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WALTER LUTZ, as Judicial Administrator of the Intestate of the deceased Antonio Jayme Ledesma,

plaintiff-appellant v. J. ANTONIO ARANETA, as collector of Internal Revenue, defendant-appellee G.R

No. L-7856. December 22, 1955
Appellant in this case Walter Lutz in his capacity as the Judicial Administrator of the intestate of the
deceased Antonio Jayme Ledesma, seeks to recover from the Collector of the Internal Revenue the total
sum of fourteen thousand six hundred sixty six and forty cents (P 14, 666.40) paid by the estate as taxes,
under section 3 of Commonwealth Act No. 567, also known as the Sugar Adjustment Act, for the crop
years 1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2 provides for an increase of the
existing tax on the manufacture of sugar on a graduated basis, on each picul of sugar manufacturer;
while section 3 levies on the owners or persons in control of the land devoted to the cultivation of
sugarcane and ceded to others for consideration, on lease or otherwise - "a tax equivalent to the
difference between the money value of the rental or consideration collected and the amount
representing 12 per centum of the assessed value of such land. It was alleged that such tax is
unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in
plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action was
dismissed by the CFI thus the plaintiff appealed directly to the Supreme Court.
Whether or not the tax imposition in the Commonwealth Act No. 567 are unconstitutional.
Yes, the Supreme Court held that the fact that sugar production is one of the greatest industry of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in the fields and factories; that it is a great source of the state's wealth, is one of
the important source of foreign exchange needed by our government and is thus pivotal in the plans of a
regime committed to a policy of currency stability. Its promotion, protection and advancement,
therefore redounds greatly to the general welfare. Hence it was competent for the legislature to find
that the general welfare demanded that the sugar industry be stabilized in turn; and in the wide field of
its police power, the law-making body could provide that the distribution of benefits therefrom be
readjusted among its components to enable it to resist the added strain of the increase in taxes that it
had to sustain.

The subject tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily a valid exercise of
police power.


Pepsi Cola Bottling Company commenced a complaint with preliminary injunction before the Court of
First Instance of Leyte for the court to declare Section 2 of RA 2264 (Local Autonomy Act)
unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos 23 and
27 of municipality of Tanauan, Leyte. Municipal Ordinance No. 23 (9/25/1962) levies and collects from
softdrinks producers and manufacturers a tax of 1/16 of a centavo for every bottle of softdrink corked.
Municipal ordinance no. 27 (10/28/1962) levies and collects on softdrinks produced or manufactured
within the territorial jurisdiction of this municipality a tax of 1 centavo on each gallon of volume
capacity. The taxes imposed are denominated as municipal production tax. CFI-Leyte dismissed the
complaint. Hence, this petition.
Is Section 2 of RA 2264 an undue delegation of power, confiscatory and oppressive?
Do ordinances nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?
Are ordinance nos. 23 and 27 unjust and unfair?
No. Under the New Constitution, local governments are granted the autonomous authority to create
their own sources of revenue and to levy taxes. Section 5, Article XI provides: Each local government
unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations
as may be provided by law. Thus, legislative powers may be delegated to local governments in respect
of matters of local concern.
No. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was
intended as a plain substitute for the prior ordinance no. 23 and operates as a repeal of the latter, even
without words to that effect. The tax is not a percentage tax as the volume capacity of the taxpayers
production of softdrinks is considered solely for purposes of determining the tax rate on the products
but there is no set ratio between volume of sales and amount of the tax. Nor can the tax levied be
treated as a specific tax. Softdrink is not one of those specified articles.
No. Municipal corporations are allowed much discretion in determining the rates of imposable taxes.
This is in line with the constitutional policy of according the widest possible autonomy to local
governments in matters of local taxation, an aspect that is given expression in the Local Tax Code.

Smith Bell & Co. vs. CIR

FACTS: The petitioner imported 119 cases of "Chatteau Gay" wine which it declared as "still wine" under
Section 134(b) of the Tax Code. The CIR later concluded that it should be classified as "sparkling wine",
and assessed the petitioner a deficiency specific tax thereon. Petitioner contends that the assessment is
unconstitutional because Section 134(a) of the Tax Code under which it was issued lays down an
insufficient and hazy standard by which the policy and purpose of the law may be ascertained, and gives
the Commissioner blanket authority to decide what is or is not the meaning of "sparkling wines."
Petitioner contends that there was an abdication of legislative power violative of the established
doctrine, delegata potestas non potest delegate.

ISSUES: WoN there was an abdication of legislative power in violation of the established doctrine,
delegata potestas non potest delegate.

RULING: NO. The purpose of the said provision is to impose a specific tax on wines and imitation wines.
The first clause of Section 134 states so in plain language. The sole object of the sub-enumeration that
follows is in turn unmistakably to prescribe the amount of the tax specifically to be paid for each type of
wine and/or imitation wine so classified and described. The section therefore clearly and undoubtedly
discloses the legislative will, leaving to the officers charged with implementation and execution thereof
nothing more than the administrative function of determining whether a particular kind of wine or
imitation wine falls in one class or another.