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Tolentino v.

Secretary of Finance
Problem: The House Ways and Means Committee of the House of Representatives recommended for approval H.
No. 11197 or the VAT Bill. The bill (H. No. 11197) was considered on second reading. The lower house also
approved it after the third and final reading. It was sent to the Senate and was referred to its Committee on Ways
and Means. The Senate Committee submitted its report recommending approval of S. No. 1630. It was stated that
the bill was being submitted "in substitution of Senate Bill No. 1129, taking into consideration P.S. Res. No. 734 and
H.B. No. 11197." The Senate then began consideration of the bill (S. No. 1630). It finished debates on the bill and
approved it on second reading. It also approved the bill on the third reading. H. No. 11197 and its Senate version
(S. No. 1630) were then referred to a conference committee which, after meeting four times recommended that
"House Bill No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the attached
copy of the bill as reconciled and approved by the conferees." The Conference Committee bill was thereafter
approved by both the House of Representatives and by the Senate. The enrolled bill was then presented to the
President of the Philippines who signed it. It became Republic Act No. 7716. It was published in two newspapers of
general circulation and thereafter it took effect, although its implementation was suspended to allow time for the
registration of business entities. It would have been enforced but its enforcement was stopped because the
Supreme Court granted a temporary restraining order.
The contention of petitioners, former Senator Arturo Tolentino et al., is that in enacting Republic Act No. 7716, or
the Expanded Value-Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had
originated in the House of Representatives, it was not passed by the Senate but was simply consolidated with the
Senate version (S. No. 1630) in the Conference Committee to produce the bill which the President signed into law.
The following provisions of the Constitution are cited in support of the proposition that because Republic Act No.
7716 was passed in this manner, it did not originate in the House of Representatives and it has not thereby become
a law:
Art. VI, s. 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the Senate may
propose or concur with amendments.
Art. VI, s. 26(2): No bill passed by either House shall become a law unless it has passed three readings on
separate days, and printed copies thereof in its final form have been distributed to its Members three days before
its passage, except when the President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal.
Did RA 7716 violate Art. VI, Section 24 and Art. VI, Section 26(2) of the Constitution?
Answer: No. It is not the law but the revenue bill which is required by the Constitution to “originate exclusively” in
the House of Representatives. It is important to emphasize this, because a bill originating in the House may
undergo such extensive changes in the Senate that the result may be a rewriting of the whole. What is important to
note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not
only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the
same as the House bill would be to deny the Senate’s power not only to “concur with amendments” but also to
“propose amendments.” It would be to violate the coequality of legislative power of the two houses of Congress and
in fact make the House superior to the Senate. Furthermore, there is really no difference between the Senate
preserving H. No. 11197 up to the enacting clause and then writing its own version following the enacting clause
(which, it would seem, petitioners admit is an amendment by substitution), and, on the other hand, separately
presenting a bill of its own on the same subject matter. In either case the result are two bills on the same subject.
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing
an increase of the public debt, private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the members of the House can be
expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected
at large, are expected to approach the same problems from the national perspective. Both views are thereby made
to bear on the enactment of such laws. Nor does the Constitution prohibit the filing in the Senate of a substitute bill
in anticipation of its receipt of the bill from the House, so long as action by the Senate as a body is withheld
pending receipt of the House bill.

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If the committee can propose an amendment consisting of one or two provisions. s. this Court recently held that it is within the power of a conference committee to include in its report an entirely new provision that is not found either in the House bill or in the Senate bill. Not even claims that a proposed constitutional amendment was invalid because the requisite votes for its approval had not been obtained or that certain provisions of a statute had been “smuggled” in the printing of the bill have moved or persuaded us to look behind the proceedings of a coequal branch of the government. Indeed. its report was not final but needed the approval of both houses of Congress to become valid as an act of the legislative department. We cannot say that. 1630) which it had prepared by “taking into consideration” the House bill. No. who had signed the enrolled bill. Whatever doubts there may be as to the formal validity of Republic Act No. so that in effect there was no longer an enrolled bill to consider. the “unless” clause must be read in relation to the “except” clause. there is no reason why it cannot propose several provisions. In fact in one case we “went behind” an enrolled bill and consulted the Journal to determine whether certain provisions of a statute had been approved by the Senate in view of the fact that the President of the Senate himself. 26(2) qualifies the two stated conditions before a bill can become a law: (i) the bill has passed three readings on separate days and (ii) it has been printed in its final form and distributed three days before it is finally approved. VI. The charge that in this case the Conference Committee acted as a third legislative chamber is thus without any basis. The phrase “except when the President certifies to the necessity of its immediate enactment. conference committees are not expected to make any material change in the measure at issue. 26(2) must. It would also negate the very premise of the “except” clause: the necessity of securing the immediate enactment of a bill which is certified in order to meet a public calamity or emergency. After all. not to the conference committee report.e.” so long as such amendment is germane to the subject of the bills before the committee. etc.The presidential certification dispensed with the requirement not only of printing but also that of reading the bill on separate days. presumably after appropriate study by their members. the members of Congress were not fully informed of the provisions of the bill. that although the Senate committee did not report out the House bill. VI. 2 . Under the Constitution such a law is required to be made within seven days of the convening of Congress in emergency session. printing and distribution three days before final approval) would not only violate the rules of grammar. The result is a third version. But where allegations that the constitutional procedures for the passage of bills have not been observed have no more basis than another allegation that the Conference Committee “surreptitiously” inserted provisions into a bill which it had prepared. that for its part the Conference Committee consolidated the two bills and prepared a compromise version. As to the possibility of an entirely new bill emerging out of a Conference Committee. There is no reason now to depart from this rule. admitted a mistake and withdrew his signature. because the two are really coordinate clauses of the same sentence. it cannot be gainsaid that H. 11197 was passed in the House after three readings. the time saved would be so negligible as to be of any use in insuring immediate enactment. Art. But this is a difficult provision to enforce. permitting a conference committee to draft essentially a new bill. 7716 must be resolved in its favor.. it submitted a version (S. To disregard the “enrolled bill” rule in such cases would be to disregard the respect due the other two departments of our government. No claim is here made that the “enrolled bill” rule is absolute. either by deleting provisions to which both houses have already agreed or by inserting new provisions. It may well be doubted whether doing away with the necessity of printing and distributing copies of the bill three days before the third reading would insure speedy enactment of a law in the face of an emergency requiring the calling of a special election for President and Vice-President.” the only requirement for which being that the third version be germane to the subject of the House and Senate bills. No. Our cases manifest firm adherence to the rule that an enrolled copy of a bill is conclusive not only of its provisions but also of its due enactment. In other words. To construe the “except” clause as simply dispensing with the second requirement in the “unless” clause (i.” in Art. that in the Senate it was considered on first reading and then referred to a committee of that body. For if it is only the printing that is dispensed with by presidential certification. For if the purpose of requiring three readings is to give members of Congress time to study bills. s. The versions are now altogether different. therefore be construed as referring only to bills introduced for the first time in either house of Congress. that the Conference Committee Report was thereafter approved by the House and the Senate. it has been explained: Under congressional rules of procedure. collectively considered as an “amendment in the nature of a substitute. which is considered an “amendment in the nature of a substitute. Note the problem when one house amends a proposal originating in either house by striking out everything following the enacting clause and substituting provisions which make it an entirely new bill. we should decline the invitation to go behind the enrolled copy of the bill. as a matter of fact.

the captain being responsible for said work and the latter also answered for all the cargo placed on board and for the manner in which said cargo is loaded. Is the plaintiff a contractor making the collection of the tax he paid legal? Answer: No. levied and assessed on the above-mentioned amount the percentage tax amounting to P2. Trinidad Problem: The plaintiff. taken by itself. has come to be used with special reference to a person who. and that the defendant. is and was a corporation engaged in the stevedoring business in Manila. in a revenue statute susceptible of two or more meanings. In a general sense every person who enters into a contract may be called a contractor. 2711. The plaintiff was assessed taxes by the defendant. Luzon Stevedoring Co. this protest having been duly overruled by the defendant. 3 . in the pursuit of an independent business.Stevedoring v.81. and not as to the means by which it is accomplished. yet the word. 2711. at certain rates of charge per unit of cargo and that all the work done by it is conducted under the direct supervision of the officers of the ships and under the instruction given to plaintiff’s men by the captain and officers of said ships.281. The plaintiff had no liability for the improper loading or unloading of vessels. Said business consisted of loading and unloading cargo from vessels in port. under the provisions of section 1462 of Act No. its gross receipts from said business during said quarter amounting to P242. In his special defense the defendant alleged that during the first quarter of the year 1921 the plaintiff was engaged in business as a contractor. The true test of a "contractor" would seem to be that he renders service in the course of an independent occupation representing the will of his employer only as to the result of his work. Internal Revenue Collector. The definition adopted by lexicographers cannot always be adopted as a correct meaning for statutory words and phrases. undertakes to do a specific piece of job or work for other persons. 1921.422. its obscurity or doubt may be removed by reference to associate words. Plaintiff’s laborers were said to be under the direct control of the captain that no discretion was left to the plaintiff nor its men. the court will adopt that interpretation most in accord with the manifest purpose of the statute as gathered from the text. under protest. The plaintiff commenced an action to recover the sum it paid to the defendant. Revenue laws imposing taxes on business must be strictly construed in favor of the citizen. The plaintiff is not a contractor in the sense that that word is used in said section 1462 of Act No. which the plaintiff paid on April 18. and therefore the tax paid by the plaintiff under protest was illegally collected and should be repaid. Where a particular word is obscure or of doubtful meaning.33. In construing a word. using his own means and methods without submitting himself to control as to the petty details. whom the plaintiff paid under protest. for want of a better one. The intention of the legislature and the object which it intended to attain must be taken into consideration for the purpose of determining the meaning of words and phrases in a statute. rather than the definition of lexicographers.

1922. and in the absence of clear legislative intent. Liability for taxes under retroactive legislation has been “one of the incidents of social life” but legislative intent that a tax statute should operate retroactively should be perfectly clear. The defendant levied and assessed the inheritance tax due from the estate of Thomas Hanley under the provisions of section 1544 of the Revised Administrative Code. “A statute should be considered as prospective in its operation. the defendant Collector of Internal Revenue. as amended by section 3 of Act No. whether it enacts. Properly speaking. Of course. No such effect can be given the statute by this court. The will was admitted to probate. as amended by Act No. amending section 1544 of the Revised Administrative Code. 3606. was. this sense has been enlarged to include within the term "penal statutes" all status which command or prohibit certain acts. 1924. which took effect on March 9. 1930. Posada Problem: Thomas Hanley died in Zamboanga City leaving a will and considerable amount of real and personal properties. a tax statute may be made retroactive in its operation. and even those which.Lorenzo v. that certain provisions of Act No. Article 22 of the Revised Penal Code is not applicable to the case at bar. The Court of First Instance of Zamboanga considered it proper for the best interests of their estate to appoint a trustee to administer the real properties which. under Act No. Act No. This is the reason why he applied Act No. was not the law in force when the testator died on May 27.052. although there are authorities to the contrary. however. a statute is penal when it imposes punishment for an offense committed against the state which. instead of on both the tax and the interest. that said provisions are penal in nature and. assessed against the estate an inheritance tax amounting to P2. 3606 a retroactive effect. The law at the time was section 1544 above-mentioned. 65 of the Department of Finance makes section 3 of Act No. 3031. Moore took his oath of office and gave bond on March 10. without expressly prohibiting certain acts. 3606 instead of Act No. and (2) the taxpayer is allowed twenty days from notice and demand by the Collector of Internal Revenue within which to pay the tax. applicable to all estates the inheritance taxes due from which have not been paid. instead of ten days only as required by the old law. and establish penalties for their violation. 3606. The taxpayer cannot foresee and ought not to be required to guess the outcome of pending measures. generally. when he resigned and the plaintiff. under the Constitution. 4 . The defendant Collector of Internal Revenue maintains. amends. 3031. as provided for in Act No. Pablo Lorenzo was appointed in his stead. 3606 are more favorable to the taxpayer than those of Act No. 1924. During the incumbency of the plaintiff as trustee. Should the provisions of Act No. should operate retroactively in conformity with the provisions of article 22 of the Revised Penal Code. Proceedings for the probate of his will and the settlement and distribution of his estate began in the Court of First Instance of Zamboanga. Revenue laws. therefore. under the will. In common use. impose a penalty upon their commission.” Though the last paragraph of section 5 of Regulations No. which impose taxes collected by the means ordinarily resorted to for the collection of taxes are not classed as penal laws. therefore. we cannot give Act No. It. He acted as trustee until February 29. But Act No. on March 8. however. or repeals an inheritance tax. were to pass to Matthew Hanley ten years after the two executors named in the will. 3031. 1922. 3606 went into effect on January 1. unless the language of the statute clearly demands or expresses that it shall have a retroactive effect. 1932. appointed trustee. It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent. 3606 itself contains no provisions indicating legislative intent to give it retroactive effect. the Executive has the power to pardon. 3606. 3031. Indeed. (1) the surcharge of 25 per cent is based on the tax only. which is favorable to the taxpayer be given retroactive effect? Answer: No. 3606.74.

Act 7167 should cover or extend to compensation income earned or received during calendar year 1991. among others. (L). par. Estanislao Problem: Congress enacted Rep. Perez stressed the necessity of passing the measure to mitigate the effects of the current inflation and of the implementation of the salary standardization law. Act 7167. Mr. Perez explained that the Bill Provides for increased personal additional exemptions to individuals in view of the higher standard of living. Mr. Sec. House Bill 28970. Subsequently. Moreover. as amended. limits the amount of income of individuals subject to income tax to enable them to spend for basic necessities and have more disposable income. the President shall automatically adjust not more often than once every three years. Item No. "the poverty threshold level" is the poverty threshold level at the time Rep. To that extent. 5 . it is the lowerincome and the middle-income groups of taxpayers (not the high-income taxpayers) who stand to benefit most from the increase of personal and additional exemptions provided for by Rep. Perez. Act 7167. Act 7167 with respect to taxable income of individual taxpayers earned or received on or after 1 January 1991 or as of taxable year ending 31 December 1991. Act 7167 was enacted by Congress. of the sponsorship remarks of Congressman Hernando B. Stating that it is imperative for the government to take measures to ease the burden of the individual income tax filers. Perez then cited specific examples of how the measure can help assuage the burden to the taxpayers. at which time there may be need of further adjustments in personal exemptions. On 27 February 1992. provides an indication of the intent of Congress in enacting Rep.Umali v. the President. the petitioners likewise filed a petition for mandamus and prohibition on their behalf as well as for those other individual taxpayers who might be similarly situated. Act 7167. Mr. however. not poverty threshold levels in futuro. The Bill. A perusal. However. Mr. to compel the Commissioner of Internal Revenue to implement the mandate of Rep. He then reiterated that the increase in the prices of commodities has eroded the purchasing power of the peso despite the recent salary increases and emphasized that the Bill will serve to compensate the adverse effects of inflation on the taxpayers. to compel the respondents to implement Rep. the Court can not lose sight of the fact that these personal and additional exemptions are fixed amounts to which an individual taxpayer is entitled. Does RA 7167 also apply to compensation income earned or received during calendar year 1991? Answer: Yes. and bare subsistence levels. as a means to cushion the devastating effects of high prices and a depreciated purchasing power of the currency. he stated. In the end. The said act was signed and approved by the President on 19 December 1991 and published on 14 January 1992 in "Malaya" a newspaper of general circulation. Act 7167 speaks of the adjustments that it provides for. 1-92. a taxpayer filed a petition for mandamus for himself and in behalf all individual Filipino taxpayers. could have adjusted the personal and additional exemptions in 1989 by increasing the same even without any legislation providing for such adjustment. As the personal and additional exemptions of individual taxpayers were last adjusted in 1986. But the President did not. Act 7167 adjusting the personal and additional exemptions allowable to individuals for income tax purposes in regard to income earned or received in 1991. Rep. the personal and additional exemptions taking into account. On 26 December 1991. on House Bill 28970. and to enjoin the respondents from implementing Revenue Regulations No. levels of minimum wages. 29. Chairman of the House Committee on Ways and Means." Certainly. provides: Upon the recommendation of the Secretary of Finance. Act 7167. respondents promulgated Revenue Regulations No. the movement in consumer price indices. 1-92. On 28 February 1992. as adjustments "to the poverty threshold level. upon the recommendation of the Secretary of Finance. was introduced in the House of Representatives in 1989 although its passage was delayed and it did not become effective law until 30 January 1992. the petitioner. 4 of the National Internal Revenue Code. It will also be observed that Rep. which was subsequently enacted by Congress as Rep. It is intended to remedy the inadequacy of the heretofore existing personal and additional exemptions for individual taxpayers. Perez added that inflation has raised the basic necessities and that it had been three years since the last exemption adjustment in 1986. The pertinent legislative journal contains the following: At the outset. the act is a social legislation intended to alleviate in part the present economic plight of the lower income taxpayers.

language that would have to authorize the payment of refunds of taxes paid on 15 April 1991 and 15 July 1991: such language is simply not found in Rep. after Rep. and thus literally defer the effectivity of Rep. 6 . which became effective. that is. Act 7167. the implementing regulations collide frontally with Section 3 of Rep. Revenue Regulations No. these exemptions are available upon the filing of personal income tax returns which is. The personal exemptions as increased by Rep. as the implementing Revenue Regulations No. under the National Internal Revenue Code. Whether or not the government can afford the drop in tax revenues resulting from such increased exemptions was for Congress (not this Court) to decide. of course. Act 7167 had not been enacted. Act 7167. Act 7167 which states that the statute "shall take effect upon its approval. Act 7167. 1-92 the legal effectivity of Rep. the tax due in respect of said income had already accrued. 1-92 would in effect postpone the availability of the increased exemptions to 1 January-15 April 1993. Act 7167 cannot be regarded as available only in respect of compensation income received during 1992. Act 7167 is. under Rep. 1-92 purport to provide. Act 7167 cannot be regarded as available in respect of compensation income received during the 1990 calendar year.And then. The personal exemptions as increased by Rep. at which time Rep. Thus. by 15 April 1991 and by 15 July 1991. Act 7167 says that the increased personal exemptions that it provides for shall be available thenceforth. the increased exemptions are literally available on or before 15 April 1992 (though not before 30 January 1992). Act 7167 refer back to income received during 1990 would require language explicitly retroactive in purport and effect. But these increased exemptions can be available on 15 April 1992 only in respect of compensation income earned or received during the calendar year 1991. Rep. Thus. Act 7167 to 1 January 1993. done not later than the 15th day of April after the end of a calendar year. on 30 January 1992." The objective of the Secretary of Finance and the Commissioner of Internal Revenue in postponing through Revenue Regulations No. Act 7167 shall have become effective. To make Rep. and been presumably paid. entirely understandable –– to defer to 1993 the reduction of governmental tax revenues which irresistibly follows from the application of Rep. But the law-making authority has spoken and the Court cannot refuse to apply the law-maker's words. as aforestated. In other words.

This amount that is used to settle the tax liability is sourced from the proceeds constitutive of the tax base. the rule on constructive receipt can be rationalized. Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is through the proper acts and legal formalities established. possession by any person without any power shall be considered as acquired when ratified by the person in whose name the act of possession is executed.474. however.693.CIR v. part of which is withheld. filed with the BIR a letter-request for the refund or tax credit.807. The Court of Tax Appeals (CTA) held in one case that the 20% FWT should not form part of its taxable gross receipts for purposes of computing the tax. the person on whom the tax is imposed. In a withholding tax system.15 representing gross receipts from passive income which was already subjected to 20% final withholding tax (FWT).44. What needs to be determined is if there is constructive receipt. the payee is the taxpayer. It also filed a petition for review with the CTA where it ordered the refund. The withholding process is one such act. a separate entity. although it claims that it derives no pecuniary benefit or advantage through the withholding process. Does FWT form part of the gross receipts tax? Answer: Yes.875. Both parties agree that there is no actual receipt by the bank. There being constructive receipt. acts as no more than an agent of the government for the collection of tax in order to ensure its payment. 7 . the fact that the amount redounded to the bank’s benefit makes it part of the taxable gross receipts in computing the Gross Receipts Tax. that income is included as part of the tax base on which the gross receipts tax is imposed. Solidbank Problem: Solidbank filed its Quarterly Percentage Tax Returns reflecting gross receipts amounting to P1. Solidbank argues that the 20% FWT did not form part of the taxable gross receipts because the FWT was not actually received by the bank but was directly remitted to the government. Since the payee is the real taxpayer. There may not be actual receipt of the income withheld. possession is acquired by the payor as the withholding agent of the government. receipt or remittance. The Court applied provisions of the Civil Code on actual and constructive possession. Solidbank. as provided for in Article 532. Solidbank admits that its income is subjected to a tax burden immediately upon “receipt”. The payor. relying on the strength of this decision. There is thus constructive receipt. The Commissioner claims that although the FWT was not actually received by Solidbank. because the taxpayer ratifies the very act of possession for the government. It alleged that the total included P350. These proceeds are either actual or constructive. The processes of bookkeeping and accounting for interest on deposits and yield on deposit substitutes that are subjected to FWT are tantamount to delivery. Besides. In our withholding tax system.

has now made this product the largest selling rum in the Philippines and the specific taxes that it had been paying the government. Republic Act No.Collector v.10 on alcohol lost by evaporation. during the period from January 1. “SEC 129. but only distilled spirits as finished products. said section reads: SEC 133. Tondo. except as hereinafter provided.172. with a distillery at 1068 Velasquez. On May 8. per proof liter.663. or be immediately or at any subsequent time transformed into any other substance either in process of original production or by any subsequent process. it is in harmony with section 129. principally from Binalbagan Isabela Sugar Central. and the tax shall attach to this substance as soon as it is in existence as such. thru re-rectification or re-redistillation. In the process of further rectification or distillation. the Conference Staff gave the appeal due course. losses thru evaporation had necessarily been incurred. "the tax shall attach to this substance as soon is it is in existence as such" etc. actually removed from the factory or bonded warehouse. the amount of the assessment. the respondent appealed the decision to the Conference Staff in the same Bureau. In a letter dated August 26. It appears that the specific taxes in question were assessed by the petitioner "in accordance with section 133 the Tax Code". 1954? Answer: Yes. Specific tax on distilled spirits. with the express permission and approval of the petitioner Collector of Internal Revenue. Manila.30 in 1950 to P4. — On distilled spirits there shall be collected.973. in the total amount of P154. 1951. which communication was received by the respondent on August 31. (b) If produced from any other material. 1954. exempted from the payment of the specific tax on rectified alcohol lost in process of further rectification. A-Account". petitioner wrote a demand letter to respondent for the payment of specific taxes. specific taxes as follows: (a) If produced from sap of the nipa.123. covering the period from June 7. in order to suit the purpose of respondent in producing only high quality products. or of some syrup of sap. on January 1. On September 1. as here used. without prepayment of specific taxes. under the column "CRUDE spirit" attested by the Inspector of the Bureau assigned to respondent's distillery. one peso and seventy centavos. Up to December 31. which are commonly produced by the fermentation and subsequent distillation of grain starch. "Distilled spirits". molasses. — Spirits requiring rectification may be removed from the place of their manufacture to some other establishment for the purpose of rectification without the prepayment of the specific tax. 1954. of the same Tax Code which provides. 1954. forty-five centavo. 1954. therefore. has been engaged in the business of manufacturing wines. for which the petitioner in the past had given the respondent allowance of not exceeding 7% for said losses. Respondent has been purchasing the alcohol used in the manufacture of its products. 1950. and liquors. camote. Removal of spirits or cigar under bond. provided the distiller removing such spirits and the rectifier receiving them shall file with the Collector of Internal Revenue their joint bond conditioned upon the future payment by the rectifier of the specific tax that may be due on any finished product. 1954. The said amendment could not mean anything else. On August 6. Respondent stated that the process adopted by it in the manufacture of its "Manila Rum". 1954.515. or buri palm. or from the juice syrup. This tax shall be proportionately increased for any strength of the spirits taxed over proof spirits. purchased in crude form from the suppliers. includes all substances known as ethyl alcohol. In the manufacture of "Manila Rum". or sugar. Is La Tondeña. Inc. which it re-rectifies or subjects to further distillation. Negros Occidental and Central Azcarera Don Pedro in Nasugbu. On September 3." a duly licensed rectifier. Pursuant to the above provision of law. 1954. and has been removing this alcohol from the centrals to respondent's distillery under joint bonds. Inc. The quantity of alcohol purchased and received by the respondent from the centrals are recorded and entered in the BIR Official Register Books of "La Tondeña. per proof liter. Batangas. or spirits of wine. respondent uses as basic materials low test alcohol. 1954. However.40 in 1954. The evident intention of the law maker in deleting the all embracing underlined clauses. Inc. or sugar of the cane. had steadily increased from P3. the petitioner made manifest its refusal to reconsider the assessment and urged the respondent to pay within 3 days from receipt. coconut. protesting against the said assessment. was to subject to specific tax not all kinds of alcoholic substances. including all dilutions or mixtures. respondent answered the demand letter dated May 8. 592 took effect. dehydrated oxide of ethyl. 1951 to February 27. casava. La Tondena Problem: The respondent "La Tondeña. whether it be subsequently separated as pure or impure spirits. amending section 133 and the clause underlined above had been eliminated.” 8 . 1950 to February 7.

who. upon the recommendation of the Bureau of Internal Revenue itself. therefore. even if already distilled (as in the present case) or rectified. based on the provision of laws then extant. so as to cover the period in question (January 1. 1608 became a law. And this must be so. 1956. It should be pointed out also that said section 129 was amended adding the following. Rep. Act No. as amended by R. It is only after August 23. took effect. until August 23. 7. which obviously reveals that the purpose of the amendment is to tax. only now.And if one would consider that the Tax Code does not prohibit further rectification or distillation and defines in section 194 thereof. No. 1608)”. 9 . Act No. the tax on alcohol did not attach as soon as it was in existence as such. but on the finished product. in further distillation or rectification. 1951 to February 27. “And provided.A. like the respondent herein. otherwise a great injustice would be caused upon a duly licensed rectifier. No. purified or refined. 5. from which no one has been benefited. the conclusion is logical that when alcohol. a rectifier as a person who rectifies. 592. is again rectified. 1951. further. of doubtful application. And on August 23. R. 1956. no loss for rectification and handling shall be allowed and the rectifier thereof shall pay the specific tax due on such losses (Sec.A. In every case of doubt. 1956 that the government woke up from its lethargy and hastened to fill the hiatus. when R. 1608 was passed. alcohol lost. Act No. That in cases where alcohol has already been rectified either by original and continuous distillation or by redistillation is further rectified. because burdens are not to be imposed beyond what the statutes expressly and clearly import. A. tax statutes are construed most strongly against the government and in favor of the citizens. 1608). restoring the very same clause which was eliminated (Sec. The inference. when Rep. Rep. This law certainly should not be given retroactive effect. is clear that from January 1. 1954). purifies or refines distilled spirits. 592. will be made to pay the specific tax on the alcohol lost thru evaporation. No. the specific tax should be based on the finished product. amending section 133 of the Tax Code. and not on the evaporated alcohol.

in said City. under the Local Autonomy Act is "broad" and "sufficiently plenary to cover everything.Serafica v. the aggregate sum of P1. Municipal Board of Ormoc City. the Supreme Court upheld the validity of a sales tax.000 board feet of lumber sold at Ormoc City by any person. Hermenegildo Serafica. Treasurer of Ormoc City Problem: Plaintiff. as owner of the Serafica Sawmill. 13. Series of 1964. of Ormoc City. seeks a declaration of nullity of Ordinance No. excepting those mentioned therein". or entities". partnership. as tax on 367. It should be noted that in said case of Ormoc Sugar Co. v. corporation. firm. pursuant to which the Treasurer of said City levied on and collected from said plaintiff. Furthermore. what was applied by the City of Ormoc was not a form of double taxation because regulation and taxation are two different things. 10 .84. whereas the latter is not. It was held in Ormoc Sugar Co.00 for every 1.568 board feet of lumber sold. the first being an exercise of police power. apart from the fact that double taxation is not prohibited in the Philippines. Is the City authorized to tax? Answer: Yes.. association. during the third quarter of 1964. imposing a "tax of P5. that the taxing power of the City of Ormoc.837. Dr.

The improvements of this land were demolished. 1915. are mandatory but those designed merely for the information or direction of officers or to secure methodical and systematic modes of proceedings are merely directory. the concrete covering and towers of the elevator shaft. a sworn declaration setting forth the value of the real estate acquired or the improvement constructed or addition made by him and containing a description of such property sufficient to enable the city assessor and collector readily to identify the same (Section 2484. under the date of December 1. 1914. and the construction of a reinforced concrete building was begun. sanitary installation. within a period of sixty days next succeeding the completion of such acquisition. unless such irregularities. The Manila Charter provides: “It shall be the duty of each person who at any time acquires real estate in the city.000. under protest. plaintiffs were notified of this assessment. on or before April 15. 1914. No taxes on the improvements were levied or paid for the year 1914. Accepting the findings of fact by the trial court. The Charter continues: “He (the city assessor and collector) shall give notice by publication for ten days prior to December first in two newspapers of general circulation published in the city. under protest. and any property which is taxable and which has therefore escaped taxation (Sec. the floors of some of the stores the dividing partitions between the stores. Was there a legal assessment of the Roxas Building for the year 1915? Answer: There was none. 2487. It was finished in all respects on February 15. the city assessor and collector was under the obligation and adding the improvements on the Roxas property to the assessment list. informalities. On January 15. to prepare and present to the city assessor and collector. still lacked the pavement of the entrances. Roxas own a parcel of land located at Escolta in the city of Manila. Between December 1 and December 15. the city assessor and collector could not prematurely and by anticipation perform this duty on improvements not yet completed." The common sense construction would be that the phrase includes December of the previous year and the current year to December. The city assessor and collector of Manila. 1914. the Roxas building in December. in November.Roxas v.” It is a general rule that those provisions of a statute relating to the assessment of taxes. Administrative Code of 1917). Under an attempted assessment in November and December. i. The city assessor and collector perforce could not in 1914 levy a tax on incomplete improvements made during the current year. or certainty as to the nature and amount of each person's tax. the roof of the building. which are intended for the security of the citizen. In the language of the United States Supreme Court. e. and the doors and windows of many rooms. nor shall any court declare any tax assessed under the provisions of article invalid except upon condition that the taxpayer shall pay the just amount of his tax as determined by the court in the pending proceeding (Sec. Administrative Code of 1917). and he shall further notify in writing each person the amount of whose tax will be changed by such action or such proposed change. Administrative Code of 1917). The Charter continues: “The city assessor and collector shall. the taxes assessed against him. “No court shall entertain any suit assailing the validity of a tax assessed under this article until the taxpayer shall have paid. Prior to this. when the statute only authorized him to make such levy upon completed improvements made during the year. or of failure to perform their duties within the times herein specified for their performance. and of any person who constructs or adds to any improvement on real estate owned by him within the city. the plaintiffs had and could have had no opportunity to comply with the law. one printed in English and one in Spanish. or failures shall have impaired the substantial rights of the taxpayer. On the latter part of 1913. or to insure the equality of taxation. “When the regulations prescribed are intended for 11 .000. electrical installation.” And finally the Charter provides that. requiring them to declare the new improvements for assessments for the year 1915. when the city assessor and collector attempted to assess it for taxation. 1914. which amounted to P3. received by them on December 25. construction or addition. Plaintiffs paid the amount of the taxes. 1915. during the first fifteen days of December of each year. the city assessor and collector had the building inspected and had assessed the new improvements for taxation for 1915 at P300. 1915. 2504. the elevators. 1915. add to his list of taxable real estate in the city the value of the improvements placed upon such property during the preceding year. nor shall any court declare any tax invalid by reason of irregularities or informalities in the proceedings of the officer in charged with the assessment or collection of taxes. the dividing partitions between the greater part of the rooms in the upper stories. Viuda e Hijos de Pedro P.” Between December 1 and December 15. sent plaintiffs notice. by delivering or mailing such notification to such person or his authorized agent at the last known address of such owner or agent in the Philippine Islands some time in the month of November (Sec. that he will be present in his office for that purpose on said days. There may be doubt as to the exact meaning which should be given to the words "during the preceding year. Rafferty Problem: Plaintiffs. 1914. Administrative Code of 1917). 2487.” Plaintiffs were under obligation to present a declaration of their improvements within sixty days succeeding completion.

But in the majority of jurisdictions this requirement is held to be mandatory. and by a disregard of which his right might be. In this instance there was no such substantial compliance with the law as amounts to due process of law. injuriously affected. so that the assessor cannot make a valid assessment unless he has given proper notice.the protection of the citizen and to prevent a sacrifice of his property. 12 . Applied to our facts. 1914. they are not directory but mandatory. 1915.” Sometimes statutes requiring the assessor to notify the taxpayer have been held merely directory. His attempted notification on December 25. was not given during the time fixed by statute and was no more than a reminder to plaintiffs to present a sworn declaration of the value of the new improvements on their property. the assessor should have notified the plaintiffs during November. and generally would be.

When petitioner's property was sold at a public auction in December 1980. was the registered owner of a parcel of land in Quezon City consisting of 256 sq. 1982 that the order for consolidation of title in the name of respondent Nepomuceno was issued and it was only on December 8. In the register for the tax years starting from 1982 (Exh. Petitioner does not claim that the notices issued from 1980 to 1983 should have been sent to him at his residence in "No. What he claims is that the notices should have been sent to him at his address at "No. For non-payment of realty taxes. 1980.Pecson v. the tax delinquency must have accumulated for several years. Worse. Section 73 thereof. From this entry. Sampaloc. Sampaloc. 79 Paquita. Mla." in pertinent part. with the epigraph "Advertisement of sale of real property at public auction. one can deduce that the taxpayer had transferred his residence to "No. petitioner never displayed an interest in paying the real estate taxes on the property. Manila" from "No." and were published in the Times Journal on October 6. that a return of the proof of service under oath shall be filed by the person making the service with the provincial or city treasurer concerned. he introduced improvements thereon without reporting the same for tax purposes. Was the sale of the property by respondent Regis valid. also Exh. in connection with the proceedings for the consolidation of title.D." and below the number 1009 was the number "79". Manila." There being no redemption made after one-year from the date of the auction sale. 1009 Paquita St. which was "No. Quezon City. either (i) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence.. 1980 by respondent. to the delinquent taxpayer. which in turn depended on whether petitioner was duly notified of the public auction? Answer: Yes. basing its conclusion on the address given by petitioner in his complaint. 1983 that the title over the property was transferred to respondents Tan and Nuguid. notices of the sale of the public auction may be sent to the delinquent taxpayer. meters and covered by TCT No. petitioner's property was sold at public auction on November 12. 79912 of the Registry of Deeds of Quezon City." his residence since 1965 and where the property in litigation is located. 79 Paquita Street. As found by the Court of Appeals. 1009 Paquita. 1981 was sent to petitioner at "No. what appeared in the records of the Office of the City Treasurer of Quezon City as the address of petitioner was "1009 Paquita. at "No.. Notices of sale were sent to petitioner at "No. 79 Kamias Road. For this misfortune that befell petitioner." The Court of Appeals advanced the theory that the number "79" was furnished by petitioner himself. he has nobody to blame but himself. All throughout these years." Petitioner's contention that he would have received the notices had they been sent to "No. Sampaloc. Sampaloc" even if he was no longer residing there because letters sent to him at the said address were forwarded to him by the occupants of his former house. 13 .” Under the said provisions of the law. he should know that if an owner fails to pay the real estate taxes on property. Sampaloc. Pedro Pecson. the address of petitioner was recorded as "79 Paquita. Manila." because the occupants thereof forwarded the letters addressed to him to his Quezon City residence. Anselmo Regis. known as the Real Property Tax Code. the said property shall be sold at public auction to recover the delinquent taxes. Manila. or through the barrio captain. 13. Quezon City. No. 1009 Paquita St. Sampaloc. however. 1982 by respondent Regis in favor of respondent. The governing law in this case is P. 79 Paquita Street. Provided." which remained "unclaimed". As a property owner and a school teacher at that. Sampaloc. if known to said treasurer or barrio captain. if known to such treasurer or barrio captain. It was only on July 12. Manila. Manila". 1009 Paquita. provides: “Copy of notices shall forthwith be sent either by registered mail or by messenger. CA Problem: Petitioner. Had he reported the improvements he had introduced on the property. Mamerto Nepomuceno. and 30. 464. or at his residence. S. a Final Bill of Sale was executed on April 19. 3). the Office of the Treasurer of Quezon City could have been informed of petitioner's new address in Quezon City. at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located. 79 Kamias Road. Manila. loses force when one considers that the Court of First Instance of Quezon City sent him a notice. A final notice to exercise the right of redemption dated September 14.

"When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price whichever is higher of existing brands of cigarettes. Hence.CIR v. without RMC 37–93. including the amounts intended to cover the taxes.' thereby removing the said brands from the foreign brand category. in fact and most importantly. Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the effective implementation of the provisions of the National Internal Revenue Code. 55% provided that the minimum tax shall not be less than P5. CA Problem: Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes.' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. Article VI.” “Premium More” and “Champion” within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. Jr. Fortune Tobacco changed the names of 'Hope' to Hope Luxury' and 'More' to 'Premium More. “Hope Luxury. 37-93 (RMC 37-93) which states that HOPE. "(c) Cigarettes packed by machine. the Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion.' 'Hope. Revenue Memorandum Circular No. of the 1987 Constitution mandates taxation to be uniform and equitable. Republic Act ("RA") No. MORE and CHAMPION being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes and any ruling inconsistent herewith is revoked or modified accordingly. Not insignificantly." "Hope. Tan. Specifically. the CIR may not disregard legal requirements or applicable principles in the exercise of its quasi-legislative powers. On various dates. but has. RMC 37–93 might have likewise infringed on uniformity of taxation. 142. Thus. . Uniformity requires that all subjects or objects of taxation. In a letter of then Commissioner of Internal Revenue Bienvenido A." About a month after the enactment and 2 days before the effectivity of RA 7654. paragraph 1. the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. Let it be made clear that such authority of the Commissioner is not here doubted. convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC. assessed and collected on cigarettes packed by machine a tax at the rates prescribed below based on the constructive manufacturer's wholesale price or the actual manufacturer's wholesale price. "(2). On other locally manufactured cigarettes. 14 . 7654 amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC") to read. similarly situated. Proof was also submitted to the Bureau of Internal Revenue that 'Champion' was an original Fortune Tobacco Corporation register and therefore a local brand. to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government. whichever is higher: "(1) On locally manufactured cigarettes which are currently classified and taxed at 55% or the exportation of which is not authorized by contract or otherwise.” and “Champion” cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax. A reading of RMC 37–93. Prior to the issuance of the questioned circular. Section 28. are to be treated alike or put on equal footing both in privileges and liabilities." Ad Valorem taxes were imposed on these brands.. Cigars and Cigarettes.00 per pack. as amended." and "More" cigarettes. of cigarettes packed in twenties does not exceed P4.There shall be levied. particularly considering the circumstances under which it has been issued. However. would have had no new tax rate consequence on private respondent’s products. In the meantime. Like any other government agency. "the initial position of the Commission was to classify 'Champion. all taxable articles or kinds of property of the same class must be taxed at the same rate and the tax must operate with the same force and effect in every place where the subject may be found.80 per pack.” “Premium More. been made in order to place “Hope Luxury. the rate shall be 20%. Is RMC 37-93 valid? Answer: No. 45% provided that the minimum tax shall not be less than P3. however. as follows: "SEC.00 per pack. the enactment of RA 7654.

I have the honor to inform you that under the last paragraph of Section 191(16) of the Tax Code. (i) and (j) of Section 7 of Republic Act Numbered Fifty-one hundred eigthysix. (b) and (c) of Section 8 of the said Act. 5186. Section 7 of Republic Act No. 6135 has been approved by the Board of Investments on January 8. known as the Investment Incentives Act. 6135 (the law under which Telefunken is registered) provides that registered export producers in a pioneer status are entitled to the incentives provided in section 8(a) of Republic Act No. 6135. and diversify exports of services and of manufacturers utilizing domestic raw materials to the fullest extent possible. It appears that your application for registration as export producer under Republic Act No. Incentives to registered export producers — Registered export producers. Telefunken contended that under the provisions of Section 7 of Republic Act No. Telefunken wrote a letter to the Appellate Division of the Bureau of Internal Revenue (BIR) dated January 19.00 which were entirely sold to foreign markets. C. Telefunken is a domestic corporation registered with the Board of Investments (BOI) as an export producer on a preferred pioneer status under Republic Act No. are exempt from the contractor's tax.35 as contractor's tax. — Registered export producers unless they already enjoy the same privileges under other laws shall be entitled to the incentives set forth in parahraphs (h). This is in accordance with the policy of the government. and in lieu of other incentives provided in Section 7 and in Section 9 of that Act. from a pioneer industry registered with the Board of Investments under the provisions of Republic Act Numbered Five Thousand One Hundred and eighty-six'. 6135 and the gross receipts of registered pioneer enterprises under Republic Act No. and to develop new markets for Philippine products. When construed together. 5186 and thus. increase foreign exchange earnings. and registered export producers that are pioneer enterprises shall be entitled also to the incentives set forth in paragraphs (a).” There is no difference between the gross receipts of pioneer enterprises registered with the Board of Investments under Republic Act No. except for income tax. 5186. gross receipts . In fact. Telefunken produced semi-conductor devices amounting to P92. 5186 in relation to Section 205 of the Tax Code.482. hasten the economic development of the nation. Construction Corporation and Marsteel Corporation are exempt from the payment of the 3% contractor's tax prescribed under Section 191(16) of the Tax Code. said: This refers to your letters dated November 29 and December 19. It is clear that the intention of the law is to relieve the pioneer industry from ultimately shouldering the contractor's tax which could be 15 . which was paid and verified to have been received by the government. the privilege of tax exemption cannot be made to apply to firms registered under Republic Act No.042. in order to attain a rising level of production and employment. 1973 requesting a ruling as to whether your contractors namely. 6135: “to actively encourage.774. petitioner himself had ruled in this vein on February 4. exempted from payment of the 3% contractor's tax from October 1979 to September 1981? Answer: Yes. it was exempted from the payment of all national internal revenue taxes for the period in question. in that case. It filed percentage tax returns on the said exportation declaring a total of P2. Petitioner argues that the law speaks of firms registered under Republic Act No. the above-quoted provisions yield no other conclusion but that gross receipts of a pioneer enterprise registered with the Board of Investments.CIR V.E. It states that: “Sec. as declared in Section 2 of Republic Act No. registered export producer shall be entitled to benefits and incentives as enumerated hereunder. Telefunken Problem: Private respondent. are exempt from the contractor's tax.482. 6135 in relation to Section 8 (a) of Republic Act No. . and ensure that the benefits of development accrue to the Filipino people. a corporation registered under Republic Act No. In addition to the said incentives. From October 1979 to September 1981. . 6135. 1974 in the case of Asian Transmission Corporation. he states that Telefunken is not covered by the Tax Code exemption because "exemption from contractor's tax is extended to pioneer enterprises registered with the Board of Investments under Republic Act No.” We find no ambiguity in the law. 1974 on a pioneer status." Is Telefunken. Petitioner. Specifically.042. 5186 (The Investment Act). In reply.843. 7. promote.35 was erroneous and requested its refund or tax credit thereof. such as Telefunken. 1982 stating that the payment of contractor's tax of P2. 6135 as a pioneer export producer.

5186. 6135 and a pioneer industry under Republic Act No. with no reference being made regarding pioneer enterprises registered under Republic Act No. rulings of the BIR may not be given retroactive effect.E. 16 . 5186 are entitled to the same tax exemption benefits under the Tax Code. Such being the case. Contractors. 246 of the National Internal Revenue Code. like the latter. 5186 as exempt from the contractor's tax. In view thereof. Construction Corporation and Marsteel Corporation from the construction of your transmission plant in Canlubang. that corporation as a registered export producer on a pioneer status is entitled to the same tax incentives granted to a pioneer industry set forth in section 8(a) of republic Act No. as well as their agents and contractors and except gross receipts of or from a pioneer industry registered with the Board of Investments under the provisions of RA 5168. Telefunken falls under the category of "pioneer industries" contemplated under Section 205(16) and should be entitled to the exemption provided for. both a registered export producer on a pioneer status under Republic Act No. Laguna. except income tax. Under this latter provision.” A comparison of the above with the previously quoted Section 205(16) of the 1977 Tax Code reveals that both provisions specifically mention pioneer industries registered with the Board of Investments under Republic Act No. and others. proprietors or operators of dockyards. the former should not also shoulder the contractor's tax which could be passed on it legally by its contractor. associations and corporations under contract for embroidery and apparel for export. 6135. the gross receipts derived by C.passed on to it legally by its contractor. In fact. the wording of the relevant part at both provisions are the same. Pursuant to Section 7 of Republic Act No. (Emphasis supplied) Petitioner now maintains that this 1974 ruling has been abrogated with the passage of the 1977 Tax Code. Clearly. a pioneer industry is exempt from all taxes under the National Internal Revenue Code. Section 205(16) which expressly mentions only pioneer enterprises registered with the Board of Investments under Republic Act No. under Sec. 6135. — A contractor's tax of three per centum of the gross receipts is hereby imposed on the following: “(16) Business agents and other independent contractors except persons. if the same is prejudicial to the taxpayer. he based the same on Section 191(16) of the Tax Code which states: Sec. 191. In other words. 5186 as exempt from payment of the contractor's tax. When petitioner made his 1974 ruling. Lastly. are exempt from the 3% contractor's tax.