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THE CITY OF MANILA,LIBERTY M.

TOLEDO, in her capacity as THE TREASURER OF MANILA and


JOSEPHSANTIAGO, in his capacity as the CHIEF OF THE LICENSE DIVISION OF CITY OFMANILA,
- versus COCA-COLA BOTTLERS PHILIPPINES, INC.,
Petitioner City of Manila is a public corporation empowered to collect and assess business taxes, revenue
fees, and permit fees, through its officers, petitionersToledo and Santiago, in their capacities as City Treasurer
and Chief of the Licensing Division, respectively. On the other hand, respondent Coca-Cola Bottlers Philippines,
Inc. is a corporation engaged in the business of manufacturing and selling beverages, and which maintains a
sales office in the City of Manila.
The case stemmed from the following facts:
Prior to 25 February 2000, respondent had been paying the City of Manilalocal business tax only under
Section 14 of Tax Ordinance No. 7794, [6] being expressly exempted from the business tax under Section 21 of the
same tax ordinance. Pertinent provisions of Tax Ordinance No. 7794 provide:
Section 14. Tax on Manufacturers, Assemblers and Other Processors. There is hereby
imposed a graduated tax on manufacturers, assemblers, repackers, processors, brewers,
distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of
any article of commerce of whatever kind or nature, in accordance with any of the following
schedule:
Section 21. Tax on Businesses Subject to the Excise, Value-Added or Percentage Taxes
under the NIRC. On any of the following businesses and articles of commerce subject to excise,
value-added or percentage taxes under the National Internal Revenue Code hereinafter referred
to as NIRC, as amended, a tax of FIFTY PERCENT (50%) of ONE PERCENT (1%) per annum
on the gross sales or receipts of the preceding calendar year is hereby imposed:
(A) On persons who sell goods and services in the course of trade or business; and
those who import goods whether for business or otherwise; as provided for in Sections 100 to 103
of the NIRC as administered and determined by the Bureau of Internal Revenue pursuant to the
pertinent provisions of the said Code.
(D) Excisable goods subject to VAT
(1) Distilled spirits
(2) Wines
(8) Coal and coke
(9) Fermented liquor, brewers wholesale price, excluding the ad valorem tax
PROVIDED, that all registered businesses in the City of Manila that are already paying the
aforementioned tax shall be exempted from payment thereof.
Petitioner City of Manila subsequently approved on 25 February 2000, Tax Ordinance No. 7988,
amending certain sections of Tax Ordinance No. 7794, particularly: (1) Section 14, by increasing the tax rates
applicable to certain establishments operating within the territorial jurisdiction of the City of Manila; and (2) Section
21, by deleting the proviso found therein, which stated that all registered businesses in the City of Manila that are
already
paying
the
aforementioned
tax
shall
be
exempted
from
payment
thereof. Petitioner City of Manila approved only after a year, on 22 February 2001, another tax ordinance, Tax
Ordinance No. 8011, amending Tax Ordinance No. 7988.
[7]

Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and void in Coca-Cola
Bottlers Philippines, Inc. v. City of Manila] (Coca-Colacase) for the following reasons: (1) Tax Ordinance No. 7988

was enacted in contravention of the provisions of the Local Government Code (LGC) of 1991 and its
implementing rules and regulations; and (2) Tax Ordinance No. 8011 could not cure the defects of Tax Ordinance
No. 7988, which did not legally exist.
However, before the Court could declare Tax Ordinance No. 7988 and Tax Ordinance No. 8011 null and
void, petitioner City of Manila assessed respondent on the basis of Section 21 of Tax Ordinance No. 7794, as
amended by the aforementioned tax ordinances, for deficiency local business taxes, penalties, and interest, in the
total amount of P18,583,932.04, for the third and fourth quarters of the year 2000. Respondent filed a protest with
petitioner Toledo on the ground that the said assessment amounted to double taxation, as respondent was taxed
twice, i.e., under Sections 14 and 21 of Tax Ordinance No. 7794, as amended by Tax Ordinances No. 7988 and
No. 8011. Petitioner Toledo did not respond to the protest of respondent.
Consequently, respondent filed with the Regional Trial Court (RTC) ofManila, Branch 47, an action for the
cancellation of the assessment against respondent for business taxes, which was docketed as Civil Case No. 03107088.
On 14 July 2006, the RTC rendered a Decision [9] dismissing Civil Case No. 03-107088. The RTC ruled
that the business taxes imposed upon the respondent under Sections 14 and 21 of Tax Ordinance No. 7988, as
amended, were not of the same kind or character; therefore, there was no double taxation. The RTC, though, in
an Order[10] dated 16 November 2006, granted the Motion for Reconsideration of respondent, decreed the
cancellation and withdrawal of the assessment against the latter, and barred petitioners from further
imposing/assessing local business taxes against respondent under Section 21 of Tax Ordinance No. 7794, as
amended by Tax Ordinance No. 7988 and Tax Ordinance No. 8011. The 16 November 2006 Decision of the RTC
was in conformity with the ruling of this Court in the Coca-Cola case, in which Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 were declared null and void. The Motion for Reconsideration of petitioners was denied by the
RTC in an Order[11] dated 4 April 2007. Petitioners received a copy of the 4 April 2007 Order of the RTC, denying
their Motion for Reconsideration of the 16 November 2006Order of the same court, on 20 April 2007.
On 4 May 2007, petitioners filed with the CTA a Motion for Extension of Time to File Petition for Review,
praying for a 15-day extension or until 20 May 2007 within which to file their Petition. The Motion for Extension of
petitioners was docketed as C.T.A. AC No. 31, raffled to the CTA First Division.
Again, on 18 May 2007, petitioners filed, through registered mail, a Second Motion for Extension of Time
to File a Petition for Review, praying for another 10-day extension, or until 30 May 2007, within which to file their
Petition.
On 24 May 2007, however, the CTA First Division already issued a Resolution dismissing C.T.A. AC No.
31 for failure of petitioners to timely file their Petition for Review on 20 May 2007.
Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed their Petition for
Review therewith on 30 May 2007 via registered mail. On 8 June 2007, the CTA First Division issued another
Resolution, reiterating the dismissal of the Petition for Review of petitioners.
Petitioners moved for the reconsideration of the foregoing Resolutions dated24 May 2007 and 8 June
2007, but their motion was denied by the CTA FirstDivision in a Resolution dated 26 July 2007. The CTA
First Division reasoned that the Petition for Review of petitioners was not only filed out of time -- it also failed to
comply with the provisions of Section 4, Rule 5; and Sections 2 and 3, Rule 6, of the Revised Rules of the CTA.
Petitioners thereafter filed a Petition for Review before the CTA en banc, docketed as C.T.A. EB No. 307,
arguing that the CTA First Division erred in dismissing their Petition for Review in C.T.A. AC No. 31 for being filed
out of time, without considering the merits of their Petition.
The CTA en banc rendered its Decision on 18 January 2008, dismissing the Petition for Review of
petitioners and affirming the Resolutions dated 24 May 2007,8 June 2007, and 26 July 2007 of the CTA First
Division. The CTA en bancsimilarly denied the Motion for Reconsideration of petitioners in a Resolution dated18
February 2008.

Hence, the present Petition, where petitioners raise the following issues:

WHETHER OR NOT PETITIONER CITY OF MANILA CAN STILL ASSESS TAXES UNDER
[SECTIONS] 14 AND 21 OF [TAX ORDINANCE NO. 7794, AS AMENDED].
WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21 OF THE [TAX ORDINANCE NO.
7794, AS AMENDED] CONSTITUTES DOUBLE TAXATION.

Petitioners assert that Section 1, Rule 7 [12] of the Revised Rules of the CTA refers to certain provisions of
the Rules of Court, such as Rule 42 of the latter, and makes them applicable to the tax court. Petitioners
then cannot be faulted in relying on the provisions of Section 1, Rule 42 [13] of the Rules of Court as
regards the period for filing a Petition for Review with the CTA in division. Section 1, Rule 42 of the Rules
of Court provides for a 15-day period, reckoned from receipt of the adverse decision of the trial court,
within which to file a Petition for Review with the Court of Appeals. The same rule allows an additional 15day period within which to file such a Petition; and, only for the most compelling reasons, another
extension period not to exceed 15 days. Petitioners received on 20 April 2007 a copy of the 4 April
2007 Order of the RTC, denying their Motion for Reconsideration of the 16 November 2006 Order of the
same court. On 4 May 2007, believing that they only had 15 days to file a Petition for Review with the CTA
in division, petitioners moved for a 15-day extension, or until 20 May 2007, within which to file said
Petition. Prior to the lapse of their first extension period, or on 18 May 2007, petitioners again moved for a
10-day extension, or until 30 May 2007, within which to file their Petition for Review. Thus, when
petitioners filed their Petition for Review with the CTA First Division on 30 May 2007, the same was filed
well within the reglementary period for doing so.
Petitioners argue in the alternative that even assuming that Section 3(a), Rule 8 [14] of the Revised Rules of
the CTA governs the period for filing a Petition for Review with the CTA in division, still, their Petition for Review
was filed within the reglementary period. Petitioners call attention to the fact that prior to the lapse of the 30-day
period for filing a Petition for Review under Section 3(a), Rule 8 of the Revised Rules of the CTA, they had already
moved for a 10-day extension, or until 30 May 2007, within which to file their Petition. Petitioners claim that there
was sufficient justification in equity for the grant of the 10-day extension they requested, as the primordial
consideration should be the substantive, and not the procedural, aspect of the case. Moreover, Section 3(a), Rule
8 of the Revised Rules of the CTA, is silent as to whether the 30-day period for filing a Petition for Review with the
CTA in division may be extended or not.
Petitioners also contend that the Coca-Cola case is not determinative of the issues in the present case
because the issue of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not the lis
mota herein. The Coca-Cola case is not doctrinal and cannot be considered as the law of the case.
Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No. 7988 and Tax
Ordinance No. 8011, Tax Ordinance No. 7794 remains a valid piece of local legislation. The nullity of Tax
Ordinance No. 7988 and Tax Ordinance No. 8011 does not effectively bar petitioners from imposing local business
taxes upon respondent under Sections 14 and 21 of Tax Ordinance No. 7794, as they were read prior to their
being amended by the foregoing null and void tax ordinances.
Petitioners finally maintain that imposing upon respondent local business taxes under both Sections 14
and 21 of Tax Ordinance No. 7794 does not constitute direct double taxation. Section 143 of the LGC gives
municipal, as well as city governments, the power to impose business taxes, to wit:
SECTION 143. Tax on Business. The municipality may impose taxes on the following
businesses:

(a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of
liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance
with the following schedule:
(b) On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature in accordance
with the following schedule:
(c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of
essential commodities enumerated hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under
subsections (a), (b) and (d) of this Section:
Provided, however, That barangays shall have the exclusive power to levy taxes, as provided under
Section 152 hereof, on gross sales or receipts of the preceding calendar year of Fifty thousand pesos
(P50,000.00) or less, in the case of cities, and Thirty thousand pesos (P30,000) or less, in the case of
municipalities.
(e) On contractors and other independent contractors, in accordance with the following schedule:
(f) On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on
the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending
activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property,
insurance premium.
(g) On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty
pesos (P50.00) per peddler annually.
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned
may deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the
National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts
of the preceding calendar year.

Section 14 of Tax Ordinance No. 7794 imposes local business tax on manufacturers, etc. of liquors,
distilled spirits, wines, and any other article of commerce, pursuant to Section 143(a) of the LGC. On the other
hand, the local business tax under Section 21 of Tax Ordinance No. 7794 is imposed upon persons selling goods
and services in the course of trade or business, and those importing goods for business or otherwise, who,
pursuant to Section 143(h) of the LGC, are subject to excise tax, value-added tax (VAT), or percentage tax under
the National Internal Revenue Code (NIRC). Thus, there can be no double taxation when respondent is being
taxed under both Sections 14 and 21 of Tax Ordinance No. 7794, for under the first, it is being taxed as a
manufacturer; while under the second, it is being taxed as a person selling goods in the course of trade or
business subject to excise, VAT, or percentage tax.
The Court first addresses the issue raised by petitioners concerning the period within which to file with the
CTA a Petition for Review from an adverse decision or ruling of the RTC.
The period to appeal the decision or ruling of the RTC to the CTA via a Petition for Review is specifically
governed by Section 11 of Republic Act No. 9282,[15] and Section 3(a), Rule 8 of the Revised Rules of the CTA.
Section 11 of Republic Act No. 9282 provides:
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. Any party adversely
affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the
Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the
Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial
Courts may file an Appeal with the CTA within thirty (30) days after the receipt of such decision
or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)
(2) herein.
Appeal shall be made by filing a petition for review under a procedure analogous to
that provided for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA
within thirty (30) days from the receipt of the decision or ruling or in the case of inaction as

herein provided, from the expiration of the period fixed by law to act thereon. x x x. (Emphasis
supplied.)
Section 3(a), Rule 8 of the Revised Rules of the CTA states:
SEC 3. Who may appeal; period to file petition. (a) A party adversely affected by a decision,
ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for
refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary
of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. x x x. (Emphasis supplied.)
It is crystal clear from the afore-quoted provisions that to appeal an adverse decision or ruling of
the RTC to the CTA, the taxpayer must file a Petition for Review with the CTA within 30
days from receipt of said adverse decision or ruling of the RTC.
It is also true that the same provisions are silent as to whether such 30-day period can be extended or
not. However, Section 11 of Republic Act No. 9282 does state that the Petition for Review shall be filed with the
CTA following the procedure analogous to Rule 42 of the Revised Rules of Civil Procedure. Section 1, Rule
42[16] of the Revised Rules of Civil Procedure provides that the Petition for Review of an adverse judgment or final
order of the RTC must be filed with the Court of Appeals within: (1) the original 15-day period from receipt of the
judgment or final order to be appealed; (2) an extended period of 15 days from the lapse of the original period;
and (3) only for the most compelling reasons, another extended period not to exceed 15 days from the lapse of
the first extended period.
Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-day original
period for filing a Petition for Review with the CTA under Section 11 of Republic Act No. 9282, as implemented by
Section 3(a), Rule 8 of the Revised Rules of the CTA, may be extended for a period of 15 days. No further
extension shall be allowed thereafter, except only for the most compelling reasons, in which case the extended
period shall not exceed 15 days.
Even the CTA en banc, in its Decision dated 18 January 2008, recognizes that the 30-day period within
which to file the Petition for Review with the CTA may, indeed, be extended, thus:
Being suppletory to R.A. 9282, the 1997 Rules of Civil Procedure allow an additional period of
fifteen (15) days for the movant to file a Petition for Review, upon Motion, and payment of the full
amount of the docket fees. A further extension of fifteen (15) days may be granted on compelling
reasons in accordance with the provision of Section 1, Rule 42 of the 1997 Rules of Civil
Procedure x x x.[17]

In this case, the CTA First Division did indeed err in finding that petitioners failed to file their Petition for
Review in C.T.A. AC No. 31 within the reglementary period.
From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the RTC, denying
their Motion for Reconsideration of the 16 November 2006 Order, petitioners had 30 days, or until 20 May 2007,
within which to file their Petition for Review with the CTA. Hence, the Motion for Extension filed by petitioners on 4
May 2007 grounded on their belief that the reglementary period for filing their Petition for Review with the CTA
was to expire on 5 May 2007, thus, compelling them to seek an extension of 15 days, or until 20 May 2007, to file
said Petition was unnecessary and superfluous. Even without said Motion for Extension, petitioners could file their
Petition for Review until 20 May 2007, as it was still within the 30-day reglementary period provided for under
Section 11 of Republic Act No. 9282; and implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA.

The Motion for Extension filed by the petitioners on 18 May 2007, prior to the lapse of the 30-day
reglementary period on 20 May 2007, in which they prayed for another extended period of 10 days, or until 30
May 2007, to file their Petition for Review was, in reality, only the first Motion for Extension of petitioners. The CTA
First Division should have granted the same, as it was sanctioned by the rules of procedure. In fact, petitioners
were only praying for a 10-day extension, five days less than the 15-day extended period allowed by the
rules. Thus, when petitioners filed via registered mail their Petition for Review in C.T.A. AC No. 31 on 30 May
2007, they were able to comply with the reglementary period for filing such a petition.
Nevertheless, there were other reasons for which the CTA First Division dismissed the Petition for Review
of petitioners in C.T.A. AC No. 31; i.e., petitioners failed to conform to Section 4 of Rule 5, and Section 2 of Rule 6
of the Revised Rules of the CTA. The Court sustains the CTA First Division in this regard.
Section 4, Rule 5 of the Revised Rules of the CTA requires that:
SEC. 4. Number of copies. The parties shall file eleven signed copies of every paper for cases before the
Court en banc and six signed copies for cases before a Division of the Court in addition to the signed
original copy, except as otherwise directed by the Court. Papers to be filed in more than one case shall include
one additional copy for each additional case. (Emphasis supplied.)
Section 2, Rule 6 of the Revised Rules of the CTA further necessitates that:
SEC. 2. Petition for review; contents. The petition for review shall contain allegations showing the
jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the issues
involved in the case, as well as the reasons relied upon for the review of the challenged decision. The petition
shall be verified and must contain a certification against forum shopping as provided in Section 3, Rule 46 of the
Rules of Court. A clearly legible duplicate original or certified true copy of the decision appealed from shall
be attached to the petition. (Emphasis supplied.)

The aforesaid provisions should be read in conjunction with Section 1, Rule 7 of the Revised Rules of the
CTA, which provides:
SECTION 1. Applicability of the Rules of Court on procedure in the Court of Appeals, exception. The
procedure in the Court en banc or in Divisions in original or in appealed cases shall be the same as those in
petitions for review and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42,
43, 44, and 46 of the Rules of Court, except as otherwise provided for in these Rules. (Emphasis supplied.)
As found by the CTA First Division and affirmed by the CTA en banc, the Petition for Review filed
by petitioners via registered mail on 30 May 2007 consisted only of one copy and all the attachments
thereto, including the Decision dated 14 July 2006; and that the assailed Orders dated 16 November 2006
and 4 April 2007 of the RTC in Civil Case No. 03-107088 were mere machine copies. Evidently,
petitioners did not comply at all with the requirements set forth under Section 4, Rule 5; or with Section 2,
Rule 6 of the Revised Rules of the CTA. Although the Revised Rules of the CTA do not provide for the
consequence of such non-compliance, Section 3, Rule 42 of the Rules of Court may be applied
suppletorily, as allowed by Section 1, Rule 7 of the Revised Rules of the CTA. Section 3, Rule 42 of the
Rules of Court reads:
SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to
comply with any of the foregoing requirements regarding the payment of the docket and other
lawful fees, the deposit for costs, proof of service of the petition, and the contents of and the
documents which should accompany the petition shall be sufficient ground for
the dismissal thereof. (Emphasis supplied.)

True, petitioners subsequently submitted certified copies of the Decision dated 14 July 2006 and assailed
Orders dated 16 November 2006 and 4 April 2007 of the RTC in Civil Case No. 03-107088, but a closer
examination of the stamp on said documents reveals that they were prepared and certified only on 14 August
2007, about two months and a half after the filing of the Petition for Review by petitioners.
Petitioners never offered an explanation for their non-compliance with Section 4 of Rule 5, and Section 2
of Rule 6 of the Revised Rules of the CTA. Hence, although the Court had, in previous instances, relaxed the
application of rules of procedure, it cannot do so in this case for lack of any justification.
Even assuming arguendo that the Petition for Review of petitioners in C.T.A. AC No. 31 should have been
given due course by the CTA First Division, it is still dismissible for lack of merit.
Contrary to the assertions of petitioners, the Coca-Cola case is indeed applicable to the instant case. The
pivotal issue raised therein was whether Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void,
which this Court resolved in the affirmative. Tax Ordinance No. 7988 was declared by the Secretary of the
Department of Justice (DOJ) as null and void and without legal effect due to the failure of
herein petitioner City of Manila to satisfy the requirement under the law that said ordinance be published for three
consecutive days. PetitionerCity of Manila never appealed said declaration of the DOJ Secretary; thus, it attained
finality after the lapse of the period for appeal of the same. The passage of Tax Ordinance No. 8011, amending
Tax Ordinance No. 7988, did not cure the defects of the latter, which, in any way, did not legally exist.
By virtue of the Coca-Cola case, Tax Ordinance No. 7988 and Tax Ordinance No. 8011 are null and void
and without any legal effect. Therefore, respondent cannot be taxed and assessed under the amendatory laws-Tax Ordinance No. 7988 and Tax Ordinance No. 8011.
Petitioners insist that even with the declaration of nullity of Tax Ordinance No. 7988 and Tax Ordinance
No. 8011, respondent could still be made liable for local business taxes under both Sections 14 and 21 of Tax
Ordinance No. 7944 as they were originally read, without the amendment by the null and void tax ordinances.
Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. 7988 and Tax
Ordinance No. 8011 by petitioner City of Manila, petitioners subjected and assessed respondent only for the local
business tax under Section 14 of Tax Ordinance No. 7794, but never under Section 21 of the same. This was due
to the clear and unambiguous proviso in Section 21 of Tax Ordinance No. 7794, which stated that all registered
business in the City of Manila that are already paying the aforementioned tax shall be exempted from payment
thereof. The aforementioned tax referred to in said proviso refers to local business tax. Stated differently, Section
21 of Tax Ordinance No. 7794 exempts from the payment of the local business tax imposed by said section,
businesses that are already paying such tax under other sections of the same tax ordinance. The said proviso,
however, was deleted from Section 21 of Tax Ordinance No. 7794 by Tax Ordinances No. 7988 and No.
8011.Following this deletion, petitioners began assessing respondent for the local business tax under Section 21
of Tax Ordinance No. 7794, as amended.
The Court easily infers from the foregoing circumstances that petitioners themselves believed that prior to
Tax Ordinance No. 7988 and Tax Ordinance No. 8011, respondent was exempt from the local business tax under
Section 21 of Tax Ordinance No. 7794. Hence, petitioners had to wait for the deletion of the exemptingproviso in
Section 21 of Tax Ordinance No. 7794 by Tax Ordinance No. 7988 and Tax Ordinance No. 8011 before they
assessed respondent for the local business tax under said section. Yet, with the pronouncement by this Court in
the Coca-Cola case that Tax Ordinance No. 7988 and Tax Ordinance No. 8011 were null and void and without
legal effect, then Section 21 of Tax Ordinance No. 7794, as it has been previously worded, with its
exempting proviso, is back in effect. Accordingly, respondent should not have been subjected to the local

business tax under Section 21 of Tax Ordinance No. 7794 for the third and fourth quarters of 2000, given its
exemption therefrom since it was already paying the local business tax under Section 14 of the same ordinance.
Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No. 7794, to their
own detriment. Said exempting proviso was precisely included in said section so as to avoid double taxation.
Double taxation means taxing the same property twice when it should be taxed only once; that is, taxing
the same person twice by the same jurisdiction for the same thing. It is obnoxious when the taxpayer is taxed
twice, when it should be but once. Otherwise described as direct duplicate taxation, the two taxes must be
imposed on the same subject matter, for the same purpose, by the same taxing authority,within the same
jurisdiction, during the same taxing period; and the taxes must be of the same kind or character.[18]
Using the aforementioned test, the Court finds that there is indeed double taxation if respondent is subjected to
the taxes under both Sections 14 and 21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the
same subject matter the privilege of doing business in the City of Manila; (2) for the same purpose to make
persons conducting business within the City of Manila contribute to city revenues; (3) by the same taxing authority
petitioner City of Manila; (4) within the same taxing jurisdiction within the territorial jurisdiction of the City of
Manila; (5) for the same taxing periods per calendar year; and (6) of the same kind or character a local business
tax imposed on gross sales or receipts of the business.
The distinction petitioners attempt to make between the taxes under Sections 14 and 21 of Tax Ordinance No.
7794 is specious. The Court revisits Section 143 of the LGC, the very source of the power of municipalities and
cities to impose a local business tax, and to which any local business tax imposed
by petitioner City ofManila must conform. It is apparent from a perusal thereof that when a municipality or city has
already imposed a business tax on manufacturers, etc. of liquors, distilled spirits, wines, and any other article of
commerce, pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same
manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section 143(h) may be imposed
only on businesses that are subject to excise tax, VAT, or percentage tax under the NIRC, and that are not
otherwise specified in preceding paragraphs. In the same way, businesses such as respondents, already
subject to a local business tax under Section 14 of Tax Ordinance No. 7794 [which is based on Section 143(a) of
the LGC], can no longer be made liable for local business tax under Section 21 of the same Tax Ordinance [which
is based on Section 143(h) of the LGC].
WHEREFORE, premises considered, the instant Petition for Review on Certiorariis hereby DENIED. No costs.

CITY OF MANILA vs. COCA-COLA BOTTLERS PHILIPPINES, INC.- CTA, Double Taxation

FACTS:
Respondent paid the local business tax only as a manufacturers as it was expressly exempted from the business
tax under a different section and which applied to businesses subject to excise, VAT or percentage tax under the
Tax Code. The City of Manila subsequently amended the ordinance by deleting the provision exempting
businesses under the latter section if they have already paid taxes under a different section in the ordinance. This
amending ordinance was later declared by the Supreme Court null and void. Respondent then filed a protest on
the ground of double taxation. RTC decided in favor of Respondent and the decision was received by Petitioner
on April 20, 2007. On May 4, 2007, Petitioner filed with the CTA a Motion for Extension of Time to File Petition for
Review asking for a 15-day extension or until May 20, 2007 within which to file its Petition. A second Motion for
Extension was filed on May 18, 2007, this time asking for a 10-day extension to file the Petition. Petitioner finally
filed the Petition on May 30, 2007 even if the CTA had earlier issued a resolution dismissing the case for failure to
timely file the Petition.

ISSUES:
(1) Has Petitioners the right to appeal with the CTA lapsed?
(2) Does the enforcement of the latter section of the tax ordinance constitute double taxation?

HELD:
(1) NO. Petitioner complied with the reglementary period for filing the petition. From April 20, 2007, Petitioner had
30 days, or until May 20, 2007, within which to file their Petition for Review with the CTA. The Motion for
Extension filed by the petitioners on May 18, 2007, prior to the lapse of the 30-day period on 20 May 2007, in
which they prayed for another extended period of 10 days, or until 30 May 2007, to file their Petition for Review
was, in reality, only the first Motion for Extension of petitioners. Thus, when Petitioner filed their Petition via
registered mail their Petition for Review on 30 May 2007, they were able to comply with the period for filing such a
petition.
(2) YES. There is indeed double taxation if respondent is subjected to the taxes under both Sections 14 and 21 of
the tax ordinance since these are being imposed: (1) on the same subject matter the privilege of doing
business in the City of Manila; (2) for the same purpose to make persons conducting business within the City of
Manila contribute to city revenues; (3) by the same taxing authority petitioner City of Manila; (4) within the
same taxing jurisdiction within the territorial jurisdiction of the City of Manila; (5) for the same taxing periods
per calendar year; and (6) of the same kind or character a local business tax imposed on gross sales or
receipts of the business.

G.R. No. L-24756

October 31, 1968

CITY OF BAGUIO, plaintiff-appellee,


vs.
FORTUNATO DE LEON, defendant-appellant.

In this appeal, a lower court decision upholding the validity of an ordinance 1 of the City of Baguio imposing a
license fee on any person, firm, entity or corporation doing business in the City of Baguio is assailed by
defendant-appellant Fortunato de Leon. He was held liable as a real estate dealer with a property therein worth
more than P10,000, but not in excess of P50,000, and therefore obligated to pay under such ordinance the P50
annual fee. That is the principal question. In addition, there has been a firm and unyielding insistence by
defendant-appellant of the lack of jurisdiction of the City Court of Baguio, where the suit originated, a complaint
having been filed against him by the City Attorney of Baguio for his failure to pay the amount of P300 as license
fee covering the period from the first quarter of 1958 to the fourth quarter of 1962, allegedly, inspite of repeated
demands. Nor was defendant-appellant agreeable to such a suit being instituted by the City Treasurer without the
consent of the Mayor, which for him was indispensable. The lower court was of a different mind.
In its decision of December 19, 1964, it declared the above ordinance as amended, valid and subsisting, and held
defendant-appellant liable for the fees therein prescribed as a real estate dealer. Hence, this appeal. Assume the
validity of such ordinance, and there would be no question about the liability of defendant-appellant for the above
license fee, it being shown in the partial stipulation of facts, that he was "engaged in the rental of his property in
Baguio" deriving income therefrom during the period covered by the first quarter of 1958 to the fourth quarter of
1962.
The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending the city
charter of Baguio2 empowering it to fix the license fee and regulate "businesses, trades and occupations as may
be established or practiced in the City."
Unless it can be shown then that such a grant of authority is not broad enough to justify the enactment of the
ordinance now assailed, the decision appealed from must be affirmed. The task confronting defendant-appellant,
therefore, was far from easy. Why he failed is understandable, considering that even a cursory reading of the
above amendment readily discloses that the enactment of the ordinance in question finds support in the power
thus conferred.
Nor is the question raised by him as to the validity thereof novel in character. In Medina v. City of Baguio,3 the
effect of the amendatory section insofar as it would expand the previous power vested by the city charter was
clarified in these terms: "Appellants apparently have in mind section 2553, paragraph (c) of the Revised
Administrative Code, which empowers the City of Baguio merely to impose a license fee for the purpose of rating
the business that may be established in the city. The power as thus conferred is indeed limited, as it does not
include the power to levy a tax. But on July 15, 1948, Republic Act No. 329 was enacted amending the charter of
said city and adding to its power to license the power to tax and to regulate. And it is precisely having in view this
amendment that Ordinance No. 99 was approved in order to increase the revenues of the city. In our opinion, the
amendment above adverted to empowers the city council not only to impose a license fee but also to levy a tax for
purposes of revenue, more so when in amending section 2553 (b), the phrase 'as provided by law' has been
removed by section 2 of Republic Act No. 329. The city council of Baguio, therefore, has now the power to tax, to

license and to regulate provided that the subjects affected be one of those included in the charter. In this sense,
the ordinance under consideration cannot be considered ultra vires whether its purpose be to levy a tax or impose
a license fee. The terminology used is of no consequence."
It would be an undue and unwarranted emasculation of the above power thus granted if defendant-appellant were
to be sustained in his contention that no such statutory authority for the enactment of the challenged ordinance
could be discerned from the language used in the amendatory act. That is about all that needs to be said in
upholding the lower court, considering that the City of Baguio was not devoid of authority in enacting this
particular ordinance. As mentioned at the outset, however, defendant-appellant likewise alleged procedural
missteps and asserted that the challenged ordinance suffered from certain constitutional infirmities. To such points
raised by him, we shall now turn.
1. Defendant-appellant makes much of the alleged lack of jurisdiction of the City Court of Baguio in the suit for the
collection of the real estate dealer's fee from him in the amount of P300. He contended before the lower court,
and it is his contention now, that while the amount of P300 sought was within the jurisdiction of the City Court of
Baguio where this action originated, since the principal issue was the legality and constitutionality of the
challenged ordinance, it is not such City Court but the Court of First Instance that has original jurisdiction.
There is here a misapprehension of the Judiciary Act. The City Court has jurisdiction. Only recently, on September
7, 1968 to be exact, we rejected a contention similar in character in Nemenzo v. Sabillano.4 The plaintiff in that
case filed a claim for the payment of his salary before the Justice of the Peace Court of Pagadian, Zamboanga del
Sur. The question of jurisdiction was raised; the defendant Mayor asserted that what was in issue was the
enforcement of the decision of the Commission of Civil Service; the Justice of the Peace Court was thus without
jurisdiction to try the case. The above plea was curtly dismissed by Us, as what was involved was "an ordinary
money claim" and therefore "within the original jurisdiction of the Justice of the Peace Court where it was filed,
considering the amount involved." Such is likewise the situation here.
Moreover, in City of Manila v. Bugsuk Lumber Co.,5 a suit to collect from a defendant this license fee
corresponding to the years 1951 and 1952 was filed with the Municipal Court of Manila, in view of the amount
involved. The thought that the municipal court lacked jurisdiction apparently was not even in the minds of the
parties and did not receive any consideration by this Court.
Evidently, the fear is entertained by defendant-appellant that whenever a constitutional question is raised, it is the
Court of First Instance that should have original jurisdiction on the matter. It does not admit of doubt, however, that
what confers jurisdiction is the amount set forth in the complaint. Here, the sum sought to be recovered was
clearly within the jurisdiction of the City Court of Baguio.
Nor could it be plausibly maintained that the validity of such ordinance being open to question as a defense
against its enforcement from one adversely affected, the matter should be elevated to the Court of First Instance.
For the City Court could rely on the presumption of the validity of such ordinance, 6 and the mere fact, however,
that in the answer to such a complaint a constitutional question was raised did not suffice to oust the City Court of
its jurisdiction. The suit remains one for collection, the lack of validity being only a defense to such an attempt at
recovery. Since the City Court is possessed of judicial power and it is likewise axiomatic that the judicial power
embraces the ascertainment of facts and the application of the law, the Constitution as the highest law
superseding any statute or ordinance in conflict therewith, it cannot be said that a City Court is bereft of
competence to proceed on the matter. In the exercise of such delicate power, however, the admonition of Cooley
on inferior tribunals is well worth remembering. Thus: "It must be evident to any one that the power to declare a
legislative enactment void is one which the judge, conscious of the fallibility of the human judgment, will shrink

from exercising in any case where he can conscientiously and with due regard to duty and official oath decline the
responsibility."7 While it remains undoubted that such a power to pass on the validity of an ordinance alleged to
infringe certain constitutional rights of a litigant exists, still it should be exercised with due care and
circumspection, considering not only the presumption of validity but also the relatively modest rank of a city court
in the judicial hierarchy.
2. To repeat the challenged ordinance cannot be considered ultra vires as there is more than ample statutory
authority for the enactment thereof. Nonetheless, its validity on constitutional grounds is challenged because of
the allegation that it imposed double taxation, which is repugnant to the due process clause, and that it violated
the requirement of uniformity. We do not view the matter thus.
As to why double taxation is not violative of due process, Justice Holmes made clear in this language: "The
objection to the taxation as double may be laid down on one side. ... The 14th Amendment [the due process
clause] no more forbids double taxation than it does doubling the amount of a tax, short of confiscation or
proceedings unconstitutional on other grounds." 8With that decision rendered at a time when American sovereignty
in the Philippines was recognized, it possesses more than just a persuasive effect. To some, it delivered the coup
de grace to the bogey of double taxation as a constitutional bar to the exercise of the taxing power. It would seem
though that in the United States, as with us, its ghost as noted by an eminent critic, still stalks the juridical state. In
a 1947 decision, however,9 we quoted with approval this excerpt from a leading American decision: 10 "Where, as
here, Congress has clearly expressed its intention, the statute must be sustained even though double taxation
results."
At any rate, it has been expressly affirmed by us that such an "argument against double taxation may not be
invoked where one tax is imposed by the state and the other is imposed by the city ..., it being widely recognized
that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to
the same occupation, calling or activity by both the state and the political subdivisions thereof." 11
The above would clearly indicate how lacking in merit is this argument based on double taxation.
Now, as to the claim that there was a violation of the rule of uniformity established by the constitution. According
to the challenged ordinance, a real estate dealer who leases property worth P50,000 or above must pay an
annual fee of P100. If the property is worth P10,000 but not over P50,000, then he pays P50 and P24 if the value
is less than P10,000. On its face, therefore, the above ordinance cannot be assailed as violative of the
constitutional requirement of uniformity. In Philippine Trust Company v. Yatco,12 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.13 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 Fuente14 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, 15 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 16 that "inequalities which result from a
singling out of one particular class for taxation or exemption infringe no constitutional limitation." 17
It is thus apparent from the above that in much the same way that the plea of double taxation is unavailing, the
allegation that there was a violation of the principle of uniformity is inherently lacking in persuasiveness. There is
no need to pass upon the other allegations to assail the validity of the above ordinance, it being maintained that
the license fees therein imposed "is excessive, unreasonable and oppressive" and that there is a failure to
observe the mandate of equal protection. A reading of the ordinance will readily disclose their inherent lack of
plausibility.
3. That would dispose of all the errors assigned, except the last two, which would predicate a grievance on the
complaint having been started by the City Treasurer rather than the City Mayor of Baguio. These alleged errors,
as was the case with the others assigned, lack merit.
In much the same way that an act of a department head of the national government, performed within the limits of
his authority, is presumptively the act of the President unless reprobated or disapproved, 18 similarly the act of the
City Treasurer, whose position is roughly analogous, may be assumed to carry the seal of approval of the City
Mayor unless repudiated or set aside. This should be the case considering that such city official is called upon to
see to it that revenues due the City are collected. When administrative steps are futile and unavailing, given the
stubbornness and obduracy of a taxpayer, convinced in good faith that no tax was due, judicial remedy may be
resorted to by him. It would be a reflection on the state of the law if such fidelity to duty would be met by
condemnation rather than commendation.
So, much for the analytical approach. The conclusion thus reached has a reinforcement that comes to it from the
functional and pragmatic test. If a city treasurer has to await the nod from the city mayor before a municipal
ordinance is enforced, then opportunity exists for favoritism and undue discrimination to come into play. Whatever
valid reason may exist as to why one taxpayer is to be accorded a treatment denied another, the suspicion is
unavoidable that such a manifestation of official favor could have been induced by unnamed but not unknown
consideration. It would not be going too far to assert that even defendant-appellant would find no satisfaction in
such a sad state of affairs. The more desirable legal doctrine therefore, on the assumption that a choice exists, is
one that would do away with such temptation on the part of both taxpayer and public official alike.
WHEREFORE, the lower court decision of December 19, 1964, is hereby affirmed. Costs against defendantappellant.

CITY OF BAGUIO vs. DE LEON


25 SCRA 938
GR No. L-24756, October 31, 1968
"There is no double taxation where one tax is imposed by the state and the other is imposed by the city."
FACTS: The City of Baguio passed an ordinance imposing a license fee on any person, entity or corporation
doing business in the City. The ordinance sourced its authority from RA No. 329, thereby amending the city
charter empowering it to fix the license fee and regulate businesses, trades and occupations as may be
established or practiced in the City. De Leon was assessed for P50 annual fee it being shown that he was
engaged in property rental and deriving income therefrom. The latter assailed the validity of the ordinance arguing
that it is ultra vires for there is no statury authority which expressly grants the City of Baguio to levy such tax, and
that there it imposed double taxation, and violates the requirement of uniformity.
ISSUE: Are the contentions of the defendant-appellant tenable?
HELD: No. First, RA 329 was enacted amending Section 2553 of the Revised Administrative Code empowering
the City Council not only to impose a license fee but to levy a tax for purposes of revenue, thus the ordinance
cannot be considered ultra vires for there is more than ample statury authority for the enactment thereof.
Second, an argument against double taxation may not be invoked where one tax is imposed by the state and
the other is imposed by the city, so that where, as here, Congress has clearly expressed its intention, the statute
must
be
sustained
even
though
double
taxation
results.
And third, violation of uniformity is out of place it being widely recognized that there is nothing inherently
obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or
activity by both the state and the political subdivisions thereof.

G.R. No. 166715

August 14, 2008

ABAKADA GURO PARTY LIST (formerly AASJS)1 OFFICERS/MEMBERS SAMSON S. ALCANTARA, ED


VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R. SANDOVAL, petitioners,
vs.
HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON. GUILLERMO L. PARAYNO, JR.,
in his capacity as Commissioner of the Bureau of Internal Revenue, and HON. ALBERTO D. LINA, in his
Capacity as Commissioner of Bureau of Customs, respondents.
This petition for prohibition1 seeks to prevent respondents from implementing and enforcing Republic Act (RA)
93352 (Attrition Act of 2005).
RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC officials and
employees to exceed their revenue targets by providing a system of rewards and sanctions through the creation
of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board (Board). 3 It covers all
officials and employees of the BIR and the BOC with at least six months of service, regardless of employment
status.4
The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the year, as
determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or reward is taken
from the fund and allocated to the BIR and the BOC in proportion to their contribution in the excess collection of
the targeted amount of tax revenue.5
The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance (DOF) or
his/her Undersecretary, the Secretary of the Department of Budget and Management (DBM) or his/her
Undersecretary, the Director General of the National Economic Development Authority (NEDA) or his/her Deputy
Director General, the Commissioners of the BIR and the BOC or their Deputy Commissioners, two
representatives from the rank-and-file employees and a representative from the officials nominated by their
recognized organization.6
Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and release of the
Fund; (2) set criteria and procedures for removing from the service officials and employees whose revenue
collection falls short of the target; (3) terminate personnel in accordance with the criteria adopted by the Board; (4)
prescribe a system for performance evaluation; (5) perform other functions, including the issuance of rules and
regulations and (6) submit an annual report to Congress. 7
The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate and issue
the implementing rules and regulations of RA 9335,8 to be approved by a Joint Congressional Oversight
Committee created for such purpose.9
Petitioners, invoking their right as taxpayers filed this petition challenging the constitutionality of RA 9335, a tax
reform legislation. They contend that, by establishing a system of rewards and incentives, the law "transform[s]
the officials and employees of the BIR and the BOC into mercenaries and bounty hunters" as they will do their
best only in consideration of such rewards. Thus, the system of rewards and incentives invites corruption and
undermines the constitutionally mandated duty of these officials and employees to serve the people with utmost
responsibility, integrity, loyalty and efficiency.
Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials and
employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There is no valid
basis for classification or distinction as to why such a system should not apply to officials and employees of all
other government agencies.
In addition, petitioners assert that the law unduly delegates the power to fix revenue targets to the President as it
lacks a sufficient standard on that matter. While Section 7(b) and (c) of RA 9335 provides that BIR and BOC
officials may be dismissed from the service if their revenue collections fall short of the target by at least 7.5%, the
law does not, however, fix the revenue targets to be achieved. Instead, the fixing of revenue targets has been
delegated to the President without sufficient standards. It will therefore be easy for the President to fix an
unrealistic and unattainable target in order to dismiss BIR or BOC personnel.

Finally, petitioners assail the creation of a congressional oversight committee on the ground that it violates the
doctrine of separation of powers. While the legislative function is deemed accomplished and completed upon the
enactment and approval of the law, the creation of the congressional oversight committee permits legislative
participation in the implementation and enforcement of the law.
In their comment, respondents, through the Office of the Solicitor General, question the petition for being
premature as there is no actual case or controversy yet. Petitioners have not asserted any right or claim that will
necessitate the exercise of this Courts jurisdiction. Nevertheless, respondents acknowledge that public policy
requires the resolution of the constitutional issues involved in this case. They assert that the allegation that the
reward system will breed mercenaries is mere speculation and does not suffice to invalidate the law. Seen in
conjunction with the declared objective of RA 9335, the law validly classifies the BIR and the BOC because the
functions they perform are distinct from those of the other government agencies and instrumentalities. Moreover,
the law provides a sufficient standard that will guide the executive in the implementation of its provisions. Lastly,
the creation of the congressional oversight committee under the law enhances, rather than violates, separation of
powers. It ensures the fulfillment of the legislative policy and serves as a check to any over-accumulation of power
on the part of the executive and the implementing agencies.
After a careful consideration of the conflicting contentions of the parties, the Court finds that petitioners have failed
to overcome the presumption of constitutionality in favor of RA 9335, except as shall hereafter be discussed.
Actual Case And Ripeness
An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims susceptible
of judicial adjudication.10 A closely related requirement is ripeness, that is, the question must be ripe for
adjudication. And a constitutional question is ripe for adjudication when the governmental act being challenged
has a direct adverse effect on the individual challenging it. 11 Thus, to be ripe for judicial adjudication, the petitioner
must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a
favorable decision of the Court.12
In this case, aside from the general claim that the dispute has ripened into a judicial controversy by the mere
enactment of the law even without any further overt act, 13 petitioners fail either to assert any specific and concrete
legal claim or to demonstrate any direct adverse effect of the law on them. They are unable to show a personal
stake in the outcome of this case or an injury to themselves. On this account, their petition is procedurally infirm.
This notwithstanding, public interest requires the resolution of the constitutional issues raised by petitioners. The
grave nature of their allegations tends to cast a cloud on the presumption of constitutionality in favor of the law.
And where an action of the legislative branch is alleged to have infringed the Constitution, it becomes not only the
right but in fact the duty of the judiciary to settle the dispute. 14
Accountability of
Public Officers
Section 1, Article 11 of the Constitution states:
Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable to
the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism, and
justice, and lead modest lives.
Public office is a public trust. It must be discharged by its holder not for his own personal gain but for the benefit of
the public for whom he holds it in trust. By demanding accountability and service with responsibility, integrity,
loyalty, efficiency, patriotism and justice, all government officials and employees have the duty to be responsive to
the needs of the people they are called upon to serve.
Public officers enjoy the presumption of regularity in the performance of their duties. This presumption necessarily
obtains in favor of BIR and BOC officials and employees. RA 9335 operates on the basis thereof and reinforces it
by providing a system of rewards and sanctions for the purpose of encouraging the officials and employees of the
BIR and the BOC to exceed their revenue targets and optimize their revenue-generation capability and
collection.15
The presumption is disputable but proof to the contrary is required to rebut it. It cannot be overturned by mere
conjecture or denied in advance (as petitioners would have the Court do) specially in this case where it is an
underlying principle to advance a declared public policy.

Petitioners claim that the implementation of RA 9335 will turn BIR and BOC officials and employees into "bounty
hunters and mercenaries" is not only without any factual and legal basis; it is also purely speculative.
A law enacted by Congress enjoys the strong presumption of constitutionality. To justify its nullification, there must
be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal one. 16To invalidate RA 9335
based on petitioners baseless supposition is an affront to the wisdom not only of the legislature that passed it but
also of the executive which approved it.
Public service is its own reward. Nevertheless, public officers may by law be rewarded for exemplary and
exceptional performance. A system of incentives for exceeding the set expectations of a public office is not
anathema to the concept of public accountability. In fact, it recognizes and reinforces dedication to duty, industry,
efficiency and loyalty to public service of deserving government personnel.
In United States v. Matthews,17 the U.S. Supreme Court validated a law which awards to officers of the customs
as well as other parties an amount not exceeding one-half of the net proceeds of forfeitures in violation of the laws
against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme Court said:
The offer of a portion of such penalties to the collectors is to stimulate and reward their zeal and industry
in detecting fraudulent attempts to evade payment of duties and taxes.
In the same vein, employees of the BIR and the BOC may by law be entitled to a reward when, as a consequence
of their zeal in the enforcement of tax and customs laws, they exceed their revenue targets. In addition, RA 9335
establishes safeguards to ensure that the reward will not be claimed if it will be either the fruit of "bounty hunting
or mercenary activity" or the product of the irregular performance of official duties. One of these precautionary
measures is embodied in Section 8 of the law:
SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the BOC. The officials,
examiners, and employees of the [BIR] and the [BOC] who violate this Act or who are guilty of negligence,
abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the
performance of their duties shall be held liable for any loss or injury suffered by any business
establishment or taxpayer as a result of such violation, negligence, abuse, malfeasance, misfeasance or
failure to exercise extraordinary diligence.
Equal Protection
Equality guaranteed under the equal protection clause is equality under the same conditions and among persons
similarly situated; it is equality among equals, not similarity of treatment of persons who are classified based on
substantial differences in relation to the object to be accomplished. 19When things or persons are different in fact or
circumstance, they may be treated in law differently. InVictoriano v. Elizalde Rope Workers Union,20 this Court
declared:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws
upon all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but
on persons according to the circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in fact be treated in law as
though they were the same. The equal protection clause does not forbid discrimination as to
things that are different. It does not prohibit legislation which is limited either in the object to
which it is directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in
the other departments of knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not invalid because of simple
inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere
fact of inequality in no manner determines the matter of constitutionality. All that is required of a valid
classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences, that it must be germane to the purpose of
the law; that it must not be limited to existing conditions only; and that it must apply equally to
each member of the class. This Court has held that the standard is satisfied if the classification or
distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary.

In the exercise of its power to make classifications for the purpose of enacting laws over matters within its
jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not necessary that the
classification be based on scientific or marked differences of things or in their relation. Neither is it
necessary that the classification be made with mathematical nicety. Hence, legislative classification may
in many cases properly rest on narrow distinctions, for the equal protection guaranty does not preclude
the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may
appear.21 (emphasis supplied)
The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable
foundation or rational basis and not arbitrary.22 With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and the BOC. 23 Since the subject of the
law is the revenue- generation capability and collection of the BIR and the BOC, the incentives and/or sanctions
provided in the law should logically pertain to the said agencies. Moreover, the law concerns only the BIR and the
BOC because they have the common distinct primary function of generating revenues for the national government
through the collection of taxes, customs duties, fees and charges.
The BIR performs the following functions:
Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue, which shall be headed by
and subject to the supervision and control of the Commissioner of Internal Revenue, who shall be
appointed by the President upon the recommendation of the Secretary [of the DOF], shall have the
following functions:
(1) Assess and collect all taxes, fees and charges and account for all revenues collected;
(2) Exercise duly delegated police powers for the proper performance of its functions and duties;
(3) Prevent and prosecute tax evasions and all other illegal economic activities;
(4) Exercise supervision and control over its constituent and subordinate units; and
(5) Perform such other functions as may be provided by law.24
xxx

xxx

xxx (emphasis supplied)

On the other hand, the BOC has the following functions:


Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed and subject to the
management and control of the Commissioner of Customs, who shall be appointed by the President upon
the recommendation of the Secretary[of the DOF] and hereinafter referred to as Commissioner, shall have
the following functions:
(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;
(2) Account for all customs revenues collected;
(3) Exercise police authority for the enforcement of tariff and customs laws;
(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of entry;
(5) Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts in all
ports of entry;
(6) Administer all legal requirements that are appropriate;
(7) Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;
(8) Exercise supervision and control over its constituent units;
(9) Perform such other functions as may be provided by law.25
xxx

xxx

xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of being the
instrumentalities through which the State exercises one of its great inherent functions taxation. Indubitably, such
substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification and
treatment accorded to the BIR and the BOC under RA 9335 fully satisfy the demands of equal protection.
Undue Delegation
Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) the sufficient
standard test. A law is complete when it sets forth therein the policy to be executed, carried out or implemented by

the delegate.26 It lays down a sufficient standard when it provides adequate guidelines or limitations in the law to
map out the boundaries of the delegates authority and prevent the delegation from running riot. 27 To be sufficient,
the standard must specify the limits of the delegates authority, announce the legislative policy and identify the
conditions under which it is to be implemented.28
RA 9335 adequately states the policy and standards to guide the President in fixing revenue targets and the
implementing agencies in carrying out the provisions of the law. Section 2 spells out the policy of the law:
SEC. 2. Declaration of Policy. It is the policy of the State to optimize the revenue-generation capability
and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) by providing for
a system of rewards and sanctions through the creation of a Rewards and Incentives Fund and a
Revenue Performance Evaluation Board in the above agencies for the purpose of encouraging their
officials and employees to exceed their revenue targets.
Section 4 "canalized within banks that keep it from overflowing" 29 the delegated power to the President to fix
revenue targets:
SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund, hereinafter referred to as the
Fund, is hereby created, to be sourced from the collection of the BIR and the BOC in excess of their
respective revenue targets of the year, as determined by the Development Budget and
Coordinating Committee (DBCC), in the following percentages:
Excess of Collection of the
Excess the Revenue Targets

Percent (%) of the Excess Collection to Accrue


to the Fund

30% or below

15%

More than 30%

15% of the first 30% plus 20% of the


remaining excess

The Fund shall be deemed automatically appropriated the year immediately following the year when the
revenue collection target was exceeded and shall be released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue collection expected of the BIR and
the BOC for a given fiscal year as stated in the Budget of Expenditures and Sources of Financing
(BESF) submitted by the President to Congress. The BIR and the BOC shall submit to the DBCC the
distribution of the agencies revenue targets as allocated among its revenue districts in the case of the
BIR, and the collection districts in the case of the BOC.
xxx

xxx

xxx (emphasis supplied)

Revenue targets are based on the original estimated revenue collection expected respectively of the BIR and the
BOC for a given fiscal year as approved by the DBCC and stated in the BESF submitted by the President to
Congress.30 Thus, the determination of revenue targets does not rest solely on the President as it also undergoes
the scrutiny of the DBCC.
On the other hand, Section 7 specifies the limits of the Boards authority and identifies the conditions under which
officials and employees whose revenue collection falls short of the target by at least 7.5% may be removed from
the service:
SEC. 7. Powers and Functions of the Board. The Board in the agency shall have the following powers
and functions:
xxx

xxx

xxx

(b) To set the criteria and procedures for removing from service officials and employees whose
revenue collection falls short of the target by at least seven and a half percent (7.5%), with due
consideration of all relevant factors affecting the level of collection as provided in the rules and
regulations promulgated under this Act, subject to civil service laws, rules and regulations and
compliance with substantive and procedural due process: Provided, That the following exemptions
shall apply:
1. Where the district or area of responsibility is newly-created, not exceeding two years in
operation, as has no historical record of collection performance that can be used as basis for
evaluation; and

2. Where the revenue or customs official or employee is a recent transferee in the middle of the
period under consideration unless the transfer was due to nonperformance of revenue targets or
potential nonperformance of revenue targets: Provided, however, That when the district or area of
responsibility covered by revenue or customs officials or employees has suffered from economic
difficulties brought about by natural calamities orforce majeure or economic causes as may be
determined by the Board, termination shall be considered only after careful and proper review by
the Board.
(c) To terminate personnel in accordance with the criteria adopted in the preceding paragraph: Provided,
That such decision shall be immediately executory: Provided, further, That the application of the criteria
for the separation of an official or employee from service under this Act shall be without prejudice
to the application of other relevant laws on accountability of public officers and employees, such
as the Code of Conduct and Ethical Standards of Public Officers and Employees and the AntiGraft and Corrupt Practices Act;
xxx

xxx

xxx (emphasis supplied)

Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR and the BOC. The
guarantee of security of tenure only means that an employee cannot be dismissed from the service for causes
other than those provided by law and only after due process is accorded the employee. 31 In the case of RA 9335,
it lays down a reasonable yardstick for removal (when the revenue collection falls short of the target by at least
7.5%) with due consideration of all relevant factors affecting the level of collection. This standard is analogous to
inefficiency and incompetence in the performance of official duties, a ground for disciplinary action under civil
service laws.32 The action for removal is also subject to civil service laws, rules and regulations and compliance
with substantive and procedural due process.
At any rate, this Court has recognized the following as sufficient standards: "public interest," "justice and equity,"
"public convenience and welfare" and "simplicity, economy and welfare." 33 In this case, the declared policy of
optimization of the revenue-generation capability and collection of the BIR and the BOC is infused with public
interest.
Separation Of Powers
Section 12 of RA 9335 provides:
SEC. 12. Joint Congressional Oversight Committee. There is hereby created a Joint Congressional
Oversight Committee composed of seven Members from the Senate and seven Members from the House
of Representatives. The Members from the Senate shall be appointed by the Senate President, with at
least two senators representing the minority. The Members from the House of Representatives shall be
appointed by the Speaker with at least two members representing the minority. After the Oversight
Committee will have approved the implementing rules and regulations (IRR) it shall thereafter
become functus officio and therefore cease to exist.
The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of approving the
implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On May 22,
2006, it approved the said IRR. From then on, it became functus officio and ceased to exist. Hence, the issue of
its alleged encroachment on the executive function of implementing and enforcing the law may be considered
moot and academic.
This notwithstanding, this might be as good a time as any for the Court to confront the issue of the constitutionality
of the Joint Congressional Oversight Committee created under RA 9335 (or other similar laws for that matter).
The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of congressional
oversight in Macalintal v. Commission on Elections34 is illuminating:
Concept and bases of congressional oversight
Broadly defined, the power of oversight embraces all activities undertaken by Congress to enhance
its understanding of and influence over the implementation of legislation it has enacted. Clearly,
oversight concerns post-enactment measures undertaken by Congress: (a) to monitor
bureaucratic compliance with program objectives, (b) to determine whether agencies are properly
administered, (c) to eliminate executive waste and dishonesty, (d) to prevent executive usurpation
of legislative authority, and (d) to assess executive conformity with the congressional perception
of public interest.

The power of oversight has been held to be intrinsic in the grant of legislative power itself and integral to
the checks and balances inherent in a democratic system of government. x x x x x x x x x
Over the years, Congress has invoked its oversight power with increased frequency to check the
perceived "exponential accumulation of power" by the executive branch. By the beginning of the
20th century, Congress has delegated an enormous amount of legislative authority to the executive branch
and the administrative agencies. Congress, thus, uses its oversight power to make sure that the
administrative agencies perform their functions within the authority delegated to them. x x x x x x x x x
Categories of congressional oversight functions
The acts done by Congress purportedly in the exercise of its oversight powers may be divided
into three categories, namely: scrutiny, investigation and supervision.
a. Scrutiny
Congressional scrutiny implies a lesser intensity and continuity of attention to administrative
operations. Its primary purpose is to determine economy and efficiency of the operation of
government activities. In the exercise of legislative scrutiny, Congress may request information
and report from the other branches of government. It can give recommendations or pass
resolutions for consideration of the agency involved.
xxx

xxx

xxx

b. Congressional investigation
While congressional scrutiny is regarded as a passive process of looking at the facts that are
readily available, congressional investigation involves a more intense digging of facts. The power
of Congress to conduct investigation is recognized by the 1987 Constitution under section 21,
Article VI, xxx
xxx
xxx
c. Legislative supervision
The third and most encompassing form by which Congress exercises its oversight power is thru
legislative supervision. "Supervision" connotes a continuing and informed awareness on the part of a
congressional committee regarding executive operations in a given administrative area. While both
congressional scrutiny and investigation involve inquiry into past executive branch actions in order to
influence future executive branch performance, congressional supervision allows Congress to scrutinize
the exercise of delegated law-making authority, and permits Congress to retain part of that delegated
authority.
Congress exercises supervision over the executive agencies through its veto power. It typically utilizes
veto provisions when granting the President or an executive agency the power to promulgate regulations
with the force of law. These provisions require the President or an agency to present the proposed
regulations to Congress, which retains a "right" to approve or disapprove any regulation before it takes
effect. Such legislative veto provisions usually provide that a proposed regulation will become a law after
the expiration of a certain period of time, only if Congress does not affirmatively disapprove of the
regulation in the meantime. Less frequently, the statute provides that a proposed regulation will become
law if Congress affirmatively approves it.
Supporters of legislative veto stress that it is necessary to maintain the balance of power between the
legislative and the executive branches of government as it offers lawmakers a way to delegate vast power
to the executive branch or to independent agencies while retaining the option to cancel particular exercise
of such power without having to pass new legislation or to repeal existing law. They contend that this
arrangement promotes democratic accountability as it provides legislative check on the activities of
unelected administrative agencies. One proponent thus explains:
It is too late to debate the merits of this delegation policy: the policy is too deeply embedded in
our law and practice. It suffices to say that the complexities of modern government have often led
Congress-whether by actual or perceived necessity- to legislate by declaring broad policy goals
and general statutory standards, leaving the choice of policy options to the discretion of an
executive officer. Congress articulates legislative aims, but leaves their implementation to the
judgment of parties who may or may not have participated in or agreed with the development of
those aims. Consequently, absent safeguards, in many instances the reverse of our constitutional

scheme could be effected: Congress proposes, the Executive disposes. One safeguard, of
course, is the legislative power to enact new legislation or to change existing law. But without
some means of overseeing post enactment activities of the executive branch, Congress would be
unable to determine whether its policies have been implemented in accordance with legislative
intent and thus whether legislative intervention is appropriate.
Its opponents, however, criticize the legislative veto as undue encroachment upon the executive
prerogatives. They urge that any post-enactment measures undertaken by the legislative branch
should be limited to scrutiny and investigation; any measure beyond that would undermine the
separation of powers guaranteed by the Constitution. They contend that legislative veto constitutes
an impermissible evasion of the Presidents veto authority and intrusion into the powers vested in the
executive or judicial branches of government. Proponents counter that legislative veto enhances
separation of powers as it prevents the executive branch and independent agencies from accumulating
too much power. They submit that reporting requirements and congressional committee investigations
allow Congress to scrutinize only the exercise of delegated law-making authority. They do not allow
Congress to review executive proposals before they take effect and they do not afford the opportunity for
ongoing and binding expressions of congressional intent. In contrast, legislative veto permits Congress to
participate prospectively in the approval or disapproval of "subordinate law" or those enacted by the
executive branch pursuant to a delegation of authority by Congress. They further argue that legislative
veto "is a necessary response by Congress to the accretion of policy control by forces outside its
chambers." In an era of delegated authority, they point out that legislative veto "is the most efficient
means Congress has yet devised to retain control over the evolution and implementation of its policy as
declared by statute."
In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court resolved the validity of
legislative veto provisions. The case arose from the order of the immigration judge suspending the
deportation of Chadha pursuant to 244(c)(1) of the Immigration and Nationality Act. The United States
House of Representatives passed a resolution vetoing the suspension pursuant to 244(c)(2) authorizing
either House of Congress, by resolution, to invalidate the decision of the executive branch to allow a
particular deportable alien to remain in the United States. The immigration judge reopened the
deportation proceedings to implement the House order and the alien was ordered deported. The Board of
Immigration Appeals dismissed the aliens appeal, holding that it had no power to declare unconstitutional
an act of Congress. The United States Court of Appeals for Ninth Circuit held that the House was without
constitutional authority to order the aliens deportation and that 244(c)(2) violated the constitutional
doctrine on separation of powers.
On appeal, the U.S. Supreme Court declared 244(c)(2) unconstitutional. But the Court shied away
from the issue of separation of powers and instead held that the provision violates the presentment
clause and bicameralism. It held that the one-house veto was essentially legislative in purpose and effect.
As such, it is subject to the procedures set out in Article I of the Constitution requiring the passage by a
majority of both Houses and presentment to the President. x x x x x x x x x
Two weeks after the Chadha decision, the Court upheld, in memorandum decision, two lower court
decisions invalidating the legislative veto provisions in the Natural Gas Policy Act of 1978 and the Federal
Trade Commission Improvement Act of 1980. Following this precedence, lower courts invalidated statutes
containing legislative veto provisions although some of these provisions required the approval of both
Houses of Congress and thus met the bicameralism requirement of Article I. Indeed, some of these veto
provisions were not even exercised.35(emphasis supplied)
In Macalintal, given the concept and configuration of the power of congressional oversight and considering the
nature and powers of a constitutional body like the Commission on Elections, the Court struck down the provision
in RA 9189 (The Overseas Absentee Voting Act of 2003) creating a Joint Congressional Committee. The
committee was tasked not only to monitor and evaluate the implementation of the said law but also to review,
revise, amend and approve the IRR promulgated by the Commission on Elections. The Court held that these
functions infringed on the constitutional independence of the Commission on Elections. 36
With this backdrop, it is clear that congressional oversight is not unconstitutional per se, meaning, it neither
necessarily constitutes an encroachment on the executive power to implement laws nor undermines the
constitutional separation of powers. Rather, it is integral to the checks and balances inherent in a democratic

system of government. It may in fact even enhance the separation of powers as it prevents the over-accumulation
of power in the executive branch.
However, to forestall the danger of congressional encroachment "beyond the legislative sphere," the Constitution
imposes two basic and related constraints on Congress.37 It may not vest itself, any of its committees or its
members with either executive or judicial power.38 And, when it exercises its legislative power, it must follow the
"single, finely wrought and exhaustively considered, procedures" specified under the Constitution, 39 including the
procedure for enactment of laws and presentment.
Thus, any post-enactment congressional measure such as this should be limited to scrutiny and investigation. In
particular, congressional oversight must be confined to the following:
(1) scrutiny based primarily on Congress power of appropriation and the budget hearings conducted in
connection with it, its power to ask heads of departments to appear before and be heard by either of its
Houses on any matter pertaining to their departments and its power of confirmation 40 and
(2) investigation and monitoring41 of the implementation of laws pursuant to the power of Congress to
conduct inquiries in aid of legislation.42
Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution.
Legislative vetoes fall in this class.
Legislative veto is a statutory provision requiring the President or an administrative agency to present the
proposed implementing rules and regulations of a law to Congress which, by itself or through a committee formed
by it, retains a "right" or "power" to approve or disapprove such regulations before they take effect. As such, a
legislative veto in the form of a congressional oversight committee is in the form of an inward-turning delegation
designed to attach a congressional leash (other than through scrutiny and investigation) to an agency to which
Congress has by law initially delegated broad powers. 43 It radically changes the design or structure of the
Constitutions diagram of power as it entrusts to Congress a direct role in enforcing, applying or implementing its
own laws.44
Congress has two options when enacting legislation to define national policy within the broad horizons of its
legislative competence.45 It can itself formulate the details or it can assign to the executive branch the
responsibility for making necessary managerial decisions in conformity with those standards. 46 In the latter case,
the law must be complete in all its essential terms and conditions when it leaves the hands of the
legislature.47 Thus, what is left for the executive branch or the concerned administrative agency when it formulates
rules and regulations implementing the law is to fill up details (supplementary rule-making) or ascertain facts
necessary to bring the law into actual operation (contingent rule-making). 48
Administrative regulations enacted by administrative agencies to implement and interpret the law which they are
entrusted to enforce have the force of law and are entitled to respect. 49 Such rules and regulations partake of the
nature of a statute50 and are just as binding as if they have been written in the statute itself. As such, they have
the force and effect of law and enjoy the presumption of constitutionality and legality until they are set aside with
finality in an appropriate case by a competent court. 51 Congress, in the guise of assuming the role of an overseer,
may not pass upon their legality by subjecting them to its stamp of approval without disturbing the calculated
balance of powers established by the Constitution. In exercising discretion to approve or disapprove the IRR
based on a determination of whether or not they conformed with the provisions of RA 9335, Congress arrogated
judicial power unto itself, a power exclusively vested in this Court by the Constitution.
Considered Opinion of
Mr. Justice Dante O. Tinga
Moreover, the requirement that the implementing rules of a law be subjected to approval by Congress as a
condition for their effectivity violates the cardinal constitutional principles of bicameralism and the rule on
presentment.52
Section 1, Article VI of the Constitution states:
Section 1. The legislative power shall be vested in the Congress of the Philippines which shall
consist of a Senate and a House of Representatives, except to the extent reserved to the people by
the provision on initiative and referendum. (emphasis supplied)
Legislative power (or the power to propose, enact, amend and repeal laws) 53 is vested in Congress which consists
of two chambers, the Senate and the House of Representatives. A valid exercise of legislative power requires the

act of both chambers. Corrollarily, it can be exercised neither solely by one of the two chambers nor by a
committee of either or both chambers. Thus, assuming the validity of a legislative veto, both a single-chamber
legislative veto and a congressional committee legislative veto are invalid.
Additionally, Section 27(1), Article VI of the Constitution provides:
Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, be presented to
the President. If he approves the same, he shall sign it, otherwise, he shall veto it and return the same
with his objections to the House where it originated, which shall enter the objections at large in its Journal
and proceed to reconsider it. If, after such reconsideration, two-thirds of all the Members of such House
shall agree to pass the bill, it shall be sent, together with the objections, to the other House by which it
shall likewise be reconsidered, and if approved by two-thirds of all the Members of that House, it shall
become a law. In all such cases, the votes of each House shall be determined by yeas or nays, and the
names of the members voting for or against shall be entered in its Journal. The President shall
communicate his veto of any bill to the House where it originated within thirty days after the date of receipt
thereof; otherwise, it shall become a law as if he had signed it. (emphasis supplied)
Every bill passed by Congress must be presented to the President for approval or veto. In the absence of
presentment to the President, no bill passed by Congress can become a law. In this sense, law-making under the
Constitution is a joint act of the Legislature and of the Executive. Assuming that legislative veto is a valid
legislative act with the force of law, it cannot take effect without such presentment even if approved by both
chambers of Congress.
In sum, two steps are required before a bill becomes a law. First, it must be approved by both Houses of
Congress.54 Second, it must be presented to and approved by the President. 55 As summarized by Justice Isagani
Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the procedure for the approval of bills:
A bill is introduced by any member of the House of Representatives or the Senate except for some
measures that must originate only in the former chamber.
The first reading involves only a reading of the number and title of the measure and its referral by the
Senate President or the Speaker to the proper committee for study.
The bill may be "killed" in the committee or it may be recommended for approval, with or without
amendments, sometimes after public hearings are first held thereon. If there are other bills of the same
nature or purpose, they may all be consolidated into one bill under common authorship or as a committee
bill.
Once reported out, the bill shall be calendared for second reading. It is at this stage that the bill is read in
its entirety, scrutinized, debated upon and amended when desired. The second reading is the most
important stage in the passage of a bill.
The bill as approved on second reading is printed in its final form and copies thereof are distributed at
least three days before the third reading. On the third reading, the members merely register their votes
and explain them if they are allowed by the rules. No further debate is allowed.
Once the bill passes third reading, it is sent to the other chamber, where it will also undergo the three
readings. If there are differences between the versions approved by the two chambers, a conference
committee58 representing both Houses will draft a compromise measure that if ratified by the Senate and
the House of Representatives will then be submitted to the President for his consideration.
The bill is enrolled when printed as finally approved by the Congress, thereafter authenticated with the
signatures of the Senate President, the Speaker, and the Secretaries of their respective chambers 59
The Presidents role in law-making.
The final step is submission to the President for approval. Once approved, it takes effect as law after the
required publication.60
Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to sufficient
standards established in the said law, the law must be complete in all its essential terms and conditions when it
leaves the hands of the legislature. And it may be deemed to have left the hands of the legislature when it
becomes effective because it is only upon effectivity of the statute that legal rights and obligations become
available to those entitled by the language of the statute. Subject to the indispensable requisite of publication
under the due process clause,61 the determination as to when a law takes effect is wholly the prerogative of

Congress.62 As such, it is only upon its effectivity that a law may be executed and the executive branch acquires
the duties and powers to execute the said law. Before that point, the role of the executive branch, particularly of
the President, is limited to approving or vetoing the law.63
From the moment the law becomes effective, any provision of law that empowers Congress or any of its members
to play any role in the implementation or enforcement of the law violates the principle of separation of powers and
is thus unconstitutional. Under this principle, a provision that requires Congress or its members to approve the
implementing rules of a law after it has already taken effect shall be unconstitutional, as is a provision that allows
Congress or its members to overturn any directive or ruling made by the members of the executive branch
charged with the implementation of the law.
Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. While there may be
similar provisions of other laws that may be invalidated for failure to pass this standard, the Court refrains from
invalidating them wholesale but will do so at the proper time when an appropriate case assailing those provisions
is brought before us.64
The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 of RA 9335 on the
other provisions of the law? Will it render the entire law unconstitutional? No.
Section 13 of RA 9335 provides:
SEC. 13. Separability Clause. If any provision of this Act is declared invalid by a competent court, the
remainder of this Act or any provision not affected by such declaration of invalidity shall remain in force
and effect.
In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules:
The general rule is that where part of a statute is void as repugnant to the Constitution, while another part
is valid, the valid portion, if separable from the invalid, may stand and be enforced. The presence of a
separability clause in a statute creates the presumption that the legislature intended separability, rather
than complete nullity of the statute. To justify this result, the valid portion must be so far independent of
the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had
supposed that it could not constitutionally enact the other. Enough must remain to make a complete,
intelligible and valid statute, which carries out the legislative intent. x x x
The exception to the general rule is that when the parts of a statute are so mutually dependent and
connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a
belief that the legislature intended them as a whole, the nullity of one part will vitiate the rest. In making
the parts of the statute dependent, conditional, or connected with one another, the legislature intended the
statute to be carried out as a whole and would not have enacted it if one part is void, in which case if
some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must
fall with them.
The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach any invalid
provision from the other provisions so that the latter may continue in force and effect. The valid portions can stand
independently of the invalid section. Without Section 12, the remaining provisions still constitute a complete,
intelligible and valid law which carries out the legislative intent to optimize the revenue-generation capability and
collection of the BIR and the BOC by providing for a system of rewards and sanctions through the Rewards and
Incentives Fund and a Revenue Performance Evaluation Board.
To be effective, administrative rules and regulations must be published in full if their purpose is to enforce or
implement existing law pursuant to a valid delegation. The IRR of RA 9335 were published on May 30, 2006 in
two newspapers of general circulation66 and became effective 15 days thereafter.67 Until and unless the contrary is
shown, the IRR are presumed valid and effective even without the approval of the Joint Congressional Oversight
Committee.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating a Joint
Congressional Oversight Committee to approve the implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The constitutionality of the remaining provisions
of RA 9335 is UPHELD. Pursuant to Section 13 of RA 9335, the rest of the provisions remain in force and effect.

ABAKADA VS. PURISIMAFACTS


: This petition for prohibition seeks to prevent respondents from implementing and enforcingRepublic Act (RA)
9335
(Attrition Act of 2005).RA 9335 provides a system of rewards and sanctions through the creation of Rewards and
IncentiveFund and Revenue Evaluation Board for all employees of the Bureau of Internal Revenue and Bureau
ofCustoms. The Fund is sourced from the collection of the BIR and the BOC in excess of their revenuetargets for
the year, as determined by the Development Budget and Coordinating Committee (DBCC)The DOF, DBM, NEDA,
BIR, BOC and the Civil Service Commission (CSC) were tasked
to promulgate and issue the implementing rules and regulations of RA 9335,
to be approved by a JointCongressional Oversight Committee created for such purpose.As taxpayers, petitioners
contend that the system will "transform[s] the officials and employees of theBIR and the BOC into mercenaries
and bounty hunters" as they will do their best only in considerationof such rewards. They also argue that the
system violates the equal protection clause, undue delegationof powers and Separation of powers.
ISSUES:Procedural Issue:
I.)Whether or not the court can exercise its power of judicial review.
Substantive Issue
:II.)Whether or not the system will turns the employees into mercenaries and bounty huntersIII.)
Whether or not the assailed law violates equal protection clause insofar as its applicability islimited only to BIR
and BOC employees and not to all government employees.IV.)
Whether or not the law unduly delegates the power to fix revenue targets to the President.V.)
Whether or not the creation of a congressional oversight committee for the questioned lawviolates the doctrine of
separation of powers.
RULINGS:I) The Court Can Exercise the Power of Judicial Review
Petitioners fail either to assert any specific and concrete legal claim or to demonstrate any direct adverseeffect of
the law on them. They are unable to show a personal stake in the outcome of this case or aninjury to themselves.
On this account, their petition is procedurally infirm. This notwithstanding, publicinterest requires the resolution of
the constitutional issues raised by petitioners.
II) The Contention Lacks Legal and Factual Basis
Implementation of RA 9335 will turn BIR and BOC officials and
employees into bounty hunters andmercenaries are
not only without any factual and legal basis; it is also purely speculative.A law enacted by Congress enjoys the
strong presumption of constitutionality. To justify itsnullification, there must be a clear and unequivocal breach of
the Constitution, not a doubtful and
equivocal one.To invalidate RA 9335 based on petitioners basel
ess supposition is an affront to thewisdom not only of the legislature that passed it but also of the executive which
approved it.
III)The Assailed Law does not Violates the Equal Protection Clause

The Constitution does not require that things which are different in fact be treated in law as though theywere the
same. The equal protection clause does not forbid discrimination as to things that are different.Since the subject
of the law is the revenue- generation capability and collection of the BIR and the BOC,the incentives and/or
sanctions provided in the law should logically pertain to the said agencies.
IV)There is No Undue Delegation of Powers
Two tests determine the validity of delegation of legislative power: (1) the completeness test and (2) thesufficient
standard test. A law is complete when it sets forth therein the policy to be executed, carriedout or implemented by
the delegate. To be sufficient, the standard must specify the limits of the
delegates authority, announce the legislative poli
cy and identify the conditions under which it is to beimplemented.RA 9335 adequately states the policy and
standards to guide the President in fixing revenue targets andthe implementing agencies in carrying out the
provisions of the law.
V)The Joint Congressional Oversight Committee Created to Approve the IRR of RA 9335 violates
the doctrine of Separation of Powers
The requirement that the implementing rules of a law be subjected to approval by Congress as acondition for their
affectivity violates the cardinal constitutional principles of bicameralism and the ruleon presentment.From the
moment the law becomes effective, any provision of law that empowers Congress or any of itsmembers to play
any role in the implementation or enforcement of the law violates the principle ofseparation of powers and is thus
unconstitutional. Following this rationale, Section 12 of RA 9335should be struck down as unconstitutionalThe
separability clause of RA 9335 reveals the intention of the legislature to isolate and detach anyinvalid provision
from the other provisions so that the latter may continue in force and effect. The
valid portions can stand independently of the invalid section. Without Section 12, the remaining provisionsstill
constitute a complete, intelligible and valid lawPetition was partially granted, Sec. 12 of RA 9335 was declared
unconstitutional, the other provisionswere upheld.

ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitioners-appellants,


vs.
THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY ASSESSOR and THE CITY MAYOR, all of
the City of Manila, respondents-appellees.

This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the Municipal Board of
the City of Manila on March 24, 1950.
The Association of Customs Brokers, Inc., which is composed of all brokers and public service operators of motor
vehicles in the City of Manila, and G. Manlapit, Inc., a member of said association, also a public service operator
of the trucks in said City, challenge the validity of said ordinance on the ground that (1) while it levies a so-called
property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila; (2)
said ordinance offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.
The respondents, represented by the city fiscal, contend on their part that the challenged ordinance imposes a
property tax which is within the power of the City of Manila to impose under its Revised Charter [Section 18 (p) of
Republic Act No. 409], and that the tax in question does not violate the rule of uniformity of taxation, nor does it
constitute double taxation.
The issues having been joined, the Court of First Instance of Manila sustained the validity of the ordinance and
dismissed the petition. Hence this appeal.
The disputed ordinance was passed by the Municipal Board of the City of Manila under the authority conferred by
section 18 (p) of Republic Act No. 409. Said section confers upon the municipal board the power "to tax motor and
other vehicles operating within the City of Manila the provisions of any existing law to the contrary
notwithstanding." It is contended that this power is broad enough to confer upon the City of Manila the power to
enact an ordinance imposing the property tax on motor vehicles operating within the city limits.
In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the Motor Vehicles
Law, as amended, (Act No. 3992) which has a bearing on the power of the municipal corporation to impose tax on
motor vehicles operating in any highway in the Philippines. The pertinent provisions are contained in section 70
(b) which provide in part:
No further fees than those fixed in this Act shall be exacted or demanded by any public highway, bridge or
ferry, or for the exercise of the profession of chauffeur, or for the operation of any motor vehicle by the
owner thereof: Provided, however, That nothing in this Act shall be construed to exempt any motor vehicle
from the payment of any lawful and equitable insular, local or municipal property tax imposed thereupon. .
..
Note that under the above section no fees may be exacted or demanded for the operation of any motor vehicle
other than those therein provided, the only exception being that which refers to the property tax which may be
imposed by a municipal corporation. This provision is all-inclusive in that sense that it applies to all motor vehicles.
In this sense, this provision should be construed as limiting the broad grant of power conferred upon the City of
Manila by its Charter to impose taxes. When section 18 of said Charter provides that the City of Manila can

impose a tax on motor vehicles operating within its limit, it can only refers to property tax as a different
interpretation would make it repugnant to the Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance Levying a Property Tax
on All Motor Vehicles Operating Within the City of Manila", and that in its section 1 it provides that the tax should
be 1 per cent ad valorem per annum. It also provides that the proceeds of the tax "shall accrue to the Streets and
Bridges Funds of the City and shall be expended exclusively for the repair, maintenance and improvement of its
streets and bridges." Considering the wording used in the ordinance in the light in the purpose for which the tax is
created, can we consider the tax thus imposed as property tax, as claimed by respondents?
While as a rule an ad valorem tax is a property tax, and this rule is supported by some authorities, the rule should
not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is
in effect an excise or a license tax. Thus, it has been held that "If a tax is in its nature an excise, it does not
become a property tax because it is proportioned in amount to the value of the property used in connection with
the occupation, privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by
property and so may be indirectly a tax upon property; but if it is really imposed upon the performance of an act,
enjoyment of a privilege, or the engaging in an occupation, it will be considered an excise." (26 R. C. L., 35-36.) It
has also been held that
The character of the tax as a property tax or a license or occupation tax must be determined by its
incidents, and from the natural and legal effect of the language employed in the act or ordinance, and not
by the name by which it is described, or by the mode adopted in fixing its amount. If it is clearly a property
tax, it will be so regarded, even though nominally and in form it is a license or occupation tax; and, on the
other hand, if the tax is levied upon persons on account of their business, it will be construed as a license
or occupation tax, even though it is graduated according to the property used in such business, or on the
gross receipts of the business. (37 C.J., 172)
The ordinance in question falls under the foregoing rules. While it refers to property tax and it is fixed ad
valoremyet we cannot reject the idea that it is merely levied on motor vehicles operating within the City of Manila
with the main purpose of raising funds to be expended exclusively for the repair, maintenance and improvement of
the streets and bridges in said city. This is precisely what the Motor Vehicle Law (Act No. 3992) intends to
prevent, for the reason that, under said Act, municipal corporation already participate in the distribution of the
proceeds that are raised for the same purpose of repairing, maintaining and improving bridges and public highway
(section 73 of the Motor Vehicle Law). This prohibition is intended to prevent duplication in the imposition of fees
for the same purpose. It is for this reason that we believe that the ordinance in question merely imposes a license
fee although under the cloak of an ad valorem tax to circumvent the prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained by our Constitution.
Note that the ordinance exacts the tax upon all motor vehicles operating within the City of Manila. It does not
distinguish between a motor vehicle for hire and one which is purely for private use. Neither does it distinguish
between a motor vehicle registered in the City of Manila and one registered in another place but occasionally
comes to Manila and uses its streets and public highways. The distinction is important if we note that the
ordinance intends to burden with the tax only those registered in the City of Manila as may be inferred from the
word "operating" used therein. The word "operating" denotes a connotation which is akin to a registration, for
under the Motor Vehicle Law no motor vehicle can be operated without previous payment of the registration fees.
There is no pretense that the ordinance equally applies to motor vehicles who come to Manila for a temporary
stay or for short errands, and it cannot be denied that they contribute in no small degree to the deterioration of the
streets and public highway. The fact that they are benefited by their use they should also be made to share the

corresponding burden. And yet such is not the case. This is an inequality which we find in the ordinance, and
which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.

THE SHELL CO. OF P.I., LTD., plaintiff-appellant,


vs.
E. E. VAO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu, defendant-appellee.
C.J. Johnston and A.P. Deen for appellant.
Provincial Fiscal Jose C. Borromeo and Assistant Provincial Fiscal Ananias V. Maribao for appellee.
PADILLA, J.:
The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10, series of 1946,
which imposes an annual tax of P150 on occupation or the exercise of the privilege of installation manager; No. 9,
series of 1947, which imposes an annual tax of P40 for local deposits in drums of combustible and inflammable
materials and an annual tax of P200 for tin can factories; and No. 11, series of 1948, which imposes an annual tax
of P150 on tin can factories having a maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a
foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the ordinances imposing
such taxes are ultra vires. The defendant denies that they are so. The controversy was submitted for judgment
upon stipulation of facts which reads as follows:
Come now the parties in the above-entitled case by their undersigned attorneys and hereby agree to the
following stipulation of facts:
1. That the parties admit the allegations contained in Paragraph 1 of the Amended Complaint referring to
residence, personality, and capacity of the parties except the fact that E.E. Vao is now replaced by F.A.
Corbo as Municipal Treasurer of Cordova, Cebu;
2. That the parties admit the allegations contained in paragraph 2 of the Amended Complaint. Official
Receipts Nos. A-1280606, A-37607422, A-3769852 and A-21030388 are herein marked as Exhibits A, B,
C, and D, respectively for the plaintiff;
3. That the parties admit that payments made under Exhibits B, C, and D were all under protest and
plaintiff admits that Exhibit A was not paid under protest;
4. That the parties admit that Official Receipt No. A-1280606 for P40 and Official Receipt No. A-3760742
for P200 were collected by the defendant by virtue of Ordinance No. 9, (Secs. E-4 and E-6, respectively)
under Resolution No. 31, series of 1947, enacted December 15, 1947, approved by the Provincial Board
of Cebu in its Resolution No. 644, series of 1948. Copy of said Ordinance No. 9, series of 1947, is herein
marked as Exhibit "E" for the plaintiff, and as Exhibit "I" for the defendant;
5. That the parties admit that Official Receipt No. A-3760852 for P150 was paid for taxes imposed on
Installation Managers, collected by the defendant by virtue of Ordinance No. 10 (section 3, E-12) under
Resolution No. 38, series of 1946, approved by the Provincial Board of Cebu in its Resolution No. 1070,
series of 1946. Copy of .said Ordinance No. 10, series of 1946 is marked as Exhibit "F" for the plaintiff
and as Exhibit "2" for the defendant;
6. That the parties admit that Official Receipt No. A-21030388 for P5,450 was paid by plaintiff and that
said amount was collected by defendant by virtue of Ordinance No. 11, series of 1948 (under Resolution
No. 46) enacted August 31, 1948 and approved by the Provincial Board of Cebu in its Resolution No. 115,
series of 1949, and same was approved by the Honorable Secretary of Finance under the provisions of
section 4 of Commonwealth Act No. 472. Copy of said Ordinance No. 11, series of 1948 is herein marked
as Exhibit "G" for the plaintiff, and Exhibit "3" for the defendant. Copy of the approval of the Honorable
Secretary of Finance of the same Ordinance is herein marked as Exhibit "4" for the defendant.
Wherefore, aside from oral evidence which may be offered by the parties and other points not covered by
this stipulation, this case is hereby submitted upon the foregoing agreed facts and record of evidence.
Cebu City, Philippines, January 20, 1950.
THE SHELL CO. OF P.I. LTD.
(Sgd.) L. DE BLECHYNDEN
Plaintiff
THE MUNICIPALITY OF CORDOVA
(Sgd.) F.A. CORBO

C.D. JOHNSTON & A.P. DEEN


(Sgd.) A.P. DEEN
Attys. for the plaintiff
(Sgd.) JOSE C. BORROMEO
Provincial Fiscal

Defendant

Attorney for the defendant


(Record on Appeal, pp. 15-18.)

The parties reserved the right to introduce parole evidence but no such evidence was submitted by either party.
From the judgment holding the ordinances valid and dismissing the complaint the plaintiff has appealed.
It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local deposit in drums of
combustible and inflammable materials," and of P200 "for tin factory" was adopted under and pursuant to section
2244 of the Revised Administrative Code, which provides that the municipal council in the exercise of the
regulative authority may require any person engaged in any business or occupation, such as "storing combustible
or explosive materials" or "the conducting of any other business of an unwholesome, obnoxious, offensive, or
dangerous character," to obtain a permit for which a reasonable fee, in no case to exceed P10 per annum, may
be charged, the annual tax of P40 and P200 are unauthorized and illegal. The permit and the fee referred to may
be required and charged by the Municipal Council of Cordova in the exercise of its regulative authority, whereas
the ordinance which imposes the taxes in question was adopted under and pursuant to the provisions of
Commonwealth Act No. 472, which authorizes municipal councils and municipal district councils "to impose
license taxes upon persons engaged in any occupation or business, or exercising privileges in the municipality or
municipal district, by requiring them to secure licenses at rates fixed by the municipal council or municipal district
council," which shall be just and uniform but not "percentage taxes and taxes on specified articles." Likewise,
Ordinance No. 10, series of 1946, which imposes an annual tax of P150 on "installation manager" comes under
the provisions of Commonwealth Act No. 472. But it is claimed that "installation manager" is a designation made
by the plaintiff and such designation cannot be deemed to be a "calling" as defined in section 178 of the National
Internal Revenue Code (Com. Act No. 466), and that the installation manager employed by the plaintiff is a
salaried employee which may not be taxed by the municipal council under the provisions of Commonwealth Act
No. 472. This contention is without merit, because even if the installation manager is a salaried employee of the
plaintiff, still it is an occupation "and one occupation or line of business does not become exempt by being
conducted with some other occupation or business for which such tax has been paid' 1 and the occupation tax
must be paid "by each individual engaged in a calling subject thereto." 2 And pursuant to section 179 of the
National Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any person from any
tax, . . . provided by law or ordinance in places where such . . . occupation in . . . regulated by municipal law, nor
shall the payment of any such tax be held to prohibit any municipality from placing a tax upon the same . . .
occupation, for local purposes, where the imposition of such tax is authorized by law." It is true that, according to
the stipulation of facts, Ordinance No. 10, series of 1946, was approved by the Provincial Board of Cebu in its
Resolution No. 1070, series of 1946, and that it does not appear that it was approved by the Department of
Finance, as provided for and required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of
municipal tax being in excess of P50 per annum. But at this point on the approval of the Department of Finance
was not raised in the court below, it cannot be raised for the first time on appeal. The issue joined by the parties in
their pleadings and the point raised by the plaintiff is that the municipal council was not empowered to adopt the
ordinance and not that it was not approved by the Department of Finance. The fact that it was not stated in the
stipulation of facts justifies the presumption that the ordinance was approved in accordance with law.
The contention that the ordinance is discriminatory and hostile because there is no other person in the locality
who exercises such "designation" or occupation is also without merit, because the fact that there is no other
person in the locality who exercises such a "designation" or calling does not make the ordinance discriminatory
and hostile, inasmuch as it is and will be applicable to any person or firm who exercises such calling or occupation
named or designated as "installation manager."
Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can factories having a
maximum annual output capacity of 30,000 tin cans which, according to the stipulation of facts, was approved by
the Provincial Board of Cebu and the Department of Finance, is valid and lawful, because it is neither a
percentage tax nor one on specified articles which are the only exceptions provided in section 1, Commonwealth
Act No. 472. Neither does it fall under any of the prohibitions provided for in section 3 of the same Act. Specific
taxes enumerated in the National Internal Revenue Code are those that are imposed upon "things manufactured
or produced in the Philippines for domestic sale or consumption" and upon "things imported from the United
States and foreign countries," such as distilled spirits, domestic denatured alcohol, fermented liquors, products of
tobacco, cigars and cigarettes, matches, mechanical lighters, firecrackers, skimmed milk, manufactured oils and
other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, sacharine. 3 And it is not a

percentage tax because it is tax on business and the maximum annual output capacity is not a percentage,
because it is not a share or a tax based on the amount of the proceeds realized out of the sale of the tin cans
manufactured therein but on the business of manufacturing tin cans having a maximum annual output capacity of
30,000 tin cans.
In an action for refund of municipal taxes claimed to have been paid and collected under an illegal ordinance, the
real party in interest is not the municipal treasurer but the municipality concerned that is empowered to sue and
be sued.4
The judgment appealed from is hereby affirmed, with costs against the appellant.

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATION, INC. vs. EXECUTIVE SECRETARYMinimum Corporate Income Tax

FACTS:
CREBA assails the imposition of the minimum corporate income tax (MCIT) as being violative of the due process
clause as it levies income tax even if there is no realized gain. They also question the creditable withholding tax
(CWT) on sales of real properties classified as ordinary assets stating that (1) they ignore the different treatment
of ordinary assets and capital assets; (2) the use of gross selling price or fair market value as basis for the CWT
and the collection of tax on a per transaction basis (and not on the net income at the end of the year) are
inconsistent with the tax on ordinary real properties; (3) the government collects income tax even when the net
income has not yet been determined; and (4) the CWT is being levied upon real estate enterprises but not on
other enterprises, more particularly those in the manufacturing sector.

ISSUE:
Are the impositions of the MCIT on domestic corporations and
classified as ordinary assets unconstitutional?

CWT on income from sales of real properties

HELD:
NO. MCIT does not tax capital but only taxes income as shown by the fact that the MCIT is arrived at by
deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. Besides, there are sufficient safeguards that exist for the MCIT: (1) it is only imposed
on the 4th year of operations; (2) the law allows the carry forward of any excess MCIT paid over the normal
income tax; and (3) the Secretary of Finance can suspend the imposition of MCIT in justifiable instances.

The regulations on CWT did not shift the tax base of a real estate business income tax from net income to GSP
or FMV of the property sold since the taxes withheld are in the nature of advance tax payments and they are thus
just installments on the annual tax which may be due at the end of the taxable year. As such the tax base for the

sale of real property classified as ordinary assets remains to be the net taxable income and the use of the GSP or
FMV is because these are the only factors reasonably known to the buyer in connection with the performance of
the duties as a withholding agent.
Neither is there violation of equal protection even if the CWT is levied only on the real industry as the real estate
industry is, by itself, a class on its own and can be validly treated different from other businesses.