited to impositions over properties of the franchisee which are not actually, directly and exclusively used in the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the pursuit of its business are beyond the pale of the delegated taxing power of local governments. In a very real sense, therefore, real properties of Bayantel, save those exclusive of its franchise, are subject to realty taxes. Ultimately, therefore, the inevitable result was that all realties which are actually, directly and exclusively used in the operation of its franchise are exempted from any property tax. 2. NO. While the system of local government taxation has changed with the onset of the 1987 Constitution,

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policy of exemption from any and all taxes as an essential factor for the solvency of the GSIS fund. - Petitioners argue that the exemption granted in Section 33 of P.D. No. 1146 was effectively withdrawn upon the enactment of the Local Government Code. - GSIS contends that the requisites for repeal are laid down in Section 33 of P.D. No. 1146, as amended, namely that it be done expressly and categorically by law, and that a provision be enacted to substitute the declared policy of exemption from taxes as an essential factor for the solvency of the GSIS fund. ISSUE WON Sections 234 and 534 of the Local Government Code, which have withdrawn real property tax exemptions of government owned and controlled corporations, have also withdrawn from the GSIS its right to be exempted from payment of the realty taxes sought to be levied by Davao City. HELD - YES. The GSISs tax-exempt status was withdrawn in 1992 by the Local Government Code but restored by the Government Service Insurance System Act of 1997, the operative provision of which is Section 39. The subject real property taxes for the years 1992 to 1994 were assessed against GSIS while the Local Government Code provisions prevailed and, thus, may be collected by the City of Davao. - A presidential decree enacted a year earlier, P.D. No. 1931, effectively withdrew all tax exemption privileges granted to GOCCs. - Whether Marcos was aware of the effect of P.D. No. 1931 on the GSISs tax-exempt status or the ramifications of the decree thereon is unknown; but apparently, he immediately reconsidered the withdrawal of the exemptions on the GSIS. Thus, P.D. No. 1981 was enacted, expressly stating that the taxexempt status of the GSIS under Section 33 of P.D. No. 1146 remained in place, notwithstanding the passage of P.D. No. 1931. - P.D. No. 1981 also attempted to proscribe future attempts to alter the tax-exempt status of the GSIS by imposing unorthodox conditions for its future repeal. Thus, a second paragraph was added to Section 33, containing the restrictions relied upon by the RTC. - Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government, its agencies and instrumentalities, as

the power of local government units to tax is still limited. Reasoning: a. Mactan Cebu International Airport Authority case. The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely be virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. Under the latter, the exercise of the power may be subject to such guidelines and limitations as the Congress may provide which, however, must be consistent with the basic policy of local autonomy. b. Comment of Fr. Bernas on the effect of Section 5 on the fiscal position of municipal corporations Section 5 does not change the doctrine that municipal corporations do not possess inherent powers of taxation. What it does is to confer municipal corporations a general power to levy taxes and otherwise create sources of revenue. They no longer have to wait for a statutory grant of these powers. The power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. Moreover, these limitations must be consistent with the basic policy of local autonomy. The important legal effect of Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations. Henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be resolved in favor of municipal corporations. It is understood, however, that taxes imposed by local government must be for a public purpose, uniform within a locality, must not be confiscatory, and must be within the jurisdiction of the local unit to pass. c. Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of Davao: The grant of taxing powers to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain persons, pursuant to a declared national policy. The legal effect of the constitutional grant to local governments simply means that in interpreting statutory provisions on municipal taxing powers, doubts must be resolved in favor of municipal corporations. 3. YES. RA 7633 was enacted subsequent to the LGC. This subsequent piece of legislation as an express and

real intention on the part of Congress to once again remove from the LGCs delegated taxing power, all of the franchisees (Bayantels) properties that are actually, directly and exclusively used in the pursuit of its franchise. DISPOSITION Petition DENIED

MANILA INTERNATIONAL AIRPORT AUTHORITY V CA THE CITY OF DAVAO V RTC AND GSIS G.R. No. 127383 TINGA; August 18, 2005
FACTS - GSIS Davao City branch office received a Notice of Public Auction scheduling the public bidding of GSIS properties located in Matina and Ulas, Davao City for non-payment of realty taxes for the years 1992 to 1994 totaling PP295,721.61. The auction was subsequently reset by virtue of a deadline extension allowed by Davao City for the payment of delinquent real property taxes. - GSIS received Warrants of Levy and Notices of Levy on three parcels of land owned by the GSIS. Another Notice of Public Auction was received by the GSIS, setting the date of auction sale. - GSIS filed a Petition for Certiorari, Prohibition, Mandamus And/Or Declaratory Relief with the RTC of Davao City. It also sought the issuance of a TRO which was granted. It also issued an Order issuing a writ of preliminary injunction effective for the duration of the suit. - RTC concluded that notwithstanding the enactment of the Local Government Code, the GSIS retained its exemption from all taxes, including real estate taxes. The RTC cited Section 33 of PD No. 1146, the Revised Government Service Insurance Act of 1977, as amended by P. D. No. 1981, which mandated such exemption. - The RTC conceded that the tax exempting statute, P.D. No. 1146, was enacted prior to the Local Government Code. However, it noted that the earlier law had prescribed two conditions in order that the tax exemption provided therein could be withdrawn by future enactments, namely: (1) that Section 33 be expressly and categorically repealed by law; and (2) that a provision be enacted to substitute the declared

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of the Boards HELD No. It is undisputed that the doctors and medical specialists holding clinics in the new building are those accredited by the hospital, that is, they are consultants of the hospital and the ones who can treat patients confined in the hospital. This fact alone takes away the new building from being categorized as commercial since a tertiary hospital is required by law to have a pool of physicians who comprises the required medical departments in various fields. These accredited physicians normally would hold office within the premises of the hospital. In which case, there is no question as to the conduct of their business in the ambit of diagnosis, treatment, and or confinement of patients. Their transfer to a more spacious and convenient place and location for the benefit of the hospitals patients does not remove them from being an integral part of the overall operation of the hospital. Disposition Petition is denied.

evidenced by these cited provisions which otherwise provided. - This Court, in Mactan, acknowledged that under Section 133, instrumentalities were generally exempt from all forms of local government taxation, unless otherwise provided in the Code. On the other hand, Section 232 otherwise provides insofar as it allowed local government units to levy an ad valorem real property tax, irrespective of who owned the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the phrase not hereinafter specifically exempted. The exemptions from real property taxes are enumerated in Section 234, which specifically states that only real properties owned by the Republic of the Philippines or any of its political subdivisions are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall within the exceptions under Section 234. - Unlike most other GOCCs, there is a statutory provision Section 33 of P.D. No. 1146, as amended which imposes conditions on the subsequent withdrawal of the GSISs tax exemptions. The RTC justified the affirmance of the tax exemptions based on the non-compliance by the Local Government Code with these conditionalities, and not by reason of a general proposition that GOCCs or instrumentalities remain exempt from local government taxation. - It does not appear that at the very least, the second conditionality of Section 33 has been met. No provision has been enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the fund. Yet the Court is averse to employing this framework, for we recognize a fundamental flaw in Section 33, particularly the amendatory second paragraph introduced by P.D. No. 1981. - The second paragraph of Section 33 of P.D. No. 1146, as amended, effectively imposes restrictions on the competency of the Congress to enact future legislation on the taxability of the GSIS. This places an undue restraint on the plenary power of the legislature to amend or repeal laws, especially considering that it is a lawmakers act that imposes such burden. Only the Constitution may operate to preclude or place restrictions on the amendment or repeal of laws. It is evident that we cannot render effective the amendatory second paragraph of Section 33 as the RTC did, for by doing so, we would be giving sanction to a disingenuous means employed through

legislative power to bind subsequent legislators to a particular mode of repeal. - Thus, the two conditionalities of Section 33 cannot bear relevance on whether the Local Government Code removed the tax-exempt status of the GSIS. The express withdrawal of all tax exemptions accorded to all persons, natural or juridical, as stated in Section 193 of the Local Government Code, applies without impediment to the present case.

CITY ASSESSOR OF CEBU V ASSOCIATION OF BENEVOLA DE CEBU, INC 524 SCRA 128 Velasco, J; June 6, 2007
NATURE Petition for review on certiorari FACTS - Respondent, a non stock, non profit organization, is the owner of a hospital in Cebu. It constructed the CHH Medical Arts Center which was classified as Commercial Clinic by the local government. The City Assessor of Cebu assessed the center as commercial and imposed an assessed value of P9.8 million which was equivalent to 35% of the value of the building and not the 10% special assessment imposed on the hospital and two other separate buildings. - Repondent filed letter petition with the Assessment Appeal Board for reconsideration claiming that rate should be only 10%. - Assessor claimed that the new building was not part of the hospital being 100 meters away from the hospital and was being used as commercial clinic for renting out to physicians. In turn, the doctors charged consultation fees for diagnosis and treatment. Hence, the commercial nature of the building. - The Local and Central Board ruled that assessment should be only 10%. The Local Board ratiocinated that hospitals have plenty of spaces leased out to medical practitioners similar to the new building. Hence the treatment in so far as assessment is concerned should be the same as that of the hospital. - CA on appeal affirmed the decision of the Boards. - Hence this appeal to the SC. ISSUE/S WON CA committed an error in affirming the decision

CALTEX V. CBAA AND CITY ASSESSOR OF PASAY 114 SCRA 196 May 31, 1982
FACTS * See Facts under Part A. - Chris ISSUE WON certiorari is the proper remedy for Caltex (SolGen contends that its the CTA w/c has exclusive appellate jurisdiction over this case) HELD YES (SolGen is not correct.) - The Central Board of Assessment Appeals has appellate jurisdiction over decisions of local boards of assessment appeals and is in the same category as the CTA. - The Real Property Tax Code says the decision of CBAA becomes final & executory after 15 days fr receipt of its decision. Within that period, reconsideration may be filed. Code doesnt provided for review of Boards decision by SC. Consequently, the only remedy available for seeking review by SC of the decision of CBAA is the special civil action of certiorari. Caltex was right.

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CHAVEZ V ONGPIN 186 SCRA 331 MEDIALDEA ; June 6, 1990

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3) The Central Board will decide within 12 months from date of receipt.The decision of the Central Board of Assessment Appeals shall become final and executory after the lapse of 15 days from the date of receipt of the decision (Sec 36). - 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 revenues must be adequate to meet government expenditures and their variations. Disposition Petition DISMISSED

NATURE Petition seeking to declare unconstitutional EO 73 FACTS - EO 73 (November 25, 1986) which provided for collection of real property taxes based on 1984 real property values, under section 21 of the real property tax code as amended WHEREAS - collection of real property taxes is still based on the 1978 revision of property values - latest general revision of real property assessments completed in 1984 has rendered the 1978 revised values obsolete - collection of real property taxes based on the 1984 real property values was deferred to take effect on January 1, 1988 instead of January 1, 1986, thus depriving the local government units of an additional source of revenue - urgent need for local governments to augment their financial resources to meet the rising cost of rendering effective services to the people DO HEREBY ORDER (1) Real property values as of December 31, 1984 as determined by the local assessors during the latest general revision of assessments shall take effect beginning January 1, 1987 for purposes of real property tax collection - MEMO ORDER 77 issued suspending implementation of EO 73 until June 30, 1987 - Chavez (taxpayer and owner of 3 parcels of land) alleges > EO 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating excessive increase in real property taxes by 100% to 400% on improvements and up to 100% on land > any increase in the value of real property brought about by the revision of real property values and assessments would necessarily lead to a proportionate increase in real property taxes > sheer oppression is the result of increasing real property taxes at a period of time when harsh economic conditions prevail

> increase in the market values of real property as reflected in the schedule of values was brought about only by inflation and economic recession - Realty Owners Association of the Philippines, Inc. (ROAP) (national association of ownerslessors) joins Chavez and additionally alleges > PD 464 is unconstitutional as it imposes an additional one percent (1%) tax on all property owners to raise funds for education, as real property tax is admittedly a local tax for local governments > General Revision of Assessments does not meet the requirements of due process as regards publication, notice of hearing, opportunity to be heard as it authorizes "replacement cost" of buildings (improvements) which is not provided in PD 464, but only in an administrative regulation of the Department of Finance > Joint Local Assessment/Treasury Regulations No. 286 is even more oppressive and unconstitutional as it imposes successive increase of 150% over the 1986 tax ISSUE WON EO 73 is unconstitutional as regards the revision of the assessments and effectivity thereof HELD NO - no legal basis on attacking EO 73 since the general revision of assessments is a continuing process mandated by PD 464 Sec 21 (make a general revision of real property assessments once every five years and if property values greatly change, with approval of Sec Fin, make gen revision before the fifth year). - Furthermore, PD 464 furnishes the PROCEDURE BY WHICH A TAX ASSESSMENT MAY BE QUESTIONED 1) Within 60 days from the date of receipt of the written notice of assessment, any owner who doubts the assessment of his property, may appeal to the Local Board of Assessment Appeals with petition under oath, copies of the tax declarations and documents in support of the appeal (Sec 30). Decision shall be made within 120 days from receipt of appeal (Sec 34). 2) In case the owner or administrator of the property or the assessor is not satisfied with the decision of the Local Board of Assessment Appeals, he may, within 30 days from the receipt of the decision, appeal to the Central Board of Assessment Appeals (Sec 34)

PHILIPPINE PETROLEUM CORPORATION V MUNICIPALITY OF PILILLA, RIZAL GR 90776 PARAS; June 3, 1991
NATURE Petition for certiorari decision of RTC (which upheld the legality of taxes, fees, and charges being imposed in Pililla under Municipal Tax Ord. No.1 FACTS - Philippine Petroleum Corporation (PPC) is engaged in the manufacture of lubricated oil basestock which is a petroleum product, with its refinery plant situated at Malaya, Pililla, Rizal, conducting its business activities within the territorial jurisdiction of the Municipality of Pililla. PPC owns and maintains an oil refinery including forty-nine storage tanks for its petroleum products in Malaya, Pililla. Under Section 142 of NIRC, manufactured oils and other fuels are subject to specific tax - Municipality of Pililla enacted Municipal Tax Ordinance No. 1(The Pililla Tax Code of 1974) on June 14, 1974 (took effect on July 1, 1974). Sections 9&10 of said ordinance imposed a tax on business, except for those for which fixed taxes are provided in the Local Tax Code on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and compounders of liquors, distilled spirits and/or wines, as well as mayor's permit, sanitary

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Reasoning Waiver partakes of the nature of an exemption. It is an ancient rule that exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. Tax exemptions are looked upon with disfavor. Thus, in the absence of a clear and express exemption from the payment of said fees, the waiver cannot be recognized. As already stated, it is the law-making body, and not an executive like the mayor, who can make an exemption. Under Section 36 of the Code, a permit fee like the mayor's permit, shall be required before any individual or juridical entity shall engage in any business or occupation under the provisions of the Code. However, since the Local Tax Code does not provide the prescriptive period for collection of local taxes, Article 1143 of the Civil Code applies. Said law provides that an action upon an obligation created by law prescribes within ten (10) years from the time the right of action accrues. The Municipality of Pililla can therefore enforce the collection of the tax on business of petitioner PPC due from 1976 to 1986, and NOT the tax that had accrued prior to 1976. Disposition Petition is partially granted. Decision modified

inspection fee and storage permit fee for flammable, combustible or explosive substances, while Section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. - On April 13, 1974, P.D. 436 was promulgated increasing the specific tax on lubricating oils, gasoline, bunker fuel oil, diesel fuel oil and other similar petroleum products levied under Sections 142, 144 and 145 NIRC, and granting provinces, cities and municipalities certain shares in the specific tax on such products in lieu of local taxes imposed on petroleum products. - provincial circular 6-77 was issued directing all city and municipal treasurers to refrain from collecting the so-called storage fee on flammable or combustible materials imposed under the local tax ordinance of their respective locality, said fee partaking of the nature of a strictly revenue measure or service charge - enforcing the municipal tax ordinance, Pililla filed a complaint against PPC for payment of almost 8.8million as business tax, storage permit fees, mayors permit and sanitation inspection fees. ISSUE 1. WON whether or not PPC whose oil products are subject to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees, considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee to Pililla, based on Municipal Ordinance No. 1. 2. WON the mayor had authority to waive payment of the mayors permit and sanitary inspection fees (a contention of PPC on appeal) HELD 1a. YES (but not to prescribed portion) Ratio Municipal Tax Ordinance No. 1 imposing the assailed taxes, fees and charges is valid especially Section 9(A) which according to RTC "was lifted in toto and/or is a literal reproduction of Sec. 19(a) of the Local Tax Code." It conforms with the mandate of the law Reasoning PD426 amending the Local Tax Code is deemed to have repealed Provincial Circular Nos. 2673 and 26 A-73 (ordering local treasurers to refrain from collecting local tax imposed on manufacturers, wholesalers, retailers, etc. prior to the effectivity of the local tax code) when Sec. 19&19(a) were carried over into PD426 and no exemptions were given to manufacturers, wholesalers, retailers, etc. in petroleum products.

- Well-settled is the rule that administrative regulations must be in harmony with provisions of the law. In case of discrepancy between a statute and an implementing rule or regulation, the former prevails - while Section 2 of PD436 prohibits the imposition of local taxes on petroleum products, said decree did not amend Sec.19&19(a) of PD231 as amended by PD426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in PD 436. - The exercise by local governments of the power to tax is ordained by the present Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73 would be tantamount to restricting their power to tax by mere administrative issuances. Under Section 5, Article X, 1987 Constitution, only guidelines and limitations that may be established by Congress can define and limit such power of local governments. (Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy . . .) 1b. NO Ratio Storage permit fee being imposed by Pililla's tax ordinance is a fee for the installation and keeping in storage of any flammable, combustible or explosive substances. Inasmuch as said storage makes use of tanks owned not by the municipality of Pililla, but by petitioner PPC, same is obviously not a charge for any service rendered by the municipality as what is envisioned in Section 37 of their tax code. Reasoning Provincial Circular No. 6-77 enjoining all city and municipal treasurers to refrain from collecting the so-called storage fee on flammable or combustible materials imposed in the local tax ordinance of their respective locality frees PPC from the payment of storage permit fee. 2. NO Ratio "Since the power to tax includes the power to exempt thereof which is essentially a legislative prerogative, it follows that a municipal mayor who is an executive officer may not unilaterally withdraw such an expression of a policy thru the enactment of a tax.

PLDT V PROVINCE OF LAGUNA GR No 151899 Garcia; August 16, 2005

FACTS: -PLDT holds a legislative franchise under Act No. 3436.In 1991, RA 7082 consolidated the terms and conditions of its franchise, wherein Section 12 embodies the in-lieu-of-all taxes clause, whereunder PLDT shall pay a franchise tax equivalent to three percent (3%) of all its gross receipts, which franchise tax shall be in lieu of all taxes. -On 1992, RA7160(Local Govt Code) took effect. Section 137 of the Code, in relation to Section 151 thereof, grants provinces and other local government units the power to impose local franchise tax on businesses enjoying a franchise. -By Section 193 of the same Code, all tax exemption privileges then enjoyed by all persons, whether natural or juridicial, save those expressly mentioned therein, were withdrawn, necessarily including those taxes from which PLDT is exempted under the in-lieu-of-all taxes clause in its charter.

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common and limited common areas of the BA-Lepanto Condominium (the Condominium), situated in Paseo de Roxas, Makati City. Its membership comprises the various unit owners of the Condominium. -On 15 December 1998, the Corporation received a Notice of Assessment dated 14 December 1998 signed by the City Treasurer. The Notice of Assessment stated that the Corporation is liable to pay the correct city business taxes, fees and charges, computed as totaling P1,601,013.77 for the years 1995 to 1997.The Notice of Assessment was silent as to the statutory basis of the business taxes assessed. -Through counsel, the Corporation responded with a written tax protest dated 12 February 1999, addressed to the City Treasurer. It was evident in the protest that the Corporation was perplexed on the statutory basis of the tax assessment. -Proceeding from the premise that its tax liability arose from Section 3A.02(m) of the Makati Revenue Code, the Corporation proceeded to argue that under both the Makati Code and the Local Government Code, business is defined as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. It was submitted that the Corporation, as a condominium corporation, was organized not for profit, but to hold title over the common areas of the Condominium, to manage the Condominium for the unit owners, and to hold title to the parcels of land on which the Condominium was located. Neither was the Corporation authorized, under its articles of incorporation or by-laws to engage in profit-making activities. The assessments it did collect from the unit owners were for capital expenditures and operating expenses. -The protest was rejected by the City Treasurer in a letter dated 4 March 1999. She insisted that the collection of dues from the unit owners was effected primarily to sustain and maintain the expenses of the common areas, with the end view of getting full appreciative living valuesfor the individual condominium occupants and to command better marketable prices for those occupants who would in the future sell their respective units. Thus, she concluded since the chances of getting higher prices for well-managed common areas of any condominium are better and more effective that condominiums with poor [sic] managed common areas, the corporation activity is a profit venture making . -From the denial of the protest, the Corporation filed an Appeal with the Regional Trial Court (RTC) of Makati

-Pursuant to the Local Government Code, the Province of Laguna, through its local legislative assembly, enacted Provincial Ordinance No. 01-92, made effective January 1, 1993, imposing a franchise tax upon all businesses enjoying a franchise, PLDT included. -On January 28, 1998, PLDT, in compliance with the aforementioned Ordinance, paid the Province of Laguna its local franchise tax liability for the year 1998 (P1,081,212.10). -Prior thereto, Congress enacted RA 7925(Public Telecommunications Policy Act of the Philippines), which contained most-favored treatment clause (sec23) providing for an equality of treatment in the telecommunications industry. -The Bureau of Local Government Finance (BLGF) of DOF, issued a ruling to the effect that as of the effectivity date of the Public Telecommunications Policy Act of the Philippines, PLDT, among other telecommunication companies, became exempt payment of franchise and business taxes imposable by LGUs under Sections 137 and 143 of the LGC However, PLDT shall be liable to pay the franchise and business taxes on its gross receipts realized from January 1, 1992 up to March 15, 1995, during which period PLDT was not enjoying the most favored clause provision of RA 7025 . -Thus, refused to pay the Province of Laguna its local franchise tax liability for 1999. And, on December 22, 1999, it even filed with the Office of the Provincial Treasurer a written claim for refund of the amount it paid as local franchise tax for 1998. ISSUE: WON PLDT Should be exempt from payment of local franchise tax HELD: -We note, quite interestingly, that except for the particular local government units involved in the earlier case of PLDT vs. City of Davao and the very recent case of PLDT vs. City of Bacolod, et al., the arguments presently advanced by petitioner on the issues raised herein are but a mere reiteration if not repetition of the very same arguments it has already raised in the two (2) earlier PLDT cases. For sure, the errors presently assigned are substantially the same as those in Davao and in Bacolod, all of which have been adequately addressed and passed upon by this Court

in its decisions therein as well as in its en banc Resolution in Davao. - In PLDT vs. City of Davao, and again in PLDT vs. City of Bacolod, et al., this Court has interpreted Section 23 of Rep. Act No. 7925. There, we ruled that Section 23 does not operate to exempt PLDT from the payment of franchise tax. We quote what we have said in Davao and reiterated in Bacolod. - In sum, it does not appear that, in approving 23 of R.A. No. 7925, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, we hold that 23 of R.A. No. 7925 cannot be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes. Consequently, we hold that petitioner is liable to pay local franchise taxes in the amount of P3,681,985.72 for the period covering the first to the fourth quarter of 1999 and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third quarter of 1998. - The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. And, even if it is granted, the exemption must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. - Petitioners theory will leave the Government with the burden of having to keep track of all granted telecommunications franchises, lest some companies be treated unequally. It is different if Congress enacts a law specifically granting uniform advantages, favor, privilege, exemption or immunity to all telecommunications entities.

LUZ YAMANE (CITY TREASURER OF MAKATI) VS. BA LEPANTO CONDOMINIUM G.R. No. 154993 Tinga, J. (2005 )
FACTS -Respondent BA-Lepanto Condominium Corporation (the Corporation) is a duly organized condominium corporation constituted in accordance with the Condominium Act, which owns and holds title to the

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ignore the very statutory nature of a condominium corporation. The creation of the condominium corporation is sanctioned by Republic Act No. 4726, otherwise known as the Condominium Act. Under the law, a condominium is an interest in real property consisting of a separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building. To enable the orderly administration over these common areas which are jointly owned by the various unit owners, the Condominium Act permits the creation of a condominium corporation, which is specially formed for the purpose of holding title to the common area, in which the holders of separate interests shall automatically be members or shareholders, to the exclusion of others, in proportion to the appurtenant interest of their respective units. The necessity of a condominium corporation has not gained widespread acceptance and even is merely permissible under the Condominium Act. Nonetheless, the condominium corporation has been resorted to by many condominium projects, such as the Corporation in this case. -We can elicit from the Condominium Act that a condominium corporation is precluded by statute from engaging in corporate activities other than the holding of the common areas, the administration of the condominium project, and other acts necessary, incidental or convenient to the accomplishment of such purposes. Neither the maintenance of livelihood, nor the procurement of profit, fall within the scope of permissible corporate purposes of a condominium corporation under the Condominium Act. -Obviously, none of these stated corporate purposes are geared towards maintaining a livelihood or the obtention of profit. Even though the Corporation is empowered to levy assessments or dues from the unit owners, these amounts collected are not intended for the incurrence of profit by the Corporation or its members, but to shoulder the multitude of necessary expenses that arise from the maintenance of the Condominium Project. Just as much is confirmed by Section 1, Article V of the Amended By-Laws, which enumerate the particular expenses to be defrayed by the regular assessments collected from the unit owners. These would include the salaries of the employees of the Corporation, and the cost of

On 1 March 2000, the Makati RTC Branch 57 rendered a Decision dismissing the appeal for lack of merit. The Corporation filed a petition for review under Rule 42 with the CA. ISSUE 1. Whether or not the RTC in deciding an appeal taken from a denial of protest by the local treasurer exercises appellate jurisdiction 2. Whether or not the City of Makati may collect business taxes on condominium corporations HELD 1. NO, it is part of RTCs original jurisdiction -There are discernible conflicting views on the issue. The first, as expressed by the Court of Appeals, holds that the RTC, in reviewing denials of protests by local treasurers, exercises appellate jurisdiction. This position is anchored on the language of Section 195 of the Local Government Code which states that the remedy of the taxpayer whose protest is denied by the local treasurer is to appeal with the court of competent jurisdiction.] Apparently though, the Local Government Code does not elaborate on how such appeal should be undertaken. -The other view, as maintained by the City Treasurer, is that the jurisdiction exercised by the RTC is original in character. This is the first time that the position has been presented to the court for adjudication. Still, this argument does find jurisprudential mooring in our ruling in Garcia v. De Jesus, where the Court proffered the following distinction between original jurisdiction and appellate jurisdiction: Original jurisdiction is the power of the Court to take judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law. Appellate jurisdiction is the authority of a Court higher in rank to re-examine the final order or judgment of a lower Court which tried the case now elevated for judicial review. -The quoted definitions were taken from the commentaries of the esteemed Justice Florenz Regalado. With the definitions as beacon, the review taken by the RTC over the denial of the protest by the local treasurer would fall within that courts original jurisdiction. In short, the review is the initial judicial cognizance of the matter. Moreover, labeling the said review as an exercise of appellate jurisdiction is inappropriate, since the denial of the protest is not the judgment or order of a lower court, but of a local government official.

2. NO. -The power of local government units to impose taxes within its territorial jurisdiction derives from the Constitution itself, which recognizes the power of these units to create its own sources of revenue and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. These guidelines and limitations as provided by Congress are in main contained in the Local Government Code of 1991 (the Code), which provides for comprehensive instances when and how local government units may impose taxes. The significant limitations are enumerated primarily in Section 133 of the Code, which include among others, a prohibition on the imposition of income taxes except when levied on banks and other financial institutions. None of the other general limitations under Section 133 find application to the case at bar. -The most well-known mode of local government taxation is perhaps the real property tax, which is governed by Title II, Book II of the Code, and which bears no application in this case. A different set of provisions, found under Title I of Book II, governs other taxes mposable by local government units, including business taxes. Under Section 151 of the Code, cities such as Makati are authorized to levy the same taxes fees and charges as provinces and municipalities. It is in Article II, Title II, Book II of the Code, governing municipal taxes, where the provisions on business taxation relevant to this petition may be found. -As stated earlier, local tax on businesses is authorized under Section 143 of the Local Government Code. The word business itself is defined under Section 131(d) of the Code as trade or commercial activity regularly engaged in as a means of livelihood or with a view to profit. This definition of business takes on importance, since Section 143 allows local government units to impose local taxes on businesses other than those specified under the provision. Moreover, even those business activities specifically named in Section 143 are themselves susceptible to broad interpretation. For example, Section 143(b) authorizes the imposition of business taxes on wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature. -It is thus imperative that in order that the Corporation may be subjected to business taxes, its activities must fall within the definition of business as provided in the Local Government Code. And to hold that they do is to

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depository bank deducts the final withholding tax and remits it to the government for the account of the lending bank. Thus, the interest income actually received by the lending bank, both physically and constructively, is the net interest plus the amount withheld as final tax. -The concept of a withholding tax on income obviously and necessarily implies that the amount of the tax withheld comes from the income earned by the taxpayer. Since the amount of the tax withheld constitutes income earned by the taxpayer, then that amount manifestly forms part of the taxpayer's gross receipts. Because the amount withheld belongs to the taxpayer, he can transfer its ownership to the government in payment of his tax liability. The amount withheld indubitably comes from income of the taxpayer, and thus forms part of his gross receipts. The law is clear. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive. Revenue Regulations No. 16-2005 dated September 1, 200520 defined and gave examples of "constructive receipt", to wit: SEC. 4. 108-4. Definition of Gross Receipts. -- x x x "Constructive receipt" occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts: (1) deposit in banks which are made available to the seller of services without restrictions; (2) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and (3) transfer of the amounts retained by the payor to the account of the contractor. There is, therefore, constructive receipt, when the consideration for the articles sold, exchanged or leased, or the services rendered has already been placed under the control of the person who sold the goods or rendered the services without any restriction by the payor. In contrast, gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. This is in consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow

maintenance and ordinary repairs of the common areas.

ERICSON TELECOMMUNICATIONS INC VS CITY OF PASIG G.R. No. 176667 November 22,2007; Austria-Martinez
NATURE Petition for review FACTS Ericsson Telecommunications is engaged in the design, engineering, and marketing of telecommunication facilities/system. In an Assessment Notice dated October 25, 2000 issued by the City Treasurer of Pasig City, petitioner was assessed a business tax deficiency for the years 1998 and 1999 amounting to P9,466,885.00 and P4,993,682.00, respectively, based on its gross revenues as reported in its audited financial statements for the years 1997 and 1998. Petitioner filed a Protest dated December 21, 2000, claiming that the computation of the local business tax should be based on gross receipts and not on gross revenue. The City of Pasig (respondent) issued another Notice of Assessment to petitioner on November 19, 2001, this time based on business tax deficiencies for the years 2000 and 2001, amounting to P4,665,775.51 and P4,710,242.93, respectively, based on its gross revenues for the years 1999 and 2000. Again, petitioner filed a Protest on January 21, 2002, reiterating its position that the local business tax should be based on gross receipts and not gross revenue. Respondent denied petitioner's protest and gave the latter 30 days within which to appeal the denial. This prompted petitioner to file a petition for review1 with the Regional Trial Court (RTC) of Pasig, Branch 168, praying for the annulment and cancellation of petitioner's deficiency local business taxes totaling P17,262,205.66. Respondent and its City Treasurer filed a motion to dismiss on the grounds that the court had no jurisdiction over the subject matter and that petitioner had no legal capacity to sue. The RTC denied the motion. CA set aside said decision and dismissed the complaint. Petitioner now comes before the Court via a Petition for Review on Certiorari.

ISSUE 1. WON respondent is authorized to levy business taxes 2. WON the local business tax on contractors should be based on gross receipts. HELD 1. Yes RATIO Respondent is authorized to levy business taxes under Section 143 in relation to Section 151 of the Local Government Code. Insofar as petitioner is concerned, the applicable provision is subsection (e), Section 143 of the same Code covering contractors and other independent contractors, to wit: SEC. 143. Tax on Business. - The municipality may impose taxes on the following businesses: xxxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding calendar year in the amount of: (Amount of Tax Per Annum) 2. YES RATIO The above provision specifically refers to gross receipts which is defined under Section 131 of the Local Government Code, as follows: (n) "Gross Sales or Receipts" include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); In Commissioner of Internal Revenue v. Bank of Commerce,17 the Court interpreted gross receipts as including those which were actually or constructively received, viz.: Actual receipt of interest income is not limited to physical receipt. Actual receipt may either be physical receipt or constructive receipt. When the depository bank withholds the final tax to pay the tax liability of the lending bank, there is prior to the withholding a constructive receipt by the lending bank of the amount withheld. From the amount constructively received by the lending bank, the

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- The Sangguniang Panglungsod of Zamboanga City passed Ordinance No. 44, dated Jan 13, 1982, imposing a P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within the territorial jurisdiction of the City of Zamboanga.. - On Feb 16, 1982, the Sanggunian sent a copy of the Ordinance to the then Minister of Finance by registered mail for his review pursuant to the Local Tax Code. - On Dec 3, 1982, the Minister of Finance sent a letter addressed to the Sanggunian, suspending the effectivity of Ordinance No. 44 on the ground that it contravenes Section 19(a) of the Local Tax Code. The City of Zamboanga, represented by its City Mayor, appealed the decision of the Minister of Finance to the RTC. - On Dec 5, 1990, the RTC ruled that the tax levied under said Ordinance is not among those that the Sanggunian may impose under the Local Tax Code, but nonetheless, it upheld its validity on the ground that the Minister of Finance did not take appropriate action on the matter within the prescribed period of 120 days after receipt of a copy thereof. ISSUE: WON the trial court erred when it held that the failure of the Minister of Finance to suspend the effectivity of Ordinance No. 44 within 120 days from receipt of a copy thereof rendered said Ordinance valid. HELD: YES - A city, like Zamboanga City may impose, in lieu of the graduated fixed tax prescribed under Section 19 of the Local Tax Code, a percentage tax on the gross sales for the preceding calendar year of non-essential commodities at the rate of not exceeding two per cent and on the gross sales of essential commodities at the rate of not exceeding one per cent. The applicable provisions are Sec 19 in relation to Sec 23 of the Local Tax Code.2
2

of economic benefits (cash, receivables, and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends), which is measured at the fair value of the consideration received or receivable.

CITY OF LAS PIAS V SEALED AIR (PHIL), INC

PETRON CORP V MAYOR TIANGCO, et al. G.R. No. 158881 Tinga; April 16, 2008
FACTS - Petron maintains a depot or bulk plant in Navotas through which it sells diesel fuels for commercial fishing in and around Manila Bay. - Petron was assessed taxes by respondent Mayor Toby Tiangco for the gross sale of diesel from 1997-2001 in the amount of P6, 259,087.62. Petron protested citing Art. 232 (h) of the IRR of the LGC and a BLGF ruling dated July 31, 1995 stating that sales of petroleum fuels are not subject to local taxation. - Petrons protest-letter was denied. Final Demand to Pay letter was sent to Petron threatening closure of operations should there be no payment within 5 days from receipt of such letter. - Petron filed with Malabon RTC a complaint for cancellation of assessment of deficiency taxes. RTC dismissed Petrons complaint and ordered payment of the assessed amount. Petron received a Closure Order from the Mayor 11 days later. A TRO sought by Petron was denied so was a MFR. - Petron brought the case before the SC, which issued a TRO. - Petron argued that the business taxes on its sale of diesel fuel partakes of an excise tax on an article enumerated under the NIRC, thus prohibited under Sec. 133(h) of the NIRC. Respondent argues that the provision merely prohibits the imposition of excise taxes on petroleum products, but not imposition of business taxes on the same. ISSUES 1. WON a LGU is empowered under the LGC to impose business taxes on persons or entities engaged in the sale of petroleum products. *Interpretation of Sec. 133(h) of the LGC

HELD 1. NO. - The language of Section 133(h) makes plain that the prohibition with respect to petroleum products extends not only to excise taxes thereon, but all taxes, fees and charges. The earlier reference in paragraph (h) to excise taxes comprehends a wider range of subjects of taxation: all articles already covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral products, automobiles, and such non-essential goods as jewelry, goods made of precious metals, perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to "taxes, fees and charges" pertains only to one class of articles of the many subjects of excise taxes, specifically, "petroleum products". While local government units are authorized to burden all such other class of goods with "taxes, fees and charges," excepting excise taxes, a specific prohibition is imposed barring the levying of any other type of taxes with respect to petroleum products. - We can concede that a tax on a business is distinct from a tax on the article itself, or for that matter, that a business tax is distinct from an excise tax. However, such distinction is immaterial insofar as the latter part of Section 133(h) is concerned, for the phrase "taxes, fees or charges on petroleum products" does not qualify the kind of taxes, fees or charges that could withstand the absolute prohibition imposed by the provision. It would have been a different matter had Congress, in crafting Section 133(h), barred "excise taxes" or "direct taxes," or any category of taxes only, for then it would be understood that only such specified taxes on petroleum products could not be imposed under the prohibition. The absence of such a qualification leads to the conclusion that all sorts of taxes on petroleum products, including business taxes, are prohibited by Section 133(h). Where the law does not distinguish, we should not distinguish. Disposition Petition GRANTED. Malabon RTC decision REVERSED and SET ASIDE. Deficiency taxes ordered cancelled.

Sec. 19. as follows:

Tax on business. The municipality may impose a tax on businesses

ESTANISLAO v COSTALES 196 SCRA 853 May 8. 1991; GANCAYCO

FACTS:

"(a) Tax on the business of manufacturing, importing, exporting, producing, wholesaling or retailing of, or dealing in, any article of commerce of whatever kind or nature, except those for which fixed taxes are provided herein: With gross annual sales Amount of tax for the preceding calendar per in the amount of: annum Less than P1,000.00 P10.00 P1,000.00 or more but less than P2,000.00 20.00 2,000.00 or more but less than 3,000.00 30.00 3,000.00 or more but less than 4,000.00 45.00

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- In accordance with Sec 44 of the Local Tax Code3, the Sanggunian Panglungsod sent a copy of Ordinance No. 44 by registered mail to the then Minister of Finance on February 16, 1982. Apparently, said official failed to act within 120 days after receipt of a copy thereof. It was only on December 6, 1982 when the Minister of Finance, through his deputy, wrote the Sanggunian informing it of the suspension of the effectivity of Ordinance No. 44 as it contravenes Section 19(a) of the Local Tax Code, as amended, without prejudice to the Sanggunian filing an appeal within thirty (30) days from receipt thereof; otherwise the same shall be deemed revoked. Public respondent Zamboanga City concurs in the position of the respondent judge that since the Minister of Finance failed to act or otherwise suspend the effectivity of the tax ordinance within 120 days from receipt of a copy thereof, said Ordinance is valid and remains in force. - There is no authority under Section 44 of the Local Tax Code for the conclusion that the Ordinance is valid when the Minister of Finance fails to act within 120 days. All that is provided therein is that if the Secretary of Finance "takes no action as authorized in the Section, the tax ordinance shall remain in force."
3
SEC. 44. Review and suspension of tax ordinance. - Within fifteen days after its approval, a certified true copy of a tax ordinance shall be furnished: the Secretary of Finance by the provincial board or city council; the provincial treasurer, by the municipal or barrio council; or the city treasurer by the barrio council in the city's jurisdiction. If, within one hundred and twenty days after receipt of a copy thereof, the Secretary of Finance or the provincial or city treasurer, as the case may be, takes no action as authorized in this section, the tax ordinance shall remain in force. The Secretary of Finance, the provincial treasurer, or the city treasurer, as the case may be, shall review and have the authority to suspend the effectivity of any tax ordinance within one hundred and twenty days after receipt of a copy thereof, if, in his opinion, the tax or fee therein levied or imposed is unjust, excessive, oppressive, confiscatory, or not among those that the particular local government may impose in the exercise of its power in accordance with this Code; or when the tax ordinance is, in whole or in part, contrary to declared national economic policy; or when the ordinance is discriminatory in nature on the conduct of business or calling or in restraint of trade. When the Secretary of Finance, the provincial treasurer or city treasurer, as the case may be, exercises this authority, the effectivity of such ordinance shall be suspended, either in part or, if necessary, in toto. The local legislative body, within thirty days after receipt of the notice of suspension, may either modify the tax ordinance to meet the objections thereto or file an appeal with the proper court, otherwise, the tax ordinance or the part or parts thereof declared suspended shall be considered as revoked. An appeal shall not stay the order of suspension nor does it authorize the local legislative body to reimpose the same tax or fee levied under a suspended ordinance until such time as the grounds for the suspension thereof shall have ceased to exist or the appeal has been resolved in its favor. Any tax or fee paid pursuant to the ordinance involved shall be considered as having been paid under protest. In case the appeal is resolved in favor of the local government, the tax or fee that would have been collected if there were no order of suspension shall immediately be collected without interest and surcharge. In case the order of suspension is upheld, the court shall forthwith order the refund of the tax or fee paid under protest to the taxpayer."

- The Ordinance is ultra vires as it is not within the

authority of the City to impose said tax. The authority of the City is limited to the imposition of a percentage tax on the gross sales or receipts of said product which, being non-essential, shall be at the rate of not exceeding 2% of the gross sales or receipts of the softdrinks for the preceding calendar year. The tax being imposed under said Ordinance is based on the output or production and not on the gross sales or receipts as authorized under the Local Tax Code. - Public respondent Zamboanga City, however, invokes Pepsi-Cola Bottling Company vs. Municipality of
4,000.00 or more but less than 5,000.00 65.00 5,000.00 or more but less than 6,000.00 80.00 6,000.00 or more but less than 7,000.00 100.00 7,000.00 or more but less than 8,000.00 120.00 8,000.00 or more but less than 10,000.00 160.00 10,000.00 or more but less than 15,000.00 P240.00 15,000.00 or more but less than 20,000.00 360.00 20,000.00 or more but less than 30,000.00 520.00 30,000.00 or more but less than 40,000.00 750.00 40,000.00 or more but less than 50,000.00 1,000.00 50,000.00 or more but less than 75,000.00 1,500.00 75,000.00 or more but less than 100,000.00 2,200.00 100,000.00 or more but less than 150,000.00 3,200.00 150,000.00 or more but less than 300,000.00 3,900.00 300,000.00 or more but less than 500,000.00 7,000.00 500,000.00 or more but less than 750,000.00 11,250.00 P750,000.00 to P1,000,000.00 16,000.00. For every P50,000.00 or fraction thereof in excess of P1,000,000.00 200.00 In the case of newly started business, the tax shall be at the rate of not exceeding one-tenth of one per cent of the capital investment but in no case shall it be less than the minimum of P10.00 fixed above. The tax on the business of manufacturing, producing or importing agricultural implements, fertilizers, medicinal drugs, and dairy products shall be onehalf of the rates above prescribed. cdlex For purposes of collection of this tax, manufacturers and producers maintaining or operating branch or sales offices elsewhere shall record the sales in the branch or sales office making the sale and the tax thereon shall accrue to the local government where the branch or sales office is located. In cases where there is no such branch or sales office in the locality where the sale is effected, the sale shall be duly recorded in the principal office and the tax shall accrue to the local government where said principal office is located." "SEC. 23. Scope of power. Except as otherwise provided in this Code, the city may levy and collect, among others, any of the taxes, fees and other impositions that the province or the municipality may levy and collect. The exercise of the taxing powers of the city extends to the taxes, fees and other impositions mentioned in Sections 12, 13, 14, 15 and 16 of this code which the city shall also impose and collect, to the exclusion of the national and municipal governments. The rates of the taxes, fees, or other impositions that the city shall fix may exceed the maximum rates allowed for the province or municipality by not more than fifty per cent, except the rates of the taxes and fees provided in Sections 12, 13 and 143 in Chapter II of this Code which shall be uniform for the province and the city. LLjur In lieu of the graduated fixed tax prescribed under Section 19 of this Code as read in relation with this Section, the city may impose a percentage tax on the sales of non-essential commodities at the rate of not exceeding two per cent and on the sales of essential commodities at the rate of not exceeding one per cent. In no case, however, shall the city impose both the graduated fixed tax and the percentage tax on the same subject. For purposes of this tax, the following shall be considered essential commodities:

Tanauan, Leyte where the SC upheld the validity of Municipal Ordinance No. 27 enacted by the Municipality of Tanauan, Leyte imposing a tax of P0.01 for every gallon of softdrinks produced in the municipality. But said case was decided on the basis of the provisions of the Local Autonomy Act, particularly Section 2, which gives the cities or municipalities ample taxing authority covering almost "everything, excepting those mentioned herein." However, the Local Autonomy Act has been superseded by the Local Tax Code insofar as the taxing authority in the provinces, cities or municipalities is concerned. By express language of Section 64(a) of the Local Tax Code," all existing tax ordinances of provinces, cities, municipalities and barrios shall be deemed ipso facto nullified on June 30, 1974." The applicable law, therefore, to the present case is the Local Tax Code and not the Local Autonomy Act. - Section 5, Article X of the 1987 Constitution provides "Each local government unit shall have the power to create its own sources of revenues, and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy." Ordinance No. 44 of public respondent Zamboanga City traverses the limitations set by the Local Tax Code.

(a) Rice, corn, wheat, flour, meat, milk, fish, sugar, salt and other agricultural, marine and fresh-water products; (b) Laundry soap, medicine and household remedies; (c) Locally manufactured ordinary fabrics and canned foodstuffs; (d) Commodities covered by the Price Control Law; and (e) Such other related and similar products necessary to human life and well-being. The city may levy any tax, fee or other imposition not specifically enumerated or otherwise provided for in this Code, subject to the provisions of Sections 49 and 50 of this Code."

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YES Reasoning - Business taxes imposed in the exercise of police power for regulatory purposes are paid for the privilege of carrying on a business in the year the tax was paid. It is paid at the beginning of the year as a fee to allow the business to operate for the rest of the year. - Income tax, on the other hand, is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a persons income, emoluments, profits and the like. It is tax on income, whether net or gross realized in one taxable year. - The trial court erred when it said that the payments made by petitioner in 1998 are payments for business tax incurred in 1997 which only accrued in January 1998. It also erred when it ruled that petitioner was still liable for business taxes based on its gross income/revenue for January to August 1998. - Under the Makati Revenue Code, it appears that the business tax, like income tax, is computed based on the previous years figures. This is the reason for the confusion. A newly-started business is already liable for business taxes (i.e. license fees) at the start of the quarter when it commences operations. In computing the amount of tax due for the first quarter of operations, the business capital investment is used as the basis. For the subsequent quarters of the first year, the tax is based on the gross sales/receipts for the previous quarter. In the following year(s), the business is then taxed based on the gross sales or receipts of the previous year. The business taxes paid in the year 1998 is for the privilege of engaging in business for the same year, and not for having engaged in business for 1997. - On the year an establishment retires or terminates its business within the municipality, it would be required to pay the difference in the amount if the tax collected, based on the previous years gross sales or receipts, is less than the actual tax due based on the current years gross sales or receipts. - For the year 1998, petitioner paid a total of P2,262,122.48 to the City Treasurer of Makati as business taxes for the year 1998. The amount of tax as computed based on petitioners gross sales for 1998 is only P1,331,638.84. Since the amount paid is more than the amount computed based on petitioners actual gross sales for 1998, petitioner upon its retirement is not liable for additional taxes to the City of Makati.

- Even if the Secretary of Finance failed to review or act on the Ordinance within the prescribed period of 120 days it does not follow as a legal consequence thereof that an otherwise invalid ordinance is thereby validated. Much less can it be interpreted to mean that the Secretary of Finance can no longer act by suspending and/or revoking an invalid ordinance even after the lapse of the 120-day period. All that the law says is that after said period the tax ordinance shall remain in force. The prescribed period for review is only directory and the Secretary of Finance may still review the ordinance and act accordingly even after the lapse of the said period provided he acts within a reasonable time. - Consequently even after the prescribed period has lapsed, should the Secretary of Finance, upon review, find that the tax or fee levied or imposed is unjust, excessive, oppressive, confiscatory, or not among those that the particular local government may impose in the exercise of its power in accordance with this Code; or when the tax ordinance, is in whole or in part, contrary to the declared national economic policy; or when the ordinance is discriminatory in nature on the conduct of business or calling or in restraint of trade," the Secretary of Finance may certainly suspend the effectivity of such ordinance and revoke the same, without prejudice to the right to appeal to the courts within 30 days after receipt of the notice of suspension. The same rule should apply to the provincial and city treasurers, as the case may be, under Section 44 of the Local Tax Code. Disposition Ordinance No. 44 null and void. Any taxes paid under protest should be refunded to the taxpayers concerned.

MOBIL PHILS. V CITY TREASURER OF MAKATI 463 SCRA 381 QUISIMBING; July 14, 2005
NATURE Petition for review on certiorari of a decision of the CA FACTS - Mobil Phils is a domestic corporation engaged in the manufacturing, importing, exporting and wholesaling of petroleum products. - Mobil previously had established its principal place of

business in Salcedo Village in Makati. On August 1998, Mobil filed an application with the city treasurer for the retirement of its business within Makati as it moved its principal place of business to Pasig. - Mobil was assessed a total tax amounting to P1,893,106.96. Mobil paid the said amount in protest. Later it applied for a tax refund amounting to P1,331,638.84. The city treasurer denied the claim for refund on the ground that Mobil was transferring, not retiring, the business. - The trial court denied Mobils petition seeking for refund. In denying the petition, the trial court examined Makatis law on the imposition of business taxes. - The tax shall be fixed by the quarter. The initial tax for the quarter in which a business starts to operate shall be 2% of 1% of its capital investment. - The tax shall be computed based on the gross sales or receipts of the preceding quarter. In the succeeding calendar year, regardless of when the business started to operate, the tax shall be based on the gross sales or receipts for the preceding calendar year. The tax shall accrue on the first day of January of each year and payment shall be made within the first 20 days of January or of each subsequent quarter as the case may be. - Considering therefore that the business tax accrues only on the first day of January as provided in Sec. 3A.07 and becomes payable within the first 20 days thereof or of each subsequent quarter, the payments made by Mobil in the year 1998 are therefore payments for the business tax for 1997 which accrued in January of 1998 and became payable within the first 20 days of January or of each subsequent quarter. - Thus, upon retirement in August 1998, the taxes for said year which should accrue in January 1999 immediately became payable before the application for retirement can be approved and does not constitute double taxation. ISSUE WON the business taxes paid by Mobil in 1998 were business taxes for 1998 HELD

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Disposition Decision reversed.

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Prof.Movido

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