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PLANTERS PRODUCTS VS FERTIPHIL

G.R. No. 166006

FACTS:
Petitioner PPI and private respondent Fertiphil are private corporations incorporated under
Philippine laws. They are both engaged in the importation and distribution of fertilizers,
pesticides and agricultural chemicals.

On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers, issued
LOI No. 1465 which provided, among others, for the imposition of a capital recovery
component (CRC) on the domestic sale of all grades of fertilizers in the Philippines. The
LOI provides:

The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to make PPI viable. Such
capital contribution shall be applied by FPA to all domestic sales of fertilizers in the
Philippines.

Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic
market to the Fertilizer and Pesticide Authority (FPA). FPA then remitted the amount
collected to the Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil
paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986.

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.
With the return of democracy, Fertiphil demanded from PPI a refund of the amounts it paid
under LOI No. 1465, but PPI refused to accede to the demand.

Unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of
due process of law. Fertiphil alleged that the LOI solely favored PPI, a privately owned
corporation, which used the proceeds to maintain its monopoly of the fertilizer industry.

In its Answer, FPA, through the Solicitor General, countered that the issuance of LOI No.
1465 was a valid exercise of the police power of the State in ensuring the stability of the
fertilizer industry in the country. It also averred that Fertiphil did not sustain any damage
from the LOI because the burden imposed by the levy fell on the ultimate consumer, not the
seller.

ISSUE AND HELD:

It is. All levies paid should be refunded in accordance with the general civil code principle against unjust enrichment. The general rule is that an unconstitutional law is void. The general rule is supported by Article 7 of the Civil Code. It has no legal effect. and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. which provides: ART. while the power of taxation is the power to levy taxes to be used for public purpose. one of the real and substantial purposes. while taxation is revenue generation. AND BECAME GOVERNMENT FUNDS PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH IMPOSED DUTIES AND CONFERRED RIGHTS BY VIRTUE OF THE PRINCIPLE OF “OPERATIVEFACT” PRIOR TO ANY DECLARATION OF UNCONSTITUTIONALITY OF LOI 1465. the primary purpose of the levy is revenue generation. It produces no rights. If the purpose is primarily revenue. These powers are distinct and have different tests for validity. is circumscribed by inherent and constitutional limitations. inoperative as if it has not been passed. The main purpose of police power is the regulation of a behavior or conduct. in legal contemplation. it is still unconstitutional because it did not promote the general welfare of the people or public interest. or if revenue is. The power of taxation. Fertiphil is not required to pay the levy. Being void. While it is true that the power of taxation can be used as an implement of police power. at least. on the other hand. Police power is the power of the State to enact legislation that may interfere with personal liberty or property in order to promote the general welfare. . imposes no duties and affords no protection. The “lawful subjects” and “lawful means” tests are used to determine the validity of a law enacted under the police power. Police power and the power of taxation are inherent powers of the State. III THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT WAS REMITTED TO THE GOVERNMENT. AND FOR BENEFITING A FOUNDATION CREATED BY LAW TO HOLD IN TRUST FOR MILLIONS OF FARMERS THEIR STOCK OWNERSHIP IN PPI CONSTITUTES A VALID LEGISLATION PURSUANT TO THE EXERCISE OF TAXATION AND POLICE POWER FOR PUBLIC PURPOSES. then the exaction is properly called a tax. Laws are repealed only by subsequent ones. BEING A LAW IMPLEMENTED FOR THE PURPOSE OF ASSURING THE FERTILIZER SUPPLY AND DISTRIBUTION IN THE COUNTRY. even if the LOI is enacted under the police power. Fertiphil also argues that. The levy was imposed to pay the corporate debt of PPI.LOI 1465. 7.

and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes. Notes: An inherent limitation on the power of taxation is public purpose. 162 SCRA 521 Petitioner Valmonte in G.' Petitioner Valmonte not only condemns the OPSF as "arbitrary and oppressive" but claims also that through said Fund. it is alleged that the OPSF provides "a fertile ground for unchecked graft and corruption" and "triggers the rise not only [of] the prices of petroleum products but also [of] the prime commodities [sic]. Citizens’ Alliance for Consumer Protection v Energy Regulatory Board. Taxes are exacted only for a public purpose. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The reason for this is simple. 79501-03 argues that the Oil Price Stabilization Fund (OPSF) is a tax imposed on consumers which is "not intended for public purpose or for government operations but to answer for the losses of oil companies.R. as an exception to the general rule. Thus. It would be a robbery for the State to tax its citizens and use the funds generated for a private purpose. the former shall be void and the latter shall govern. The past cannot always be erased by a new judicial declaration. The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law." Finally. The power to tax exists for the general welfare. hence. As an old United States case bluntly put it: “To lay with one hand. implicit in its power is the limitation that it should be used only for a public purpose. is nonetheless a robbery because it is done under the forms of law and is called taxation.When the courts declare a law to be inconsistent with the Constitution. it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it. "all oil consumers are being made to pay not only for their present oil consumption but also for a portion of future consumption which may or may not come. only applies as a matter of equity and fair play." . Nos. They cannot be used for purely private purposes or for the exclusive benefit of private persons.” The doctrine of operative fact. the power of the government on the property of the citizen.

The foregoing arguments suggest the presence of misconceptions about the nature and functions of the OPSF. The OPSF is a trust Account" which was established "for the purpose of minimizing frequent price changes brought about by exchange rate adjustment and/or changes in World market prices of crude oil and imported petroleum products . manufacturing and/or marketing petroleum products. 'Cost underrecovery' shall include the following: i. 1956. c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment of persons or companies engaged in the business of importing. (Emphasis supplied) Upon the other hand. Reduction in oil company take as directed by the Board of Energy without the corresponding reduction in the landed cost of oil inventories in the possession of the oil companies at the time of the price change. as may be determined by the Minister of Finance in consultation with the Board of Energy. shall be determined by the Ministry of Finance. b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations. if any. as amended by Executive Order No. as may be determined by the Minister of Finance in consultation with the Board of Energy. No. ." 17 Under P. The magnitude of the underrecovery. 2) To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction of domestic prices of petroleum products.D. this Trust Account may be funded from any of the following sources: a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment. funds may be drawn from said Trust Account only for the following purposes: l) To reimburse the oil companies for cost increases in crude oil and imported petroleum products resulting from exchange rate adjustment and/or increase in world market prices of crude oil. d) Any resulting peso costs differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rate as fixed by the Board of Energy. 137 dated 27 February 1987.

and oil companies are allowed to recover those portions of their costs which they would not otherwise recover given the level of domestic prices existing at any given time. issues which are not properly addressed to this Court and which this Court may not constitutionally pass upon. The OPSF was established precisely to protect local consumers from the adverse consequences that such frequent oil price adjustments may have upon the economy. is not compelled to speculate and to imagine how the assailed legislation may possibly offend some provision of the Constitution. 19 The Court notes. vary from day to day is of judicial notice. It appears to the Court that the establishment and maintenance of the OPSF is well within that pervasive and non-waivable power and responsibility of the government to secure the physical and economic survival and well-being of the community. when appropriate situations arise. dollar and other convertible foreign currencies also changes from day to day. costs of crude importation. OPSF serves as a pocket. Thus. among other things. in any case. The stabilization and subsidy of domestic prices of petroleum products and fuel oil — clearly critical in importance considering. the OPSF is in effect a device through which the domestic prices of petroleum products are subsidized in part. Other factors as may be determined by the Ministry of Finance to result in cost underrecovery. iii.ii. into which a portion of the purchase price of oil and petroleum products paid by consumers as well as some tax revenues are inputted and from which amounts are drawn from time to time to reimburse oil companies. justice and expediency of the establishment of the OPSF. 1956. Those issues should be addressed rather to the political departments of government: the President and the Congress . Petitioners have not undertaken to Identify the provisions in the Constitution which they claim to have been violated by that statute. as it were. in this respect that petitioners have in the main put in question the wisdom. 137 has. measured by the spot market in Rotterdam. These fluctuations in world market prices and in tanker rates and foreign exchange rates would in a completely free market translate into corresponding adjustments in domestic prices of oil and petroleum products with sympathetic frequency. for increases in. instead of fluctuating every so often. This Court. Freight rates for hauling crude oil and petroleum products from sources of supply to the Philippines may also vary from time to time. further. Reduction in internal ad valorem taxes as a result of foregoing government mandated price reductions. To the extent that some tax revenues are also put into it. the continuing high level of dependence of the country on imported crude oil — are appropriately regarded as public purposes. The OPSF is thus a buffer mechanism through which the domestic consumer prices of oil and petroleum products are stabilized. Presidential Decree No. in its favor the presumption of validity and constitutionality 18 which petitioners Valmonte and the KMU have not overturned. But domestic prices which vary from day to day or even only from week to week would result in a chaotic market with unpredictable effects upon the country's economy in general. The fact that the world market prices of oil. as well as underrecovery of. that comprehensive sovereign authority we designate as the police power of the state. The exchange rate of the peso vis-a-vis the U. as amended by Executive Order No. however.S.

On 30 September 2002. In a letter dated 29 October 2002. the Pasig City Assessors Office sent MPLDC two notices of tax delinquency for its failure to pay real property tax on the properties for the period 1979 to 2001 totaling P256.R. Petitioner. situated in Pasig City. Respondent. with a total area of 18.Jalandoni(Jalandoni) and Treasurer Rosario Razon informed the Pasig City Treasurer that the tax for the period 1979 to 1986 had been paid.858. 337158 and 469702 and Tax Declaration Nos. Jose Y.555. In 1986.4891 hectares.: FACTS: Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of land. Independent Realty Corporation (IRC) President Ernesto R.E-030-01185 and E-030-01186 under the name of MPLDC. CARPIO. No. and that the properties were exempt from tax beginning 1987. v.G. .Portions of the properties are leased to different business establishments.86. voluntarily surrendered MPLDC to the Republic of the Philippines. 185023 : August 24. The properties are covered by Transfer Certificate of Title (TCT) Nos. 2011 CITY OF PASIG REPRESENTED BY THE CITY TREASURER AND THE CITY ASSESSOR. REPUBLIC OF THE PHILIPPINES REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD GOVERNANCE. the registered owner of MPLDC. J. Campos (Campos).

Since there was no other bidder. On 9 November 2005. the Pasig City Treasurer again informed Merelos that the properties were not exempt from tax. MPLDC General Manager Antonio Merelos(Merelos) andJalandoniagain informed the Pasig City Treasurer that the properties were exempt from tax. through the Presidential Commission on Good Government (PCGG).000partial payment under protest. On the same day.814. Hence. MPLDC paidP2.In letters dated 10 July 2003 and 8 January 2004. In a letter dated 11 March 2004. On 19 December 2005. In a letter dated 16 February 2004. the Pasig City Treasurer offered the properties for sale at public auction.000. PCGG filed with the RTC an amended petition for certiorari. In its 31 March 2008 Decision. On 1 December 2005. HELD: . prohibition and mandamus against Pasig City.027. Pasig City bought the properties and was issued the corresponding certificates of sale. RTC granted the petition for certiorari. filed with the RTC a petition for prohibition with prayer for issuance of a temporary restraining order or writ of preliminary injunction to enjoin petitioner Pasig City from auctioning the properties and from collecting real property tax. the present petition. On 20 October 2005. the Court of Appeals set aside the RTCs 6 November 2006 Decision. On 2 December 2005. the Pasig City Treasurer informed MPLDC and IRC that the properties were not exempt from tax. MPLDC received two warrants of levy on the properties.48. ISSUE: Whether the lower courts erred in ordering Pasig City to assess and collect real property tax from the lessees of the properties. Pasig City appealed to the Court of Appeals. prohibition and mandamus. the Pasig City Assessors Office sent MPLDC a notice of final demand for payment of tax for the period 1987 to 2005 totaling P389. respondent Republic of the Philippines.

canals. such as roads. ports and bridges constructed by the State. torrents. Article 420 of the Civil Code classifies as properties of public dominion those that are intended for public use. shores. Pasig City must. Properties of public dominion are not only exempt from real estate tax. assumed that the Republic of the Philippines passes on the real estate tax as part of the rent to the lessees. rivers.roadsteads. Neither are they intended for some public service or for the development of the national wealth. banks. the portions of the properties leased to taxable entities are not only subject to real estate tax. issue to respondent new real property tax assessments covering the portions of the properties leased to taxable entities.they are exempt from sale at public auction. The law imposes the liability to pay real estate tax on the Republic of the Philippines for the portions of the properties leased to taxable entities.TAXATION LAW: properties owned by the Republic of the Philippines are exempt from real property tax.Thus. to a taxable person. . exception Section 234(a) of Republic Act No. torrents. Thus. If the Republic of the Philippines fails to pay the real property tax on the portions of the properties leased to taxable entities. which generally includes property belonging to the State. In the present case. such as roads. then such portions may be sold at public auction to satisfy the tax delinquency. MPLDC leases portions of the properties to different business establishments. shores. It is clear that property of public dominion. canals. ports and bridges constructed by the State. In sum. therefore. of course. the Court held that. It is.roadsteads and those that are intended for some public service or for the development of the national wealth. 7160 states that properties owned by the Republic of the Philippines are exempt from real property tax except when the beneficial use thereof has been granted. cannot be subject of the commerce of man. the portions of the properties not leased to taxable entities are exempt from real estate tax while the portions of the properties leased to taxable entities are subject to real estate tax. they can also be sold at public auction to satisfy the tax delinquency. banks. rivers. Republic. only those portions of the properties leased to taxable entities are subject to real estate tax for the period of such leases. for consideration or otherwise. the parcels of land are not properties of public dominion because they are not intended for public use. In Heirs of Mario Malabanan v.

(c) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is more than Twenty-two pesos (P22. tapuy and similar domestic fermented liquors in accordance with the following schedule: (a) If the net retail price (excluding the excise tax and value-added tax) per liter of volume capacity is less than Fourteen pesos and fifty centavos (P14.15) per liter. ale.There shall be levied. lager beer. and 1-liter bottle variants. assessed and collected an excise tax on beer.00). .CIR V SAN MIG CORPORATION FACTS: Respondent San Miguel Corporation. 8240 shall not be lower than the tax which was due from each brand on October 1. Republic Act (R. 1996. 1998.A. Variants of existing brands which are introduced in the domestic market after the effectivity of Republic Act No.50) up to Twenty-two pesos (P22. Section 143 of the Tax Reform Act of 1997 reads: SEC. The excise tax from any brand of fermented liquor within the next three (3) years from the effectivity of Republic Act No. 143.15) per liter. basi. the tax shall be Nine pesos and fifteen centavos (P9. 8424 or the Tax Reform Act of 1997 took effect. a domestic corporation engaged in the manufacture and sale of fermented liquor.15) per liter. .50). (b) If the net retail price (excluding the excise tax and the value-added tax) per liter of volume capacity is Fourteen pesos and fifty centavos (P14. the tax shall be Twelve pesos and fifteen centavos (P12. the tax shall be Six pesos and fifteen centavos (P6. Fermented liquor which are brewed and sold at micro-breweries or small establishments such as pubs and restaurants shall be subject to the rate in paragraph (c) hereof. produces as one of its products Red Horse beer which is sold in 500-ml.00). 8240 shall be taxed under the highest classification of any variant of that brand. Fermented Liquor. On January 1.) No. porter and other fermented liquors except tuba.

(b) and (c) hereof shall be increased by twelve percent (12%) on January 1. Section 143 provides that the excise tax rate shall be the figures provided under paragraphs (a). No. however. 2000. the qualification that the tax due after the 12% increase becomes effective shall not be lower than the tax actually paid prior to January 1. until December 31. Revenue Regulations No. 2000.A. 17-99 has no basis in the plain wording of Section 143 Petitioner contends that the last paragraph of Section 1 of Revenue Regulations No. 2000. 1996. 17-99 providing that the new specific tax rate for any brand of cigars. 8240. 17-99. No. HELD: Section 143 of the Tax Reform Act of 1997 is clear and unambiguous. which is to increase government revenues through the collection of higher excise taxes on fermented liquor. Thereafter. It bears reiterating that tax burdens are not to be imposed. 2000. 17-99 increasing the applicable tax rates on fermented liquor by 12% Respondent. Section 143 provides that the excise tax from any brand of fermented liquor shall not be lower than the tax which was due from each brand on October 1. without regard to whether the revenue collection starting January 1. such interpretation is clearly an invalid exercise of the power of the Secretary of Finance to interpret tax laws and to promulgate rules and regulations necessary for the effective enforcement of the Tax Reform Act of 1997. 1999. nor presumed to be imposed beyond what the statute expressly and clearly imports. however. During the 3-year transition period. is a valid administrative interpretation of Section 143 of the Tax Reform Act of 1997. on December 16. It must be stressed that the objective of issuing BIR Revenue Regulations is to establish parameters or guidelines within which our tax laws should be implemented. It provides for two periods: the first is the 3-year transition period beginning January 1. the Secretary of Finance issued Revenue Regulations No.The rates of excise tax on fermented liquor under paragraphs (a). tax statutes being construed strictissimi juris against the government. 1999. and the second is the period thereafter. Said qualification must. and not to amend or modify its substantive meaning and import. perforce. the date when R. 8240 took effect. the basic law prevails as said rule or regulation cannot go beyond the terms and provisions of the basic law.A. In case of discrepancy between the basic law and a rule or regulation issued to implement said law. cigarettes packed by machine. wines and fermented liquors shall not be lower than the excise tax that is actually being paid prior to January 1. be struck down as invalid and of no effect. (b) and (c) of Section 143 but increased by 12%. . 2000 may turn out to be lower than that collected prior to said date. distilled spirits. created a new tax rate when it added in the last paragraph of Section 1 thereof. without regard to whether such rate is lower or higher than the tax rate that is actually being paid prior to January 1. It carries out the legislative intent behind the enactment of R. 2000 and therefore. As there is nothing in Section 143 of the Tax Reform Act of 1997 which clothes the BIR with the power or authority to rule that the new specific tax rate should not be lower than the excise tax that is actually being paid prior to January 1. later contended that the said qualification in the last paragraph of Section 1 of Revenue Regulations No. 1997. After the transitory period.