G.R. No.

L-3538

May 28, 1952

JUAN LUNA SUBDIVISION, INC., plaintiff-appellee, vs. M. SARMIENTO, ET AL., defendants-appellants. Gibbs, Gibbs, Chuidian and Quasha for appellee. City Fiscal Eugenio Angeles and Assistant Fiscal Cornelio S. Ruperto for appellant. La O and Feria for defendant Philippine Trust Co. TUASON, J.: This is an appeal by the City Treasure of the City of Manila from the following judgment handed down in the above-entitled cause: POR TODAS CONSIDERACIONES, el Jugado dicta sentencia ordenado: que el demandado Tesorero de la Ciudad de Manila pague a la demandante la cantidad de P2,210.52 sin intereses; que la demandada Philippine Trust Companypague a la demandante la suma de P105 sin intereses. The Philippine Trust Company did not appeal. The facts of the case, in so far as they are not in controversy, are these: The plaintiff was a corporation duly organized and existing under the laws of the Philippines with principal office in Manila. On December 29, 1941 it issued to the City Treasurer of Manila, and the City Treasurer accepted checks No. 628334 for P2,210.52 drawn upon the Philippine Trust Company with which it had a credit balance of P4,940.17 on its account. This check was to be applied to plaintiff's land tax for the second semester of 1941 the exact amount of which was yet undetermine and so it was entered in the ledger, Exhibit "F", as deposit by the taxpayer. On February 20, 1942, presumably after the exact amount had been verified, which was P341.60, the balance of P1,868.92, covered by voucher No. 1487 of the City Treasure's office, was noted in the ledger as a credit to the Juan Luna Subdivision, Inc. Further than this, the records of the City Treasurer's office do not show what was done with the check. But the books of the Philippine Trust Company do reveal that it was deposited with the Philippine National Bank, the City Treasurer's sole depository, on December 29, 1941, and that it was presented by that Bank to the Philippine Trust Company on May 1, 1944 and was cashed by the drawee. Manuel F. Garcia, Assistant Treasurer of the Philippine Trust Company, testified that soon after his bank was authorized in March, 1942, to reopen for business (it had been closed by order of the Japanese military authorities,) it received from the Philippine National Bank a bundle of checks, including appellees check No. 628334, drawn upon the Philippine Trust Company before the Japanese occupation and held in abeyance by the Philippine National Bank pending resumption of operation by the Philippine Trust Company; that these checks, including the appellee's check, were accepted and the amounts thereof debited against the respective drawer's accounts; that with respect to check No. 628334, the operation was effected on May 1, 1944. The City refused after liberation to refund the plaintiff's deposit or apply it to such future taxes as might be found due, while the Philippine Trust Company was unwilling to reverse its debit entry against the Juan Luna Subdivision, Inc. It was upon this predicament that the Juan Luna Subdivision, Inc. brought this suit against the City Treasurer and the Philippine Trust Company as defendants in the alternative. The purpose of the action is determine which of the two defendants is liable for plaintiff's check. There is a separate cause of action which concerns the plaintiff and the City Treasurer alone. On the main cause of action the burden of the City Treasurer's defense is that his office was not benefited why the check. He denies that the said check was cashed "or rather there was no proof that it was." It is pointed out that Mr. Gibbs, testifying in open court, admitted that he had never received nor could he have received the cancelled checks;" that "the courts finding that sum P2,210.52 was in fact and in truth added to the actual cash of the Treasurer of the City of Manila is based on conjectures and surprises without any support of pertinent and competent proof;" that "special ledger sheet of the City Treasurer . . . simply showed that some accounting transaction in the book value was done or accomplished but these accounting processes did not show that actual payment had been made (by the Philippine National Bank) to the City Treasurer, and that the City Treasurer had in effect received said amount represented by said checks;" that "the burden of proving that the check in question was in fact paid rest on the defendant Philippine Trust Company." It is further argued that "there is a lot of difference between the book value and the cash value of this check," that the acceptance by the City Treasurer and the issuance of the Official Receipt No. 755402 on December 29, 1941 in favor of Juan Luna Subdivision, Inc. did not simultaneously and automatically place in the hands of the City Treasurer the cash value represented by the said checks in the amount of P2,210.52". That the plaintiff's check was deposited by the City Treasurer with the Philippine National Bank, and the latter was paid the cash equivalent thereof by the Philippine Trust Company, admits of no doubt. The entries in the books of the latter bank are not in the least impugned. Whether the City Treasurer was paid that amount by the Philippine National Bank or given credit for it, the City Treasurer would neither admit nor deny. He said: A. Not that I am not willing (to admit); I am willing, but I am not the right party to admit that the check was actually collected by the City of Manila from the Philippine Trust Company, The Philippine Trust Company never submitted any financial statement. To my knowledge, the City Treasurer of Manila has never been informed by the Philippine Trust Company or by the Philippine National Bank, which is the depository of the City of Manila, that same check was collected by the City Manila from the Philippine National Bank; by that I am not trying to say that the check was not actually collected by the City. xxx xxx xxx

Q. This particular check in question pertains to the revenue account of the City of Manila, is that right? A. Yes, sir. Q. Ordinarily it would be deposited with the Philippine National Bank, is that right? A. That is right. Q. And the Philippine National Bank has not rendered you any account of its collections? A. I would not say that; they probably gave us statement, but as we have lost our records pertaining to the occupation and the pre-war years, I could not make a categorial statement. From the fact that the Philippine National Bank was open throughout the Japanese occupation and the other facts heretofore admitted or not denied, it is to be presumed that the Philippine National Bank credited the City Treasurer with the amount of the check in question, and that the City Treasurer, taking ordinary care of his concerns, withdrew that amount. This is in accordance with the presumption that things happened according to the ordinary course of business and habits. The burden is on the City Treasurer, not on the plaintiff, to rebut these presumptions. But the point is not material at all as far as the plaintiff is concerned. What became of the check or where the money went is a matter between the City Treasurer and the Philippine National Bank. The drawer of the check had funds on deposit to meet it; the City Treasurer accepted it and deposited it with the Philippine National Bank, and the Philippine National Bank, collected the equivalent amount from the drawee Bank. In the light of these circumstances, the City Treasurer became the Philippine

National Bank's creditor and the Juan Luna Subdivision, Inc. was released from liability on its checks. If the City Treasurer did not collect his credit from the Philippine National Bank or otherwise make use of it, he alone was to blame and should suffer the consequences of his neglect. That the City Treasurer held the check merely in trust for plaintiff does not alter the situation as far as his branch of the case goes. The amount to be refunded to the plaintiff is the subject of another disagreement between the Juan Luna Subdivision, Inc. and the City Treasurer. This is the ground of other cause of action heretofore referred to. The plaintiff claims the whole amount of the check contending that taxes for the last semester of 1941 have been remitted by Commonwealth Act No. 703. Section 1 of this Act, which was approved on November 1, 1945, provides: All land taxes and penalties due and payable for the years nineteen hundred and forty-two nineteen hundred and forty-three nineteen hundred and forty-four and fifty per cent of the tax due for nineteen hundred and forty-five, are hereby remitted. The land taxes and penalties due and payable for the second semester of the year nineteen hundred and forty-one shall also be remitted the if the remaining fifty per cent corresponding to the year nineteen hundred and forty-five shall been paid on or before December thirty-first, nineteen hundred and forty-five. Does this provision cover taxes paid before its enactment as the plaintiff maintains and the court below held, or does it refer, as the City Treasurer believes, only to taxes which were still unpaid? There is no ambiguity in the language of the law. It says "taxes and penalties due and payable," the literal meaning of which taxes owned or owing. (See Webster's New International Dictionary) Note that the provision speaks of penalties, and note that penalties accrue only when taxes are not paid on time. The word "remit" underlined by the appellant does not help its theory, for to remit to desist or refrain from exacting, inflicting, or enforcing something as well as to restore what has already been taken. (Webster's New International Dictionary.) We do not see that literal interpretation of Commonwealth Act No. 703 runs counter and does violence to its spirit and intention , nor do we think that such interpretation would be "constitutionally bad" in that "it would unduly discriminate against taxpayers who had paid in favor of delinquent taxpayers." The remission of taxes due and payable to the exclusion of taxes already collected does not constitute unfair discrimination. Each set of taxes is a class by itself, and the law would be open to attack as class legislation only if all taxpayers belonging to one class were not treated alike. They are not. As to the justice of the measure, the confinement of the condonation to deliquent taxes was not without good reason. The property owners who had paid their taxes before liberation and those who had not were not on the same footing on the need of material relief. It is true that the ravages and devastations wrought by was operations had rendered the bulk of the people destitute or impoverished and that it was this situation which prompted the passage of Commonwealth Act No. 703. But it is also true that the taxpayers who had been in arrears in their obligation would have to satisfy their liability with genuine currency, while the taxes paid during the occupation had been satisfied in Japanese military notes, many of them at a time when those notes were well-nigh worthless. To refund those taxes with the restored currency, even if the Government could afford to do so, would be unduly to enrich many of the payers at a greater expense to the people at large. What is more, the process of refunding would entail a tremendous amount of work and difficulties, what with the destruction of tax records and the great number of claimants who would take advantage of such grace. It is said that the plaintiff's check was in the nature of deposit, held trust by the City Treasurer, and that for this reason, plaintiff's taxes are to be regarded as still due and payable. This argument is well taken but only to the extent of P1,868.92. The amount of P341.60 as early as February 20, 1942, had been applied to the second half of plaintiff's 1941 tax and become part of the general funds of the city treasury. From that date that tax was legally and actually paid and settled. The appealed judgment should, therefore, be modified so that the defendant City Treasurer shall refund to the plaintiff the sum of P1,868.92 instead P2,210.52, without costs. It is so ordered. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 81311 June 30, 1988 KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C. DUMLAO, GERONIMO Q. QUADRA, and MARIO C. VILLANUEVA, petitioners, vs. HON. BIENVENIDO TAN, as Commissioner of Internal Revenue, respondent. G.R. No. 81820 June 30, 1988 KILUSANG MAYO UNO LABOR CENTER (KMU), its officers and affiliated labor federations and alliances, petitioners, vs. THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, THE COMMISSIONER OF INTERNAL REVENUE, and SECRETARY OF BUDGET, respondents. G.R. No. 81921 June 30, 1988 INTEGRATED CUSTOMS BROKERS ASSOCIATION OF THE PHILIPPINES and JESUS B. BANAL, petitioners, vs. The HON. COMMISSIONER, BUREAU OF INTERNAL REVENUE, respondent. G.R. No. 82152 June 30, 1988 RICARDO C. VALMONTE, petitioner, vs. THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF INTERNAL REVENUE and SECRETARY OF BUDGET, respondent. Franklin S. Farolan for petitioner Kapatiran in G.R. No. 81311.

Jaime C. Opinion for individual petitioners in G.R. No. 81311. Banzuela, Flores, Miralles, Raeses, Sy, Taquio and Associates for petitioners in G.R. No 81820. Union of Lawyers and Advocates for Peoples Right collaborating counsel for petitioners in G.R. No 81820. Jose C. Leabres and Joselito R. Enriquez for petitioners in G.R. No. 81921.

PADILLA, J.: These four (4) petitions, which have been consolidated because of the similarity of the main issues involved therein, seek to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the Philippines on 25 July 1987, to take effect on 1 January 1988, and which amended certain sections of the National Internal Revenue Code and adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactment is not alledgedly within the powers of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection clauses and other provisions of the 1987 Constitution. The Solicitor General prays for the dismissal of the petitions on the ground that the petitioners have failed to show justification for the exercise of its judicial powers, viz. (1) the existence of an appropriate case; (2) an interest, personal and substantial, of the party raising the constitutional questions; (3) the constitutional question should be raised at the earliest opportunity; and (4) the question of constitutionality is directly and necessarily involved in a justiciable controversy and its resolution is essential to the protection of the rights of the parties. According to the Solicitor General, only the third requisite that the constitutional question should be raised at the earliest opportunity has been complied with. He also questions the legal standing of the petitioners who, he contends, are merely asking for an advisory opinion from the Court, there being no justiciable controversy for resolution. Objections to taxpayers' suit for lack of sufficient personality standing, or interest are, however, in the main procedural matters. Considering the importance to the public of the cases at bar, and in keeping with the Court's duty, under the 1987 Constitution, to determine wether or not the other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken cognizance of these petitions. But, before resolving the issues raised, a brief look into the tax law in question is in order. The VAT is a tax levied on a wide range of goods and services. It is a tax on the value, added by every seller, with aggregate gross annual sales of articles and/or services, exceeding P200,00.00, to his purchase of goods and services, unless exempt. VAT is computed at the rate of 0% or 10% of the gross selling price of goods or gross receipts realized from the sale of services. The VAT is said to have eliminated privilege taxes, multiple rated sales tax on manufacturers and producers, advance sales tax, and compensating tax on importations. The framers of EO 273 that it is principally aimed to rationalize the system of taxing goods and services; simplify tax administration; and make the tax system more equitable, to enable the country to attain economic recovery. The VAT is not entirely new. It was already in force, in a modified form, before EO 273 was issued. As pointed out by the Solicitor General, the Philippine sales tax system, prior to the issuance of EO 273, was essentially a single stage value added tax system computed under the "cost subtraction method" or "cost deduction method" and was imposed only on original sale, barter or exchange of articles by manufacturers, producers, or importers. Subsequent sales of such articles were not subject to sales tax. However, with the issuance of PD 1991 on 31 October 1985, a 3% tax was imposed on a second sale, which was reduced to 1.5% upon the issuance of PD 2006 on 31 December 1985, to take effect 1 January 1986. Reduced sales taxes were imposed not only on the second sale, but on every subsequent sale, as well. EO 273 merely increased the VAT on every sale to 10%, unless zero-rated or exempt. Petitioners first contend that EO 273 is unconstitutional on the Ground that the President had no authority to issue EO 273 on 25 July 1987. The contention is without merit. It should be recalled that under Proclamation No. 3, which decreed a Provisional Constitution, sole legislative authority was vested upon the President. Art. II, sec. 1 of the Provisional Constitution states: Sec. 1. Until a legislature is elected and convened under a new Constitution, the President shall continue to exercise legislative powers. On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution for the Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article XVIII, sec. 6 of said Constitution, hereafter referred to as the 1987 Constitution, provides: Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened. It should be noted that, under both the Provisional and the 1987 Constitutions, the President is vested with legislative powers until a legislature under a new Constitution is convened. The first Congress, created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of EO 273 on 25 July 1987, two (2) days before Congress convened on 27 July 1987, was within the President's constitutional power and authority to legislate. Petitioner Valmonte claims, additionally, that Congress was really convened on 30 June 1987 (not 27 July 1987). He contends that the word "convene" is synonymous with "the date when the elected members of Congress assumed office." The contention is without merit. The word "convene" which has been interpreted to mean "to call together, cause to assemble, or convoke," 1 is clearly different from assumption of office by the individual members of Congress or their taking the oath of office. As an example, we call to mind the interim National Assembly created under the 1973 Constitution, which had not been "convened" but some members of the body, more particularly the delegates to the 1971 Constitutional Convention who had opted to serve therein by voting affirmatively for the approval of said Constitution, had taken their oath of office. To uphold the submission of petitioner Valmonte would stretch the definition of the word "convene" a bit too far. It would also defeat the purpose of the framers of the 1987 Constitutional and render meaningless some other provisions of said Constitution. For example, the provisions of Art. VI, sec. 15, requiring Congress to convene once every year on the fourth Monday of July for its regular session would be a contrariety, since Congress would already be deemed to be in session after the individual members have taken their oath of office. A portion of the provisions of Art. VII, sec. 10, requiring Congress to convene for the purpose of enacting a law calling for a special election to elect a President and Vice-President in case a vacancy occurs in said offices, would also be a surplusage. The portion of Art. VII, sec. 11, third paragraph, requiring Congress to convene, if not in session, to decide a conflict between the President and the Cabinet as to whether or not the President and the Cabinet as to whether or not the President can re-assume the powers and duties of his office, would also be redundant. The same is true with the portion of Art. VII, sec. 18, which requires Congress to convene within twenty-four (24) hours following the declaration of martial law or the suspension of the privilage of the writ of habeas corpus.

The 1987 Constitution mentions a specific date when the President loses her power to legislate. If the framers of said Constitution had intended to terminate the exercise of legislative powers by the President at the beginning of the term of office of the members of Congress, they should have so stated (but did not) in clear and unequivocal terms. The Court has not power to re-write the Constitution and give it a meaning different from that intended. The Court also finds no merit in the petitioners' claim that EO 273 was issued by the President in grave abuse of discretion amounting to lack or excess of jurisdiction. "Grave abuse of discretion" has been defined, as follows: Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Abad Santos vs. Province of Tarlac, 38 Off. Gaz. 834), or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. (Tavera-Luna, Inc. vs. Nable, 38 Off. Gaz. 62). 2 Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been extensively discussed by this framers and other government agencies involved in its implementation, even under the past administration. As the Solicitor General correctly sated. "The signing of E.O. 273 was merely the last stage in the exercise of her legislative powers. The legislative process started long before the signing when the data were gathered, proposals were weighed and the final wordings of the measure were drafted, revised and finalized. Certainly, it cannot be said that the President made a jump, so to speak, on the Congress, two days before it convened." 3 Next, the petitioners claim that EO 273 is oppressive, discriminatory, unjust and regressive, in violation of the provisions of Art. VI, sec. 28(1) of the 1987 Constitution, which states: Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. The petitioners" assertions in this regard are not supported by facts and circumstances to warrant their conclusions. They have failed to adequately show that the VAT is oppressive, discriminatory or unjust. Petitioners merely rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law. there must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. 4 As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform. The court, in City of Baguio vs. De Leon, 5 said: ... In Philippine Trust Company v. Yatco (69 Phil. 420), Justice Laurel, speaking for the Court, stated: "A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found." There was no occasion in that case to consider the possible effect on such a constitutional requirement where there is a classification. The opportunity came in Eastern Theatrical Co. v. Alfonso (83 Phil. 852, 862). Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; . . ." About two years later, Justice Tuason, speaking for this Court in Manila Race Horses Trainers Assn. v. de la Fuente (88 Phil. 60, 65) incorporated the above excerpt in his opinion and continued; "Taking everything into account, the differentiation against which the plaintiffs complain conforms to the practical dictates of justice and equity and is not discriminatory within the meaning of the Constitution." To satisfy this requirement then, all that is needed as held in another case decided two years later, (Uy Matias v. City of Cebu, 93 Phil. 300) is that the statute or ordinance in question "applies equally to all persons, firms and corporations placed in similar situation." This Court is on record as accepting the view in a leading American case (Carmichael v. Southern Coal and Coke Co., 301 US 495) that "inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation." (Lutz v. Araneta, 98 Phil. 148, 153). The sales tax adopted in EO 273 is applied similarly on all goods and services sold to the public, which are not exempt, at the constant rate of 0% or 10%. The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engage in business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general public. 6 The Court likewise finds no merit in the contention of the petitioner Integrated Customs Brokers Association of the Philippines that EO 273, more particularly the new Sec. 103 (r) of the National Internal Revenue Code, unduly discriminates against customs brokers. The contested provision states: Sec. 103. Exempt transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (r) Service performed in the exercise of profession or calling (except customs brokers) subject to the occupation tax under the Local Tax Code, and professional services performed by registered general professional partnerships; The phrase "except customs brokers" is not meant to discriminate against customs brokers. It was inserted in Sec. 103(r) to complement the provisions of Sec. 102 of the Code, which makes the services of customs brokers subject to the payment of the VAT and to distinguish customs brokers from other professionals who are subject to the payment of an occupation tax under the Local Tax Code. Pertinent provisions of Sec. 102 read: Sec. 102. Value-added tax on sale of services. There shall be levied, assessed and collected, a value-added tax equivalent to 10% percent of gross receipts derived by any person engaged in the sale of services. The phrase sale of services" means the performance of all kinds of services for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of personal property; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; and similar services regardless of whether or not the performance thereof call for the exercise or use of the physical or mental faculties: ... With the insertion of the clarificatory phrase "except customs brokers" in Sec. 103(r), a potential conflict between the two sections, (Secs. 102 and 103), insofar as customs brokers are concerned, is averted. At any rate, the distinction of the customs brokers from the other professionals who are subject to occupation tax under the Local Tax Code is based upon material differences, in that the activities of customs brokers (like those of stock, real estate and immigration brokers) partake more of a business, rather than a profession and were thus subjected to the percentage tax under Sec. 174 of the National Internal Revenue Code prior to its amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the petitioner Association did not protest the classification of customs brokers then, the Court sees no reason why it should protest now. The Court takes note that EO 273 has been in effect for more than five (5) months now, so that the fears expressed by the petitioners that the adoption of the VAT will trigger skyrocketing of prices of basic commodities and services, as well as mass actions and demonstrations against the VAT should by now be evident. The fact that

nothing of the sort has happened shows that the fears and apprehensions of the petitioners appear to be more imagined than real. It would seem that the VAT is not as bad as we are made to believe. In any event, if petitioners seriously believe that the adoption and continued application of the VAT are prejudicial to the general welfare or the interests of the majority of the people, they should seek recourse and relief from the political branches of the government. The Court, following the time-honored doctrine of separation of powers, cannot substitute its judgment for that of the President as to the wisdom, justice and advisability of the adoption of the VAT. The Court can only look into and determine whether or not EO 273 was enacted and made effective as law, in the manner required by, and consistent with, the Constitution, and to make sure that it was not issued in grave abuse of discretion amounting to lack or excess of jurisdiction; and, in this regard, the Court finds no reason to impede its application or continued implementation. WHEREFORE, the petitions are DISMISSED. Without pronouncement as to costs. SO ORDERED.

EN BANC G.R. No. 3473 March 22, 1907

J. CASANOVAS, plaintiff-appellant, vs. JNO. S. HORD, defendant-appellee. F.G. Waite for appellant. Attorney-General Araneta for appellee. WILLARD, J.: The plaintiff brought this action against the defendant, the Collector of Internal Revenue, to recover the sum of P9,600, paid by him under protest as taxes on certain mining claims owned by him in the Province of Ambos Camarines. Judgment was rendered in the court below in favor of the defendant, and from that judgment the plaintiff appealed. There is no dispute about the facts. In January, 1897, the Spanish Government, in accordance with the provisions of the royal decree of the 14th of May, 1867, granted to the plaintiff certain mines in the said Province of Ambos Camarines, of which mines the plaintiff is now the owner. That there were valid perfected mining concessions granted prior to the 11th of April, 1899, is conceded. They were so considered by the Collector of Internal Revenue and were by him said to fall within the provisions of section 134 of Act No. 1189, known as the Internal Revenue Act. That section is as follows: SEC. 134. On all valid perfected mining concessions granted prior to April eleventh, eighteen hundred and ninety-nine, there shall be levied and collected on the after January first, nineteen hundred and five, the following taxes: 2. (a) On each claim containing an area of sixty thousand square meters, an annual tax of one hundred pesos; (b) and at the same rate proportionately on each claim containing an area in excess of, or less than, sixty thousand square meters. 3. On the gross output of each an ad valorem tax equal to three per centum of the actual market value of such output. The defendant accordingly imposed upon these properties the tax mentioned in section 134, which tax, as has before been stated, plaintiff paid under protest. The only question in the case is whether this section 134 is void or valid. I. It is claimed by the plaintiff that it is void because it comes within the provision of section 5 of the act of Congress of July 1, 1902 1 (32 U.S. Stat. L., 691), which provides "that no law impairing the obligation of contracts shall be enacted." The royal decree of the 14th of May, 1867, provided, among other things, as follows: ART. 76. On each pertenencia minera (mining claim) of the area prescribed in the first paragraph of article 13 (sixty thousand square meters) there shall be paid annually a fixed tax of forty escudos (about P20.00). The pertenencia referred to in the second paragraph of the same article, though of greater area than the others (one hundred and fifty thousand square meters), shall pay only twenty escudos (about P10.00). ART. 78. Pertenencia of iron mines and mines of combustible minerals shall be exempt from the annual tax for a period of thirty years from the date of publication of this decree. ART. 80. A further tax of three per centum on the gross earnings shall be paid without deduction of costs of any kind whatsoever. All substances enumerated in section one shall be exempt from said tax of three per centum for a period of thirty years. ART. 81. No other taxes than those herein mentioned shall be imposed upon mining and metallurgical industries. The royal decree and regulation for its enforcement provided that the deeds granted by the Government should be in a particular form, which form was inserted in the regulations. It must be presumed that the deeds granted to the plaintiff were made as provided by law, and, in fact, one of such concessions was exhibited during the argument in this court, and was found to be in exact conformity with the form prescribed by law. The deed is as follows: Don Camilo Garcia de Polavieja, Marquez de Polavieja, Teniente General de los Ejercitos Nacionales, Caballero Gran Cruz de la Real y Militar Orden de San Hermenegildo, de la Real y distinguida de Isabel la Catolica, de la del Merito Militar Roja, de la de la Corona de Italia, Comendador de Carlos Tercero,

Bennemerito de la Patria en grado eminente, condecorado con varias cruses de distincion por meritos de guerra, Capitan General y Gobernador General de Filipinas. Whereas I have granted to Don Joaquin Casanovas y Llovet and to Don Martin Buck the concession of a gold mine entitled "Nueva California Segunda" in the jurisdiction of Paracale, Province of Ambos Camarines: Now, therefore, in the name of His Majesty the King (whom God preserve), and pursuant to the provisions of article 37 of the royal decree of May 14, 1867, regulating mining in these Islands, I issue, this fifth day of November, eighteen hundred and ninety-six, this title deed to four pertenencias, comprising an area of two hundred and forty thousand square meters, as shown in the attached sketch map drafted by the engineer Don Enrique Abella y Casariego, and dated at Manila December sixteenth of the said year, subject to the following general terms and conditions: 1. That the mine shall be worked in conformity with the rules in mining, the grantee and his laborers to be governed by the police rules established by existing regulations. 2. That the grantee shall be liable for all damages to third parties that may be caused by his operations. 3. That the grantee shall likewise indemnify his neighbors for any damage they may suffer by reason of water accumulated on his works, if, upon being requested, he fail to drain the same within the time indicated. 4. That he shall contribute for the drainage of the adjacent mines and for the general galleries for drainage or haulage in proportion to the benefit he derives therefrom, whenever, by authority of the Governor-General, such works shall be opened for a group of pertenencias or for the entire mining locality in which the mine is situated. 5. That he shall commence work on the mine immediately upon receipt of this concession unless prevented by force majeure. 6. That he shall keep the mine in active operation by employing at the rate of at least four laborers for each pertenencia for at least six months of each year. 7. That he shall strengthen the walls of the mine within the time indicated whenever, by reason of mismanagement of the work, it threatens to cave in, unless he be prevented by force majeure. 8. That he shall not render further profitable development of the mine difficult or impossible by avaricious operation. 9. That he shall not suspend the operation of the mine with the intention of abandoning the same without first informing the Governor of his intention, in which case he must leave the mine in a good state of timbering. 10. That he shall pay taxes on the mine and its output as prescribed in the royal decree. 11. Finally, that he shall comply with all the requirements contained in the royal decree and in the regulations for concessions of the same nature as the present. Without special conditions. Now, therefore, by virtue of this title deed, I grant to Don Joaquin Casanovas y Llovet and to Don Martin Buck the ownership of the said mine for an unlimited period of time so long as they shall comply with the foregoing terms and conditions, to the end that they may develop the same and make free use and disposition of the output thereof, with the right to alienate the said mine subject to the provisions of existing laws, and to enjoy all the rights and benefits conceded to such grantees by the royal decree and by the mining regulations. And for the prompt fulfillment and observance of the said conditions, both on the part of the said grantees and by all authorities, courts, corporations, and private persons whom it may concern, I have ordered this title deed to be issued given under my hand and the proper seal and countersigned by the undersigned Director-General of Civil Administration. It seems very clear to us that this deed constituted a contract between the Spanish Government and the plaintiff, the obligation of which contract was impaired by the enactment of section 134 of the Internal Revenue Law above cited, thereby infringing the provisions above quoted from section 5 of the act of Congress of July 1, 1902. This conclusion seems necessarily to result from the decisions of the Supreme Court of the United States in similar cases. In the case of McGee vs. Mathis (4 Wallace, 143), it appeared that the State of Arkansas, by an act of the legislature of 1851, provided for the sale of certain swamp lands granted to it by the United States; for the issue of transferable scrip receivable for any lands not already taken up at the time of selection by the holder; for contracts for the making of levees and drains, and for the payment of contractors in scrip and otherwise. In the fourteenth section of this act it was provided that To encourage by all just means the progress and completion of the reclaiming of such lands by offering inducements to purchasers and contractors to take up said lands, all said swamp and overflowed lands shall be exempt from taxation for the term of ten years or until they shall be reclaimed. In 1855 this section was repealed and provision was made by law for the taxation of swamp and overflowed lands, sold or to be sold, precisely as other lands. McGee, before this appeal, had become the owner by transfer from contractors of a large amount of scrip issued under the Act of 1851, and with this scrip, after the repeal, took up and paid for many sections and parts of sections of the granted lands. Taxes were levied by the State on the lands so taken up by McGee. The Supreme Court held that these taxes could not be collected. The Court said at page 156: It seems quite clear that the Act of 1851 authorizing the issue of land scrip constituted a contract between the State and the holders of the land scrip issued under the act. In the case of the Home of the Friendless vs. Rouse (8 Wallace, 430), it appeared that on the 3d day of February, 1853, the legislature of Missouri passed on act to incorporate the Home of the Friendless in the city of St. Louis. Section 1 of the act provided that All property of said corporation shall be exempt from taxation. The court held that the State had no power afterwards to pass laws providing for the levying of taxes upon this institution. The Court said among other things at page 438: The validity of this contract is questioned at the bar on the ground that the legislature had no authority to grant away the power of taxation. The answer to this position is, that the question is no longer open for argument here, for it is settled by the repeated adjudications of this court, that a State may be contract based on a consideration exempt the property of an individual or corporation from taxation, either for a specified period or permanently. And it is equally well settled that the exemption is presumed to be on sufficient consideration, and binds the State if the charter containing it is accepted.

In the case of The Asylum vs. The City of New Orleans (105 U.S., 362), it appears that St. Ariva's Asylum was incorporated by an act of the legislature of Louisiana, approved April 29, 1853. The law incorporating it provided that it should enjoy the same exemption from taxation which was enjoyed by the Orphan Boys' Asylum of New Orleans. The law relating to the last named institution provided (page 364): That, from and after the passage of this act, all the property, real and personal, belonging to the Orphan Boys' Asylum of New Orleans be, and the same is hereby exempted from all taxation, either by the State, parish, or city in which it is situated, any law to the contrary notwithstanding. It was held that the State had no power by subsequent legislation to impose taxes upon the property of this institution. That the doctrine announced in these cases is still maintained in that court is apparent from the case of Powers vs.The Detroit, Grand Haven and Milwaukee Railway which was decided on the 16th of April, 1906, and reported in 201 U. S., 543. Section 9 of the act of the legislature of Michigan, incorporating the railway company, provided: Said company shall, on or before the 1st day of July, pay to the State treasurer, an annual tax of one per cent on the capital stock of said company, pain in, which tax shall be in lieu of all other taxation. The court said at page 556: It has often been decided by this court, so often that a citation on authorities in unnecessary, that the legislature of a State may, in the absence of special restrictions in its constitution, make a valid contract with a corporation in respect to taxation, and that such contract can be enforced against the State at the instance of the corporation. The case at bar falls within the cases hereinbefore cited. It is to be distinguished from the case of the Metropolitan Street Railway Company vs. The New York State Board of Tax Commissioners (199 U.S., 1). In that case it was provided by various acts of the legislature, that the companies therein referred to, should pay annually to the city of New York, a fixed amount or percentage, varying from 2 to 8 per cent of their gross earnings additional taxes was sustained by the court. It was sustained on the ground that the prior legislation did not expressly say that the taxes thus provided for should be in lieu of all other taxes. The court said at page 37: Applying these well-established rules to the several contracts, it will be perceived that there was no express relinquishment of the right of taxation. The plaintiff in error must rely upon some implication, and not upon any direct stipulation. In each contract there was a grant of privileges, but the grant was specifically or privileges in respect to the construction, operation and maintenance of the street railroad. These were all that in terms were granted. As consideration for this grant, the grantees were to pay something, and such payment is nowhere said to be in lieu of, or as an equivalent or substitute of taxes. All that can be extracted from the language used, was a grant of privileges and a payment therefor. Other words must be written into the contract before there can be found any relinquishment of the power of taxation. But in the case at bar, there is found not only the provisions for the payment of certain taxes annually, but there is also found the provision contained in article 81, above quoted, which expressly declares that no other taxes shall be imposed upon these mines. The present case is to be distinguished also from that class of cases of which Grands Lodge vs. The City of New Orleans (166 U.S., 143) is a type, and which includes Salt Company vs. East Saginaw (13 Wall., 373) and Welchvs. Cook (97 U.S., 541). In these cases the exemption was a mere bounty and did not form a part of any contract. The fact that this concession was made by the Government of Spain, and not by the Government of the United States, is not important. (Trustees of Dartmouth College vs. Woodward, 4 Wheaton, 518.) Our conclusion is that the concessions granted by the Government of Spain to the plaintiff, constitute contracts between the parties; that section 134 of the Internal Revenue Law impairs the obligation of these contracts, and is therefore void as to them. II. We think that this section is also void because in conflict with section 60 of the act of Congress of July 1, 1902. This section is as follows: That nothing in this Act shall be construed to effect the rights of any person, partnership, or corporation, having a valid, perfected mining concession granted prior to April eleventh, eighteen hundred and ninety-nine, but all such concessions shall be conducted under the provisions of the law in force at the time they were granted, subject at all times to cancellation by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisite to their retention in the laws under which they were granted: Provided, That the owner or owners of every such concession shall cause the corners made by its boundaries to be distinctly marked with permanent monuments within six months after this act has been promulgated in the Philippine Islands, and that any concessions, the boundaries of which are not so marked within this period shall be free and open to explorations and purchase under the provisions of this act.2 This section seems to indicate that concessions, like those in question, can be canceled only by reason of illegality in the procedure by which they were obtained, or for failure to comply with the conditions prescribed as requisite for their retention in the laws under which they were granted. There is nothing in the section which indicates that they can be canceled for failure to comply with the conditions prescribed by subsequent legislation. In fact, the real intention of the act seems to be that such concession should be subject to the former legislation and not to any subsequent legislation. There is no claim in this case that there was any illegality in the procedure by which these concessions were obtained, nor is there any claim that the plaintiff has not complied with the conditions prescribed in the said royal decree of 1867. III. In view of the result at which we have arrived, it is not necessary to consider the further claim made by the plaintiff that the taxes imposed by article 134 above quoted, are in violation of the part of section 5 of the act of July 1, 1902, which declares "that the rule of taxation in said Islands shall be uniform." The judgment of the court below is reversed, and judgment is ordered in favor of the plaintiff and against the defendant for P9,600, with interest thereon, at 6 per cent, from the 21st day of February, 1906, and the costs of the Court of First Instance. No costs will be allowed to either party in this court. After the expiration of twenty days let judgment be entered in accordance herewith and ten days thereafter let the case be remanded to the court from whence it came for proper action. So ordered. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant appellees. Sabido, Sabido & Associates for appellant. Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.: This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was certified to Us by the Court of Appeals on October 6, 1969, as involving only pure questions of law, challenging the power of taxation delegated to municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959). On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary injunction 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 declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void. On July 23, 1963, the parties entered into a Stipulation of Facts, the material 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 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 Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the provisions of said Ordinance No. 27, series of 1962. Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked." 2 For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month. 3 On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft drinks produced or 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 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 produced or manufactured during the month. 5 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 "dismissing the complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs." From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended. There are three capital questions raised in this appeal: 1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive? 2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes? 3. Are Ordinances Nos. 23 and 27 unjust and unfair? 1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people. 6 It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern. 7 This is sanctioned by immemorial practice. 8 By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax. 9 Under the New Constitution, local governments are granted the autonomous authority to create their own 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 levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation. The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more general purposes. 10 This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided. 11 Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. 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 notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due process of law. 12 There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. 13 The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some states of the Union. 14 Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity 15 or by the same jurisdiction for the same purpose, 16 but not in a case where one tax is imposed by the State and the other by the city or municipality. 17

2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its assumption that both ordinances are valid and legally enforceable. This is not 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 one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used. When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect. 18 Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former." That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same comes within the ambit of the general rule, pursuant to the rules of exclucion attehus and exceptio firmat regulum in cabisus non excepti 19 The limitation applies, particularly, to the prohibition against municipalities and municipal districts to impose "any percentage tax or other taxes in any form based thereon nor impose taxes on articles subject to specific tax except gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a 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 of the municipality to enact. 20 But, the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft 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 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, but there is not set ratio between the volume of sales and the amount of the tax. 21 Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs. 22 Soft drink is not one of those specified. 3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or manufactured, or an equivalent of 1- centavos per case, 23 cannot be considered unjust and unfair. 24 an increase in the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in determining the reates of imposable taxes. 25 This is in line with the constutional policy of according the widest possible autonomy to local governments in matters of local taxation, an aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as 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 autonomy were to be realized. 28 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 twenty crowners imposed on manufacturers, producers, importers and dealers of soft drinks and/or mineral waters under Ordinance No. 54, series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant 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 but also to levy for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a municipality. ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series, is hereby declared of valid and legal effect. Costs against petitioner-appellant. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-22814 August 28, 1968

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant, vs. CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD, THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendants-appellees. Sabido, Sabido and Associates for plaintiff-appellant. The City Attorney of Butuan City for defendants-appellees. CONCEPCION, C.J.: Direct appeal to this Court, from a decision of the Court of First Instance of Agusan, dismissing plaintiff's complaint, with costs. Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor, the members of its municipal board and its City Treasurer. Plaintiff seeks to recover the sums paid by it to the City of Butuan hereinafter referred to as the City and collected by the latter, pursuant to its Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both series of 1960, which plaintiff assails as null and void, and to prevent the enforcement thereof. Both parties submitted the case for decision in the lower court upon a stipulation to the effect: 1. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the "Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of Butuan and all municipalities of Agusan. . 2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122 and effective November 28, 1960. A copy of Ordinance No. 110, Series of 1960 and Ordinance No. 122 are incorporated herein as Exhibits "A" and "B", respectively.

3. That Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4,926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961. 4. That the plaintiff filed the foregoing complaint for the recovery of the total amount of P14,177.03 paid under protest and those that if may later on pay until the termination of this case on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional. 5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of Butuan City, has prepared a form to be accomplished by the plaintiff for the computation of the tax. A copy of the form is enclosed herewith as Exhibit "C". 6. That the Profit and Loss Statement of the plaintiff for the period from January 1, 1961 to July 30, 1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D-5". In this Profit and Loss Statement, the defendants claim that the plaintiff is not entitled to a depreciation of P3,052.63 but only P1,202.55 in which case the profit of plaintiff will be increased from P1,254.44 to P3,104.52. The plaintiff differs only on the claim of depreciation which the company claims to be P3,052.62. This is in accordance with the findings of the representative of the undersigned City Attorney who verified the records of the plaintiff. 7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24 bottles was increased to P1.92 which price is uniform throughout the Philippines. Said increase was made due to the increase in the production cost of its manufacture. 8. That the parties reserve the right to submit arguments on the constitutionality and illegality of Ordinance No. 110, as amended of the City of Butuan in their respective memoranda. xxx xxx x x x1wph1.t

Section 1 of said Ordinance No. 110, as amended, states what products are "liquors", within the purview thereof. Section 2 provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors, imported or local, in the City," of taxes at specified rates. Section 3 prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages therein named, and "all other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the term "consignee or agent" for purposes of the ordinance. Section 4 provides that said taxes "shall be paid at the end of every calendar month." Pursuant to Section 5, the taxes "shall be based and computed from the cargo manifest or bill of lading or any other record showing the number of cases of soft drinks, liquors or all other soft drinks or carbonated drinks received within the month." Sections 6, 7 and 8 specify the surcharge to be added for failure to pay the taxes within the period prescribed and the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in Sections 2 and 3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading or cargo manifest or record of soft drinks, liquors or carbonated drinks for sale in the City." Section 9 makes the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but "sold within" the City. Section 10 of the ordinance provides that the revenue derived therefrom "shall be alloted as follows: 40% for Roads and Bridges Fund; 40% for the General Fund and 20% for the School Fund." Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4) it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority of which it was enacted, is an unconstitutional delegation of legislative powers. The second and last objections are manifestly devoid of merit. Indeed independently of whether or not the tax in question, when considered in relation to the sales tax prescribed by Acts of Congress, amounts to double taxation, on which we need not and do not express any opinion - double taxation, in general, is not forbidden by our fundamental law. We have not adopted, as part thereof, the injunction against double taxation found in the Constitution of the United States and of some States of the Union.1 Then, again, the general principle against delegation of legislative powers, in consequence of the theory of separation of powers 2 is subject to one wellestablished exception, namely: legislative powers may be delegated to local governments to which said theory does not apply 3 in respect of matters of local concern. The third objection is, likewise, untenable. The tax of "P0.10 per case of 24 bottles," of soft drinks or carbonated drinks in the production and sale of which plaintiff is engaged or less than P0.0042 per bottle, is manifestly too small to be excessive, oppressive, or confiscatory. The first and the fourth objections merit, however, serious consideration. In this connection, it is noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No. 122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association, partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks." And, pursuant to section 3-A, which was inserted by said Ordinance No. 122: ... Definition of the Term Consignee or Agent. For purposes of this Ordinance, a consignee of agent shall mean any person, association, partnership, company or corporation who acts in the place of another by authority from him or one entrusted with the business of another or to whom is consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month for resale, either retail or wholesale. As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged in business outside the City. Besides, the tax would not be applicable to such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him every month. When we consider, also, that the tax "shall be based and computed from the cargo manifest or bill of lading ... showing the number of cases" not sold but "received" by the taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax partakes of the nature of an import duty, which is beyond defendant's authority to impose by express provision of law.4 Even however, if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation.5 The classification made in the exercise of this authority, to be valid, must, however, be reasonable 6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally all those who belong to the same class.7 These conditions are not fully met by the ordinance in question.8 Indeed, if its purpose were merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by sealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with interest thereon at the legal rate from the date of the promulgation of this decision, in addition to the costs, and defendants herein are, accordingly, restrained and prohibited permanently from enforcing said Ordinance, as amended. It is so ordered.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-35048 April 23, 1974 WILLIAM LINES, INC., SWEET LINES, INC., CARLOS A. GO THONG & CO., INC., and GEORGE & PETER LINES, INC., petitioners-appellants, vs. THE CITY OF OZAMIS, City Mayor and City Treasurer, all of the City of Ozamis, and Court of First Instance of Misamis Occidental, (Judge Geronimo Marave) respondents-appellees. Manuel B. Pastrana for petitioners-appellants. Oscar E. Gador for respondents-appellees.

FERNANDO, J.:p In this petition for declaratory relief to annul an ordinance of respondent City of Ozamis, 1 the assertion was made that the imposition of a gross sales tax of one and one-half percent (1-%) on the gross freight and fares of the cargo and passengers shipped or transported from Ozamis City collectible on owners, operators or agents of shipping companies with shipping offices or shipping agencies therein is tainted by legal and constitutional infirmity. The lower court decided adversely against petitioners, upholding its validity. Hence this appeal by certiorari with such a plea being reiterated with an even greater insistence. It is unavailing. There is, in the present Constitution, support for such an ordinance and renders futile any attempt at its nullification. We sustain the order of dismissal by the lower court. It is undisputed that on March 18, 1971, the Municipal Board of the City of Ozamis approved Ordinance No. 604, Series of 1971. Its first section is worded thus: "All shipping agencies or offices or shipping agents with offices established in the City of Ozamis and transacting business in the City are hereby required to pay license fee therefore at the rate of Fifty (P50.00) Pesos per quarter and a yearly Mayor's permit fee of Forty (P40.00) Pesos." 2 It Seems quite obvious that there is no infringement of any statutory or constitutional provision. Its second section is worded thus: "There is also hereby imposed upon owners, operators or agents of shipping companies with shipping offices or shipping agencies established in the City of Ozamis and transacting business in the city, a gross sales tax of 1- per centum of the gross freight and fares of the cargo and passengers shipped or transported out from Ozamis City by any of their vessels, ships or boats plying between Ozamis City and other ports, payable quarterly to the City Treasurer of Ozamis; [Provided], that 50% of the proceeds of the tax collections hereof shall be specifically allocated as City's aid for the barrio high schools in the City of Ozamis." 3This is the questioned provision. The other sections deal with the five percent (5%) surcharge, 4 the repealing clause, 5 and the penal sanction. 6 In the decision of the lower court upholding its validity reliance is had on the Local Autonomy Act, 7 with stress being laid on the fact that the tax levied in Section 2 "is for public purposes, just and uniform." 8 The petition for declaratory relief was thus dismissed in its decision of October 14, 1971. As was made clear at the outset, this appeal by certiorari is to be disposed of similarly. 1. There is this categorial statement in the petition that the aforesaid Ordinance No. 604 of the City of Ozamis "is illegal, unconstitutional and null and void ..." 9 In raising the constitutional issue, petitioners undoubtedly are relying on the plenary legislative power being possessed by the then Congress of the Philippines subject to its devolution over matters of municipal, provincial, or city concern to local governments. It is one of the exceptions to the fundamental principle of non-delegation. 10 It would follow then that the authority vested in such unit is limited to the terms of the grant. It is the contention of petitioners that under the Local Autonomy Act as amended, 11 the validity of the gross sales tax may be assailed. To so argue is to lose sign of what is ordained in the present Constitution. There is this declaration of principle: "The State shall guarantee and promote the autonomy of local government units, especially the barrio, to ensure their fullest development as self-reliant communities." 12 Even more explicit is this provision on the article on local government: "Each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject to such limitations as may be provided by law." 13In the Local Tax Code, 14 in line with the constitutional policy of according the widest possible autonomy on local governments even as to the power to tax, the absence of any restriction to its conceded competence to impose a revenue measure of this character is quite manifest. It would appear therefore that the Constitution, far from lending support to petitioners, precisely favors the stand of the respondent City of Ozamis. In De Chavez v. Zobel,15 a decision promulgated last January, this Court was quite categorical in its view that it cannot "set at naught an express mandate of the Constitution." 16 The opinion continues: "Once it has spoken, our duty is clear; obedience is unavoidable." 17 So again, in the face of an explicit provision empowering a local government unit to create its own sources of revenue and to levy taxes, without any limitation to be found in the applicable Presidential decree, the plea of unconstitutionality cannot be sustained. 2. This is not to say that without the invocation of the present Constitution, the lower court decision dismissing this petition for declaratory relief would be susceptible to the charge of non-conformity with what the law then prescribed. The cases cited in the petition to cast doubt on the competence of the City of Ozamis to enact the challenged ordinance speak the language of a bygone era. 18 To quote from that eminent jurist, Claro M. Recto: "But as the saying goes, heretofore much water has passed under the bridge." 19 With the enactment of Republic Act No. 2264, this Court, in line with the policy set forth therein, has accorded the widest latitude to the efforts of municipal corporations to meet the ever-increasing need for revenues with the appropriate taxing ordinances. 20Perhaps petitioners, being sufficiently aware that a general objection premised on alleged unconstitutionality orultra vires is not likely to carry weight, would stigmatize the questioned provision as being an export tax. Reference to Procter and Gamble Trading Company v. Municipality of Medina 21 suffices to demonstrate its lack of persuasive character. Thus: "Nor are appellants anymore successful in resisting its operation by the allegation in the second assignment of error that what is therein imposed is an export tax expressly prohibited by law. The decisive case, Ormoc Sugarcane Planters Association Inc. v. Municipal Board of Ormoc City, the opinion being penned by Justice Makalintal, leaves no doubt that only where there is a clear showing that what is being taxed is an export to any foreign country would the amendatory provision of Republic Act No. 2264, prohibiting it come into play. The ordinance in question is not susceptible to such a reproach." 22 The contention that it is a tax on public utilities is beside the point, not only for the reasons set forth in the comment of Solicitor General Estelito Mendoza sustaining the validity of the ordinance, but also in view of the constitutional provisions above referred to as implemented by the applicable Presidential Decree. WHEREFORE, the decision of the lower court dated October 14, 1971 dismissing this petition for declaratory relief and upholding the validity of Ordinance No. 604 of respondent City of Ozamis is hereby affirmed. Costs against petitioners.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. L-60126 September 25, 1985 CAGAYAN ELECTRIC POWER & LIGHT CO., INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents. Quasha, De Guzman Makalintal & Barot for petitioner. AQUINO, J.: This is about the liability of petitioner Cagayan Electric Power & Light Co., Inc. for income tax amounting to P75,149.73 for the more than seven-month period of the year 1969 in addition to franchise tax. The petitioner is the holder of a legislative franchise, Republic Act No. 3247, under which its payment of 3% tax on its gross earnings from the sale of electric current is "in lieu of all taxes and assessments of whatever authority upon privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee, from which taxes and assessments the grantee is hereby expressly exempted" (Sec. 3). On June 27, 1968, Republic Act No. 5431 amended section 24 of the Tax Code by making liable for income tax all corporate taxpayers not specifically exempt under paragraph (c) (1) of said section and section 27 of the Tax Code notwithstanding the "provisions of existing special or general laws to the contrary". Thus, franchise companies were subjected to income tax in addition to franchise tax. However, in petitioner's case, its franchise was amended by Republic Act No. 6020, effective August 4, 1969, by authorizing the petitioner to furnish electricity to the municipalities of Villanueva and Jasaan, Misamis Oriental in addition to Cagayan de Oro City and the municipalities of Tagoloan and Opol. The amendment reenacted the tax exemption in its original charter or neutralized the modification made by Republic Act No. 5431 more than a year before. By reason of the amendment to section 24 of the Tax Code, the Commissioner of Internal Revenue in a demand letter dated February 15, 1973 required the petitioner to pay deficiency income taxes for 1968-to 1971. The petitioner contested the assessments. The Commissioner cancelled the assessments for 1970 and 1971 but insisted on those for 1968 and 1969. The petitioner filed a petition for review with the Tax Court, which on February 26, 1982 held the petitioner liable only for the income tax for the period from January 1 to August 3, 1969 or before the passage of Republic Act No. 6020 which reiterated its tax exemption. The petitioner appealed to this Court. It contends that the Tax Court erred (1) in not holding that the franchise tax paid by the petitioner is a commutative tax which already includes the income tax; (2) in holding that Republic Act No. 5431 as amended, altered or repealed petitioner's franchise; (3) in holding that petitioner's franchise is a contract which can be impaired by an implied repeal and (4) in not holding that section 24(d) of the Tax Code should be construed strictly against the Government. We hold that Congress could impair petitioner's legislative franchise by making it liable for income tax from which heretofore it was exempted by virtue of the exemption provided for in section 3 of its franchise. The Constitution provides that a franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5, Art. XIV, 1973 Constitution), Section 1 of petitioner's franchise, Republic Act No. 3247, provides that it is subject to the provisions of the Constitution and to the terms and conditions established in Act No. 3636 whose section 12 provides that the franchise is subject to amendment, alteration or repeal by Congress. Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all corporate taxpayers not expressly exempted therein and in section 27 of the Code, had the effect of withdrawing petitioner's exemption from income tax. The Tax Court acted correctly in holding that the exemption was restored by the subsequent enactment on August 4, 1969 of Republic Act No. 6020 which reenacted the said tax exemption. Hence, the petitioner is liable only for the income tax for the period from January 1 to August 3, 1969 when its tax exemption was modified by Republic Act No. 5431. It is relevant to note that franchise companies, like the Philippine Long Distance Telephone Company, have been paying income tax in addition to the franchise tax. However, it cannot be denied that the said 1969 assessment appears to be highly controversial. The Commissioner at the outset was not certain as to petitioner's income tax liability. It had reason not to pay income tax because of the tax exemption in its franchise. For this reason, it should be liable only for tax proper and should not be held liable for the surcharge and interest. (Advertising Associates, Inc. vs. Commissioner of Internal Revenue and Court of Tax Appeals, G. R. No. 59758, December 26, 1984,133 SCRA 765; Imus Electric Co., Inc. vs. Commissioner of Internal Revenue, 125 Phil. 1024; C.M. Hoskins & Co., Inc. vs. Commissioner of Internal Revenue, L-28383, June 22, 1976, 71 SCRA 511.) WHEREFORE, the judgment of the Tax Court is affirmed with the modification that the petitioner is liable only for the tax proper and that it should not pay the delinquency penalties. No costs. SO ORDERED.