Full Text Tax 1 Set 1

TAX 1 FULL TEXTS | SET 1
G.R. No. L-31156 February 27, 1976 Municipal Treasurer a monthly report, of the total number of bottles produced
and corked during the month. 3
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,
vs. On the other hand, Municipal Ordinance No. 27, which was approved on
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant October 28, 1962, levies and collects "on soft drinks produced or
appellees. manufactured within the territorial jurisdiction of this municipality a tax of ONE
CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
Sabido, Sabido & Associates for appellant. capacity." 4 For the purpose of computing the taxes due, the person, fun
company, partnership, corporation or plant producing soft drinks shall submit
to the Municipal Treasurer a monthly report of the total number of gallons
Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol
produced or manufactured during the month. 5
and Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M.
Reyes for appellees.
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as
"municipal production tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment

MARTIN, J.:
"dismissing the complaint and upholding the constitutionality of [Section 2,
Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and
This is an appeal from the decision of the Court of First Instance of Leyte in its constitutional; ordering the plaintiff to pay the taxes due under the oft the said
Civil Case No. 3294, which was certified to Us by the Court of Appeals on Ordinances; and to pay the costs."
October 6, 1969, as involving only pure questions of law, challenging the
power of taxation delegated to municipalities under the Local Autonomy Act
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to
(Republic Act No. 2264, as amended, June 19, 1959).
the Court of Appeals, which, in turn, elevated the case to Us pursuant to
Section 31 of the Judiciary Act of 1948, as amended.
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of
the Philippines, Inc., commenced a complaint with preliminary injunction
There are three capital questions raised in this appeal:
before the Court of First Instance of Leyte for that court to declare Section 2 of
Republic Act No. 2264.1 otherwise known as the Local Autonomy Act,
unconstitutional as an undue delegation of taxing authority as well as to 1. — Is Section 2, Republic Act No. 2264 an undue delegation
declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of of power, confiscatory and oppressive?
Tanauan, Leyte, null and void.
2. — Do Ordinances Nos. 23 and 27 constitute double
On July 23, 1963, the parties entered into a Stipulation of Facts, the material taxation and impose percentage or specific taxes?
portions of which state that, first, both Ordinances Nos. 23 and 27 embrace or
cover the same subject matter and the production tax rates imposed therein 3. — Are Ordinances Nos. 23 and 27 unjust and unfair?
are practically the same, and second, that on January 17, 1963, the acting
Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the 1. The power of taxation is an essential and inherent attribute of sovereignty,
Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to belonging as a matter of right to every independent government, without
enforce compliance by the latter of the provisions of said Ordinance No. 27, being expressly conferred by the people. 6 It is a power that is purely legislative
series of 1962. and which the central legislative body cannot delegate either to the
executive or judicial department of the government without infringing upon
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on the theory of separation of powers. The exception, however, lies in the case of
September 25, 1962, levies and collects "from soft drinks producers and municipal corporations, to which, said theory does not apply. Legislative
1
manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of powers may be delegated to local governments in respect of matters of local
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soft drink corked." 2 For the purpose of computing the taxes due, the person, concern. 7 This is sanctioned by immemorial practice. 8 By necessary
firm, company or corporation producing soft drinks shall submit to the implication, the legislative power to create political corporations for purposes
of local self-government carries with it the power to confer on such local entity 15 or by the same jurisdiction for the same purpose, 16 but not in a case
governmental agencies the power to tax. 9 Under the New Constitution, local where one tax is imposed by the State and the other by the city or
governments are granted the autonomous authority to create their own municipality. 17
sources of revenue and to levy taxes. Section 5, Article XI provides: "Each local
government unit shall have the power to create its sources of revenue and to 2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute
levy taxes, subject to such limitations as may be provided by law." Withal, it double taxation, because these two ordinances cover the same subject
cannot be said that Section 2 of Republic Act No. 2264 emanated from matter and impose practically the same tax rate. The thesis proceeds from its
beyond the sphere of the legislative power to enact and vest in local assumption that both ordinances are valid and legally enforceable. This is not
governments the power of local taxation. so. As earlier quoted, Ordinance No. 23, which was approved on September
25, 1962, levies or collects from soft drinks producers or manufacturers a tax of
The plenary nature of the taxing power thus delegated, contrary to plaintiff- one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the
appellant's pretense, would not suffice to invalidate the said law as volume contents of the bottle used. When it was discovered that the producer
confiscatory and oppressive. In delegating the authority, the State is not or manufacturer could increase the volume contents of the bottle and still pay
limited 6 the exact measure of that which is exercised by itself. When it is said the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27,
that the taxing power may be delegated to municipalities and the like, it is approved on October 28, 1962, imposing a tax of one centavo (P0.01) on
meant that there may be delegated such measure of power to impose and each gallon (128 fluid ounces, U.S.) of volume capacity. The difference
collect taxes as the legislature may deem expedient. Thus, municipalities may between the two ordinances clearly lies in the tax rate of the soft drinks
be permitted to tax subjects which for reasons of public policy the State has produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle
not deemed wise to tax for more general purposes. 10 This is not to say though corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128
that the constitutional injunction against deprivation of property without due fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council
process of law may be passed over under the guise of the taxing power, of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a
except when the taking of the property is in the lawful exercise of the taxing plain substitute for the prior Ordinance No. 23, and operates as a repeal of the
power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of latter, even without words to that effect. 18 Plaintiff-appellant in its brief
taxation is observed; (3) either the person or property taxed is within the admitted that defendants-appellees are only seeking to enforce Ordinance
jurisdiction of the government levying the tax; and (4) in the assessment and No. 27, series of 1962. Even the stipulation of facts confirms the fact that the
collection of certain kinds of taxes notice and opportunity for hearing are Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance
provided. 11 Due process is usually violated where the tax imposed is for a by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of
private as distinguished from a public purpose; a tax is imposed on property 1962. The aforementioned admission shows that only Ordinance No. 27, series
outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal,
methods are used in assessing and collecting taxes. But, a tax does not violate counsel for defendants-appellees admits in his brief "that Section 7 of
the due process clause, as applied to a particular taxpayer, although the Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the
purpose of the tax will result in an injury rather than a benefit to such taxpayer. provisions of the latter are inconsistent with the provisions of the former."
Due process does not require that the property subject to the tax or the
amount of tax to be raised should be determined by judicial inquiry, and a That brings Us to the question of whether the remaining Ordinance No. 27
notice and hearing as to the amount of the tax and the manner in which it imposes a percentage or a specific tax. Undoubtedly, the taxing authority
shall be apportioned are generally not necessary to due process of law. 12 conferred on local governments under Section 2, Republic Act No. 2264, is
broad enough as to extend to almost "everything, accepting those which are
There is no validity to the assertion that the delegated authority can be mentioned therein." As long as the text levied under the authority of a city or
declared unconstitutional on the theory of double taxation. It must be municipal ordinance is not within the exceptions and limitations in the law, the
observed that the delegating authority specifies the limitations and same comes within the ambit of the general rule, pursuant to the rules
enumerates the taxes over which local taxation may not be exercised. 13 The of exclucion attehus and exceptio firmat regulum in cabisus non excepti 19 The
reason is that the State has exclusively reserved the same for its own limitation applies, particularly, to the prohibition against municipalities and
prerogative. Moreover, double taxation, in general, is not forbidden by our municipal districts to impose "any percentage tax or other taxes in any
fundamental law, since We have not adopted as part thereof the injunction form based thereon nor impose taxes on articles subject to specific tax except
2
against double taxation found in the Constitution of the United States and gasoline, under the provisions of the National Internal Revenue Code." For
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some states of the Union.14 Double taxation becomes obnoxious only where purposes of this particular limitation, a municipal ordinance which prescribes a
the taxpayer is taxed twice for the benefit of the same governmental set ratio between the amount of the tax and the volume of sale of the
taxpayer imposes a sales tax and is null and void for being outside the power and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series
of the municipality to enact. 20 But, the imposition of "a tax of one centavo of 1962, re-pealing Municipal Ordinance No. 23, same series, is hereby
(P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft declared of valid and legal effect. Costs against petitioner-appellant.
drinks produced or manufactured under Ordinance No. 27 does not partake
of the nature of a percentage tax on sales, or other taxes in any form based SO ORDERED.
thereon. The tax is levied on the produce (whether sold or not) and not on the
sales. The volume capacity of the taxpayer's production of soft drinks is
considered solely for purposes of determining the tax rate on the products, G.R. No. L-75697
but there is not set ratio between the volume of sales and the amount of the
tax.21 VALENTIN TIO doing business under the name and style of OMI
ENTERPRISES, petitioner,
Nor can the tax levied be treated as a specific tax. Specific taxes are those vs.
imposed on specified articles, such as distilled spirits, wines, fermented liquors, VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA
products of tobacco other than cigars and cigarettes, matches firecrackers, COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents.
manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil,
cinematographic films, playing cards, saccharine, opium and other habit- Nelson Y. Ng for petitioner.
forming drugs. 22 Soft drink is not one of those specified. The City Legal Officer for respondents City Mayor and City Treasurer.
3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume MELENCIO-HERRERA, J.:
capacity on all softdrinks, produced or manufactured, or an equivalent of 1-½
centavos per case, 23 cannot be considered unjust and unfair. 24 an increase This petition was filed on September 1, 1986 by petitioner on his own behalf
in the tax alone would not support the claim that the tax is oppressive, unjust and purportedly on behalf of other videogram operators adversely affected.
and confiscatory. Municipal corporations are allowed much discretion in It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act
determining the reates of imposable taxes. 25 This is in line with the Creating the Videogram Regulatory Board" with broad powers to regulate
constutional policy of according the widest possible autonomy to local and supervise the videogram industry (hereinafter briefly referred to as the
governments in matters of local taxation, an aspect that is given expression in BOARD). The Decree was promulgated on October 5, 1985 and took effect on
the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so April 10, 1986, fifteen (15) days after completion of its publication in the Official
excessive as to be prohibitive, courts will go slow in writing off an ordinance as Gazette.
unreasonable. 27 Reluctance should not deter compliance with an ordinance
such as Ordinance No. 27 if the purpose of the law to further strengthen local
On November 5, 1985, a month after the promulgation of the
autonomy were to be realized. 28
abovementioned decree, Presidential Decree No. 1994 amended the
National Internal Revenue Code providing, inter alia:
Finally, the municipal license tax of P1,000.00 per corking machine with five
but not more than ten crowners or P2,000.00 with ten but not more than
SEC. 134. Video Tapes. — There shall be collected on each processed
twenty crowners imposed on manufacturers, producers, importers and dealers
video-tape cassette, ready for playback, regardless of length, an
of soft drinks and/or mineral waters under Ordinance No. 54, series of 1964, as
annual tax of five pesos; Provided, That locally manufactured or
amended by Ordinance No. 41, series of 1968, of defendant
imported blank video tapes shall be subject to sales tax.
Municipality, 29 appears not to affect the resolution of the validity of
Ordinance No. 27. Municipalities are empowered to impose, not only
municipal license taxes upon persons engaged in any business or occupation On October 23, 1986, the Greater Manila Theaters Association, Integrated
but also to levy for public purposes, just and uniform taxes. The ordinance in Movie Producers, Importers and Distributors Association of the Philippines, and
question (Ordinance No. 27) comes within the second power of a Philippine Motion Pictures Producers Association, hereinafter collectively
municipality. referred to as the Intervenors, were permitted by the Court to intervene in the
case, over petitioner's opposition, upon the allegations that intervention was
3
necessary for the complete protection of their rights and that their "survival
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264,
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and very existence is threatened by the unregulated proliferation of film
otherwise known as the Local Autonomy Act, as amended, is hereby upheld
piracy." The Intervenors were thereafter allowed to file their Comment in civic efficiency and the development of moral character and
Intervention. promote their physical, intellectual, and social well-being;
The rationale behind the enactment of the DECREE, is set out in its preambular 7. WHEREAS, civic-minded citizens and groups have called for
clauses as follows: remedial measures to curb these blatant malpractices which have
flaunted our censorship and copyright laws;
1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes or 8. WHEREAS, in the face of these grave emergencies corroding the
any technical improvement or variation thereof, have greatly moral values of the people and betraying the national economic
prejudiced the operations of moviehouses and theaters, and have recovery program, bold emergency measures must be adopted with
caused a sharp decline in theatrical attendance by at least forty dispatch; ... (Numbering of paragraphs supplied).
percent (40%) and a tremendous drop in the collection of sales,
contractor's specific, amusement and other taxes, thereby resulting in Petitioner's attack on the constitutionality of the DECREE rests on the following
substantial losses estimated at P450 Million annually in government grounds:
revenues;
1. Section 10 thereof, which imposes a tax of 30% on the gross receipts
2. WHEREAS, videogram(s) establishments collectively earn around payable to the local government is a RIDER and the same is not
P600 Million per annum from rentals, sales and disposition of germane to the subject matter thereof;
videograms, and such earnings have not been subjected to tax,
thereby depriving the Government of approximately P180 Million in
2. The tax imposed is harsh, confiscatory, oppressive and/or in
taxes each year;
unlawful restraint of trade in violation of the due process clause of the
Constitution;
3. WHEREAS, the unregulated activities of videogram establishments
have also affected the viability of the movie industry, particularly the
3. There is no factual nor legal basis for the exercise by the President
more than 1,200 movie houses and theaters throughout the country,
of the vast powers conferred upon him by Amendment No. 6;
and occasioned industry-wide displacement and unemployment due
to the shutdown of numerous moviehouses and theaters;
4. There is undue delegation of power and authority;
4. "WHEREAS, in order to ensure national economic recovery, it is
imperative for the Government to create an environment conducive 5. The Decree is an ex-post facto law; and
to growth and development of all business industries, including the
movie industry which has an accumulated investment of about P3 6. There is over regulation of the video industry as if it were a nuisance,
Billion; which it is not.
5. WHEREAS, proper taxation of the activities of videogram We shall consider the foregoing objections in seriatim.
establishments will not only alleviate the dire financial condition of the
movie industry upon which more than 75,000 families and 500,000 1. The Constitutional requirement that "every bill shall embrace only one
workers depend for their livelihood, but also provide an additional subject which shall be expressed in the title thereof" 1 is sufficiently complied
source of revenue for the Government, and at the same time with if the title be comprehensive enough to include the general purpose
rationalize the heretofore uncontrolled distribution of videograms; which a statute seeks to achieve. It is not necessary that the title express each
and every end that the statute wishes to accomplish. The requirement is
6. WHEREAS, the rampant and unregulated showing of obscene satisfied if all the parts of the statute are related, and are germane to the
videogram features constitutes a clear and present danger to the subject matter expressed in the title, or as long as they are not inconsistent
4
moral and spiritual well-being of the youth, and impairs the mandate with or foreign to the general subject and title. 2 An act having a single general
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of the Constitution for the State to support the rearing of the youth for subject, indicated in the title, may contain any number of provisions, no
matter how diverse they may be, so long as they are not inconsistent with or whatever, except such as rest in the discretion of the authority which exercises
foreign to the general subject, and may be considered in furtherance of such it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in
subject by providing for the method and means of carrying out the general general, a sufficient security against erroneous and oppressive taxation. 10
object." 3 The rule also is that the constitutional requirement as to the title of a
bill should not be so narrowly construed as to cripple or impede the power of The tax imposed by the DECREE is not only a regulatory but also a revenue
legislation. 4 It should be given practical rather than technical construction. 5 measure prompted by the realization that earnings of videogram
establishments of around P600 million per annum have not been subjected to
Tested by the foregoing criteria, petitioner's contention that the tax provision tax, thereby depriving the Government of an additional source of revenue. It
of the DECREE is a rider is without merit. That section reads, inter alia: is an end-user tax, imposed on retailers for every videogram they make
available for public viewing. It is similar to the 30% amusement tax imposed or
Section 10. Tax on Sale, Lease or Disposition of Videograms. — borne by the movie industry which the theater-owners pay to the
Notwithstanding any provision of law to the contrary, the province government, but which is passed on to the entire cost of the admission ticket,
shall collect a tax of thirty percent (30%) of the purchase price or thus shifting the tax burden on the buying or the viewing public. It is a tax that
rental rate, as the case may be, for every sale, lease or disposition of is imposed uniformly on all videogram operators.
a videogram containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of the tax The levy of the 30% tax is for a public purpose. It was imposed primarily to
collected shall accrue to the province, and the other fifty percent answer the need for regulating the video industry, particularly because of the
(50%) shall acrrue to the municipality where the tax is collected; rampant film piracy, the flagrant violation of intellectual property rights, and
PROVIDED, That in Metropolitan Manila, the tax shall be shared the proliferation of pornographic video tapes. And while it was also an
equally by the City/Municipality and the Metropolitan Manila objective of the DECREE to protect the movie industry, the tax remains a valid
Commission. imposition.
xxx xxx xxx The public purpose of a tax may legally exist even if the motive which
impelled the legislature to impose the tax was to favor one industry
The foregoing provision is allied and germane to, and is reasonably necessary over another. 11
for the accomplishment of, the general object of the DECREE, which is the
regulation of the video industry through the Videogram Regulatory Board as It is inherent in the power to tax that a state be free to select the
expressed in its title. The tax provision is not inconsistent with, nor foreign to that subjects of taxation, and it has been repeatedly held that "inequities
general subject and title. As a tool for regulation 6 it is simply one of the which result from a singling out of one particular class for taxation or
regulatory and control mechanisms scattered throughout the DECREE. The exemption infringe no constitutional limitation". 12 Taxation has been
express purpose of the DECREE to include taxation of the video industry in made the implement of the state's police power.13
order to regulate and rationalize the heretofore uncontrolled distribution of
videograms is evident from Preambles 2 and 5, supra. Those preambles At bottom, the rate of tax is a matter better addressed to the taxing
explain the motives of the lawmaker in presenting the measure. The title of the legislature.
DECREE, which is the creation of the Videogram Regulatory Board, is
comprehensive enough to include the purposes expressed in its Preamble and
3. Petitioner argues that there was no legal nor factual basis for the
reasonably covers all its provisions. It is unnecessary to express all those
promulgation of the DECREE by the former President under Amendment No. 6
objectives in the title or that the latter be an index to the body of the
of the 1973 Constitution providing that "whenever in the judgment of the
DECREE. 7
President ... , there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular National
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and Assembly fails or is unable to act adequately on any matter for any reason
oppressive, confiscatory, and in restraint of trade. However, it is beyond serious that in his judgment requires immediate action, he may, in order to meet the
question that a tax does not cease to be valid merely because it regulates, exigency, issue the necessary decrees, orders, or letters of instructions, which
5
discourages, or even definitely deters the activities taxed. 8 The power to shall form part of the law of the land."
impose taxes is one so unlimited in force and so searching in extent, that the
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courts scarcely venture to declare that it is subject to any restrictions
In refutation, the Intervenors and the Solicitor General's Office aver that the possession of such videogram be for private showing and/or public
8th "whereas" clause sufficiently summarizes the justification in that grave exhibition.
emergencies corroding the moral values of the people and betraying the
national economic recovery program necessitated bold emergency raises immediately a prima facie evidence of violation of the DECREE when
measures to be adopted with dispatch. Whatever the reasons "in the the required proof of registration of any videogram cannot be presented and
judgment" of the then President, considering that the issue of the validity of thus partakes of the nature of an ex post facto law.
the exercise of legislative power under the said Amendment still pends
resolution in several other cases, we reserve resolution of the question raised at
The argument is untenable. As this Court held in the recent case of Vallarta vs.
the proper time.
Court of Appeals, et al. 15
4. Neither can it be successfully argued that the DECREE contains an undue

... it is now well settled that "there is no constitutional objection to the
delegation of legislative power. The grant in Section 11 of the DECREE of
passage of a law providing that the presumption of innocence may
authority to the BOARD to "solicit the direct assistance of other agencies and
be overcome by a contrary presumption founded upon the
units of the government and deputize, for a fixed and limited period, the
experience of human conduct, and enacting what evidence shall be
heads or personnel of such agencies and units to perform enforcement
sufficient to overcome such presumption of innocence" (People vs.
functions for the Board" is not a delegation of the power to legislate but
Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON
merely a conferment of authority or discretion as to its execution,
THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may
enforcement, and implementation. "The true distinction is between the
enact that when certain facts have been proved that they shall be
delegation of power to make the law, which necessarily involves a discretion
prima facie evidence of the existence of the guilt of the accused and
as to what it shall be, and conferring authority or discretion as to its execution
shift the burden of proof provided there be a rational connection
to be exercised under and in pursuance of the law. The first cannot be done;
between the facts proved and the ultimate facts presumed so that
to the latter, no valid objection can be made." 14 Besides, in the very
the inference of the one from proof of the others is not unreasonable
language of the decree, the authority of the BOARD to solicit such assistance
and arbitrary because of lack of connection between the two in
is for a "fixed and limited period" with the deputized agencies concerned
common experience". 16
being "subject to the direction and control of the BOARD." That the grant of
such authority might be the source of graft and corruption would not
stigmatize the DECREE as unconstitutional. Should the eventuality occur, the Applied to the challenged provision, there is no question that there is a
aggrieved parties will not be without adequate remedy in law. rational connection between the fact proved, which is non-registration, and
the ultimate fact presumed which is violation of the DECREE, besides the fact
that the prima facie presumption of violation of the DECREE attaches only
5. The DECREE is not violative of the ex post facto principle. An ex post
after a forty-five-day period counted from its effectivity and is, therefore,
facto law is, among other categories, one which "alters the legal rules of
neither retrospective in character.
evidence, and authorizes conviction upon less or different testimony than the
law required at the time of the commission of the offense." It is petitioner's
position that Section 15 of the DECREE in providing that: 6. We do not share petitioner's fears that the video industry is being over-
regulated and being eased out of existence as if it were a nuisance. Being a
relatively new industry, the need for its regulation was apparent. While the
All videogram establishments in the Philippines are hereby given a
underlying objective of the DECREE is to protect the moribund movie industry,
period of forty-five (45) days after the effectivity of this Decree within
there is no question that public welfare is at bottom of its enactment,
which to register with and secure a permit from the BOARD to engage
considering "the unfair competition posed by rampant film piracy; the erosion
in the videogram business and to register with the BOARD all their
of the moral fiber of the viewing public brought about by the availability of
inventories of videograms, including videotapes, discs, cassettes or
unclassified and unreviewed video tapes containing pornographic films and
other technical improvements or variations thereof, before they could
films with brutally violent sequences; and losses in government revenues due
be sold, leased, or otherwise disposed of. Thereafter any videogram
to the drop in theatrical attendance, not to mention the fact that the
found in the possession of any person engaged in the videogram
activities of video establishments are virtually untaxed since mere payment of
business without the required proof of registration by the BOARD, shall
6
Mayor's permit and municipal license fees are required to engage in
be prima facie evidence of violation of the Decree, whether the
business. 17
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The enactment of the Decree since April 10, 1986 has not brought about the INTERNAL REVENUE,
"demise" of the video industry. On the contrary, video establishments are seen Respondent. Promulgated:
to have proliferated in many places notwithstanding the 30% tax imposed. September 18, 2009
In the last analysis, what petitioner basically questions is the necessity, wisdom x - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
and expediency of the DECREE. These considerations, however, are primarily
and exclusively a matter of legislative concern. RESOLUTION
CORONA, J.:
Only congressional power or competence, not the wisdom of the
action taken, may be the basis for declaring a statute invalid. This is as
ARTICLE II
it ought to be. The principle of separation of powers has in the main
Declaration of Principles and State Policies
wisely allocated the respective authority of each department and
confined its jurisdiction to such a sphere. There would then be intrusion
Section 15. The State shall protect and promote the
not allowable under the Constitution if on a matter left to the
right to health of the people and instill health consciousness
discretion of a coordinate branch, the judiciary would substitute its
among them.
own. If there be adherence to the rule of law, as there ought to be,
the last offender should be courts of justice, to which rightly litigants
ARTICLE XIII
submit their controversy precisely to maintain unimpaired the
Social Justice and Human Rights
supremacy of legal norms and prescriptions. The attack on the validity
of the challenged provision likewise insofar as there may be
Section 11. The State shall adopt an integrated and
objections, even if valid and cogent on its wisdom cannot be
comprehensive approach to health development which shall
sustained. 18
endeavor to make essential goods, health and other social
services available to all the people at affordable cost. There
In fine, petitioner has not overcome the presumption of validity which shall be priority for the needs of the underprivileged sick,
attaches to a challenged statute. We find no clear violation of the elderly, disabled, women, and children. The State shall
Constitution which would justify us in pronouncing Presidential Decree No. endeavor to provide free medical care to paupers.[1]
1987 as unconstitutional and void. For resolution are a motion for reconsideration and supplemental
motion for reconsideration dated July 10, 2008 and July 14, 2008, respectively,
WHEREFORE, the instant Petition is hereby dismissed. filed by petitioner Philippine Health Care Providers, Inc.[2]
No costs. We recall the facts of this case, as follows:
Petitioner is a domestic corporation whose primary purpose is

SO ORDERED. [t]o establish, maintain, conduct and operate a prepaid
group practice health care delivery system or a health
PHILIPPINE HEALTH CARE G.R. No. 167330 maintenance organization to take care of the sick and
PROVIDERS, INC., disabled persons enrolled in the health care plan and to
Petitioner, Present: provide for the administrative, legal, and financial
responsibilities of the organization. Individuals enrolled in its
PUNO, C.J., Chairperson, health care programs pay an annual membership fee and
CORONA, are entitled to various preventive, diagnostic and curative
- v e r s u s - CHICO-NAZARIO,* medical services provided by its duly licensed physicians,
LEONARDO-DE CASTRO and specialists and other professional technical staff participating
BERSAMIN, JJ.** in the group practice health delivery system at a hospital or
7
clinic owned, operated or accredited by it.
Page
COMMISSIONER OF
xxx xxx xxx Respondent appealed the CTA decision to the
[Court of Appeals (CA)] insofar as it cancelled the DST
On January 27, 2000, respondent Commissioner of assessment. He claimed that petitioners health care
Internal Revenue [CIR] sent petitioner a formal demand letter agreement was a contract of insurance subject to DST under
and the corresponding assessment notices demanding the Section 185 of the 1997 Tax Code.
payment of deficiency taxes, including surcharges and
interest, for the taxable years 1996 and 1997 in the total On August 16, 2004, the CA rendered its decision. It
amount of P224,702,641.18. xxxx held that petitioners health care agreement was in the nature
of a non-life insurance contract subject to DST.
The deficiency [documentary stamp tax (DST)]
assessment was imposed on petitioners health care WHEREFORE, the petition for review is
agreement with the members of its health care program GRANTED. The Decision of the Court of Tax
pursuant to Section 185 of the 1997 Tax Code xxxx Appeals, insofar as it cancelled and set aside
the 1996 and 1997 deficiency documentary
xxx xxx xxx stamp tax assessment and ordered petitioner
to desist from collecting the same is
Petitioner protested the assessment in a letter dated REVERSED and SET ASIDE.
February 23, 2000. As respondent did not act on the protest,
petitioner filed a petition for review in the Court of Tax Appeals Respondent is ordered to pay the
(CTA) seeking the cancellation of the deficiency VAT and DST amounts of P55,746,352.19
assessments. and P68,450,258.73 as deficiency
Documentary Stamp Tax for 1996 and 1997,
respectively, plus 25% surcharge for late
payment and 20% interest per annum from
On April 5, 2002, the CTA rendered a decision, the January 27, 2000, pursuant to Sections 248
dispositive portion of which read: and 249 of the Tax Code, until the same shall
have been fully paid.
WHEREFORE, in view of the
foregoing, the instant Petition for Review is SO ORDERED.
PARTIALLY GRANTED. Petitioner is hereby
ORDERED to PAY the deficiency VAT Petitioner moved for reconsideration but the CA
amounting to P22,054,831.75 inclusive of 25% denied it. Hence, petitioner filed this case.
surcharge plus 20% interest from January 20,
1997 until fully paid for the 1996 VAT xxx xxx xxx
deficiency and P31,094,163.87 inclusive of
25% surcharge plus 20% interest from January
20, 1998 until fully paid for the 1997 VAT In a decision dated June 12, 2008, the Court denied the petition and
deficiency. Accordingly, VAT Ruling No. affirmed the CAs decision. We held that petitioners health care agreement
[231]-88 is declared void and without force during the pertinent period was in the nature of non-life insurance which is a
and effect. The 1996 and 1997 deficiency contract of indemnity, citing Blue Cross Healthcare, Inc. v.
DST assessment against petitioner is hereby Olivares[3] and Philamcare Health Systems, Inc. v. CA.[4] We also ruled
CANCELLED AND SET ASIDE. Respondent is that petitioners contention that it is a health maintenance organization (HMO)
ORDERED to DESIST from collecting the said and not an insurance company is irrelevant because contracts between
DST deficiency tax. companies like petitioner and the beneficiaries under their plans are treated
as insurance contracts. Moreover, DST is not a tax on the business transacted
8
SO ORDERED. but an excise on the privilege, opportunity or facility offered at exchanges for
Page
the transaction of the business.
Unable to accept our verdict, petitioner filed the present motion for
reconsideration and supplemental motion for reconsideration, asserting the We find merit in petitioners motion for reconsideration.
following arguments:
Petitioner was formally registered and incorporated with the Securities
(a) The DST under Section 185 of the National Internal and Exchange Commission on June 30, 1987.[9] It is engaged in the
Revenue of 1997 is imposed only on a company dispensation of the following medical services to individuals who enter into
engaged in the business of fidelity bonds and other health care agreements with it:
insurance policies. Petitioner, as an HMO, is a service
provider, not an insurance company. Preventive medical services such as periodic
monitoring of health problems, family planning counseling,
(b) The Court, in dismissing the appeal in CIR v. Philippine consultation and advices on diet, exercise and other healthy
National Bank, affirmed in effect the CAs disposition habits, and immunization;
that health care services are not in the nature of an
insurance business. Diagnostic medical services such as routine physical
examinations, x-rays, urinalysis, fecalysis, complete blood
(c) Section 185 should be strictly construed. count, and the like and
(d) Legislative intent to exclude health care agreements from Curative medical services which pertain to the
items subject to DST is clear, especially in the light of performing of other remedial and therapeutic processes in
the amendments made in the DST law in 2002. the event of an injury or sickness on the part of the enrolled
member.[10]
(e) Assuming arguendo that petitioners agreements are Individuals enrolled in its health care program pay an annual
contracts of indemnity, they are not those membership fee. Membership is on a year-to-year basis. The medical services
contemplated under Section 185. are dispensed to enrolled members in a hospital or clinic owned, operated or
accredited by petitioner, through physicians, medical and dental practitioners
(f) Assuming arguendo that petitioners agreements are akin under contract with it. It negotiates with such health care practitioners
to health insurance, health insurance is not covered regarding payment schemes, financing and other procedures for the delivery
by Section 185. of health services. Except in cases of emergency, the professional services are
to be provided only by petitioner's physicians, i.e. those directly employed by
(g) The agreements do not fall under the phrase other branch it[11] or whose services are contracted by it.[12] Petitioner also provides hospital
of insurance mentioned in Section 185. services such as room and board accommodation, laboratory services,
operating rooms, x-ray facilities and general nursing care.[13] If and when a
(h) The June 12, 2008 decision should only apply member avails of the benefits under the agreement, petitioner pays the
prospectively. participating physicians and other health care providers for the services
rendered, at pre-agreed rates.[14]
(i) Petitioner availed of the tax amnesty benefits under
RA[5] 9480 for the taxable year 2005 and all prior To avail of petitioners health care programs, the individual members
years. Therefore, the questioned assessments on the are required to sign and execute a standard health care agreement
DST are now rendered moot and academic.[6] embodying the terms and conditions for the provision of the health care
services. The same agreement contains the various health care services that
Oral arguments were held in Baguio City on April 22, 2009. The parties can be engaged by the enrolled member, i.e., preventive, diagnostic and
submitted their memoranda on June 8, 2009. curative medical services. Except for the curative aspect of the medical
service offered, the enrolled member may actually make use of the health
In its motion for reconsideration, petitioner reveals for the first time that care services being offered by petitioner at any time.
it availed of a tax amnesty under RA 9480 [7] (also known as the Tax Amnesty
9
Act of 2007) by fully paying the amount of P5,127,149.08 representing 5% of its
Page
net worth as of the year ending December 31, 2005.[8]
HEALTH MAINTENANCE valeat quam pereat, that is, we choose the interpretation which gives effect
ORGANIZATIONS ARE NOT to the whole of the statute its every word.[18]
ENGAGED IN THE INSURANCE From the language of Section 185, it is evident that two requisites must
BUSINESS concur before the DST can apply, namely: (1) the document must be a policy
of insurance or an obligation in the nature of indemnity and (2) the maker
We said in our June 12, 2008 decision that it is irrelevant that petitioner should be transacting the business of accident, fidelity, employers liability,
is an HMO and not an insurer because its agreements are treated as plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other
insurance contracts and the DST is not a tax on the business but an excise on branch of insurance (except life, marine, inland, and fire insurance).
the privilege, opportunity or facility used in the transaction of the business.[15]
Petitioner is admittedly an HMO. Under RA 7875 (or The National
Petitioner, however, submits that it is of critical importance to Health Insurance Act of 1995), an HMO is an entity that provides, offers or
characterize the business it is engaged in, that is, to determine whether it is an arranges for coverage of designated health services needed by plan
HMO or an insurance company, as this distinction is indispensable in turn to members for a fixed prepaid premium.[19] The payments do not vary with the
the issue of whether or not it is liable for DST on its health care agreements.[16] extent, frequency or type of services provided.
A second hard look at the relevant law and jurisprudence convinces The question is: was petitioner, as an HMO, engaged in the business of
the Court that the arguments of petitioner are meritorious. insurance during the pertinent taxable years? We rule that it was not.
Section 185 of the National Internal Revenue Code of 1997 (NIRC of Section 2 (2) of PD[20] 1460 (otherwise known as the Insurance Code)
1997) provides: enumerates what constitutes doing an insurance business or transacting an
insurance business:
Section 185. Stamp tax on fidelity bonds and other
insurance policies. On all policies of insurance or bonds or a) making or proposing to make, as insurer, any
obligations of the nature of indemnity for loss, damage, or insurance contract;
liability made or renewed by any person, association or
company or corporation transacting the business of accident, b) making or proposing to make, as surety, any
fidelity, employers liability, plate, glass, steam boiler, burglar, contract of suretyship as a vocation and not as
elevator, automatic sprinkler, or other branch of insurance merely incidental to any other legitimate business or
(except life, marine, inland, and fire insurance), and all activity of the surety;
bonds, undertakings, or recognizances, conditioned for the
performance of the duties of any office or position, for the c) doing any kind of business, including a reinsurance
doing or not doing of anything therein specified, and on all business, specifically recognized as constituting the
obligations guaranteeing the validity or legality of any bond doing of an insurance business within the meaning of
or other obligations issued by any province, city, municipality, this Code;
or other public body or organization, and on all obligations
guaranteeing the title to any real estate, or guaranteeing any d) doing or proposing to do any business in substance
mercantile credits, which may be made or renewed by any equivalent to any of the foregoing in a manner
such person, company or corporation, there shall be designed to evade the provisions of this Code.
collected a documentary stamp tax of fifty centavos (P0.50)
on each four pesos (P4.00), or fractional part thereof, of the In the application of the provisions of this Code, the
premium charged. (Emphasis supplied) fact that no profit is derived from the making of insurance
contracts, agreements or transactions or that no separate or
It is a cardinal rule in statutory construction that no word, clause, direct consideration is received therefore, shall not be
sentence, provision or part of a statute shall be considered surplusage or deemed conclusive to show that the making thereof does
10
superfluous, meaningless, void and insignificant. To this end, a construction not constitute the doing or transacting of an insurance
which renders every word operative is preferred over that which makes some business.
Page
words idle and nugatory.[17] This principle is expressed in the maxim Ut magis
features, the regularization of service as well as payment, the
Various courts in the United States, whose jurisprudence has a substantial reduction in cost by quantity purchasing in short,
persuasive effect on our decisions,[21] have determined that HMOs are not in getting the medical job done and paid for; not, except
the insurance business. One test that they have applied is whether the incidentally to these features, the indemnification for cost
assumption of risk and indemnification of loss (which are elements of an after the services is rendered. Except the last, these are not
insurance business) are the principal object and purpose of the organization distinctive or generally characteristic of the insurance
or whether they are merely incidental to its business. If these are the principal arrangement. There is, therefore, a substantial difference
objectives, the business is that of insurance. But if they are merely incidental between contracting in this way for the rendering of service,
and service is the principal purpose, then the business is not insurance. even on the contingency that it be needed, and contracting
merely to stand its cost when or after it is rendered.
Applying the principal object and purpose test,[22] there is significant
American case law supporting the argument that a corporation (such as an That an incidental element of risk distribution or
HMO, whether or not organized for profit), whose main object is to provide the assumption may be present should not outweigh all other
members of a group with health services, is not engaged in the insurance factors. If attention is focused only on that feature, the line
business. between insurance or indemnity and other types of legal
arrangement and economic function becomes faint, if not
The rule was enunciated in Jordan v. Group Health extinct. This is especially true when the contract is for the sale
Association[23] wherein the Court of Appeals of the District of Columbia Circuit of goods or services on contingency. But obviously it was not
held that Group Health Association should not be considered as engaged in the purpose of the insurance statutes to regulate all
insurance activities since it was created primarily for the distribution of health arrangements for assumption or distribution of risk. That view
care services rather than the assumption of insurance risk. would cause them to engulf practically all contracts,
xxx Although Group Healths activities may be considered in particularly conditional sales and contingent service
one aspect as creating security against loss from illness or agreements.The fallacy is in looking only at the risk element,
accident more truly they constitute the quantity purchase of to the exclusion of all others present or their subordination to
well-rounded, continuous medical service by its members. it. The question turns, not on whether risk is involved or
xxx The functions of such an organization are not identical assumed, but on whether that or something else to which it is
with those of insurance or indemnity companies. The latter related in the particular plan is its principal object
are concerned primarily, if not exclusively, with risk and the purpose.[24] (Emphasis supplied)
consequences of its descent, not with service, or its extension
in kind, quantity or distribution; with the unusual occurrence,
not the daily routine of living. Hazard is predominant. On the In California Physicians Service v. Garrison,[25] the California court felt
other hand, the cooperative is concerned principally with that, after scrutinizing the plan of operation as a whole of the corporation, it
getting service rendered to its members and doing so at was service rather than indemnity which stood as its principal purpose.
lower prices made possible by quantity purchasing and
economies in operation. Its primary purpose is to reduce the There is another and more compelling reason for
cost rather than the risk of medical care; to broaden the holding that the service is not engaged in the insurance
service to the individual in kind and quantity; to enlarge the business. Absence or presence of assumption of risk or peril is
number receiving it; to regularize it as an everyday incident not the sole test to be applied in determining its status. The
of living, like purchasing food and clothing or oil and gas, question, more broadly, is whether, looking at the plan of
rather than merely protecting against the financial loss operation as a whole, service rather than indemnity is its
caused by extraordinary and unusual occurrences, such as principal object and purpose. Certainly the objects and
death, disaster at sea, fire and tornado. It is, in this instance, to purposes of the corporation organized and maintained by
take care of colds, ordinary aches and pains, minor ills and all the California physicians have a wide scope in the field of
the temporary bodily discomforts as well as the more serious social service. Probably there is no more impelling need than
11
and unusual illness. To summarize, the distinctive features of that of adequate medical care on a voluntary, low-cost basis
the cooperative are the rendering of service, its extension, the for persons of small income. The medical profession unitedly
Page
bringing of physician and patient together, the preventive is endeavoring to meet that need. Unquestionably this is
service of a high order and not indemnity.[26] (Emphasis
supplied) By the same token, any indemnification resulting from the payment
for services rendered in case of emergency by non-participating health
providers would still be incidental to petitioners purpose of providing and
American courts have pointed out that the main difference between arranging for health care services and does not transform it into an insurer. To
an HMO and an insurance company is that HMOs undertake to provide or fulfill its obligations to its members under the agreements, petitioner is required
arrange for the provision of medical services through participating physicians to set up a system and the facilities for the delivery of such medical services.
while insurance companies simply undertake to indemnify the insured for This indubitably shows that indemnification is not its sole object.
medical expenses incurred up to a pre-agreed limit. Somerset Orthopedic
Associates, P.A.v. Horizon Blue Cross and Blue Shield of New Jersey[27] is clear In fact, a substantial portion of petitioners services covers preventive
on this point: and diagnostic medical services intended to keep members from developing
medical conditions or diseases.[30] As an HMO, it is its obligation to maintain
The basic distinction between medical service the good health of its members. Accordingly, its health care programs are
corporations and ordinary health and accident insurers is that designed to prevent or to minimize the possibility of any assumption of risk on
the former undertake to provide prepaid medical its part. Thus, its undertaking under its agreements is not to indemnify its
services through participating physicians, thus relieving members against any loss or damage arising from a medical condition but, on
subscribers of any further financial burden, while the latter the contrary, to provide the health and medical services needed to prevent
only undertake to indemnify an insured for medical expenses such loss or damage.[31]
up to, but not beyond, the schedule of rates contained in the Overall, petitioner appears to provide insurance-type benefits to its
policy. members (with respect to its curative medical services), but these are
incidental to the principal activity of providing them medical
xxx xxx xxx care. The insurance-like aspect of petitioners business is miniscule compared
The primary purpose of a medical service to its noninsurance activities. Therefore, since it substantially provides health
corporation, however, is an undertaking to provide physicians care services rather than insurance services, it cannot be considered as being
who will render services to subscribers on a prepaid in the insurance business.
basis. Hence, if there are no physicians participating in the
medical service corporations plan, not only will the It is important to emphasize that, in adopting the principal purpose
subscribers be deprived of the protection which they might test used in the above-quoted U.S. cases, we are not saying that petitioners
reasonably have expected would be provided, but the operations are identical in every respect to those of the HMOs or health
corporation will, in effect, be doing business solely as a health providers which were parties to those cases. What we are stating is that, for
and accident indemnity insurer without having qualified as the purpose of determining what doing an insurance business means, we
such and rendering itself subject to the more stringent have to scrutinize the operations of the business as a whole and not its mere
financial requirements of the General Insurance Laws. components. This is of course only prudent and appropriate, taking into
account the burdensome and strict laws, rules and regulations applicable to
A participating provider of health care services is one insurers and other entities engaged in the insurance business. Moreover, we
who agrees in writing to render health care services to or for are also not unmindful that there are other American authorities who have
persons covered by a contract issued by health service found particular HMOs to be actually engaged in insurance activities.[32]
corporation in return for which the health service corporation
agrees to make payment directly to the participating Lastly, it is significant that petitioner, as an HMO, is not part of the
provider.[28] (Emphasis supplied) insurance industry. This is evident from the fact that it is not supervised by the
Insurance Commission but by the Department of Health.[33] In fact, in a letter
Consequently, the mere presence of risk would be insufficient to dated September 3, 2000, the Insurance Commissioner confirmed that
override the primary purpose of the business to provide medical services as petitioner is not engaged in the insurance business. This determination of the
needed, with payment made directly to the provider of these services.[29] In commissioner must be accorded great weight. It is well-settled that the
12
short, even if petitioner assumes the risk of paying the cost of these services interpretation of an administrative agency which is tasked to implement a
even if significantly more than what the member has prepaid, it nevertheless statute is accorded great respect and ordinarily controls the interpretation of
Page
cannot be considered as being engaged in the insurance business.
laws by the courts. The reason behind this rule was explained in Nestle x-ray and laboratory tests, medical consultations, vaccine
Philippines, Inc. v. Court of Appeals:[34] administration and family planning counseling) is the
contingent event which gives rise to liability on the part of the
The rationale for this rule relates not only to the member. In case of exposure of the member to liability, he
emergence of the multifarious needs of a modern or would be entitled to indemnification by petitioner.
modernizing society and the establishment of diverse
administrative agencies for addressing and satisfying those Furthermore, the fact that petitioner must relieve its
needs; it also relates to the accumulation of experience and member from liability by paying for expenses arising from the
growth of specialized capabilities by the administrative stipulated contingencies belies its claim that its services are
agency charged with implementing a particular statute. prepaid. The expenses to be incurred by each member
In Asturias Sugar Central, Inc. vs. Commissioner of cannot be predicted beforehand, if they can be predicted
Customs,[35] the Court stressed that executive officials are at all. Petitioner assumes the risk of paying for the costs of the
presumed to have familiarized themselves with all the services even if they are significantly and substantially more
considerations pertinent to the meaning and purpose of the than what the member has "prepaid." Petitioner does not
law, and to have formed an independent, conscientious and bear the costs alone but distributes or spreads them out
competent expert opinion thereon. The courts give much among a large group of persons bearing a similar risk, that is,
weight to the government agency officials charged with the among all the other members of the health care program.
implementation of the law, their competence, expertness, This is insurance.[37]
experience and informed judgment, and the fact that they
frequently are the drafters of the law they interpret.[36]
We reconsider. We shall quote once again the pertinent portion of
Section 185:
A HEALTH CARE AGREEMENT Section 185. Stamp tax on fidelity bonds and other
IS NOT AN INSURANCE insurance policies. On all policies of insurance or bonds or
CONTRACT CONTEMPLATED obligations of the nature of indemnity for loss, damage, or
UNDER SECTION 185 OF THE liability made or renewed by any person, association or
NIRC OF 1997 company or corporation transacting the business of
accident, fidelity, employers liability, plate, glass, steam boiler,
burglar, elevator, automatic sprinkler, or other branch of
Section 185 states that DST is imposed on all policies of insurance or insurance (except life, marine, inland, and fire insurance), xxxx
obligations of the nature of indemnity for loss, damage, or liability. In our (Emphasis supplied)
decision dated June 12, 2008, we ruled that petitioners health care
agreements are contracts of indemnity and are therefore insurance In construing this provision, we should be guided by the principle that
contracts: tax statutes are strictly construed against the taxing authority.[38] This is
because taxation is a destructive power which interferes with the personal
It is incorrect to say that the health care agreement is and property rights of the people and takes from them a portion of their
not based on loss or damage because, under the said property for the support of the government.[39] Hence, tax laws may not be
agreement, petitioner assumes the liability and indemnifies its extended by implication beyond the clear import of their language, nor their
member for hospital, medical and related expenses (such as operation enlarged so as to embrace matters not specifically provided.[40]
professional fees of physicians). The term "loss or damage" is
broad enough to cover the monetary expense or liability a We are aware that, in Blue Cross and Philamcare, the Court
member will incur in case of illness or injury. pronounced that a health care agreement is in the nature of non-life
Under the health care agreement, the rendition of insurance, which is primarily a contract of indemnity. However, those cases
13
hospital, medical and professional services to the member in did not involve the interpretation of a tax provision. Instead, they dealt with
case of sickness, injury or emergency or his availment of so- the liability of a health service provider to a member under the terms of their
Page
called "out-patient services" (including physical examination, health care agreement. Such contracts, as contracts of adhesion, are liberally
interpreted in favor of the member and strictly against the HMO. For this purpose of such a contract is not to render personal services,
reason, we reconsider our ruling that Blue Cross and Philamcare are but to indemnify against loss and damage resulting from the
applicable here. defense of actions for malpractice.[42] (Emphasis supplied)
Section 2 (1) of the Insurance Code defines a contract of insurance as

an agreement whereby one undertakes for a consideration to indemnify Second. Not all the necessary elements of a contract of insurance are
another against loss, damage or liability arising from an unknown or present in petitioners agreements. To begin with, there is no loss, damage or
contingent event. An insurance contract exists where the following elements liability on the part of the member that should be indemnified by petitioner as
concur: an HMO. Under the agreement, the member pays petitioner a predetermined
consideration in exchange for the hospital, medical and professional services
1. The insured has an insurable interest; rendered by the petitioners physician or affiliated physician to him. In case of
availment by a member of the benefits under the agreement, petitioner does
2. The insured is subject to a risk of loss by the happening not reimburse or indemnify the member as the latter does not pay any third
of the designed peril; party. Instead, it is the petitioner who pays the participating physicians and
other health care providers for the services rendered at pre-agreed rates. The
3. The insurer assumes the risk; member does not make any such payment.
4. Such assumption of risk is part of a general scheme to

distribute actual losses among a large group of persons In other words, there is nothing in petitioner's agreements that gives
bearing a similar risk and rise to a monetary liability on the part of the member to any third party-
provider of medical services which might in turn necessitate indemnification
5. In consideration of the insurers promise, the insured from petitioner. The terms indemnify or indemnity presuppose that a liability or
pays a premium.[41] claim has already been incurred. There is no indemnity precisely because the
member merely avails of medical services to be paid or already paid in
Do the agreements between petitioner and its members possess all advance at a pre-agreed price under the agreements.
these elements? They do not.
Third. According to the agreement, a member can take advantage
First. In our jurisdiction, a commentator of our insurance laws has of the bulk of the benefits anytime, e.g. laboratory services, x-ray, routine
pointed out that, even if a contract contains all the elements of an insurance annual physical examination and consultations, vaccine administration as well
contract, if its primary purpose is the rendering of service, it is not a contract of as family planning counseling, even in the absence of any peril, loss or
insurance: damage on his or her part.
It does not necessarily follow however, that a Fourth. In case of emergency, petitioner is obliged to reimburse the
contract containing all the four elements mentioned above member who receives care from a non-participating physician or
would be an insurance contract. The primary purpose of the hospital. However, this is only a very minor part of the list of services
parties in making the contract may negate the existence of available. The assumption of the expense by petitioner is not confined to the
an insurance contract. For example, a law firm which enters happening of a contingency but includes incidents even in the absence of
into contracts with clients whereby in consideration of illness or injury.
periodical payments, it promises to represent such clients in all
suits for or against them, is not engaged in the insurance In Michigan Podiatric Medical Association v. National Foot Care
business. Its contracts are simply for the purpose of rendering Program, Inc.,[43] although the health care contracts called for the defendant
personal services. On the other hand, a contract by which a to partially reimburse a subscriber for treatment received from a non-
corporation, in consideration of a stipulated amount, agrees designated doctor, this did not make defendant an insurer. Citing Jordan, the
at its own expense to defend a physician against all suits for Court determined that the primary activity of the defendant (was) the
14
damages for malpractice is one of insurance, and the provision of podiatric services to subscribers in consideration of prepayment
corporation will be deemed as engaged in the business of for such services.[44] Since indemnity of the insured was not the focal point of
Page
insurance. Unlike the lawyers retainer contract, the essential
the agreement but the extension of medical services to the member at an
affordable cost, it did not partake of the nature of a contract of insurance. Section 116. There shall be levied, collected, and
paid for and in respect to the several bonds, debentures, or
Fifth. Although risk is a primary element of an insurance contract, it is certificates of stock and indebtedness, and other documents,
not necessarily true that risk alone is sufficient to establish it. Almost anyone instruments, matters, and things mentioned and described in
who undertakes a contractual obligation always bears a certain degree of this section, or for or in respect to the vellum, parchment, or
financial risk. Consequently, there is a need to distinguish prepaid service paper upon which such instrument, matters, or things or any
contracts (like those of petitioner) from the usual insurance contracts. of them shall be written or printed by any person or persons
Indeed, petitioner, as an HMO, undertakes a business risk when it who shall make, sign, or issue the same, on and after January
offers to provide health services: the risk that it might fail to earn a reasonable first, nineteen hundred and five, the several taxes following:
return on its investment. But it is not the risk of the type peculiar only to
insurance companies. Insurance risk, also known as actuarial risk, is the risk that xxx xxx xxx
the cost of insurance claims might be higher than the premiums paid. The
amount of premium is calculated on the basis of assumptions made relative to Third xxx (c) on all policies of insurance or bond or obligation
the insured.[45] of the nature of indemnity for loss, damage, or liability made
or renewed by any person, association, company, or
However, assuming that petitioners commitment to provide medical corporation transacting the business of accident, fidelity,
services to its members can be construed as an acceptance of the risk that it employers liability, plate glass, steam boiler, burglar, elevator,
will shell out more than the prepaid fees, it still will not qualify as an insurance automatic sprinkle, or other branch of insurance (except life,
contract because petitioners objective is to provide medical services at marine, inland, and fire insurance) xxxx(Emphasis supplied)
reduced cost, not to distribute risk like an insurer.
On February 27, 1914, Act No. 2339 (the Internal Revenue Law of 1914)
In sum, an examination of petitioners agreements with its members was enacted revising and consolidating the laws relating to internal revenue.
leads us to conclude that it is not an insurance contract within the context of The aforecited pertinent portion of Section 116, Article XI of Act No. 1189 was
our Insurance Code. completely reproduced as Section 30 (l), Article III of Act No. 2339. The very
detailed and exclusive enumeration of items subject to DST was thus retained.
THERE WAS NO LEGISLATIVE On December 31, 1916, Section 30 (l), Article III of Act No. 2339 was again
INTENT TO IMPOSE DST ON reproduced as Section 1604 (l), Article IV of Act No. 2657 (Administrative
HEALTH CARE AGREEMENTS Code). Upon its amendment on March 10, 1917, the pertinent DST provision
OF HMOS became Section 1449 (l) of Act No. 2711, otherwise known as the
Administrative Code of 1917.
Furthermore, militating in convincing fashion against the imposition of DST on Section 1449 (1) eventually became Sec. 222 of Commonwealth Act
petitioners health care agreements under Section 185 of the NIRC of 1997 is No. 466 (the NIRC of 1939), which codified all the internal revenue laws of the
the provisions legislative history. The text of Section 185 came into U.S. law as Philippines. In an amendment introduced by RA 40 on October 1, 1946, the
early as 1904 when HMOs and health care agreements were not even in DST rate was increased but the provision remained substantially the same.
existence in this jurisdiction. It was imposed under Section 116, Article XI of Act
No. 1189 (otherwise known as the Internal Revenue Law of 1904)[46] enacted Thereafter, on June 3, 1977, the same provision with the same DST rate was
on July 2, 1904 and became effective on August 1, 1904. Except for the rate of reproduced in PD 1158 (NIRC of 1977) as Section 234. Under PDs 1457 and
tax, Section 185 of the NIRC of 1997 is a verbatim reproduction of the pertinent 1959, enacted on June 11, 1978 and October 10, 1984 respectively, the DST
portion of Section 116, to wit: rate was again increased.
Effective January 1, 1986, pursuant to Section 45 of PD 1994, Section 234 of the

NIRC of 1977 was renumbered as Section 198. And under Section 23 of
15
EO[47] 273 dated July 25, 1987, it was again renumbered and became Section
ARTICLE XI 185.
Page
Stamp Taxes on Specified Objects
On December 23, 1993, under RA 7660, Section 185 was amended but, again, disputed these assertions. Given the realities on the ground, imposing the DST
only with respect to the rate of tax. on petitioner would be highly oppressive. It is not the purpose of the
Notwithstanding the comprehensive amendment of the NIRC of 1977 by RA government to throttle private business. On the contrary, the government
8424 (or the NIRC of 1997), the subject legal provision was retained as the ought to encourage private enterprise.[55] Petitioner, just like any concern
present Section 185. In 2004, amendments to the DST provisions were organized for a lawful economic activity, has a right to maintain a legitimate
introduced by RA 9243[48] but Section 185 was untouched. business.[56] As aptly held in Roxas, et al. v. CTA, et al.:[57]
On the other hand, the concept of an HMO was introduced in the
Philippines with the formation of Bancom Health Care Corporation in 1974. The The power of taxation is sometimes called also the
same pioneer HMO was later reorganized and renamed Integrated Health power to destroy. Therefore it should be exercised with
Care Services, Inc. (or Intercare). However, there are those who claim that caution to minimize injury to the proprietary rights of a
Health Maintenance, Inc. is the HMO industry pioneer, having set foot in the taxpayer. It must be exercised fairly, equally and uniformly,
Philippines as early as 1965 and having been formally incorporated in lest the tax collector kill the hen that lays the golden egg.[58]
1991. Afterwards, HMOs proliferated quickly and currently, there are 36 Legitimate enterprises enjoy the constitutional protection not to be taxed out
registered HMOs with a total enrollment of more than 2 million.[49] of existence. Incurring losses because of a tax imposition may be an
acceptable consequence but killing the business of an entity is another
We can clearly see from these two histories (of the DST on the one matter and should not be allowed. It is counter-productive and ultimately
hand and HMOs on the other) that when the law imposing the DST was first subversive of the nations thrust towards a better economy which will ultimately
passed, HMOs were yet unknown in the Philippines. However, when the benefit the majority of our people.[59]
various amendments to the DST law were enacted, they were already in
existence in the Philippines and the term had in fact already been defined by
RA 7875. If it had been the intent of the legislature to impose DST on health PETITIONERS TAX LIABILITY
care agreements, it could have done so in clear and categorical terms. It had WAS EXTINGUISHED UNDER
many opportunities to do so. But it did not. The fact that the NIRC contained THE PROVISIONS OF RA 9840
no specific provision on the DST liability of health care agreements of HMOs at
a time they were already known as such, belies any legislative intent to Petitioner asserts that, regardless of the arguments, the DST
impose it on them. As a matter of fact, petitioner was assessed its DST liability assessment for taxable years 1996 and 1997 became moot and
only on January 27, 2000, after more than a decade in the business as an academic[60] when it availed of the tax amnesty under RA 9480 on December
HMO.[50] 10, 2007. It paid P5,127,149.08 representing 5% of its net worth as of the year
ended December 31, 2005 and complied with all requirements of the tax
Considering that Section 185 did not change since 1904 (except for amnesty. Under Section 6(a) of RA 9480, it is entitled to immunity from
the rate of tax), it would be safe to say that health care agreements were payment of taxes as well as additions thereto, and the appurtenant civil,
never, at any time, recognized as insurance contracts or deemed engaged in criminal or administrative penalties under the 1997 NIRC, as amended, arising
the business of insurance within the context of the provision. from the failure to pay any and all internal revenue taxes for taxable year 2005
and prior years.[61]
THE POWER TO TAX IS NOT Far from disagreeing with petitioner, respondent manifested in its
THE POWER TO DESTROY memorandum:
As a general rule, the power to tax is an incident of sovereignty and is Section 6 of [RA 9840] provides that availment of tax
unlimited in its range, acknowledging in its very nature no limits, so that amnesty entitles a taxpayer to immunity from payment of the
security against its abuse is to be found only in the responsibility of the tax involved, including the civil, criminal, or administrative
legislature which imposes the tax on the constituency who is to pay it. [51] So penalties provided under the 1997 [NIRC], for tax liabilities
potent indeed is the power that it was once opined that the power to tax arising in 2005 and the preceding years.
involves the power to destroy.[52]
16
In view of petitioners availment of the benefits of [RA
Petitioner claims that the assessed DST to date which amounts to P376 9840], and without conceding the merits of this case as
Page
million[53] is way beyond its net worth of P259 million.[54] Respondent never discussed above, respondent concedes that such tax
amnesty extinguishes the tax liabilities of petitioner. This the latter case because the two cases involved different subject matters as
admission, however, is not meant to preclude a revocation of they were concerned with the taxable income of different taxable years.[72]
the amnesty granted in case it is found to have been granted
under circumstances amounting to tax fraud under Section Besides, there are substantial, not simply formal, distinctions between a minute
10 of said amnesty law.[62] (Emphasis supplied) resolution and a decision. The constitutional requirement under the first
paragraph of Section 14, Article VIII of the Constitution that the facts and the
Furthermore, we held in a recent case that DST is one of the taxes law on which the judgment is based must be expressed clearly and distinctly
covered by the tax amnesty program under RA 9480.[63] There is no other applies only to decisions, not to minute resolutions. A minute resolution
conclusion to draw than that petitioners liability for DST for the taxable years is signed only by the clerk of court by authority of the justices, unlike a
1996 and 1997 was totally extinguished by its availment of the tax amnesty decision. It does not require the certification of the Chief Justice. Moreover,
under RA 9480. unlike decisions, minute resolutions are not published in the Philippine Reports.
Finally, the proviso of Section 4(3) of Article VIII speaks of a decision. [73] Indeed,
as a rule, this Court lays down doctrines or principles of law which constitute
IS THE COURT BOUND BY A binding precedent in a decision duly signed by the members of the Court and
MINUTE RESOLUTION IN certified by the Chief Justice.
ANOTHER CASE?
Accordingly, since petitioner was not a party in G.R. No. 148680 and
Petitioner raises another interesting issue in its motion for reconsideration: since petitioners liability for DST on its health care agreement was not the
whether this Court is bound by the ruling of the CA[64] in CIR v. Philippine subject matter of G.R. No. 148680, petitioner cannot successfully invoke the
National Bank[65] that a health care agreement of Philamcare Health Systems minute resolution in that case (which is not even binding precedent) in its
is not an insurance contract for purposes of the DST. favor. Nonetheless, in view of the reasons already discussed, this does not
detract in any way from the fact that petitioners health care agreements are
In support of its argument, petitioner cites the August 29, 2001 minute not subject to DST.
resolution of this Court dismissing the appeal in Philippine National Bank (G.R. A FINAL NOTE
No. 148680).[66] Petitioner argues that the dismissal of G.R. No. 148680 by
minute resolution was a judgment on the merits; hence, the Court should
apply the CA ruling there that a health care agreement is not an insurance Taking into account that health care agreements are clearly not
contract. within the ambit of Section 185 of the NIRC and there was never any
legislative intent to impose the same on HMOs like petitioner, the same should
It is true that, although contained in a minute resolution, our dismissal of the not be arbitrarily and unjustly included in its coverage.
petition was a disposition of the merits of the case. When we dismissed the
petition, we effectively affirmed the CA ruling being questioned. As a result, It is a matter of common knowledge that there is a great social need
our ruling in that case has already become final.[67] When a minute resolution for adequate medical services at a cost which the average wage earner can
denies or dismisses a petition for failure to comply with formal and substantive afford. HMOs arrange, organize and manage health care treatment in the
requirements, the challenged decision, together with its findings of fact and furtherance of the goal of providing a more efficient and inexpensive health
legal conclusions, are deemed sustained.[68] But what is its effect on other care system made possible by quantity purchasing of services and economies
cases? of scale. They offer advantages over the pay-for-service system (wherein
individuals are charged a fee each time they receive medical services),
With respect to the same subject matter and the same issues including the ability to control costs. They protect their members from
concerning the same parties, it constitutes res judicata.[69] However, if other exposure to the high cost of hospitalization and other medical expenses
parties or another subject matter (even with the same parties and issues) is brought about by a fluctuating economy. Accordingly, they play an
involved, the minute resolution is not binding precedent. Thus, in CIR v. Baier- important role in society as partners of the State in achieving its constitutional
Nickel,[70] the Court noted that a previous case, CIR v. Baier-Nickel[71] involving mandate of providing its citizens with affordable health services.
the same parties and the same issues, was previously disposed of by the Court
17
thru a minute resolution dated February 17, 2003 sustaining the ruling of the The rate of DST under Section 185 is equivalent to 12.5% of the
CA. Nonetheless, the Court ruled that the previous case ha(d) no bearing on premium charged.[74] Its imposition will elevate the cost of health care
Page
services. This will in turn necessitate an increase in the membership fees,
resulting in either placing health services beyond the reach of the ordinary existing under the laws of the Republic of the Philippines. Both are engaged in the
wage earner or driving the industry to the ground. At the end of the business of operating cinema houses, among others.[7]
day, neither side wins, considering the indispensability of the services offered
by HMOs. CTA Case No. 7079
WHEREFORE, the motion for reconsideration is GRANTED. The August On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM Prime a
16, 2004 decision of the Court of Appeals in CA-G.R. SP Preliminary Assessment Notice (PAN) for value added tax (VAT) deficiency on cinema
No. 70479 is REVERSED and SET ASIDE. The 1996 and 1997 deficiency DST ticket sales in the amount of P119,276,047.40 for taxable year 2000.[8] In response, SM
assessment against petitioner is hereby CANCELLED and SET Prime filed a letter-protest dated December 15, 2003.[9]
ASIDE. Respondent is ordered to desist from collecting the said tax. On December 12, 2003, the BIR sent SM Prime a Formal Letter of Demand for
No costs. the alleged VAT deficiency, which the latter protested in a letter dated January 14,
2004.[10]
SO ORDERED. On September 6, 2004, the BIR denied the protest filed by SM Prime and
ordered it to pay the VAT deficiency for taxable year 2000 in the amount
of P124,035,874.12.[11]
COMMISSIONER OF INTERNAL G.R. No. 183505
REVENUE, On October 15, 2004, SM Prime filed a Petition for Review before the CTA
Petitioner, Present: docketed as CTA Case No. 7079.[12]
CARPIO, J., Chairperson, CTA Case No. 7085

- versus - BRION,
DEL CASTILLO, On May 15, 2002, the BIR sent First Asia a PAN for VAT deficiency on
ABAD, and cinema ticket sales for taxable year 1999 in the total amount
SM PRIME HOLDINGS, INC. PEREZ, JJ. of P35,823,680.93.[13] First Asia protested the PAN in a letter dated July 9, 2002.[14]
and FIRST ASIA REALTY
DEVELOPMENT CORPORATION, Promulgated: Subsequently, the BIR issued a Formal Letter of Demand for the alleged VAT
Respondents. February 26, 2010 deficiency which was protested by First Asia in a letter dated December 12, 2002.[15]
x-------------------------------------------------------------------x
On September 6, 2004, the BIR rendered a Decision denying the protest and
DECISION ordering First Asia to pay the amount of P35,823,680.93 for VAT deficiency for taxable
year 1999.[16]
DEL CASTILLO, J.:
Accordingly, on October 20, 2004, First Asia filed a Petition for Review before
When the intent of the law is not apparent as worded, or when the the CTA, docketed as CTA Case No. 7085.[17]
application of the law would lead to absurdity or injustice, legislative history is all
important. In such cases, courts may take judicial notice of the origin and history of the CTA Case No. 7111
law,[1] the deliberations during the enactment,[2] as well as prior laws on the same
subject matter[3] to ascertain the true intent or spirit of the law. On April 16, 2004, the BIR sent a PAN to First Asia for VAT deficiency on
cinema ticket sales for taxable year 2000 in the amount
This Petition for Review on Certiorari under Rule 45 of the Rules of Court, in of P35,840,895.78. First Asia protested the PAN through a letter dated April 22, 2004.[18]
relation to Republic Act (RA) No. 9282,[4] seeks to set aside the April 30, 2008
Decision[5] and the June 24, 2008 Resolution[6] of the Court of Tax Appeals (CTA). Thereafter, the BIR issued a Formal Letter of Demand for alleged VAT
Factual Antecedents deficiency.[19] First Asia protested the same in a letter dated July 9, 2004.[20]
18
Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia Realty On October 5, 2004, the BIR denied the protest and ordered First Asia to pay
Page
Development Corporation (First Asia) are domestic corporations duly organized and the VAT deficiency in the amount of P35,840,895.78 for taxable year 2000.[21]
history of the law, it ruled that the activity of showing cinematographic films is not a
This prompted First Asia to file a Petition for Review before the CTA service covered by VAT under the National Internal Revenue Code (NIRC) of 1997, as
on December 16, 2004. The case was docketed as CTA Case No. 7111.[22] amended, but an activity subject to amusement tax under RA 7160, otherwise known
as the Local Government Code (LGC) of 1991. Citing House Joint Resolution No. 13,
CTA Case No. 7272 entitled Joint Resolution Expressing the True Intent of Congress with Respect to the
Prevailing Tax Regime in the Theater and Local Film Industry Consistent with the States
Re: Assessment Notice No. 008-02 Policy to Have a Viable, Sustainable and Competitive Theater and Film Industry as
One of its Partners in National Development,[30] the CTA First Division held that the
A PAN for VAT deficiency on cinema ticket sales for the taxable year 2002 in House of Representatives resolved that there should only be one business tax
the total amount of P32,802,912.21 was issued against First Asia by the BIR. In response, applicable to theaters and movie houses, which is the 30% amusement tax imposed
First Asia filed a protest-letter dated November 11, 2004. The BIR then sent a Formal by cities and provinces under the LGC of 1991. Further, it held that consistent with the
Letter of Demand, which was protested by First Asia on December 14, 2004.[23] States policy to have a viable, sustainable and competitive theater and film industry,
the national government should be precluded from imposing its own business tax in
Re: Assessment Notice No. 003-03 addition to that already imposed and collected by local government units. The CTA
First Division likewise found that Revenue Memorandum Circular (RMC) No. 28-2001,
A PAN for VAT deficiency on cinema ticket sales in the total amount which imposes VAT on gross receipts from admission to cinema houses, cannot be
of P28,196,376.46 for the taxable year 2003 was issued by the BIR against First Asia. In a given force and effect because it failed to comply with the procedural due process
letter dated September 23, 2004, First Asia protested the PAN. A Formal Letter of for tax issuances under RMC No. 20-86.[31] Thus, it disposed of the case as follows:
Demand was thereafter issued by the BIR to First Asia, which the latter protested
through a letter dated November 11, 2004. [24] IN VIEW OF ALL THE FOREGOING, this Court
hereby GRANTS the Petitions for Review. Respondents Decisions
On May 11, 2005, the BIR rendered a Decision denying the protests. It denying petitioners protests against deficiency value-added taxes
ordered First Asia to pay the amounts of P33,610,202.91 and P28,590,826.50 for VAT are hereby REVERSED. Accordingly, Assessment Notices Nos. VT-00-
deficiency for taxable years 2002 and 2003, respectively.[25] 000098, VT-99-000057, VT-00-000122, 003-03 and 008-02
are ORDERED cancelled and set aside.
Thus, on June 22, 2005, First Asia filed a Petition for Review before the CTA,
docketed as CTA Case No. 7272.[26] SO ORDERED.[32]
Consolidated Petitions Aggrieved, the CIR moved for reconsideration which was denied by the First
Division in its Resolution dated December 14, 2006.[33]
The Commissioner of Internal Revenue (CIR) filed his Answers to the Petitions
filed by SM Prime and First Asia.[27] Ruling of the CTA En Banc
On July 1, 2005, SM Prime filed a Motion to Consolidate CTA Case Nos. 7085, Thus, the CIR appealed to the CTA En Banc.[34] The case was docketed as
7111 and 7272 with CTA Case No. 7079 on the grounds that the issues raised therein CTA EB No. 244.[35] The CTA En Banc however denied[36] the Petition for Review and
are identical and that SM Prime is a majority shareholder of First Asia. The motion was dismissed[37] as well petitioners Motion for Reconsideration.
granted.[28] The CTA En Banc held that Section 108 of the NIRC actually sets forth an
exhaustive enumeration of what services are intended to be subject to VAT. And
Upon submission of the parties respective memoranda, the consolidated since the showing or exhibition of motion pictures, films or movies by cinema operators
cases were submitted for decision on the sole issue of whether gross receipts derived or proprietors is not among the enumerated activities contemplated in the phrase
from admission tickets by cinema/theater operators or proprietors are subject to sale or exchange of services, then gross receipts derived by cinema/ theater
VAT.[29] operators or proprietors from admission tickets in showing motion pictures, film or
movie are not subject to VAT. It reiterated that the exhibition or showing of motion
Ruling of the CTA First Division pictures, films, or movies is instead subject to amusement tax under the LGC of 1991.
19
As regards the validity of RMC No. 28-2001, the CTA En Banc agreed with its First
On September 22, 2006, the First Division of the CTA rendered a Decision Division that the same cannot be given force and effect for failure to comply with
Page
granting the Petition for Review. Resorting to the language used and the legislative RMCNo. 20-86.
amusement tax imposed by the Local Government
Issue Code; and
Hence, the present recourse, where petitioner alleges that the CTA En (4) In invalidating Revenue Memorandum Circular (RMC) No. 28-
Banc seriously erred: 2001.[38]
(1) In not finding/holding that the gross receipts Simply put, the issue in this case is whether the gross receipts derived by
derived by operators/proprietors of cinema houses from operators or proprietors of cinema/theater houses from admission tickets are subject
admission tickets [are] subject to the 10% VAT because: to VAT.
(a) THE EXHIBITION OF MOVIES BY CINEMA Petitioners Arguments

OPERATORS/PROPRIETORS TO THE PAYING
PUBLIC IS A SALE OF SERVICE; Petitioner argues that the enumeration of services subject to VAT in Section
108 of the NIRC is not exhaustive because it covers all sales of services unless
(b) UNLESS EXEMPTED BY LAW, ALL SALES OF exempted by law. He claims that the CTA erred in applying the rules on statutory
SERVICES ARE EXPRESSLY SUBJECT TO VAT construction and in using extrinsic aids in interpreting Section 108 because the
UNDER SECTION 108 OF THE NIRC OF 1997; provision is clear and unambiguous. Thus, he maintains that the exhibition of movies by
cinema operators or proprietors to the paying public, being a sale of service, is subject
(c) SECTION 108 OF THE NIRC OF 1997 IS A to VAT.
CLEAR PROVISION OF LAW AND THE
APPLICATION OF RULES OF STATUTORY Respondents Arguments
CONSTRUCTION AND EXTRINSIC AIDS IS
UNWARRANTED; Respondents, on the other hand, argue that a plain reading of Section 108 of
the NIRC of 1997 shows that the gross receipts of proprietors or operators of
(d) GRANTING WITHOUT CONCEDING THAT cinemas/theaters derived from public admission are not among the services subject
RULES OF CONSTRUCTION ARE APPLICABLE to VAT. Respondents insist that gross receipts from cinema/theater admission tickets
HEREIN, STILL THE HONORABLE COURT were never intended to be subject to any tax imposed by the national government.
ERRONEOUSLY APPLIED THE SAME AND According to them, the absence of gross receipts from cinema/theater admission
PROMULGATED DANGEROUS PRECEDENTS; tickets from the list of services which are subject to the national amusement tax under
Section 125 of the NIRC of 1997 reinforces this legislative intent. Respondents also
(e) THERE IS NO VALID, EXISTING PROVISION highlight the fact that RMC No. 28-2001 on which the deficiency assessments were
OF LAW EXEMPTING RESPONDENTS SERVICES based is an unpublished administrative ruling.
FROM THE VAT IMPOSED UNDER SECTION 108
OF THE NIRC OF 1997; Our Ruling
(f) QUESTIONS ON THE WISDOM OF THE The petition is bereft of merit.

LAW ARE NOT PROPER ISSUES TO BE TRIED BY
THE HONORABLE COURT; and
The enumeration of services
(g) RESPONDENTS WERE TAXED BASED ON subject to VAT under Section
THE PROVISION OF SECTION 108 OF THE NIRC. 108 of the NIRC is not
exhaustive
(2) In ruling that the enumeration in Section 108 of
the NIRC of 1997 is exhaustive in coverage;
20
Section 108 of the NIRC of the 1997 reads:
(3) In misconstruing the NIRC of 1997 to conclude
Page
that the showing of motion pictures is merely subject to the
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of similar services, and shall likewise include, indicate that the enumeration is by way of
Properties. example only.[39]
(A) Rate and Base of Tax. There shall be levied, assessed and Among those included in the enumeration is the lease of motion picture films,
collected, a value-added tax equivalent to ten percent (10%) of films, tapes and discs. This, however, is not the same as the showing or exhibition of
gross receipts derived from the sale or exchange of services, motion pictures or films. As pointed out by the CTA En Banc:
including the use or lease of properties.
The phrase sale or exchange of services means the performance of Exhibition in Blacks Law Dictionary is defined as To show or display. x
all kinds of services in the Philippines for others for a fee, x x To produce anything in public so that it may be taken into
remuneration or consideration, including those performed or possession (6th ed., p. 573). While the word lease is defined as a
rendered by construction and service contractors; stock, real contract by which one owning such property grants to another the
estate, commercial, customs and immigration brokers; lessors of right to possess, use and enjoy it on specified period of time in
property, whether personal or real; warehousing services; lessors or exchange for periodic payment of a stipulated price, referred to as
distributors of cinematographic films; persons engaged in milling, rent (Blacks Law Dictionary, 6th ed., p. 889). x x x[40]
processing, manufacturing or repacking goods for others;
proprietors, operators or keepers of hotels, motels, rest houses, Since the activity of showing motion pictures, films or movies by cinema/
pension houses, inns, resorts; proprietors or operators of restaurants, theater operators or proprietors is not included in the enumeration, it is incumbent
refreshment parlors, cafes and other eating places, including clubs upon the court to the determine whether such activity falls under the phrase similar
and caterers; dealers in securities; lending investors; transportation services. The intent of the legislature must therefore be ascertained.
contractors on their transport of goods or cargoes, including
persons who transport goods or cargoes for hire and other domestic The legislature never intended
common carriers by land, air and water relative to their transport of operators
goods or cargoes; services of franchise grantees of telephone and or proprietors of
telegraph, radio and television broadcasting and all other franchise cinema/theater houses to be
grantees except those under Section 119 of this Code; services of covered by VAT
banks, non-bank financial intermediaries and finance companies;
and non-life insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding companies; Under the NIRC of 1939,[41] the national government imposed amusement
and similar servicesregardless of whether or not the performance tax on proprietors, lessees, or operators of theaters, cinematographs, concert halls,
thereof calls for the exercise or use of the physical or mental circuses, boxing exhibitions, and other places of amusement, including cockpits, race
faculties. The phrase sale or exchange of services shall likewise tracks, and cabaret.[42] In the case of theaters or cinematographs, the taxes were first
include: deducted, withheld, and paid by the proprietors, lessees, or operators of such theaters
or cinematographs before the gross receipts were divided between the proprietors,
(1) The lease or the use of or the right or privilege to use any lessees, or operators of the theaters or cinematographs and the distributors of the
copyright, patent, design or model, plan, secret formula or process, cinematographic films. Section 11[43] of the Local Tax Code,[44] however, amended
goodwill, trademark, trade brand or other like property or right; this provision by transferring the power to impose amusement tax[45] on admission from
theaters, cinematographs, concert halls, circuses and other places of amusements
xxxx exclusively to the local government. Thus, when the NIRC of 1977[46] was enacted, the
national government imposed amusement tax only on proprietors, lessees or
(7) The lease of motion picture films, films, tapes and discs; and operators of cabarets, day and night clubs, Jai-Alai and race tracks.[47]
(8) The lease or the use of or the right to use radio, television, satellite On January 1, 1988, the VAT Law[48] was promulgated. It amended certain
transmission and cable television time. provisions of the NIRC of 1977 by imposing a multi-stage VAT to replace the tax on
original and subsequent sales tax and percentage tax on certain services. It imposed
21
x x x x (Emphasis supplied) VAT on sales of services under Section 102 thereof, which provides:
A cursory reading of the foregoing provision clearly shows that the enumeration of the
Page
sale or exchange of services subject to VAT is not exhaustive. The words, including,
SECTION 102. Value-added tax on sale of services. (a) Rate than from admission tickets were subject to amusement tax under the NIRC of 1977,
and base of tax. There shall be levied, assessed and collected, a as amended.Pertinent portions of RMC 8-88 read:
value-added tax equivalent to 10% percent of gross receipts
derived by any person engaged in the sale of services. The phrase Under the Local Tax Code (P.D. 231, as amended), the
sale of services means the performance of all kinds of services for jurisdiction to levy amusement tax on gross receipts arising from
others for a fee, remuneration or consideration, including those admission to places of amusement has been transferred to the
performed or rendered by construction and service contractors; local governments to the exclusion of the national government.
stock, real estate, commercial, customs and immigration brokers;
lessors of personal property; lessors or distributors of xxxx
cinematographic films; persons engaged in milling, processing, Since the promulgation of the Local Tax Code which took
manufacturing or repacking goods for others; and similar services effect on June 28, 1973 none of the amendatory laws which
regardless of whether or not the performance thereof calls for the amended the National Internal Revenue Code, including the value
exercise or use of the physical or mental faculties: Provided That the added tax law under Executive Order No. 273, has amended the
following services performed in the Philippines by VAT-registered provisions of Section 11 of the Local Tax Code. Accordingly, the sole
persons shall be subject to 0%: jurisdiction for collection of amusement tax on admission receipts in
places of amusement rests exclusively on the local government, to
(1) Processing manufacturing or repacking goods for other the exclusion of the national government. Since the Bureau of
persons doing business outside the Philippines which goods are Internal Revenue is an agency of the national government, then it
subsequently exported, x x x follows that it has no legal mandate to levy amusement tax on
admission receipts in the said places of amusement.
xxxx
Considering the foregoing legal background, the
Gross receipts means the total amount of money or its provisions under Section 123 of the National Internal Revenue Code
equivalent representing the contract price, compensation or as renumbered by Executive Order No. 273 (Sec. 228, old NIRC)
service fee, including the amount charged for materials supplied pertaining to amusement taxes on places of amusement shall be
with the services and deposits or advance payments actually or implemented in accordance with BIR RULING, dated December 4,
constructively received during the taxable quarter for the service 1973 and BIR RULING NO. 231-86 dated November 5, 1986 to wit:
performed or to be performed for another person, excluding value-
added tax. x x x Accordingly, only the gross receipts of the amusement
places derived from sources other than from admission tickets shall
(b) Determination of the tax. (1) Tax billed as a separate be subject to x x x amusement tax prescribed under Section 228 of
item in the invoice. If the tax is billed as a separate item in the the Tax Code, as amended (now Section 123, NIRC, as amended
invoice, the tax shall be based on the gross receipts, excluding the by E.O. 273). The tax on gross receipts derived from admission
tax. tickets shall be levied and collected by the city government
pursuant to Section 23 of Presidential Decree No. 231, as amended
(2) Tax not billed separately or is billed erroneously in the x x x or by the provincial government, pursuant to Section 11 of P.D.
invoice. If the tax is not billed separately or is billed erroneously in the 231, otherwise known as the Local Tax Code. (Emphasis supplied)
invoice, the tax shall be determined by multiplying the gross receipts
(including the amount intended to cover the tax or the tax billed On October 10, 1991, the LGC of 1991 was passed into law. The local
erroneously) by 1/11. (Emphasis supplied) government retained the power to impose amusement tax on proprietors, lessees, or
Persons subject to amusement tax under the NIRC of 1977, as amended, however, operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other
were exempted from the coverage of VAT.[49] places of amusement at a rate of not more than thirty percent (30%) of the gross
receipts from admission fees under Section 140 thereof.[50] In the case of theaters or
On February 19, 1988, then Commissioner Bienvenido A. Tan, Jr. issued RMC cinemas, the tax shall first be deducted and withheld by their proprietors, lessees, or
22
8-88, which clarified that the power to impose amusement tax on gross operators and paid to the local government before the gross receipts are divided
receipts derived from admission tickets was exclusive with the local government units between said proprietors, lessees, or operators and the distributors of the
Page
and that only the gross receipts of amusement places derived from sources other cinematographic films. However, the provision in the Local Tax Code expressly
excluding the national government from collecting tax from the proprietors, lessees, or
operators of theaters, cinematographs, concert halls, circuses and other places of (9) Only lessors or distributors of cinematographic films are
amusements was no longer included. included in the coverage of VAT.
In 1994, RA 7716 restructured the VAT system by widening its tax base and These reveal the legislative intent not to impose VAT on persons already
enhancing its administration. Three years later, RA 7716 was amended by RA covered by the amusement tax. This holds true even in the case of cinema/theater
8241. Shortly thereafter, the NIRC of 1997[51]was signed into law. Several operators taxed under the LGC of 1991 precisely because the VAT law was intended
amendments[52] were made to expand the coverage of VAT. However, none pertain to replace the percentage tax on certain services. The mere fact that they are taxed
to cinema/theater operators or proprietors. At present, only lessors or distributors of by the local government unit and not by the national government is immaterial. The
cinematographic films are subject to VAT. While persons subject to amusement Local Tax Code, in transferring the power to tax gross receipts derived by
tax[53] under the NIRC of 1997 are exempt from the coverage of VAT.[54] cinema/theater operators or proprietor from admission tickets to the local
Based on the foregoing, the following facts can be established: government, did not intend to treat cinema/theater houses as a separate class.No
distinction must, therefore, be made between the places of amusement taxed by the
(1) Historically, the activity of showing motion pictures, films national government and those taxed by the local government.
or movies by cinema/theater operators or proprietors has To hold otherwise would impose an unreasonable burden on
always been considered as a form of entertainment subject cinema/theater houses operators or proprietors, who would be paying an additional
to amusement tax. 10%[55] VAT on top of the 30% amusement tax imposed by Section 140 of the LGC of
1991, or a total of 40% tax. Such imposition would result in injustice, as persons taxed
(2) Prior to the Local Tax Code, all forms of amusement tax under the NIRC of 1997 would be in a better position than those taxed under the LGC
were imposed by the national government. of 1991. We need not belabor that a literal application of a law must be rejected if it
will operate unjustly or lead to absurd results.[56] Thus, we are convinced that the
(3) When the Local Tax Code was enacted, amusement legislature never intended to include cinema/theater operators or proprietors in the
tax on admission tickets from theaters, cinematographs, coverage of VAT.
concert halls, circuses and other places of amusements
were transferred to the local government. On this point, it is apropos to quote the case of Roxas v. Court of Tax Appeals,[57] to wit:
(4) Under the NIRC of 1977, the national government The power of taxation is sometimes called also the power
imposed amusement tax only on proprietors, lessees or to destroy. Therefore, it should be exercised with caution to minimize
operators of cabarets, day and night clubs, Jai-Alai and race injury to the proprietary rights of a taxpayer. It must be exercised
tracks. fairly, equally and uniformly, lest the tax collector kill the hen that lays
the golden egg. And, in order to maintain the general public's trust
(5) The VAT law was enacted to replace the tax on original and confidence in the Government this power must be used justly
and subsequent sales tax and percentage tax on certain and not treacherously.
services.
(6) When the VAT law was implemented, it exempted
persons subject to amusement tax under the NIRC from the The repeal of the Local Tax
coverage of VAT. Code by the LGC of 1991 is not
a legal basis for the imposition
(7) When the Local Tax Code was repealed by the LGC of of VAT
1991, the local government continued to impose
amusement tax on admission tickets from theaters,
cinematographs, concert halls, circuses and other places of Petitioner, in issuing the assessment notices for deficiency VAT against
amusements. respondents, ratiocinated that:
23
(8) Amendments to the VAT law have been consistent in Basically, it was acknowledged that a cinema/theater
exempting persons subject to amusement tax under the operator was then subject to amusement tax under Section 260 of
Page
NIRC from the coverage of VAT. Commonwealth Act No. 466, otherwise known as the National
Internal Revenue Code of 1939, computed on the amount paid for
admission. With the enactment of the Local Tax Code under Rule on tax exemption does
Presidential Decree (PD) No. 231, dated June 28, 1973, the power of not apply
imposing taxes on gross receipts from admission of persons to
cinema/theater and other places of amusement had, thereafter, Moreover, contrary to the view of petitioner, respondents need not prove
been transferred to the provincial government, to the exclusion of their entitlement to an exemption from the coverage of VAT. The rule that tax
the national or municipal government (Sections 11 & 13, Local Tax exemptions should be construed strictly against the taxpayer presupposes that the
Code). However, the said provision containing the exclusive power taxpayer is clearly subject to the tax being levied against him.[61] The reason is obvious:
of the provincial government to impose amusement tax, had also it is both illogical and impractical to determine who are exempted without first
been repealed and/or deleted by Republic Act (RA) No. 7160, determining who are covered by the provision.[62] Thus, unless a statute imposes a tax
otherwise known as the Local Government Code of 1991, enacted clearly, expressly and unambiguously, what applies is the equally well-settled rule that
into law on October 10, 1991. Accordingly, the enactment of RA No. the imposition of a tax cannot be presumed.[63] In fact, in case of doubt, tax laws must
7160, thus, eliminating the statutory prohibition on the national be construed strictly against the government and in favor of the taxpayer.[64]
government to impose business tax on gross receipts from
admission of persons to places of amusement, led the way to the WHEREFORE, the Petition is hereby DENIED. The assailed April 30, 2008 Decision
valid imposition of the VAT pursuant to Section 102 (now Section of the Court of Tax Appeals En Banc holding that gross receipts derived by
108) of the old Tax Code, as amended by the Expanded VAT Law respondents from admission tickets in showing motion pictures, films or movies are not
(RA No. 7716) and which was implemented beginning January 1, subject to value-added tax under Section 108 of the National Internal Revenue Code
1996.[58](Emphasis supplied) of 1997, as amended, and its June 24, 2008 Resolution denying the motion for
reconsideration are AFFIRMED.
We disagree.
SO ORDERED.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis for
the imposition of VAT on the gross receipts of cinema/theater operators or proprietors
derived from admission tickets. The removal of the prohibition under the Local Tax
G.R. No. 168584 October 15, 2007
Code did not grant nor restore to the national government the power to impose
amusement tax on cinema/theater operators or proprietors. Neither did it expand the
coverage of VAT. Since the imposition of a tax is a burden on the taxpayer, it cannot REPUBLIC OF THE PHILIPPINES, represented by THE HONORABLE SECRETARY OF
be presumed nor can it be extended by implication. A law will not be construed as FINANCE, THE HONORABLE COMMISSIONER OF BUREAU OF INTERNAL REVENUE,
imposing a tax unless it does so clearly, expressly, and unambiguously.[59] As it is, the THE HONORABLE COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF
power to impose amusement tax on cinema/theater operators or proprietors remains CUSTOMS OF THE PORT OF SUBIC, petitioners,
with the local government. vs.
HON. RAMON S. CAGUIOA, Presiding Judge, Branch 74, RTC, Third Judicial
Revenue Memorandum Region, Olongapo City, INDIGO DISTRIBUTION CORP., herein represented by
Circular No. 28-2001 is invalid ARIEL G. CONSOLACION, W STAR TRADING AND WAREHOUSING CORP., herein
represented by HIERYN R. ECLARINAL, FREEDOM BRANDS PHILS., CORP., herein
represented by ANA LISA RAMAT, BRANDED WAREHOUSE, INC., herein
Considering that there is no provision of law imposing VAT on the gross represented by MARY AILEEN S. GOZUN, ALTASIA INC., herein represented by
receipts of cinema/theater operators or proprietors derived from admission tickets, ALAN HARROW, TAINAN TRADE (TAIWAN), INC., herein represented by ELENA
RMC No. 28-2001 which imposes VAT on the gross receipts from admission to cinema RANULLO, SUBIC PARK N’ SHOP, herein represented by NORMA MANGALINO
houses must be struck down. We cannot overemphasize that RMCs must not override, DIZON, TRADING GATEWAYS INTERNATIONAL PHILS., herein represented by MA.
supplant, or modify the law, but must remain consistent and in harmony with, the law CHARINA FE C. RODOLFO, DUTY FREE SUPERSTORE (DFS), herein represented by
they seek to apply and implement.[60] RAJESH R. SADHWANI, CHJIMES TRADING INC., herein represented by ANGELO
MARK M. PICARDAL, PREMIER FREEPORT, INC., herein represented by ROMMEL
24
In view of the foregoing, there is no need to discuss whether RMC No. 28- P. GABALDON, FUTURE TRADE SUBIC FREEPORT, INC., herein represented by
2001 complied with the procedural due process for tax issuances as prescribed under WILLIE S. VERIDIANO, GRAND COMTRADE INTERNATIONAL CORP., herein
Page
RMC No. 20-86. represented by JULIUS MOLINDA, and FIRST PLATINUM INTERNATIONAL, INC.,
herein represented by ISIDRO M. MUÑOZ,respondents.
DECISION the Subic Special Economic Zone. In lieu of paying taxes, three
percent (3%) of the gross income earned by all businesses and
CARPIO MORALES, J.: enterprises within the Subic Special Economic Zone shall be remitted
to the National Government, one percent (1%) each to the local
government units affected by the declaration of the zone in
Petitioners seek via petition for certiorari and prohibition to annul (1) the May
proportion to their population area, and other factors. In addition,
4, 2005 Order1 issued by public respondent Judge Ramon S. Caguioa of the
there is hereby established a development fund of one percent (1%)
Regional Trial Court (RTC), Branch 74, Olongapo City, granting private
of the gross income earned by all businesses and enterprises within
respondents’ application for the issuance of a writ of preliminary injunction
the Subic Special Economic Zone to be utilized for the development
and (2) the Writ of Preliminary Injunction2that was issued pursuant to such
of municipalities outside the City of Olongapo and the Municipality of
Order, which stayed the implementation of Republic Act (R.A.) No. 9334, AN
Subic, and other municipalities contiguous to be base areas.
ACT INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND
TOBACCO PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142,
143, 144, 145 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS In case of conflict between national and local laws with respect to
AMENDED. tax exemption privileges in the Subic Special Economic Zone, the
same shall be resolved in favor of the latter;
Petitioners likewise seek to enjoin, restrain and inhibit public respondent from
enforcing the impugned issuances and from further proceeding with the trial (d) No exchange control policy shall be applied and free markets for
of Civil Case No. 102-0-05. foreign exchange, gold, securities and future shall be allowed and
maintained in the Subic Special Economic Zone;
The relevant facts are as follows:
(e) The Central Bank, through the Monetary Board, shall supervise and
regulate the operations of banks and other financial institutions within
In 1992, Congress enacted Republic Act (R.A) No. 72273
or the Bases
the Subic Special Economic Zone;
Conversion and Development Act of 1992 which, among other things,
created the Subic Special Economic and Freeport Zone (SBF4) and the Subic
Bay Metropolitan Authority (SBMA). (f) Banking and finance shall be liberalized with the establishment of
foreign currency depository units of local commercial banks and
offshore banking units of foreign banks with minimum Central Bank
R.A. No. 7227 envisioned the SBF to be developed into a "self-sustaining,
regulation;
industrial, commercial, financial and investment center to generate
employment opportunities in and around the zone and to attract and
promote productive foreign investments."5 In line with this vision, Section 12 of (g) Any investor within the Subic Special Economic Zone whose
the law provided: continuing investment shall not be less than Two hundred fifty
thousand dollars ($250,000), his/her spouse and dependent children
under twenty-one (21) years of age, shall be granted permanent
(b) The Subic Special Economic Zone shall be operated and
resident status within the Subic Special Economic Zone. They shall
managed as a separate customs territory ensuring free flow or
have freedom of ingress and egress to and from the Subic Special
movement of goods and capital within, into and exported out of the
Economic Zone without any need of special authorization from the
Subic Special Economic Zone, as well as provide incentives such as
Bureau of Immigration and Deportation. The Subic Bay Metropolitan
tax and duty-free importations of raw materials, capital and
Authority referred to in Section 13 of this Act may also issue working
equipment. However, exportation or removal of goods from the
visas renewal every two (2) years to foreign executives and other
territory of the Subic Special Economic Zone to the other parts of the
aliens possessing highly-technical skills which no Filipino within the
Philippine territory shall be subject to customs duties and taxes under
Subic Special Economic Zone possesses, as certified by the
the Customs and Tariff Code and other relevant tax laws of the
Department of Labor and Employment. The names of aliens granted
Philippines;
25
permanent residence status and working visas by the Subic Bay
Metropolitan Authority shall be reported to the Bureau of Immigration
(c) The provisions of existing laws, rules and regulations to the contrary and Deportation within thirty (30) days after issuance thereof;
Page
notwithstanding, no taxes, local and national, shall be imposed within
x x x x. (Emphasis supplied) exempt persons or entities, the purchasers or recipients shall be
considered the importers thereof, and shall be liable for the duty and
Pursuant to the law, private respondents Indigo Distribution Corporation, W internal revenue tax due on such importation.
Star Trading and Warehousing Corporation, Freedom Brands Philippines
Corporation, Branded Warehouse, Inc., Altasia, Inc., Tainan Trade (Taiwan) The provision of any special or general law to the contrary
Inc., Subic Park ‘N Shop, Incorporated, Trading Gateways International notwithstanding, the importation of cigars and cigarettes, distilled
Philipines, Inc., Duty Free Superstore (DFS) Inc., Chijmes Trading, Inc., Premier spirits, fermented liquors and wines into the Philippines, even if
Freeport, Inc., Future Trade Subic Freeport, Inc., Grand Comtrade Int’l., Corp., destined for tax and duty free shops, shall be subject to all applicable
and First Platinum International, Inc., which are all domestic corporations taxes, duties, charges, including excise taxes due thereon. This shall
doing business at the SBF, applied for and were granted Certificates of apply to cigars and cigarettes, distilled spirits, fermented liquors and
Registration and Tax Exemption6 by the SBMA. wines brought directly into the duly chartered or legislated freeports of
the Subic Economic Freeport Zone, created under Republic Act No.
These certificates allowed them to engage in the business either of trading, 7227; x x x and such other freeports as may hereafter be established
retailing or wholesaling, import and export, warehousing, distribution and/or or created by law: Provided, further, That importations of cigars and
transshipment of general merchandise, including alcohol and tobacco cigarettes, distilled spirits, fermented liquors and wines made directly
products, and uniformly granted them tax exemptions for such importations as by a government-owned and operated duty-free shop, like the Duty
contained in the following provision of their respective Certificates: Free Philippines (DFP), shall be exempted from all applicable duties
only: x x x Provided, finally, That the removal and transfer of tax and
duty-free goods, products, machinery, equipment and other similar
ARTICLE IV. The Company shall be entitled to tax and duty-free
articles other than cigars and cigarettes, distilled spirits, fermented
importation of raw materials, capital equipment, and household and
liquors and wines, from one Freeport to another Freeport, shall not be
personal items for use solely within the Subic Bay Freeport
deemed an introduction into the Philippine customs territory. x x x.
Zonepursuant to Sections 12(b) and 12(c) of the Act and Sections 43,
(Emphasis and underscoring supplied)
45, 46 and 49 of the Implementing Rules. All importations by the
Company are exempt from inspection by the Societe Generale de
Surveillance if such importations are delivered immediately to and for On the basis of Section 6 of R.A. No. 9334, SBMA issued on January 10, 2005 a
use solely within the Subic Bay Freeport Zone. (Emphasis supplied) Memorandum8 declaring that effective January 1, 2005, all importations of
cigars, cigarettes, distilled spirits, fermented liquors and wines into the SBF,
including those intended to be transshipped to other free ports in the
Congress subsequently passed R.A. No. 9334, however, effective on January 1,
Philippines, shall be treated as ordinary importations subject to all applicable
2005,7 Section 6 of which provides:
taxes, duties and charges, including excise taxes.
Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as

Meanwhile, on February 3, 2005, former Bureau of Internal Revenue (BIR)
amended, is hereby amended to read as follows:
Commissioner Guillermo L. Parayno, Jr. requested then Customs Commissioner
George M. Jereos to immediately collect the excise tax due on imported
Sec. 131. Payment of Excise Taxes on Imported Articles. – alcohol and tobacco products brought to the Duty Free Philippines (DFP) and
Freeport zones.9
(A) Persons Liable. – Excise taxes on imported articles shall be paid by
the owner or importer to the Customs Officers, conformably with the Accordingly, the Collector of Customs of the port of Subic directed the SBMA
regulations of the Department of Finance and before the release of Administrator to require payment of all appropriate duties and taxes on all
such articles from the customshouse or by the person who is found in importations of cigars and cigarettes, distilled spirits, fermented liquors and
possession of articles which are exempt from excise taxes other than wines; and for all transactions involving the said items to be covered from then
those legally entitled to exemption. on by a consumption entry and no longer by a warehousing entry.10
26
In the case of tax-free articles brought or imported into the Philippines On February 7, 2005, SBMA issued a Memorandum11 directing the
by persons, entities or agencies exempt from tax which are departments concerned to require locators/importers in the SBF to pay the
Page
subsequently sold, transferred or exchanged in the Philippines to non- corresponding duties and taxes on their importations of cigars, cigarettes,
liquors and wines before said items are cleared and released from the They maintained that greater injury would be inflicted on the public should the
freeport. However, certain SBF locators which were "exclusively engaged in writ be granted.
the transshipment of cigarette products for foreign destinations" were allowed
by the SBMA to process their import documents subject to their submission of On May 4, 2005, the court a quo granted private respondents’ application for
an Undertaking with the Bureau of Customs.12 the issuance of a writ of preliminary injunction, after it found that the essential
requisites for the issuance of a preliminary injunction were present.
On February 15, 2005, private respondents wrote the offices of respondent
Collector of Customs and the SBMA Administrator requesting for a As investors duly licensed to operate inside the SBF, the trial court declared
reconsideration of the directives on the imposition of duties and taxes, that private respondents were entitled to enjoy the benefits of tax incentives
particularly excise taxes, on their shipments of cigars, cigarettes, wines and under R.A. No. 7227, particularly the exemption from local and national taxes
liquors.13 Despite these letters, however, they were not allowed to file any under Section 12(c); the aforecited provision of R.A. No. 7227, coupled with
warehousing entry for their shipments. private respondents’ Certificates of Registration and Tax Exemption from the
SBMA, vested in them a clear and unmistakable right or right in esse that
Thus, private respondent enterprises, through their representatives, brought would be violated should R.A. No. 9334 be implemented; and the invasion of
before the RTC of Olongapo City a special civil action for declaratory such right is substantial and material as private respondents would be
relief14 to have certain provisions of R.A. No. 9334 declared as unconstitutional, compelled to pay more than what they should by way of taxes to the national
which case was docketed as Civil Case No. 102-0-05. government.
In the main, private respondents submitted that (1) R.A. No. 9334 should not The trial court thereafter ruled that the prima facie presumption of validity of
be interpreted as altering, modifying or amending the provisions of R.A. No. R.A. No. 9334 had been overcome by private respondents, it holding that as a
7227 because repeals by implication are not favored; (2) a general law like partial amendment of the National Internal Revenue Code (NIRC) of
R.A. No. 9334 cannot amend R.A. No. 7727, which is a special law; and (3) the 1997,18 as amended, R.A. No. 9334 is a general law that could not prevail over
assailed law violates the one bill-one subject rule embodied in Section 26(1), a special statute like R.A. No. 7227 notwithstanding the fact that the assailed
Article VI 15 of the Constitution as well as the constitutional proscription against law is of later effectivity.
the impairment of the obligation of contracts.16
The trial court went on to hold that the repealing provision of Section 10 of R.A.
Alleging that great and irreparable loss and injury would befall them as a No. 9334 does not expressly mention the repeal of R. A. No. 7227, hence, its
consequence of the imposition of taxes on alcohol and tobacco products repeal can only be an implied repeal, which is not favored; and since R.A. No.
brought into the SBF, private respondents prayed for the issuance of a writ of 9334 imposes new tax burdens, whatever doubts arising therefrom should be
preliminary injunction and/or Temporary Restraining Order (TRO) and resolved against the taxing authority and in favor of the taxpayer.
preliminary mandatory injunction to enjoin the directives of herein petitioners.
The trial court furthermore held that R.A. No. 9334 violates the terms and
Petitioners duly opposed the private respondents’ prayer for the issuance of a conditions of private respondents’ subsisting contracts with SBMA, which are
writ of preliminary injunction and/or TRO, arguing that (1) tax exemptions are embodied in their Certificates of Registration and Exemptions in contravention
not presumed and even when granted, are strictly construed against the of the constitutional guarantee against the impairment of contractual
grantee; (2) an increase in business expense is not the injury contemplated by obligations; that greater damage would be inflicted on private respondents if
law, it being a case of damnum absque injuria; and (3) the drawback the writ of injunction is not issued as compared to the injury that the
mechanism established in the law clearly negates the possibility of the feared government and the general public would suffer from its issuance; and that
injury.17 the damage that private respondents are bound to suffer once the assailed
statute is implemented – including the loss of confidence of their foreign
Petitioners moreover pointed out that courts are enjoined from issuing a writ of principals, loss of business opportunity and unrealized income, and the danger
injunction and/or TRO on the grounds of an alleged nullity of a law, ordinance of closing down their businesses due to uncertainty of continued viability –
27
or administrative regulation or circular or in a manner that would effectively cannot be measured accurately by any standard.
dispose of the main case. Taxes, they stressed, are the lifeblood of the
Page
government and their prompt and certain availability is an imperious need. With regard to the rule that injunction is improper to restrain the collection of
taxes under Section 21819 of the NIRC, the trial court held that what is sought
to be enjoined is not per se the collection of taxes, but the implementation of In their Reply25 to private respondents’ Comment, petitioners additionally
a statute that has been found preliminarily to be unconstitutional. plead public respondent’s bias and partiality in allowing the motions for
intervention of a number of corporations26 without notice to them and in
Additionally, the trial court pointed out that private respondents’ taxes have disregard of their present pending petition for certiorari and prohibition before
not yet been assessed, as they have not filed consumption entries on all their this Court. The injunction bond filed by private respondent Indigo Distribution
imported tobacco and alcohol products, hence, their duty to pay the Corporation, they stress, is not even sufficient to cover all the original private
corresponding excise taxes and the concomitant right of the government to respondents, much less, intervenor-corporations.
collect the same have not yet materialized.
The petition is partly meritorious.
On May 11, 2005, the trial court issued a Writ of Preliminary Injunction directing
petitioners and the SBMA Administrator as well as all persons assisting or acting At the outset, it bears emphasis that only questions relating to the propriety of
for and in their behalf "1) to allow the operations of [private respondents] in the issuance of the May 4, 2005 Order and the Writ of Preliminary Injunction
accordance with R.A. No. 7227; 2) to allow [them] to file warehousing entries are properly within the scope of the present petition and shall be so
instead of consumption entries as regards their importation of tobacco and addressed in order to determine if public respondent committed grave abuse
alcohol products; and 3) to cease and desist from implementing the pertinent of discretion. The arguments raised by private respondents which pertain to
provisions of R.A. No. 9334 by not compelling [private respondents] to the constitutionality of R.A. No. 9334 subject matter of the case pending
immediately pay duties and taxes on said alcohol and tobacco products as a litigation before the trial court have no bearing in resolving the present
condition to their removal from the port area for transfer to the warehouses of petition.
[private respondents]."20
Section 3 of Rule 58 of the Revised Rules of Court provides:
The injunction bond was approved at One Million pesos (P1,000,000).21
SEC. 3. Grounds for issuance of preliminary injunction. – A preliminary
Without moving for reconsideration, petitioners have come directly to this injunction may be granted when it is established.
Court to question the May 4, 2005 Order and the Writ of Preliminary Injunction
which, they submit, were issued by public respondent with grave abuse of (a) That the applicant is entitled to the relief demanded, and the
discretion amounting to lack or excess of jurisdiction. whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the
In particular, petitioners contend that public respondent peremptorily and performance of an act or acts, either for a limited period or
unjustly issued the injunctive writ despite the absence of the legal requisites for perpetually;
its issuance, resulting in heavy government revenue losses.22 They emphatically
argue that since the tax exemption previously enjoyed by private respondents (b) That the commission, continuance or non-performance of the act
has clearly been withdrawn by R.A. No. 9334, private respondents do not have or acts complained of during the litigation would probably work
any right in esse nor can they invoke legal injury to stymie the enforcement of injustice to the applicant; or
R.A. No. 9334.
(c) That a party, court, agency or a person is doing, threatening, or is
Furthermore, petitioners maintain that in issuing the injunctive writ, public attempting to do, or is procuring or suffering to be done, some act or
respondent showed manifest bias and prejudice and prejudged the merits of acts probably in violation of the rights of the applicant respecting the
the case in utter disregard of the caveat issued by this Court in Searth subject of the action or proceeding, and tending to render the
Commodities Corporation, et al. v. Court of Appeals23 and Vera v. Arca.24 judgment ineffectual.
Regarding the P1 million injunction bond fixed by public respondent, For a writ of preliminary injunction to issue, the plaintiff must be able to
petitioners argue that the same is grossly disproportionate to the damages establish that (1) there is a clear and unmistakable right to be protected, (2)
28
that have been and continue to be sustained by the Republic. the invasion of the right sought to be protected is material and substantial,
and (3) there is an urgent and paramount necessity for the writ to prevent
Page
serious damage.27
Conversely, failure to establish either the existence of a clear and positive right The provision of any special or general law The provision of any speci
which should be judicially protected through the writ of injunction, or of the to the contrary notwithstanding, the to the contrary notwithstan
acts or attempts to commit any act which endangers or tends to endanger importation of cigars and cigarettes, importation of cigars and c
the existence of said right, or of the urgent need to prevent serious damage, is distilled spirits, fermented liquors and wines distilled spirits, fermented l
a sufficient ground for denying the preliminary injunction.28 into the Philippines, even if destined for tax into the Philippines, even i
and duty free shops, shall be subject to all and duty free shops, shall
It is beyond cavil that R.A. No. 7227 granted private respondents exemption applicable taxes, duties, charges, including applicable taxes, duties, c
from local and national taxes, including excise taxes, on their importations of excise taxes due thereon. Provided, excise taxes due thereon.
general merchandise, for which reason they enjoyed tax-exempt status until however, That this shall not apply to cigars cigars and cigarettes, disti
the effectivity of R.A. No. 9334. and cigarettes, fermented spirits and wines fermented liquors and win
brought directly into the duly chartered or directly into the duly chart
legislated freeports of the Subic Economic freeports of the Subic Econ
By subsequently enacting R.A. No. 9334, however, Congress expressed its
Freeport Zone, created under Republic Act Zone, created under Repu
intention to withdraw private respondents’ tax exemption privilege on their
No. 7227; the Cagayan Special Economic the Cagayan Special Econ
importations of cigars, cigarettes, distilled spirits, fermented liquors and wines.
Zone and Freeport, created under Republic Freeport, created under Re
Juxtaposed to show this intention are the respective provisions of Section 131
Act No. 7922; and the Zamboanga City 7922; and the Zamboanga
of the NIRC before and after its amendment by R.A. No. 9334:
Special Economic Zone, created under Economic Zone, created u
Republic Act No. 7903, and are not Act No. 7903, and such ot
x x x x. transshipped to any other port in the may hereafter be establish
Philippines: Provided, further, That law: Provided, further, Tha
Sec. 131 of NIRC before R.A. No. 9334 Sec. 131, as amended by R.A. No. 9334 importations of cigars and cigarettes, cigars and cigarettes, disti
Sec. 131. Payment of Excise Taxes on Sec. 131. Payment of Excise Taxes on distilled spirits, fermented liquors and wines fermented liquors and win
Imported Articles. – Imported Articles. – made directly by a government-owned by a government-owned a
and operated duty-free shop, like the Duty duty-free shop, like the Du
Free Philippines (DFP), shall be exempted (DFP), shall be exempted f
(A) Persons Liable. – Excise taxes on (A) Persons Liable. – Excise taxes on
from all applicable duties, charges, applicable duties only: Pro
imported articles shall be paid by the owner imported articles shall be paid by the owner
including excise tax due thereon; Provided That such articles directly i
or importer to the Customs Officers, or importer to the Customs Officers,
still further, That such articles directly government-owned and o
conformably with the regulations of the conformably with the regulations of the
imported by a government-owned and free shop, like the Duty-Fre
Department of Finance and before the Department of Finance and before the
operated duty-free shop, like the Duty-Free shall be labeled "tax and d
release of such articles from the customs release of such articles from the customs
Philippines, shall be labeled "tax and duty- "not for resale": Provided, f
house or by the person who is found in house or by the person who is found in
free" and "not for resale": Provided, still removal and transfer of ta
possession of articles which are exempt possession of articles which are exempt
further, That if such articles brought into the goods, products, machine
from excise taxes other than those legally from excise taxes other than those legally
duly chartered or legislated freeports under and other similar articles o
entitled to exemption. entitled to exemption.
Republic Acts Nos. 7227, 7922 and 7903 are and cigarettes, distilled sp
subsequently introduced into the Philippine liquors and wines, from on
In the case of tax-free articles brought or In the case of tax-free articles brought or customs territory, then such articles shall, another Freeport, shall not
imported into the Philippines by persons, imported into the Philippines by persons, upon such introduction, be deemed introduction into the Philip
entities or agencies exempt from tax which entities or agencies exempt from tax whichimported into the Philippines and shall be territory.
are subsequently sold, transferred or are subsequently sold, transferred or subject to all imposts and excise taxes
exchanged in the Philippines to non- exchanged in the Philippines to non- provided herein and other statutes: x x x x.
exempt persons or entities, the purchasers exempt persons or entities, the purchasers Provided, finally, That the removal and
or recipients shall be considered the or recipients shall be considered the transfer of tax and duty-free goods,
importers thereof, and shall be liable for the importers thereof, and shall be liable for theproducts, machinery, equipment and other
29
duty and internal revenue tax due on such duty and internal revenue tax due on suchsimilar articles, from one freeport to another
importation. importation. freeport, shall not be deemed an
Page
introduction into the Philippine customs
territory. Fourth. A tax exemption cannot be grounded upon the continued existence
of a statute which precludes its change or repeal.37 Flowing from the basic
x x x x. precept of constitutional law that no law is irrepealable, Congress, in the
legitimate exercise of its lawmaking powers, can enact a law withdrawing a
tax exemption just as efficaciously as it may grant the same under Section
(Emphasis and underscoring supplied) 28(4) of Article VI 38 of the Constitution. There is no gainsaying therefore that
Congress can amend Section 131 of the NIRC in a manner it sees fit, as it did
To note, the old Section 131 of the NIRC expressly provided that all taxes, when it passed R.A. No. 9334.
duties, charges, including excise taxes shall not apply to importations of cigars,
cigarettes, fermented spirits and wines brought directly into the duly chartered Fifth. The rights granted under the Certificates of Registration and Tax
or legislated freeports of the SBF. Exemption of private respondents are not absolute and unconditional as to
constitute rights in esse – those clearly founded on or granted by law or is
On the other hand, Section 131, as amended by R.A. No. 9334, now provides enforceable as a matter of law.39
that such taxes, duties and charges, including excise taxes, shall apply to
importation of cigars and cigarettes, distilled spirits, fermented liquors and These certificates granting private respondents a "permit to operate" their
wines into the SBF. respective businesses are in the nature of licenses, which the bulk of
jurisprudence considers as neither a property nor a property right.40 The
Without necessarily passing upon the validity of the withdrawal of the tax licensee takes his license subject to such conditions as the grantor sees fit to
exemption privileges of private respondents, it behooves this Court to state impose, including its revocation at pleasure.41 A license can thus be revoked
certain basic principles and observations that should throw light on the at any time since it does not confer an absolute right.42
propriety of the issuance of the writ of preliminary injunction in this case.
While the tax exemption contained in the Certificates of Registration of private
First. Every presumption must be indulged in favor of the constitutionality of a respondents may have been part of the inducement for carrying on their
statute.29 The burden of proving the unconstitutionality of a law rests on the businesses in the SBF, this exemption, nevertheless, is far from being
party assailing the law.30 In passing upon the validity of an act of a co-equal contractual in nature in the sense that the non-impairment clause of the
and coordinate branch of the government, courts must ever be mindful of the Constitution can rightly be invoked.43
time-honored principle that a statute is presumed to be valid.
Sixth. Whatever right may have been acquired on the basis of the Certificates
Second. There is no vested right in a tax exemption, more so when the latest of Registration and Tax Exemption must yield to the State’s valid exercise of
expression of legislative intent renders its continuance doubtful. Being a mere police power.44 It is well to remember that taxes may be made the implement
statutory privilege,31 a tax exemption may be modified or withdrawn at will by of the police power.45
the granting authority.32
It is not difficult to recognize that public welfare and necessity underlie the
To state otherwise is to limit the taxing power of the State, which is unlimited, enactment of R.A. No. 9334. As petitioners point out, the now assailed
plenary, comprehensive and supreme. The power to impose taxes is one so provision was passed to curb the pernicious practice of some unscrupulous
unlimited in force and so searching in extent, it is subject only to restrictions business enterprises inside the SBF of using their tax exemption privileges for
which rest on the discretion of the authority exercising it.33 smuggling purposes. Smuggling in whatever form is bad enough; it is worse
when the same is allegedly perpetrated, condoned or facilitated by
Third. As a general rule, tax exemptions are construed strictissimi juris against enterprises hiding behind the cloak of their tax exemption privileges.
the taxpayer and liberally in favor of the taxing authority.34 The burden of
proof rests upon the party claiming exemption to prove that it is in fact Seventh. As a rule, courts should avoid issuing a writ of preliminary injunction
covered by the exemption so claimed.35 In case of doubt, non-exemption is which would in effect dispose of the main case without trial.46 This rule is
30
favored.36 intended to preclude a prejudgment of the main case and a reversal of the
rule on the burden of proof since by issuing the injunctive writ, the court would
Page
assume the proposition that petitioners are inceptively duty bound to prove.47
Eighth. A court may issue a writ of preliminary injunction only when the Indeed, Sections 20454 and 22955 of the NIRC provide for the recovery of
petitioner assailing a statute has made out a case of unconstitutionality or erroneously or illegally collected taxes which would be the nature of the
invalidity strong enough, in the mind of the judge, to overcome the excise taxes paid by private respondents should Section 6 of R.A. No. 9334 be
presumption of validity, in addition to a showing of a clear legal right to the declared unconstitutional or invalid.
remedy sought.48
It may not be amiss to add that private respondents can also opt not to
Thus, it is not enough that petitioners make out a case of unconstitutionality or import, or to import less of, those items which no longer enjoy tax exemption
invalidity to overcome the prima faciepresumption of validity of a statute; under R.A. No. 9334 to avoid the payment of taxes thereon.
they must also be able to show a clear legal right that ought to be protected
by the court. The issuance of the writ is therefore not proper when the The Court finds that public respondent had also ventured into the delicate
complainant’s right is doubtful or disputed.49 area which courts are cautioned from taking when deciding applications for
the issuance of the writ of preliminary injunction. Having ruled preliminarily
Ninth. The feared injurious effects of the imposition of duties, charges and against the prima facie validity of R.A. No. 9334, he assumed in effect the
taxes on imported cigars, cigarettes, distilled spirits, fermented liquors and proposition that private respondents in their petition for declaratory relief were
wines on private respondents’ businesses cannot possibly outweigh the dire duty bound to prove, thereby shifting to petitioners the burden of proving that
consequences that the non-collection of taxes, not to mention the unabated R.A. No. 9334 is not unconstitutional or invalid.
smuggling inside the SBF, would wreak on the government. Whatever
damage would befall private respondents must perforce take a back seat to In the same vein, the Court finds public respondent to have overstepped his
the pressing need to curb smuggling and raise revenues for governmental discretion when he arbitrarily fixed the injunction bond of the SBF enterprises at
functions. only P1million.
All told, while the grant or denial of an injunction generally rests on the sound The alleged sparseness of the testimony of Indigo Corporation’s
discretion of the lower court, this Court may and should intervene in a clear representative56 on the injury to be suffered by private respondents may be
case of abuse.50 excused because evidence for a preliminary injunction need not be
conclusive or complete. Nonetheless, considering the number of private
One such case of grave abuse obtained in this case when public respondent respondent enterprises and the volume of their businesses, the injunction bond
issued his Order of May 4, 2005 and the Writ of Preliminary Injunction on May is undoubtedly not sufficient to answer for the damages that the government
11, 200551 despite the absence of a clear and unquestioned legal right of was bound to suffer as a consequence of the suspension of the
private respondents. implementation of the assailed provisions of R.A. No. 9334.
In holding that the presumption of constitutionality and validity of R.A. No. Rule 58, Section 4(b) provides that a bond is executed in favor of the party
9334 was overcome by private respondents for the reasons public respondent enjoined to answer for all damages which it may sustain by reason of the
cited in his May 4, 2005 Order, he disregarded the fact that as a condition sine injunction. The purpose of the injunction bond is to protect the defendant
qua non to the issuance of a writ of preliminary injunction, private respondents against loss or damage by reason of the injunction in case the court finally
needed also to show a clear legal right that ought to be protected. That decides that the plaintiff was not entitled to it, and the bond is usually
requirement is not satisfied in this case. conditioned accordingly.57
To stress, the possibility of irreparable damage without proof of an actual Recalling this Court’s pronouncements in Olalia v. Hizon58 that:
existing right would not justify an injunctive relief.52
x x x [T]here is no power the exercise of which is more delicate, which
Besides, private respondents are not altogether lacking an appropriate relief requires greater caution, deliberation and sound discretion, or more
under the law. As petitioners point out in their Petition53 before this Court, dangerous in a doubtful case, than the issuance of an injunction. It is
31
private respondents may avail themselves of a tax refund or tax credit should the strong arm of equity that should never be extended unless to
R.A. No. 9334 be finally declared invalid. cases of great injury, where courts of law cannot afford an adequate
Page
or commensurate remedy in damages.
Every court should remember that an injunction is a limitation upon HERMOSISIMA, JR., J.:
the freedom of action of the defendant and should not be granted
lightly or precipitately. It should be granted only when the court is fully Of grave concern to this Court is the judicial pronouncement of the
satisfied that the law permits it and the emergency demands it, court a quo that certain provisions of the Tariff & Customs Code and the
National Internal Revenue Code are unconstitutional. This provokes the
it cannot be overemphasized that any injunction that restrains the collection issue: Can the Regional Trial Courts declare a law inoperative and without
of taxes, which is the inevitable result of the suspension of the implementation force and effect or otherwise unconstitutional? If it can, under what
of the assailed Section 6 of R.A. No. 9334, is a limitation upon the right of the circumstances?
government to its lifeline and wherewithal.
In this petition, the Commissioner of Internal Revenue and the
Commissioner of Customs jointly seek the reversal of the Decision, [1] dated
The power to tax emanates from necessity; without taxes, government cannot
February 16, 1995, of herein public respondent, Hon. Apolinario B. Santos,
fulfill its mandate of promoting the general welfare and well-being of the
Presiding Judge of Branch 67 of the Regional Trial Court of Pasig City.
people.59 That the enforcement of tax laws and the collection of taxes are of
paramount importance for the sustenance of government has been The following facts, concisely related in the petition[2] of the Office of the
repeatedly observed. Taxes being the lifeblood of the government that should Solicitor General, appear to be undisputed:
be collected without unnecessary hindrance,60 every precaution must be
taken not to unduly suppress it. "1. Private respondent Guild of Philippine Jewelers, Inc., is an association of
Filipino jewelers engaged in the manufacture of jewelers (sic) and allied
undertakings. Among its members are Hans Brumann, Inc., Miladay Jewels
Whether this Court must issue the writ of prohibition, suffice it to stress that
Inc., Mercelles, Inc., Solid Gold International Traders inc., Diagem Trading
being possessed of the power to act on the petition for declaratory relief,
Corporation, and Private respondent Jewelry by Marco & Co., Inc. Private
public respondent can proceed to determine the merits of the main case. To
respondent Antonio M. Marco is the President of the Guild.
halt the proceedings at this point may be acting too prematurely and would
2. On August 5, 1988, Felicidad L. Viray, then Regional Director, Region No. 4-A
not be in keeping with the policy that courts must decide controversies on the
of the Bureau of Internal Revenue, acting for and in behalf of the
merits.
Commissioner of Internal Revenue, issued Regional Mission Order No. 109-88 to
BIR officers, led by Eliseo Corcega, to conduct surveillance, monitoring, and
Moreover, lacking the requisite proof of public respondent’s alleged partiality, inventory of all imported articles of Hans Brumann, Inc., and place the same
this Court has no ground to prohibit him from proceeding with the case for under preventive embargo. The duration of the mission was from August 8 to
declaratory relief. For these reasons, prohibition does not lie. August 20, 1988 (Exhibit 1; Exhibit A).
3. On August 17, 1988, persuant to the aforementioned Mission Order, the BIR
WHEREFORE, the Petition is PARTLY GRANTED. The writ of certiorari to nullify and officers proceeded to the establishment of Hans Brumann, Inc., served the
set aside the Order of May 4, 2005 as well as the Writ of Preliminary Injunction Mission Order, and informed the establishment that they were going to make
issued by respondent Judge Caguioa on May 11, 2005 is GRANTED. The an inventory of the articles involved to see if the proper taxes thereon have
assailed Order and Writ of Preliminary Injunction are hereby declared NULL been paid. They then made an inventory of the articles displayed in the
AND VOID and accordingly SET ASIDE. The writ of prohibition prayed for is, cabinets with the assistance of an employee of the establishment. They listed
however, DENIED. down the articles, which list was signed by the assistant employee. They also
requested the presentation of proof of necessary payments for excise tax and
SO ORDERED. value-added tax on said articles (pp, 10-15, TSN April 12,1993, Exhibits 2, 2-A, 3,
3-a).
4. The BIR officers requested the establishment not to sell the articles until it can
COMMISIONER OF INTERNAL REVENUE and COMMISIONER OF be proven that the necessary taxes thereon have been paid. Accordingly, Mr.
CUSTOMS, petitioners, vs. HON. APOLINARIO B. SANTOS, in his capacity Hans Brumann, the owner of the establishment, signed a receipt for Goods,
as Presiding Judge of the Regional Trial Court, Branch 67, Pasig City; Articles, and Things Seized under Authority of the National Internal Revenue
ANTONIO M. MARCO; JEWELRY BY MARCO & CO., INC., and GUILD OF
32
Code (dated August 17, 1988), acknowledging that the articles inventoried
PHILIPPINE JEWELLERS, INC., respondents. have been seized and left in his possession, and promising not to dispose of
the same without authority of the Commissioner of Internal Revenue pending
Page
DECISION investigation.[3]
5. Subsequently, BIR officer Eliseo Corcega submitted to his superiors a report 1. Declaring Section 104 of the Tariff and the Custom Code of the Philippines,
of the inventory conducted and a computation of the value-added tax and Hdg, 71.01, 71.02, 71.03, and 71.04, Chapter 71 as amended by Executive
ad valorem tax on the articles for evaluation and disposition.[4] Order No. 470, imposing three to ten (3% to 10%) percent tariff and customs
6. Mr. Hans Brumann, the owner of the establishment, never filed a protest with duty on natural and cultured pearls and precious or semi-precious stones, and
the BIR on the preventive embargo of the articles.[5] Section 150 par. (a)the National Internal Revenue Code of 1977, as amended,
7. On October 17, 1988, Letter of Authority No. 0020596 was issued by Deputy renumbered and rearranged by Executive Order 273, imposing twenty (20%)
Commissioner Eufracio D. Santos to BIR officers to examine the books of percent excise tax on jewelry, pearls and other precious stones, as
accounts and other accounting records of Hans Brumann, Inc., for stocktaking INOPERATIVE and WITHOUT FORCE and EFFECT insofar as petitioners are
investigation for excise tax purposes for the period January 1, 1988 to present concerned.
(Exhibit C). In a latter dated October 27, 1988, in connection with the physical
count of the inventory (stocks on hand) pursuant to said Letter of Authority, 2. Enforcement of the same is hereby enjoined.
Hans Brumann, Inc. was requested to prepare and make available to the BIR
the documents indicated therein (Exhibit 'D'). No cost.
8. Hans Brumann, inc., did not produce the documents requested by the BIR.[6] SO ORDERED.
9. Similar Letters of Authority were issued to BIR officers to examine the books
Section 150 (a) of Executive Order No. 273 reads:
of accounts ans other accounting records of Miladay Jewels, Inc., Mercelles,
Inc., Solid Gold International Traders, Inc., (Exhibit E, G and N) and Diagem SEC. 150. Non-essential goods. There shall be levied, assessed and collected a
Trading Corporation[7] for stocktaking/investigation for excise tax pirpose for tax equivalent to 20% based on the wholesale price or the value of
the period January 1, 1988 to present. importation used by the Bureau of Customs in determining tariff and customs
10. In the case of Miladay Jewels, Inc. and Mercelles, Inc., there is no account duties; net of the excise tax and value-added tax, of the following goods:
of what actually transpired in the implementation of the Letters of Authority. (a) All goods commonly or commercially known as jewelry, whether real or
11. In the case of Solid Gold International Traders Corporation, the BIR officers imitation, pearls, precious and semi-precious stones and imitations thereof;
made an inventory of the articles in the establishment. [8] The same is true with goods made of, or ornamented, mounted and fitted with, precious metals or
respect to Diagem Traders Corporation.[9] imitations thereof or ivory (not including surgical and dental instruments, silver-
12. On November 29, 1988, private respondents Antonio M. Marco and plated wares, frames or mountings for spectacles or eyeglasses, and dental
Jewelry By Marco & Co., Inc. filed with the Regional Trial Court, National gold or gold alloys and other precious metals used in filling, mounting or fitting
Capital Judicial Region, Pasig City, Meto Manila, a petition for declaratory of the teeth); opera glasses and lorgnettes. The term precious metals shall
relief with writ of preliminary injunction and/or temporary restraining order include platinum, gold, silver, and other metals of similar or greater value. The
against herein petitioners and Revenue Regional Director Felicidad L. Viray term imitation thereof shall include platings and alloys of such metals.
(docketed as Civil Case No. 56736) praying that Sections 126, 127(a) and (b)
and 150 (a) of the National Internal Revenue Code and Hdg. No 71.01, 71.02, Section 150 (a) of Executive Order No. 273, which took effect on January
71.03 and 71.04, Chapter 71 of the Tariff and Customs Code of the Philippines 1, 1988, amended the then Section 163 (a) of the Tax Code of 1986 which
be declared unconstitutional and void, and that the Commissioner of Internal provided that:
Revenue and Customs be prevented or enjoined from issuing mission orders
and other orders of similar nature. x x x SEC. 163. Percentage tax on sales of non-essential articles. There shall be
13. On February 9, 1989, herein petitioners filed their answer to the petition. x x levied, assessed and collected, once only on every original sale, barter,
x exchange or similar transaction for nominal or valuable consideration
14. On October 16, 1989, private respondents filed a Motion with Leave to intended to transfer ownership of, or title to, the article herein below
Amend Petition by including as petitioner the Guild of Philippine Jewelers, Inc., enumerated a tax equivalent to 50% of the gross value in money of the
which motion was granted. x x x articles so sold, bartered. Exchanged or transferred, such tax to be paid by the
15. The case, which was originally assigned to Branch 154, was later manufacturer or producer:
reassigned to Branch 67. (a) All articles commonly or commercially known as jewelry, whether real or
16. On February 16, 1995, public respondent rendered a decision, the imitation, pearls, precious and semi-precious stones, and imitations thereof,
dispositive portion of which reads: articles made of, or ornamented, mounted or fitted with, precious metals or
33
'In view of the foregoing reflections, judgment is hereby rendered, as follows: imitations thereof or ivory (not including surgical and dental instruments, silver-
plated wares, frames or mounting for spectacles or eyeglasses, and dental
Page
gold or gold alloys and other precious metal used in filling, mounting or fitting
of the teeth); opera glasses, and lorgnettes. The term precious metals shall
include platinum, gold, silver, and other metals of similar or greater value. The Evidence for the petitioners indeed reveals that government taxation policy
term imitations thereof shall include platings and alloys of such metals; treats jewelry, pearls, and other precious stones and metals as non-essential
luxury items and therefore, taxed heavily; that the atmospheric cost of
Section 163(a) of the 1986 Tax Code was formerly Section 194(a) of the taxation is killing the local manufacturing jewelry industry because they
1977 Tax Code and Section 184(a) of the Tax code, as amended by cannot compete with the neighboring and other countries where importation
Presidential Decree No. 69, which took effect on January 1, 1974. and manufacturing of jewelry is not taxed heavily, if not at all; that while
government incentives and subsidies exist, local manufacturers cannot avail
It will be noted that, while under the present law, jewelry is subject to a
of the same because officially many of them are unregistered and are unable
20% excise tax in addition to a 10% value-added tax under the old law, it was
to produce the required official documents because they operate
subjected to 50% percentage tax. It was even subjected to a 70% percentage
underground, outside the tariff and tax structure; that local jewelry
tax under then Section 184(a) of the Tax Code, as amended by P.D. 69.
manufacturing is under threat of extinction, otherwise discouraged, while
Section 104, Hdg, Nos. 17.01, 17.02, 17.03 and 17.04, Chapter 71 of the domestic trading has become more attractive; and as a consequence,
Tariff and Customs Code, as amended by Executive Order No. 470, dated July neighboring countries, such as Hongkong, Singapore, Malaysia, Thailand, and
20, 1991, imposes import duty on natural or cultured pearls and precious or other foreign competitors supplying the Philippine market either through local
semi-precious stones at the rate of 3% to 10% to be applied in stages from channels or through the black market for smuggled goods are the ones who
1991 to 1994 and 30% in 1995. are getting business and making money, while members of the petitioner
Guild of Philippine Jewelers, Inc. are constantly subjected to bureaucratic
Prior to the issuance of E.O. 470, the rate of import duty in 1988 was 10% harassment instead of being given by the government the necessary support
to 50% when the petition was filed in the court a quo. in order to survive and generate revenue for the government, and most of all
fight competitively not only in the domestic market but in the arena of world
In support of their petition before the lower court, the private respondents
market where the real contest is.
submitted a position paper purporting to be an exhaustive study of the tax
Considering the allegations of fact in the petition which were duly proven
rates on jewelry prevailing in other Asian countries, in comparison to tax rates
during the trial, the Court holds that the petition states a cause of action and
levied on the same in the Philippines.[10]
there exist a justiciable controversy between the parties which would require
The following issues were thus raised therein: determination of constitutionality of laws imposing excise tax and customs
duty on jewelry.[11] (emphasis ours)
"1. Whether or not the Honorable Court has jurisdiction over the subject matter
of the petition. The public respondent, in addressing the third issue, ruled that the laws in
2. Whether the petition states a cuase of action or whether the petition question are confiscatory and oppressive. Again, virtually adopting verbatim
alleges a justiciable controversy between the parties. the reasons presented by the private respondents in their position paper, the
3. Whether Section 150, par. (a) of the NIRC and Section 104, Hdg. 71.01, lower court stated:
71.02, 71.03 and 71.04 of the Tariff and Customs Code are unconstitutional.
The court finds that indeed government taxation policy trats(sic) hewelry(sic)
4. Whether the issuance of the Mission Order and Letters of Authority is valid
as non-essential luxury item and therefore, taxed heavily. Aside from the ten
and legal.
(10%) percent value added tax (VAT), local jewelry manufacturers contend
In the assailed decision, the public respondent held indeed that the with the (manufacturing) excise tax of twenty (20%) percent (to be applied in
Regional Trial Court has jurisdiction to take cognizance of the petition since stages) customs duties on imported raw materials, the highest in the Asia-
jurisdiction over the nature of the suit is conferred by law and it is detemine[d] Pacific region. In contrast, imported gemstones and other precious metals are
through the allegations in the petition, and that the Court of Tax Appeals ha duty free in Hongkong, Thailand, Malaysia and Singapore.
no jurisdiction to declare a statute unconstitutional much less issue writs The court elaborates further on the experience of other countries in their
of certiorari and prohibition in order to correct acts of respondents allegedly treatment of the jewelry sector.
committed with grave abuse of discretion amounting to lack of jurisdiction.
MALAYSIA
As to the second issue, the public respondent, made the holding that
Duties and taxes on imported gemstones and gold and the sales tax on
there exist a justiciable controversy between the parties, agreeing with the
34
jewelry were abolished in Malaysia in 1984. They were removed to
statements made in the position paper presented by the private respondents,
encouraged the development of Malaysias jewelry manufacturing industry
and considering these statements to be factual evidence, to wit:
Page
and to increase exports of jewelry.
THAILAND ineffectively, or cease manufacturing activities and instead engage in the
tradinf (sic) of smuggled finished jewelry.
Gems and jewelry are Thailands ninth most important export earner. In the Worthy of not is the fact that indeed no evidence was adduced by
past, the industry was overlooked by successive administrations much to the respondents to disprove the foregoing allegations of fact. Under the foregoing
dismay of those involved in developing trade. Prohibitive import duties and factual circumstances, the Court finds the questioned statutory provisions
sales tax on precious gemstones restricted the growth (sic) of the industry, confiscatory and destructive of the proprietary right of the petitioners to
resulting in most of the business being unofficial. It was indeed difficult for a engage in business in violation of Section 1, Article III of the Constitution which
government or businessman to promote an industry which did not officially states, as follows:
exist. No person shall be deprived of the life, liberty, or property without due process
Despite these circumstances, Thailands Gem business kept growing up in (sic) of law x x x.[12]
businessmen began to realize its potential. In 1978, the government quietly
removed the severe duties on precious stones, but imposed a sales tax of Anent the fourth and last issue, the herein public respondent did not find
3.5%. Little was said or done at that time as the government wanted to see if a it necessary to rule thereon, since, in his opinion, the same has been rendered
free trade in gemstones and jewelry would increase local manufacturing and moot and academic by the aforementioned pronouncement.[13]
exports or if it would mean more foreign made jewelry pouring into
Thailand. However, as time progressed, there were indications that local The petitioners now assail the decision rendered by the public
manufacturing was indeed being encouraged and the economy was earning respondent, contending that the latter has no authority to pass judgment
more from exports. The government soon removed the 3% sales tax too. upon the taxation policy of the government. In addition, the petitioners
Putting Thailand at par with Hongkong and Singapore. In these countries, impugn the decision in question by asserting that there was no showing that
there are no more import duties and sales tax on gems. (Cited in pages 6 and the tax laws on jewelry are confiscatory and desctructive of private
7 of Exhibit M. The Center for Research and Communication in cooperation respondents proprietary rights.
with the Guild of Philippine Jewelers, Inc., June 1986). We rule in favor of the petitioners.
To illustrate, shown hereunder in the Philippine tariff and tax structure on
jewelry and other percious and semi-precious stones compared to other It is interesting to note that public respondent, in the dispositive portion of
neighboring countries, to wit: his decision, perhaps keeping in mind his limitations under the law as a trial
Tariff on imported judge, did not go so far as to declare the laws in question to be
Jewelry and (MANUFACTURING) Sales Tax 10% (VAT) unconstitutional. However, therein he declared the laws to be inoperative and
Precious stones Excise Tax without force and effect insofar as the private respondents are
Philippines 3% to 10% to be 20% 10% VAT concerned. But, respondent judge, in the body of his decision, unequivocally
applied in stages but wrongly declared the said provisions of law to be violative of Section 1,
Malaysia None None None Article III of the Constitution. In fact, in their Supplemental Comment on the
Thailand None None None Petition for Review,[14] the private respondents insist that Judge Santos, in his
Singapore None None None capacity as judge of the Regional Trial Court, acted within his authority in
Hongkong None None None passing upon the issues, to wit:
In this connection, the present tariff and tax structure increases manufacturing
costs and renders the local jewelry manufacturers uncompetitive against A perusal of the appealed decision would undoubtedly disclose that public
other countries even before they start manufacturing and trading. Because of respondent did not pass judgment on the soundness or wisdom of the
the prohibitive cast(sic) of taxation, most manufacturers source from black governments tax policy on jewelry. True, public respondent, in his questioned
market for smuggled goods, and that while manufacturers can avail of tax decision, observed, inter alia, that indeed government tax policy treats jewelry
exemption and/or tax credits from the (manufacturing) excise tax, they have as non-essential item, and therefore, taxed heavily; that the present tariff and
no documents to present when filing this exemption because, as pointed out tax structure increase manufacturing cost and renders the local jewelry
earlier, most of them source their raw materials from the black market, and manufacturers uncompetitive against other countries even before they start
since many of them do not legally exist or operate onofficially(sic), or manufacturing and trading; that many of the local manufacturers do not
underground, again they have no records (receipts) to indicate where and legally exist or operate unofficially or underground; and that the
35
when they will utilize such tax credits. (Cited in Exhibit M Buencamino Report). manufacturers have no recourse but to the back door for smuggled goods if
Given these constraints, the local manufacturer has no recourse but to the only to be able to compete even if ineffectively or cease manufacturing
activities.
Page
back door for smuggled goods if only to be able to compete even
BUT, public respondent did not, in any manner, interfere with or encroach Trial Courts have no power whatsoever to declare a law unconstitutional. In J.
upon the prerogative of the legislature to determine what should be the tax M. Tuason and Co. v. Court of Appeals[20] we said that [p]lainly the
policy on jewelry. On the other hand, the issue raised before, and passed Constitution contemplates that the inferior courts should have jurisdiction in
upon by, the public respondent was whether or not Section 150, paragraph cases involving constitutionality of any treaty or law, for it speaks of appellate
(a) of the National Internal Revenue Code (NIRC) and Section 104, Hdg, 71.01, review of final judgments of inferior courts in cases where such constitutionality
71.02, 71.03 and 71,04 of the Tariff and Customs Code are unconstitutional, or happens to be in issue. this authority of lower courts to decide questions of
differently stated, whether or not the questioned statutory provisions affect the constitutionality in the first instance was reaffirmed in Ynos v.
constitutional right of private respondents to engage in business. Intermediate Court of Appeals.[21] But this authority does not extend to
It is submitted that public respondent confined himself on this issue which is deciding questions which pertain to legislative policy.
clearly a judicial question.
The trial court is not the proper forum for the ventilation of the issues
We find it incongruous, in the face of the sweeping pronouncements raised by the private respondents. The arguments they presented focus on the
made by Judge Santos in his decision, that private respondents can still persist wisdom of the provisions of law which they seek to nullify.Regional Trial Courts
in their argument that the former did not overreach the restrictions dictated can only look into the validity of a provision, that is, whether or not it has been
upon him by law. There is no doubt in the Courts mind, despite protestations to passed according to the procedures laid down by law, and thus cannot
the contrary, that respondent judge encroached upon matters properly inquire as to the reasons for its existence. Granting arguendo that the private
falling within the province of legislative functions. In citing as basis for his respondents may have provided convincing arguments why the jewelry
decision unproven comparative data pertaining to differences between tax industry in the Philippines should not be taxed as it is, it is to the legislature that
rates of various Asian countries, and concluding that the jewelry industry in the they must resort to for relief, since with the legislature primarily lies the
Philippines suffers as a result, the respondent judge took it upon himself to discretion to determine the nature (kind), object (purpose), extent (rate),
supplant legislative policy regarding jewelry taxation. In advocating the coverage (subjects) and situs (place) of taxation. This Court cannot freely
abolition of local tax and duty on jewelry simply because other countries have delve into those matters which, by constitutional fiat, rightly rest on legislative
adopted such policies, the respondent judge overlooked the fact that such judgment.[22]
matters are not for him to decide. There are reasons why jewelry, a non-
essential item, is taxed as it is in this country, and these reasons, deliberate As succinctly put in Lim vs. Pacquing:[23] Where a controversy may be
upon by our legislature, are beyond the reach of judicial questioning. As held settled an a platform other than one involving constitutional adjudication, the
in Macasiano vs. National Housing Authority:[15] court should exercise becoming modesty and avoid the constitutional
question. As judges, we can only interpret and apply the law and, despite our
The policy of our courts is to avoid ruling on constitutional questions and to doubts about its wisdom, cannot repeal or amend it.[24]
presume that the acts of the political departments are valid in the absence of
a clear and unmistakable showing to the contrary. To doubt is to sustain, this The respondents presented an exhaustive study on the tax rates on
presumption is based on the doctrine of separation of powers which enjoins jewelry levied by different Asian countries. This is meant to convince us that
upon each department a becoming respect for the acts of the other compared to other countries, the tax rates imposed on said industry in the
departments. The theory is that as the joint act of Congress and the President Philippines is oppressive and confiscatory. This Court, however, cannot
of the Philippines, a law has been carefully studied and determined to be in subscribe to the theory that the tax rates of other countries should be used as
accordance with the fundamental law before it was finally a yardstick in determining what may be the proper subjects of taxation in our
enacted. (emphasis ours) own country. It should be pointed out that in imposing the aforementioned
taxes and duties, the State, acting through the legislative and executive
What we see here is a debate on the WISDOM of the laws in branches, is exercising its sovereign prerogative. It is inherent in the power to
question. This is a matter on which the RTC is not competent to rule. [16] As tax that the State be free to select the subjects of taxation, and it has been
Cooley observed: Debatable questions are for the legislature to decide. The repeatedly held that inequalities which result from singling out of one
courts do not sit to resolve the merits of conflicting issues.[17] In Angara vs. particular class for taxation, or exemption, infringe no constitutional
Electoral Commission,[18] Justice Laurel made it clear that the judiciary does limitation.[25]
not pass upon question of wisdom, justice or expediency of legislation. And
fittingly so, for in the exercise of judicial power, we are allowed only to settle WHEREFORE, premises considered, the petition is hereby GRANTED, and
36
actual controversies involving rights which are legally demandable and the DECISION in Civil Case No. 56736 is hereby REVERSED and SET ASIDE. No
enfoceable, and may not annul an act of the political departments simply costs.
Page
because we feel it is unwise or impractical.[19] This is not to say that Regional SO ORDERED

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TAX 1 FULL TEXTS | SET 1

On October 7, 1963, the Court of First Instance of Leyte rendered judgment

4. Neither can it be successfully argued that the DECREE contains an undue

No costs. We recall the facts of this case, as follows:

Petitioner is a domestic corporation whose primary purpose is

Section 2 (1) of the Insurance Code defines a contract of insurance as

4. Such assumption of risk is part of a general scheme to

Effective January 1, 1986, pursuant to Section 45 of PD 1994, Section 234 of the

CARPIO, J., Chairperson, CTA Case No. 7085

(a) THE EXHIBITION OF MOVIES BY CINEMA Petitioners Arguments

(f) QUESTIONS ON THE WISDOM OF THE The petition is bereft of merit.

Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as

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