FIRST DIVISION

DAVIDE, JR., C.J.:

This Circular subjects to the 5% lending investors tax the gross income of pawnshops pursuant to
Section 116 of the Tax Code, and it thus revokes BIR Ruling No[]. 6-90, and VAT Ruling Nos. 22-90
and 67-90. In order to have a uniform cut-off date, avoid unfairness on the part of tax- payers if they
are required to pay the tax on past transactions, and so as to give meaning to the express provisions
of Section 246 of the Tax Code, pawnshop owners or operators shall become liable to the lending
investors tax on their gross income beginning January 1, 1991. Since the deadline for the filing of
percentage tax return (BIR Form No. 2529A-0) and the payment of the tax on lending investors
covering the first calendar quarter of 1991 has already lapsed, taxpayers are given up to June 30, 1991
within which to pay the said tax without penalty. If the tax is paid after June 30, 1991, the
corresponding penalties shall be assessed and computed from April 21, 1991.

Are pawnshops included in the term lending investors for the purpose of imposing the
5% percentage tax under then Section 116 of the National Internal Revenue Code (NIRC) of
1977, as amended by Executive Order No. 273?

Since pawnshops are considered as lending investors effective January 1, 1991, they also become
subject to documentary stamp taxes prescribed in Title VII of the Tax Code. BIR Ruling No. 325-88
dated July 13, 1988 is hereby revoked.

Petitioner Commissioner of Internal Revenue (CIR) filed the instant petition for review to
set aside the decision[1] of 20 November 2001 of the Court of Appeals in CA G.R. SP No.
62463, which affirmed the decision of 13 December 2000 of the Court of Tax Appeals (CTA)
in CTA Case No. 5690 cancelling the assessment issued against respondent Michel J.
Lhuillier Pawnshop, Inc. (hereafter Lhuillier) in the amount of P3,360,335.11 as deficiency
percentage tax for 1994, inclusive of interest and surcharges.

On 11 September 1997, pursuant to these issuances, the Bureau of Internal Revenue

(BIR) issued Assessment Notice No. 81-PT-13-94-97-9-118 against Lhuillier demanding
payment of deficiency percentage tax in the sum of P3,360,335.11 for 1994 inclusive of
interest and surcharges.

[G.R. No. 150947. July 15, 2003]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MICHEL J. LHUILLIER
PAWNSHOP, INC., respondent.
DECISION

The facts are as follows:

On 11 March 1991, CIR Jose U. Ong issued Revenue Memorandum Order (RMO) No.
15-91 imposing a 5% lending investors tax on pawnshops; thus:
A restudy of P.D. [No.] 114 shows that the principal activity of pawnshops is lending money at interest
and incidentally accepting a pawn of personal property delivered by the pawner to the pawnee as
security for the loan.(Sec. 3, Ibid). Clearly, this makes pawnshop business akin to lending investors
business activity which is broad enough to encompass the business of lending money at interest by any
person whether natural or juridical. Such being the case, pawnshops shall be subject to the 5% lending
investors tax based on their gross income pursuant to Section 116 of the Tax Code, as amended.
This RMO was clarified by Revenue Memorandum Circular (RMC) No. 43-91 on 27 May
1991, which reads:
1. RM[O] 15-91 dated March 11, 1991.

On 3 October 1997, Lhuillier filed an administrative protest with the Office of the
Revenue Regional Director contending that (1) neither the Tax Code nor the VAT Law
expressly imposes 5% percentage tax on the gross income of pawnshops; (2) pawnshops are
different from lending investors, which are subject to the 5% percentage tax under the
specific provision of the Tax Code; (3) RMO No. 15-91 is not implementing any provision of
the Internal Revenue laws but is a new and additional tax measure on pawnshops, which only
Congress could enact; (4) RMO No. 15-91 impliedly amends the Tax Code and is therefore
taxation by implication, which is proscribed by law; and (5) RMO No. 15-91 is a class
legislation because it singles out pawnshops among other lending and financial operations.
On 12 October 1998, Deputy BIR Commissioner Romeo S. Panganiban issued Warrant
of Distraint and/or Levy No. 81-043-98 against Lhuilliers property for the enforcement and
payment of the assessed percentage tax.
Its protest having been unacted upon, Lhuillier, in a letter dated 3 March 1998, elevated
the matter to the CIR. Still, the protest was not acted upon by the CIR. Thus, on 11 November
1998, Lhuillier filed a Notice and Memorandum on Appeal with the Court of Tax
Appeals invoking Section 228 of Republic Act No. 8424, otherwise known as the Tax Reform
Act of 1997, which provides:

Section 228. Protesting of Assessment.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days
from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal
to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse
of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and
demandable.
The case was docketed as CTA Case No. 5690.
On 19 November 1998, the CIR filed with the CTA a motion to dismiss Lhuilliers petition
on the ground that it did not state a cause of action, as there was no action yet on the protest.
Lhuillier opposed the motion to dismiss and moved for the issuance of a writ of
preliminary injunction praying that the BIR be enjoined from enforcing the warrant of distraint
and levy.
For Lhuilliers failure to appear on the scheduled date of hearing, the CTA denied the
motion for the issuance of a writ of preliminary injunction. However, on Lhuilliers motion for
reconsideration, said denial was set aside and a hearing on the motion for the issuance of a
writ of preliminary injunction was set.
On 30 June 1999, after due hearing, the CTA denied the CIRs motion to dismiss and
granted Lhuilliers motion for the issuance of a writ of preliminary injunction.
On 13 December 2000, the CTA rendered a decision declaring (1) RMO No. 15-91 and
RMC No. 43-91 null and void insofar as they classify pawnshops as lending investors subject
to 5% percentage tax; and (2) Assessment Notice No. 81-PT-13-94-97-9-118 as cancelled,
withdrawn, and with no force and effect.[2]
Dissatisfied, the CIR filed a petition for review with the Court of Appeals praying that the
aforesaid decision be reversed and set aside and another one be rendered ordering Lhuillier
to pay the 5% lending investors tax for 1994 with interests and surcharges.
Upon due consideration of the issues presented by the parties in their respective
memoranda, the Court of Appeals affirmed the CTA decision on 20 November 2001.
The CIR is now before this Court via this petition for review on certiorari, alleging that the
Court of Appeals erred in holding that pawnshops are not subject to the 5% lending investors
tax. He invokes then Section 116 of the Tax Code, which imposed a 5% percentage tax on

lending investors. He argues that the legal definition of lending investors provided in Section
157 (u) of the Tax Code is broad enough to include pawnshop operators. Section 3 of
Presidential Decree No. 114 states that the principal business activity of a pawnshop is
lending money; thus, a pawnshop easily falls under the legal definition of lending
investors. RMO No. 15-91 and RMC No. 43-91, which subject pawnshops to the 5% lending
investors tax based on their gross income, are valid. Being mere interpretations of the NIRC,
they need not be published. Lastly, the CIR invokes the case of Commissioner of Internal
Revenue vs. Agencia Exquisite of Bohol, Inc.,[3] where the Court of Appeals Special
Fourteenth Division ruled that a pawnshop is subject to the 5% lending investors tax. [4]
Lhuillier, on the other hand, maintains that before and after the amendment of the Tax
Code by E.O. No. 273, which took effect on 1 January 1988, pawnshops and lending
investors were subjected to different tax treatments. Pawnshops were required to pay an
annual fixed tax of only P1,000, while lending investors were subject to a 5% percentage tax
on their gross income in addition to their fixed annual taxes. Accordingly, during the period
from April 1982 up to December 1990, the CIR consistently ruled that a pawnshop is not a
lending investor and should not therefore be required to pay percentage tax on its gross
income.
Lhuillier likewise asserts that RMO No. 15-91 and RMC No. 43-91 are not implementing
rules but are new and additional tax measures, which only Congress is empowered to
enact.Besides, they are invalid because they have never been published in the Official
Gazette or any newspaper of general circulation.
Lhuillier further points out that pawnshops are strictly regulated by the Central
Bank pursuant to P.D. No. 114, otherwise known as The Pawnshop Regulation Act. On the
other hand, there is no special law governing lending investors. Due to the wide differences
between the two, pawnshops had never been considered as lending investors for tax
purposes. In fact, in 1994, Congress passed House Bill No. 11197, [5] which attempted to
amend Section 116 of the NIRC, as amended, to include owners of pawnshops as among
those subject to percentage tax. However, the Senate Bill and the subsequent Bicameral
Committee version, which eventually became the E-VAT Law, did not incorporate such
proposed amendment.
Lastly, Lhuillier argues that following the maxim in statutory construction expressio unius
est exclusio alterius, it was not the intention of the Legislature to impose percentage taxes on
pawnshops because if it were so, pawnshops would have been included as among the
businesses subject to the said tax. Inasmuch as revenue laws impose special burdens upon
taxpayers, the enforcement of such laws should not be extended by implication beyond the
clear import of the language used.

We are therefore called upon to resolve the issue of whether pawnshops are subject to
the 5% lending investors tax. Corollary to this issue are the following questions: (1) Are RMO
No. 15-91 and RMC No. 43-91 valid? (2) Were they issued to implement Section 116 of the
NIRC of 1977, as amended? (3) Are pawnshops considered lending investors for the purpose
of the imposition of the lending investors tax? (4) Is publication necessary for the validity of
RMO No. 15-91 and RMC No. 43-91.
RMO No. 15-91 and RMC No. 43-91 were issued in accordance with the power of the
CIR to make rulings and opinions in connection with the implementation of internal revenue
laws, which was bestowed by then Section 245 of the NIRC of 1977, as amended by E.O.
No. 273.[6] Such power of the CIR cannot be controverted. However, the CIR cannot, in the
exercise of such power, issue administrative rulings or circulars not consistent with the law
sought to be applied. Indeed, administrative issuances must not override, supplant or modify
the law, but must remain consistent with the law they intend to carry out. Only Congress can
repeal or amend the law.[7]

person or entity engaged in the business of lending money on personal property delivered as
security for loans and shall be synonymous, and may be used interchangeably, with
pawnbroker or pawn brokerage.
While it is true that pawnshops are engaged in the business of lending money, they are
not considered lending investors for the purpose of imposing the 5% percentage taxes for the
following reasons:
First. Under Section 192, paragraph 3, sub-paragraphs (dd) and (ff), of the NIRC of
1977, prior to its amendment by E.O. No. 273, as well as Section 161, paragraph 2, subparagraphs (dd) and (ff), of the NIRC of 1986, pawnshops and lending investors were
subjected to different tax treatments; thus:
(3) Other Fixed Taxes. The following fixed taxes shall be collected as follows, the amount stated being
for the whole year, when not otherwise specified:

The CIR argues that both issuances are mere rules and regulations implementing then
Section 116 of the NIRC, as amended, which provided:

.
(dd) Lending investors

SEC. 116. Percentage tax on dealers in securities; lending investors. - Dealers in securities and
lending investors shall pay a tax equivalent to six (6) per centum of their gross income. Lending
investors shall pay a tax equivalent to five (5%) percent of their gross income.
It is clear from the aforequoted provision that pawnshops are not specifically
included. Thus, the question is whether pawnshops are considered lending investors for the
purpose of imposing percentage tax.
We rule in the negative.
Incidentally, we observe that both parties, as well as the Court of Tax Appeals and the
Court of Appeals, refer to the National Internal Revenue Code as the Tax Code. They did not
specify whether the provisions they cited were taken from the NIRC of 1977, as amended, or
the NIRC of 1986, as amended. For clarity, it must be pointed out that the NIRC of 1977 as
renumbered and rearranged by E.O. No. 273 is a later law than the NIRC of 1986, as
amended by P.D. Nos. 1991, 1994, 2006 and 2031. The citation of the specific Code is
important for us to determine the intent of the law.
Under Section 157(u) of the NIRC of 1986, as amended, the term lending
investor includes all persons who make a practice of lending money for themselves or others
at interest. Apawnshop, on the other hand, is defined under Section 3 of P.D. No. 114 as a

1. In chartered cities and first class municipalities, one thousand pesos;

2. In second and third class municipalities, five hundred pesos;
3. In fourth and fifth class municipalities and municipal districts, two hundred fifty
pesos: Provided, That lending investors who do business as such in more than
one province shall pay a tax of one thousand pesos.
.
(ff) Pawnshops, one thousand pesos (underscoring ours)
Second. Congress never intended pawnshops to be treated in the same way as lending
investors. Section 116 of the NIRC of 1977, as renumbered and rearranged by E.O. No. 273,
was basically lifted from Section 175 [8] of the NIRC of 1986, which treated both tax subjects
differently. Section 175 of the latter Code read as follows:
Sec. 175. Percentage tax on dealers in securities, lending investors. -- Dealers in securities shall pay
a tax equivalent to six (6%) percent of their gross income. Lending investors shall pay a tax equivalent

to five (5%) percent of their gross income. (As amended by P.D. No. 1739, P.D. No. 1959 and P.D. No.
1994).
We note that the definition of lending investors found in Section 157 (u) of the NIRC of
1986 is not found in the NIRC of 1977, as amended by E.O. No. 273, where Section 116
invoked by the CIR is found. However, as emphasized earlier, both the NIRC of 1986 and the
NIRC of 1977 dealt with pawnshops and lending investors differently. Verily then, it was the
intent of Congress to deal with both subjects differently. Hence, we must likewise interpret the
statute to conform with such legislative intent.
Third. Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects to
percentage tax dealers in securities and lending investors only. There is no mention of
pawnshops.Under the maxim expressio unius est exclusio alterius, the mention of one thing
implies the exclusion of another thing not mentioned. Thus, if a statute enumerates the things
upon which it is to operate, everything else must necessarily and by implication be excluded
from its operation and effect. [9] This rule, as a guide to probable legislative intent, is based
upon the rules of logic and natural workings of the human mind. [10]
Fourth. The BIR had ruled several times prior to the issuance of RMO No. 15-91 and
RMC 43-91 that pawnshops were not subject to the 5% percentage tax imposed by Section
116 of the NIRC of 1977, as amended by E.O. No. 273. This was even admitted by the CIR in
RMO No. 15-91 itself. Considering that Section 116 of the NIRC of 1977, as amended, was
practically lifted from Section 175 of the NIRC of 1986, as amended, and there being no
change in the law, the interpretation thereof should not have been altered.
It may not be amiss to state that, as pointed out by the respondent, pawnshops was
sought to be included as among those subject to 5% percentage tax by House Bill No. 11197
in 1994. Section 13 thereof reads:
Section 13. Section 116 of the National Internal Revenue Code, as amended, is hereby further amended
to read as follows:
SEC. 116. Percentage tax on dealers in securities; lending investors; OWNERS OF PAWNSHOPS;
FOREIGN CURRENCY DEALERS AND/OR MONEY CHANGERS. Dealers in securities shall pay
a tax equivalent to Six (6%) per centum of their gross income. Lending investors, OWNERS OF
PAWNSHOPS AND FOREIGN CURRENCY DEALERS AND/OR MONEY CHANGERS shall pay a
tax equivalent to Five (5%) percent of their gross income.
If pawnshops were covered within the term lending investor, there would have been no
need to introduce such amendment to include owners of pawnshops. At any rate, such

proposed amendment was not adopted. Instead, the approved bill which became R.A. No.
7716[11] repealed Section 116 of NIRC of 1977, as amended, which was the basis of RMO No.
15-91 and RMC No. 43-91; thus:
SEC. 20. Repealing Clauses. -- The provisions of any special law relative to the rate of franchise taxes
are hereby expressly repealed. Sections 113, 114 and 116 of the National Internal Revenue Code are
hereby repealed.
Section 21 of the same law provides that the law shall take effect fifteen (15) days after
its complete publication in the Official Gazette or in at least two (2) national newspapers of
general circulation whichever comes earlier. R.A. No. 7716 was published in the Official
Gazette on 1 August 1994[12]; in the Journal and Malaya newspapers, on 12 May 1994; and in
the Manila Bulletin, on 5 June 1994. Thus, R.A. No. 7716 is deemed effective on 27 May
1994.
Since Section 116 of the NIRC of 1977, which breathed life on the questioned
administrative issuances, had already been repealed, RMO 15-91 and RMC 43-91, which
depended upon it, are deemed automatically repealed. Hence, even granting that pawnshops
are included within the term lending investors, the assessment from 27 May 1994 onward
would have no leg to stand on.
Adding to the invalidity of the RMC No. 43-91 and RMO No. 15-91 is the absence of
publication. While the rule-making authority of the CIR is not doubted, like any other
government agency, the CIR may not disregard legal requirements or applicable principles in
the exercise of quasi-legislative powers.
Let us first distinguish between two kinds of administrative issuances: the legislative
rule and the interpretative rule. A legislative rule is in the nature of subordinate legislation,
designed to implement a primary legislation by providing the details thereof. An interpretative
rule, on the other hand, is designed to provide guidelines to the law which the administrative
agency is in charge of enforcing.[13]
In Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance
Secretary,[14] this Tribunal ruled:
In the same way that laws must have the benefit of public hearing, it is generally required that before a
legislative rule is adopted there must be hearing. In this connection, the Administrative Code of 1987
provides:

Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish
or circulate notices of proposed rules and afford interested parties the opportunity to submit their views
prior to the adoption of any rule.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The decision of the
Court of Appeals of 20 November 2001 in CA-G.R. SP No. 62463 is AFFIRMED.
SO ORDERED.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least
two weeks before the first hearing thereon.

Vitug, Ynarez-Santiago, Carpio, and Azcuna, JJ., concur.

(3) In case of opposition, the rules on contested cases shall be observed.

In addition, such rule must be published.
When an administrative rule is merely interpretative in nature, its applicability needs
nothing further than its bare issuance, for it gives no real consequence more than what the
law itself has already prescribed. When, on the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least cumbersome the
implementation of the law but substantially increases the burden of those governed, it
behooves the agency to accord at least to those directly affected a chance to be heard, and
thereafter to be duly informed, before that new issuance is given the force and effect of law. [15]
RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing rules or
corrective measures revoking in the process the previous rulings of past
Commissioners.Specifically, they would have been amendatory provisions applicable to
pawnshops. Without these disputed CIR issuances, pawnshops would not be liable to pay the
5% percentage tax, considering that they were not specifically included in Section 116 of the
NIRC of 1977, as amended. In so doing, the CIR did not simply interpret the law. The due
observance of the requirements of notice, hearing, and publication should not have been
ignored.

FIRST DIVISION
[G.R. No. 119761. August 29, 1996]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF APPEALS,
HON.
COURT
OF
TAX
APPEALS
and
FORTUNE
TOBACCO
CORPORATION, respondents.
DECISION
VITUG, J.:

There is no need for us to discuss the ruling in CA-G.R. SP No. 59282

entitled Commissioner of Internal Revenue v. Agencia Exquisite of Bohol Inc., which upheld
the validity of RMO No. 15-91 and RMC No. 43-91. Suffice it to say that the judgment in that
case cannot be binding upon the Supreme Court because it is only a decision of the Court of
Appeals. The Supreme Court, by tradition and in our system of judicial administration, has the
last word on what the law is; it is the final arbiter of any justifiable controversy. There is only
one Supreme Court from whose decisions all other courts should take their bearings. [16]

The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March
1995, of respondent Court of Appeals [1] affirming the 10th August 1994 decision and the 11th
October 1994 resolution of the Court of Tax Appeals [2] ("CTA") in C.T.A. Case No. 5015,
entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity as
Commissioner of Internal Revenue."
The facts, by and large, are not in dispute.

In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby declared null
and void. Consequently, Lhuillier is not liable to pay the 5% lending investors tax.

Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of

different brands of cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate
certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. In a
letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan,
Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government,
"the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as
foreign brands since they were listed in the World Tobacco Directory as belonging to foreign
companies.However, Fortune Tobacco changed the names of 'Hope' to Hope Luxury' and
'More' to 'Premium More,' thereby removing the said brands from the foreign brand
category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that
'Champion' was an original Fortune Tobacco Corporation register and therefore a local
brand."[3] Ad Valorem taxes were imposed on these brands,[4] at the following rates:

More Premium M. 100's

Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's

"BRAND AD VALOREM TAX RATE

Sec. 142, (c), (2) 40% 45%

E.O. 22

Champion M. King

06-23-86

Sec. 142, (c), last par. 15% 20%

07-01-86 and E.O. 273

Champion Lights

07-25-87

Sec. 142, (c), last par. 15% 20%"[5]

01-01-88 RA 6956
06-18-90
07-05-90

A bill, which later became Republic Act ("RA") No. 7654, [6] was enacted, on 10 June
1993, by the legislature and signed into law, on 14 June 1993, by the President of the
Philippines.The new law became effective on 03 July 1993. It amended Section 142(c)(1) of
the National Internal Revenue Code ("NIRC") to read; as follows:
"SEC. 142. Cigars and Cigarettes. -

Hope Luxury M. 100's

Sec. 142, (c), (2) 40% 45%

"x x x x x x x x x.
"(c) Cigarettes packed by machine. - There shall be levied, 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, whichever is higher:

Hope Luxury M. King

Sec. 142, (c), (2) 40% 45%

"(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent
(55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided
that the minimum tax shall not be less than Five Pesos (P5.00) per pack.

"(2). On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax
shall not be less than Three Pesos (P3.00) per pack.
"x x x x x x x x x.
"When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price
whichever is higher of existing brands of cigarettes, including the amounts intended to cover the taxes,
of cigarettes packed in twenties does not exceed Four Pesos and eighty centavos (P4.80) per pack, the
rate shall be twenty percent (20%)."[7] (Italics supplied.)
About a month after the enactment and two (2) days before the effectivity of RA 7654,
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text
of which expressed:
"REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS
July 1, 1993
REVENUE MEMORANDUM CIRCULAR NO. 37-93
SUBJECT : Reclassification of Cigarettes Subject to Excise Tax
TO : All Internal Revenue Officers and Others Concerned.
"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes which are
locally manufactured are appropriately considered as locally manufactured cigarettes bearing a foreign
brand, this Office is compelled to review the previous rulings on the matter.
"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides:
"'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That
this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or
transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a
cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern."
"Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally
manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the

foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be
originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand is,
however, not definitely determinable, 'x x x the listing of brands manufactured in foreign countries
appearing in the current World Tobacco Directory shall govern. x x x'
"'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan
and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said directory as being manufactured by:
(a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald, Canada; (d) RettigStrenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h)
Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera,
Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. 'Champion' is registered in the said
directory as being manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan
Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies,
Switzerland.
"Since there is no showing who among the above-listed manufacturers of the cigarettes bearing the
said brands are the real owner/s thereof, then it follows that the same shall be considered foreign brand
for purposes of determining the ad valorem tax pursuant to Section 142 of the National Internal
Revenue Code. As held in BIR Ruling No. 410-88, dated August 24, 1988, 'in cases where it cannot be
established or there is dearth of evidence as to whether a brand is foreign or not, resort to the World
Tobacco Directory should be made.'
"In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' '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.
"Any ruling inconsistent herewith is revoked or modified accordingly.
(SGD) LIWAYWAY
VINZONS-CHATO
Commissioner"
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio,
Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one
in particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox
copy of RMC 37-93.
In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune
Tobacco, requested for a review, reconsideration and recall of RMC 37-93. The request was

denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune
Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. [8]
On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:
"WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz:
`HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune Tobacco Corporation as locally
manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is
found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3,
1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to
Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as
other locally manufactured cigarettes and taxed at 45% or 20% as the case may be.
"Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco
Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby canceled for
lack of legal basis.
"Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency tax
assessment made and issued on petitioner in relation to the implementation of RMC No. 37-93.
"SO ORDERED."

[9]

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for
reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals, questioning the
CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the
appellate court's Special Thirteenth Division affirmed in all respects the assailed decision and
resolution.

"III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY
2, 1993.
IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY
MANUFACTURED CIGARETTES SIMILARLY SITUATED AS 'HOPE,' 'MORE' AND
'CHAMPION' CIGARETTES.
"V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING HOPE, MORE
AND CHAMPION CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654.
VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS
VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR
PROPRIETY; RMC 37-93 IS CORRECT." [10]
In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR
which can thus become effective without any prior need for notice and hearing, nor
publication, and that its issuance is not discriminatory since it would apply under similar
circumstances to all locally manufactured cigarettes.
The Court must sustain both the appellate court and the tax court.
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. Let
it be made clear that such authority of the Commissioner is not here doubted. Like any other
government agency, however, the CIR may not disregard legal requirements or applicable
principles in the exercise of its quasi-legislative powers.
Let us first distinguish between two kinds of administrative issuances - a legislative rule
and an interpretative rule.
In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance
Secretary, [11] the Court expressed:

In the instant petition, the Solicitor General argues: That "I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE
INTERPRETING THE PROVISIONS OF THE TAX CODE.
"II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93,
FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT
NECESSARY TO ITS VALIDITY, EFFECTIVITY AND ENFORCEABILITY.

"x x x a legislative rule is in the nature of subordinate legislation, designed to implement a primary
legislation by providing the details thereof. In the same way that laws must have the benefit of public
hearing, it is generally required that before a legislative rule is adopted there must be hearing. In this
connection, the Administrative Code of 1987 provides:

"Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish
or circulate notices of proposed rules and afford interested parties the opportunity to submit their views
prior to the adoption of any rule.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:
"RMC NO. 10-86

"(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been
published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon.
"(3) In case of opposition, the rules on contested cases shall be observed.
"In addition such rule must be published. On the other hand, interpretative rules are designed to
provide guidelines to the law which the administrative agency is in charge of enforcing." [12]
It should be understandable that when an administrative rule is merely interpretative in
nature, its applicability needs nothing further than its bare issuance for it gives no real
consequence more than what the law itself has already prescribed. When, upon the other
hand, the administrative rule goes beyond merely providing for the means that can facilitate
or render least cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard, and thereafter to be duly informed, before that new
issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under which it has
been issued, 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, as amended, but has, in fact and most importantly,
been made in order to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and to thereby have
them covered by RA 7654. Specifically, 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. Prior to the issuance of the questioned circular, "Hope
Luxury," "Premium More," and "Champion" cigarettes were in the category of locally
manufactured cigarettes notbearing foreign brand subject to 45% ad valorem tax. Hence,
without RMC 37-93, the enactment of RA 7654, would have had no new tax rate
consequence on private respondent's products. Evidently, in order to place "Hope Luxury,"
"Premium More," and "Champion" cigarettes within the scope of the amendatory law and
subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so
doing, the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative
authority. The due observance of the requirements of notice, of hearing, and of publication
should not have been then ignored.

Effectivity of Internal Revenue Rules and Regulations

"It has been observed that one of the problem areas bearing on compliance with Internal Revenue Tax
rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due
notice, due compliance therewith may not be reasonably expected. And most importantly, their strict
enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on
`due process of law' and the essence of the Civil Code provision concerning effectivity of laws,
whereby due notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).
"In order that there shall be a just enforcement of rules and regulations, in conformity with the basic
element of due process, the following procedures are hereby prescribed for the drafting, issuance and
implementation of the said Revenue Tax Issuances:
"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum
Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on
internal revenue tax rules and regulations.
"(2). Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances
shall not begin to be operative until after due notice thereof may be fairly presumed.
"Due notice of the said issuances may be fairly presumed only after the following procedures have
been taken:
"xxx xxx xxx
"(5). Strict compliance with the foregoing procedures is enjoined." [13]
Nothing on record could tell us that it was either impossible or impracticable for the BIR to
observe and comply with the above requirements before giving effect to its questioned
circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be
uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly
situated, are to be treated alike or put on equal footing both in privileges and liabilities.

[14]

Thus, all taxable articles or kinds of property of the same class must be taxed at the same
rate[15] and the tax must operate with the same force and effect in every place where the
subject may be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and
"Champion" cigarettes and, unless petitioner would be willing to concede to the submission of
private respondent that the circular should, as in fact my esteemed colleague Mr. Justice
Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus
violative of due process following the Ang Tibay[16] doctrine, the measure suffers from lack of
uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes bearing
foreign brands have not been similarly included within the scope of the circular, such as "1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.
(a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit `R')
"2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY
(a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit `S')
(b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit `T')
"3. Locally manufactured by LA PERLA INDUSTRIES, INC.
(a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit `U')
(b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit `V-1')
"4. Locally manufactured by MIGHTY CORPORATION
(a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit 'U-1')
"5. Locally manufactured by STERLING TOBACCO CORPORATION
(a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown and
Williamson, USA (Exhibit 'U-3')
(b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh; Nanyang, Hongkong;
Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan and Haggar, Sudan
(Exhibit 'U-4')." [17]

The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by
the Committee on Ways and Means of the House of Representatives; viz:
"THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have
specific information on other tobacco manufacturers. Now, there are other brands which are similarly
situated.They are locally manufactured bearing foreign brands. And may I enumerate to you all these
brands, which are also listed in the World Tobacco Directory x x x. Why were these brands not
reclassified at 55 if your want to give a level playing field to foreign manufacturers?
"MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum Circular
that was supposed to come after RMC No. 37-93 which have really named specifically the list of
locally manufactured cigarettes bearing a foreign brand for excise tax purposes and includes all these
brands that you mentioned at 55 percent except that at that time, when we had to come up with this, we
were forced to study the brands of Hope, More and Champion because we were given documents that
would indicate the that these brands were actually being claimed or patented in other countries because
we went by Revenue Memorandum Circular 1488 and we wanted to give some rationality to how it
came about but we couldn't find the rationale there. And we really found based on our own
interpretation that the only test that is given by that existing law would be registration in the World
Tobacco Directory. So we came out with this proposed revenue memorandum circular which we
forwarded to the Secretary of Finance except that at that point in time, we went by the Republic Act
7654 in Section 1 which amended Section 142, C-1, it said, that on locally manufactured cigarettes
which are currently classified and taxed at 55 percent. So we were saying that when this law took effect
in July 3 and if we are going to come up with this revenue circular thereafter, then I think our action
would really be subject to questionbut we feel that . . . Memorandum Circular Number 37-93 would
really cover even similarly situated brands. And in fact, it was really because of the study, the short
time that we were given to study the matter that we could not include all the rest of the other brands
that would have been really classified as foreign brand if we went by the law itself. I am sure that by
the reading of the law, you would without that ruling by Commissioner Tan they would really have
been included in the definition or in the classification of foregoing brands. These brands that you
referred to or just read to us and in fact just for your information, we really came out with a proposed
revenue memorandum circular for those brands. (Italics supplied)
"Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3).
"x x x x x x x x x.
"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I felt that
we . . . I wanted to come up with a more extensive coverage and precisely why I asked that revenue
memorandum circular that would cover all those similarly situated would be prepared but because of
the lack of time and I came out with a study of RA 7654, it would not have been possible to really come

up with the reclassification or the proper classification of all brands that are listed there. x x x' (italics
supplied) (Exhibit 'FF-2d', page IX-1)

THIRD DIVISION

"x x x x x x x x x.
"HON. DIAZ. But did you not consider that there are similarly situated?
"MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue Memorandum
Circular No. 37-93, the other brands came about the would have also clarified RMC 37-93 by I was
saying really because of the fact that I was just recently appointed and the lack of time, the period that
was allotted to us to come up with the right actions on the matter, we were really caught by the July 3
deadline.But in fact, We have already prepared a revenue memorandum circular clarifying with the
other . . . does not yet, would have been a list of locally manufactured cigarettes bearing a foreign
brand for excise tax purposes which would include all the other brands that were mentioned by the
Honorable Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."18
All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen
short of a valid and effective administrative issuance.

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,
Petitioners,
- versus COCA-COLA BOTTLERS PHILIPPINES,
INC.,
Respondent.

G.R. No. 181845

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
Promulgated:

August 4, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax
Appeals, is AFFIRMED. No costs.

DECISION

SO ORDERED.
CHICO-NAZARIO, J.:
Kapunan, J., concurs.
Padilla, J., joins Justice Hermosisima, Jr., in his dissenting opinion.
Bellosillo, J., see separate opinion.
Hermosisima, Jr., J., see dissenting opinion.

This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Civil
Procedure seeking to review and reverse the Decision [1] dated 18 January 2008 and Resolution[2] dated
18 February 2008 of the Court of Tax Appeals en banc (CTA en banc) in C.T.A. EB No. 307. In its
assailed Decision, the CTA en banc dismissed the Petition for Review of herein petitioners City of
Manila, Liberty M. Toledo (Toledo), and Joseph Santiago (Santiago); and affirmed the Resolutions
dated 24 May 2007,[3] 8 June 2007,[4] and 26 July 2007,[5] of the CTA First Division in C.T.A. AC No.
31, which, in turn, dismissed the Petition for Review of petitioners in said case for being filed out of
time. In its questioned Resolution, the CTA en banc denied the Motion for Reconsideration of
petitioners.

Petitioner City of Manila is a public corporation empowered to collect and assess business

(2) Wines
xxxx

taxes, revenue fees, and permit fees, through its officers, petitioners Toledo andSantiago, in their

(8) Coal and coke

(9) Fermented liquor, brewers wholesale price, excluding the ad valorem tax

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.

xxxx
PROVIDED, that all registered businesses in the City of Manila that are
already paying the aforementioned tax shall be exempted from payment thereof.

The case stemmed from the following facts:

Petitioner City of Manila subsequently approved on 25 February 2000, Tax Ordinance No.

Prior to 25 February 2000, respondent had been paying the City of Manila local 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:

[7]

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 theproviso found therein, which stated that all

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:

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.

xxxx
Tax Ordinances No. 7988 and No. 8011 were later declared by the Court null and void

over P6,500,000.00 up to
P25,000,000.00 - - - - - - - - - - - - - - - - - - - -- P36,000.00 plus 50% of 1%
in excess of P6,500,000.00

in Coca-Cola Bottlers Philippines, Inc. v. City of Manila[8] (Coca-Cola case) for the following reasons:

xxxx

Code (LGC) of 1991 and its implementing rules and regulations; and (2) Tax Ordinance No. 8011

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:

could not cure the defects of Tax Ordinance No. 7988, which did not legally exist.

(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.
xxxx
(D) Excisable goods subject to VAT
(1) Distilled spirits

(1) Tax Ordinance No. 7988 was enacted in contravention of the provisions of the Local Government

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 ofP18,583,932.04, 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.

Unaware of the 24 May 2007 Resolution of the CTA First Division, petitioners filed their
Consequently, respondent filed with the Regional Trial Court (RTC) of Manila, Branch 47, an
action for the cancellation of the assessment against respondent for business taxes, which was docketed

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.

as Civil Case No. 03-107088.

Petitioners moved for the reconsideration of the foregoing Resolutions dated 24 May
On 14 July 2006, the RTC rendered a Decision[9] dismissing Civil Case No. 03-107088. The

2007 and 8 June 2007, but their motion was denied by the CTA First Division in a Resolution dated 26

RTC ruled that the business taxes imposed upon the respondent under Sections 14 and 21 of Tax

July 2007. The CTA First Division reasoned that the Petition for Review of petitioners was not only

Ordinance No. 7988, as amended, were not of the same kind or character; therefore, there was no

filed out of time -- it also failed to comply with the provisions of Section 4, Rule 5; and Sections 2 and

[10]

double taxation. The RTC, though, in an Order dated 16 November 2006, granted the Motion for

3, Rule 6, of the Revised Rules of the CTA.

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

Petitioners thereafter filed a Petition for Review before the CTA en banc, docketed as C.T.A.

under Section 21 of Tax Ordinance No. 7794, as amended by Tax Ordinance No. 7988 and Tax

EB No. 307, arguing that the CTA First Division erred in dismissing their Petition for Review in C.T.A.

Ordinance No. 8011. The 16 November 2006 Decision of the RTC was in conformity with the ruling of

AC No. 31 for being filed out of time, without considering the merits of their Petition.

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

The CTA en banc rendered its Decision on 18 January 2008, dismissing the Petition for

Order[11] dated 4 April 2007. Petitioners received a copy of the 4 April 2007 Order of the RTC, denying

Review of petitioners and affirming the Resolutions dated 24 May 2007, 8 June 2007, and 26 July

their Motion for Reconsideration of the 16 November 2006 Order of the same court, on 20 April 2007.

2007 of the CTA First Division. The CTA en banc similarly denied the Motion for Reconsideration of
petitioners in a Resolution dated 18 February 2008.

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

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

Petition. The Motion for Extension of petitioners was docketed as C.T.A. AC No. 31, raffled to the
I.

CTA First Division.

Again, on 18 May 2007, petitioners filed, through registered mail, a Second Motion for

II.

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.
III.
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.

WHETHER OR NOT PETITIONERS SUBSTANTIALLY

COMPLIED WITH THE REGLEMENTARY PERIOD TO TIMELY
APPEAL THE CASE FOR REVIEW BEFORE THE [CTA DIVISION].
WHETHER OR NOT THE RULING OF THIS COURT IN THE
EARLIER [COCA-COLA CASE] IS DOCTRINAL AND CONTROLLING
IN THE INSTANT CASE.
WHETHER OR NOT PETITIONER CITY OF MANILA CAN
STILL ASSESS TAXES UNDER [SECTIONS] 14 AND 21 OF [TAX
ORDINANCE NO. 7794, AS AMENDED].

IV.

WHETHER OR NOT THE ENFORCEMENT OF [SECTION] 21

OF THE [TAX ORDINANCE NO. 7794, AS AMENDED] CONSTITUTES
DOUBLE TAXATION.

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 assert that Section 1, Rule 7 [12] of the Revised Rules of the CTA refers to certain

Petitioners also contend that the Coca-Cola case is not determinative of the issues in the

provisions of the Rules of Court, such as Rule 42 of the latter, and makes them applicable to the tax

present case because the issue of nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 is not

court. Petitioners then cannot be faulted in relying on the provisions of Section 1, Rule 42 [13] of the

the lis mota herein. The Coca-Cola case is not doctrinal and cannot be considered as the law of the

Rules of Court as regards the period for filing a Petition for Review with the CTA in division. Section

case.

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

Petitioners further insist that notwithstanding the declaration of nullity of Tax Ordinance No.

same rule allows an additional 15-day period within which to file such a Petition; and, only for the

7988 and Tax Ordinance No. 8011, Tax Ordinance No. 7794 remains a valid piece of local

most compelling reasons, another extension period not to exceed 15 days. Petitioners received on 20

legislation. The nullity of Tax Ordinance No. 7988 and Tax Ordinance No. 8011 does not effectively

April 2007 a copy of the 4 April 2007 Order of the RTC, denying their Motion for Reconsideration of

bar petitioners from imposing local business taxes upon respondent under Sections 14 and 21 of Tax

the 16 November 2006 Order of the same court. On 4 May 2007, believing that they only had 15 days

Ordinance No. 7794, as they were read prior to their being amended by the foregoing null and void tax

to file a Petition for Review with the CTA in division, petitioners moved for a 15-day extension, or

ordinances.

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

Petitioners finally maintain that imposing upon respondent local business taxes under both

which to file their Petition for Review. Thus, when petitioners filed their Petition for Review with the

Sections 14 and 21 of Tax Ordinance No. 7794 does not constitute direct double taxation. Section 143

CTA First Division on 30 May 2007, the same was filed well within the reglementary period for doing

of the LGC gives municipal, as well as city governments, the power to impose business taxes, to wit:

so.

SECTION 143. Tax on Business. The municipality may impose taxes on

the following businesses:
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

(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:
xxxx
(b) On wholesalers, distributors, or dealers in any article of commerce of
whatever kind or nature in accordance with the following schedule:
xxxx
(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:
xxxx
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:
xxxx
(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 withinthirty (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 aRegional 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

From 20 April 2007, the date petitioners received a copy of the 4 April 2007 Order of the

of the RTC to the CTA, the taxpayer must file a Petition for Review with the CTA within 30

RTC, denying their Motion for Reconsideration of the 16 November 2006 Order, petitioners had 30

days from receipt of said adverse decision or ruling of the RTC.

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

It is also true that the same provisions are silent as to whether such 30-day period can be

period for filing their Petition for Review with the CTA was to expire on 5 May 2007, thus, compelling

extended or not. However, Section 11 of Republic Act No. 9282 does state that the Petition for Review

them to seek an extension of 15 days, or until 20 May 2007, to file said Petition was unnecessary and

shall be filed with the CTA following the procedure analogous to Rule 42 of the Revised Rules of

superfluous. Even without said Motion for Extension, petitioners could file their Petition for Review

Civil Procedure. Section 1, Rule 42[16] of the Revised Rules of Civil Procedure provides that the

until 20 May 2007, as it was still within the 30-day reglementary period provided for under Section 11

Petition for Review of an adverse judgment or final order of the RTC must be filed with the Court of

of Republic Act No. 9282; and implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA.

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

The Motion for Extension filed by the petitioners on 18 May 2007, prior to the lapse of the

most compelling reasons, another extended period not to exceed 15 days from the lapse of the first

30-day reglementary period on 20 May 2007, in which they prayed for another extended period of 10

extended period.

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

Following by analogy Section 1, Rule 42 of the Revised Rules of Civil Procedure, the 30-

the rules of procedure. In fact, petitioners were only praying for a 10-day extension, five days less than

day original period for filing a Petition for Review with the CTA under Section 11 of Republic Act No.

the 15-day extended period allowed by the rules. Thus, when petitioners filed via registered mail their

9282, as implemented by Section 3(a), Rule 8 of the Revised Rules of the CTA, may be extended for a

Petition for Review in C.T.A. AC No. 31 on 30 May 2007, they were able to comply with the

period of 15 days. No further extension shall be allowed thereafter, except only for the most

reglementary period for filing such a petition.

compelling reasons, in which case the extended period shall not exceed 15 days.
Nevertheless, there were other reasons for which the CTA First Division dismissed the
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.

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 dismissalthereof. (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. 03107088, 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. Petitioner City 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

Petitioners obstinately ignore the exempting proviso in Section 21 of Tax Ordinance No.

Ordinance No. 8011, respondent could still be made liable for local business taxes under both Sections

7794, to their own detriment. Said exempting proviso was precisely included in said section so as to

14 and 21 of Tax Ordinance No. 7944 as they were originally read, without the amendment by the null

avoid double taxation.

and void tax ordinances.

Double taxation means taxing the same property twice when it should be taxed only once; that
Emphasis must be given to the fact that prior to the passage of Tax Ordinance No. 7988 and

is, taxing the same person twice by the same jurisdiction for the same thing. It is obnoxious when the

Tax Ordinance No. 8011 by petitioner City of Manila, petitioners subjected and assessed respondent

taxpayer is taxed twice, when it should be but once. Otherwise described as direct duplicate

only for the local business tax under Section 14 of Tax Ordinance No. 7794, but never under Section

taxation, the two taxes must be imposed on the same subject matter, for the same purpose, by

21 of the same. This was due to the clear and unambiguous proviso in Section 21 of Tax Ordinance No.

the same taxing authority, within the same jurisdiction, during the same taxing period; and the

7794, which stated that all registered business in the City of Manila that are already paying the

taxes must be of the same kind or character.[18]

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 saidproviso, 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 exempting proviso 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.

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 of Manila 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 Certiorari is
hereby DENIED. No costs.

SO ORDERED.