G.R. No.

175220 February 12, 2009

WILLIAM C. DAGAN, CARLOS H. REYES, NARCISO MORALES, BONIFACIO MANTILLA, CESAR AZURIN, WEITONG LIM, MA. TERESA
TRINIDAD, MA. CARMELITA FLORENTINO, Petitioners, vs.PHILIPPINE RACING COMMISSION, MANILA JOCKEY CLUB, INC., and
PHILIPPINE RACING CLUB, INC., Respondents.

DECISION
TINGA, J.:
The subject of this petition for certiorari is the decision1 of the Court of Appeals in CA-G.R. SP No. 95212, affirming in toto the
judgment2 of the Regional Trial Court of Makati in Civil Case No. 04-1228.

The controversy stemmed from the 11 August 2004 directive3 issued by the Philippine Racing Commission (Philracom) directing the
Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI) to immediately come up with their respective Clubs’ House
Rule to address Equine Infectious Anemia (EIA) problem and to rid their facilities of horses infected with EIA. Said directive was issued
pursuant to Administrative Order No. 55 dated 28 March 1994 by the Department of Agriculture declaring it unlawful for any person,
firm or corporation to ship, drive, or transport horses from any locality or place except when accompanied by a certificate issued by
the authority of the Director of the Bureau of Animal Industry (BAI).6

In compliance with the directive, MJCI and PRCI ordered the owners of racehorses stable in their establishments to submit the horses
to blood sampling and administration of the Coggins Test to determine whether they are afflicted with the EIA virus. Subsequently,
on 17 September 2004, Philracom issued copies of the guidelines for the monitoring and eradication of EIA.7

Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes, Narciso Morales, Bonifacio Montilla, Cezar Azurin, Weitong
Lim, Ma. Teresa Trinidad and Ma. Carmelita Florentino refused to comply with the directive. First, they alleged that there had been
no prior consultation with horse owners. Second, they claimed that neither official guidelines nor regulations had been issued
relative to the taking of blood samples. And third, they asserted that no documented case of EIA had been presented to justify the
undertaking.8

Despite resistance from petitioners, the blood testing proceeded. The horses, whose owners refused to comply were banned from
the races, were removed from the actual day of race, prohibited from renewing their licenses or evicted from their stables.

When their complaint went unheeded, the racehorse owners lodged a complaint before the Office of the President (OP) which in
turn issued a directive instructing Philracom to investigate the matter.

For failure of Philracom to act upon the directive of the OP, petitioners filed a petition for injunction with application for the issuance
of a temporary restraining order (TRO). In an order9 dated 11 November 2004, the trial court issued a TRO.

Dagan refused to comply with the directives because, according to him, the same are unfair as there are no implementing rules on
the banning of sick horses from races. Consequently, his horses were evicted from the stables and transferred to an isolation area. He
also admitted that three of his horses had been found positive for EIA.10

Confronted with two issues, namely: whether there were valid grounds for the issuance of a writ of injunction and whether
respondents had acted with whim and caprice in the implementation of the contested guideline, the trial court resolved both queries
in the negative.

The trial court found that most racehorse owners, except for Dagan, had already subjected their racehorses to EIA testing. Their act
constituted demonstrated compliance with the contested guidelines, according to the trial court. Hence, the acts sought to be
enjoined had been rendered moot and academic.

With respect to the subject guidelines, the trial court upheld their validity as an exercise of police power, thus:

The Petitioner’s submission that the subject guidelines are oppressive and hence confiscatory of proprietary rights is likewise viewed
by this Court to be barren of factual and legal support. The horseracing industry, needless to state, is imbued with public interest
deserving of utmost concern if not constant vigilance. The Petitioners do not dispute this. It is because of this basic fact that
respondents are expected to police the concerned individuals and adopt measures that will promote and protect the interests of all
the stakeholders starting from the moneyed horse-owners, gawking bettors down to the lowly maintainers of the stables. This is a
clear and valid exercise of police power with the respondents acting for the State. Participation in the business of horseracing is but a
privilege; it is not a right. And no clear acquiescence to this postulation can there be than the Petitioners' own undertaking to abide
by the rules and conditions issued and imposed by the respondents as specifically shown by their contracts of lease with
MCJI.111avvphi1

Petitioners appealed to the Court of Appeals. In its Decision dated 27 October 2006, the appellate court affirmed in toto the decision
of the trial court.

The appellate court upheld the authority of Philracom to formulate guidelines since it is vested with exclusive jurisdiction over and
control of the horse-racing industry per Section 8 of Presidential Decree (P.D.) No. 8. The appellate court further pointed out that P.D.
No. 420 also endows Philracom with the power to prescribe additional rules and regulations not otherwise inconsistent with the said
presidential decree12 and to perform such duties and exercise all powers incidental or necessary to the accomplishment of its aims
and objectives.13 It similarly concluded that the petition for prohibition should be dismissed on the ground of mootness in light of
evidence indicating that petitioners had already reconsidered their refusal to have their horses tested and had, in fact, subsequently
requested the administration of the test to the horses.14

Aggrieved by the appellate court’s decision, petitioners filed the instant certiorari petition15 imputing grave abuse of discretion on
the part of respondents in compelling petitioners to subject their racehorses to blood testing.
In their amended petition,16 petitioners allege that Philracom’s unsigned and undated implementing guidelines suffer from several
infirmities. They maintain that the assailed guidelines do not comply with due process requirements. Petitioners insist that
racehorses already in the MJCI stables were allowed to be so quartered because the individual horse owners had already complied
with the Philracom regulation that horses should not bear any disease. There was neither a directive nor a rule that racehorses
already lodged in the stables of the racing clubs should again be subjected to the collection of blood samples preparatory to the
conduct of the EIA tests,17 petitioners note. Thus, it came as a surprise to horse owners when told about the administration of a new
Coggins Tests on old horses since the matter had not been taken up with them.18 No investigation or at least a summary proceeding
was conducted affording petitioners an opportunity to be heard.19 Petitioners also aver that the assailed guidelines are ultra vires in
that the sanctions imposed for refusing to submit to medical examination are summary eviction from the stables or arbitrary banning
of participation in the races, notwithstanding the penalties prescribed in the contract of lease.20

In its Comment,21 the PRCI emphasizes that it merely obeyed the terms of its franchise and abided by the rules enacted by
Philracom.22 For its part, Philracom, through the Office of the Solicitor-General (OSG), stresses that the case has become moot and
academic since most of petitioners had complied with the guidelines by subjecting their race horses to EIA testing. The horses found
unafflicted with the disease were eventually allowed to join the races.23 Philracom also justified its right under the law to regulate
horse racing.24 MJCI adds that Philracom need not delegate its rule-making power to the former since MJCI’s right to formulate its
internal rules is subsumed under the franchise granted to it by Congress.25

In their Reply,26 petitioners raise for the first time the issue that Philracom had unconstitutionally delegated its rule-making power to
PRCI and MJCI in issuing the directive for them to come up with club rules. In response to the claim that respondents had merely
complied with their duties under their franchises, petitioners counter that the power granted to PRCI and MJCI under their
respective franchises is limited to: (1) the construction, operation and maintenance of racetracks; (2) the establishment of branches
for booking purposes; and (3) the conduct of horse races.

It appears on record that only Dagan had refused to comply with the orders of respondents. Therefore, the case subsists as regards
Dagan.

Petitioners essentially assail two issuances of Philracom; namely: the Philracom directive and the subsequent guidelines addressed to
MJCI and PRCI.

The validity of an administrative issuance, such as the assailed guidelines, hinges on compliance with the following requisites:

1. Its promulgation must be authorized by the legislature;

2. It must be promulgated in accordance with the prescribed procedure;

3. It must be within the scope of the authority given by the legislature;

4. It must be reasonable.28

All the prescribed requisites are met as regards the questioned issuances. Philracom’s authority is drawn from P.D. No. 420. The
delegation made in the presidential decree is valid. Philracom did not exceed its authority. And the issuances are fair and reasonable.

The rule is that what has been delegated cannot be delegated, or as expressed in the Latin maxim: potestas delegate non delegare
potest. This rule is based upon the ethical principle that such delegated power constitutes not only a right but a duty to be
performed by the delegate by the instrumentality of his own judgment acting immediately upon the matter of legislation and not
through the intervening mind of another.29 This rule however admits of recognized exceptions30 such as the grant of rule-making
power to administrative agencies. They have been granted by Congress with the authority to issue rules to regulate the
implementation of a law entrusted to them. Delegated rule-making has become a practical necessity in modern governance due to
the increasing complexity and variety of public functions.

However, in every case of permissible delegation, there must be a showing that the delegation itself is valid. It is valid only if the law
(a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate; and (b) fixes a
standard—the limits of which are sufficiently determinate and determinable—to which the delegate must conform in the
performance of his functions. A sufficient standard is one which defines legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected.

P.D. No. 420 hurdles the tests of completeness and standards sufficiency.

Philracom was created for the purpose of carrying out the declared policy in Section 1 which is "to promote and direct the
accelerated development and continued growth of horse racing not only in pursuance of the sports development program but also in
order to insure the full exploitation of the sport as a source of revenue and employment." Furthermore, Philracom was granted
exclusive jurisdiction and control over every aspect of the conduct of horse racing, including the framing and scheduling of races, the
construction and safety of race tracks, and the security of racing. P.D. No. 420 is already complete in itself.

Section 9 of the law fixes the standards and limitations to which Philracom must conform in the performance of its functions, to wit:

Section 9. Specific Powers. Specifically, the Commission shall have the power:

a. To enforce all laws, decrees and executive orders relating to horse-racing that are not expressly or implied repealed or modified by
this Decree, including all such existing rules and regulations until otherwise modified or amended by the Commission;

b. To prescribe additional rules and regulations not otherwise inconsistent with this Decree;
c. To register race horses, horse owners or associations or federations thereof, and to regulate the construction of race tracks and to
grant permit for the holding of races;

d. To issue, suspend or revoke permits and licenses and to impose or collect fees for the issuance of such licenses and permits to
persons required to obtain the same;

e. To review, modify, approve or disapprove the rules and regulations issued by any person or entity concerning the conduct of horse
races held by them;

f. To supervise all such race meeting to assure integrity at all times. It can order the suspension of any racing event in case of violation
of any law, ordinance or rules and regulations;

g. To prohibit the use of improper devices, drugs, stimulants or other means to enhance or diminish the speed of horse or materially
harm their condition;

h. To approve the annual budget of the omission and such supplemental budgets as may be necessary;

i. To appoint all personnel, including an Executive Director of the Commission, as it may be deem necessary in the exercise and
performance of its powers and duties; and

j. To enter into contracts involving obligations chargeable to or against the funds of the Commission. (Emphasis supplied)

Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too, for its part Philracom has exercised its
rule-making power in a proper and reasonable manner. More specifically, its discretion to rid the facilities of MJCI and PRCI of horses
afflicted with EIA is aimed at preserving the security and integrity of horse races.

Petitioners also question the supposed delegation by Philracom of its rule-making powers to MJCI and PRCI.

There is no delegation of power to speak of between Philracom, as the delegator and MJCI and PRCI as delegates. The Philracom
directive is merely instructive in character. Philracom had instructed PRCI and MJCI to "immediately come up with Club’s House Rule
to address the problem and rid their facilities of horses infected with EIA." PRCI and MJCI followed-up when they ordered the
racehorse owners to submit blood samples and subject their race horses to blood testing. Compliance with the Philracom’s directive
is part of the mandate of PRCI and MJCI under Sections 133 of R.A. No. 795334 and Sections 135 and 236 of 8407.37

As correctly proferred by MJCI, its duty is not derived from the delegated authority of Philracom but arises from the franchise
granted to them by Congress allowing MJCI "to do and carry out all such acts, deeds and things as may be necessary to give effect
to the foregoing."38 As justified by PRCI, "obeying the terms of the franchise and abiding by whatever rules enacted by Philracom
is its duty."39

More on the second, third and fourth requisites.

As to the second requisite, petitioners raise some infirmities relating to Philracom’s guidelines. They question the supposed belated
issuance of the guidelines, that is, only after the collection of blood samples for the Coggins Test was ordered. While it is conceded
that the guidelines were issued a month after Philracom’s directive, this circumstance does not render the directive nor the
guidelines void. The directive’s validity and effectivity are not dependent on any supplemental guidelines. Philracom has every right
to issue directives to MJCI and PRCI with respect to the conduct of horse racing, with or without implementing guidelines.

Petitioners also argue that Philracom’s guidelines have no force and effect for lack of publication and failure to file copies with the
University of the Philippines (UP) Law Center as required by law.

As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its quasi-legislative power does not
require notice 7and hearing.40 In Abella, Jr. v. Civil Service Commission,41 this Court had the occasion to rule that prior notice and
hearing are not essential to the validity of rules or regulations issued in the exercise of quasi-legislative powers since there is no
determination of past events or facts that have to be established or ascertained.42

The third requisite for the validity of an administrative issuance is that it must be within the limits of the powers granted to it. The
administrative body may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute,
particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.43

The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These guidelines are in accord with Philracom’s
mandate under the law to regulate the conduct of horse racing in the country.

Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or discriminatory. In fact, all horses stabled at
the MJCI and PRCI’s premises underwent the same procedure. The guidelines implemented were undoubtedly reasonable as they
bear a reasonable relation to the purpose sought to be accomplished, i.e., the complete riddance of horses infected with EIA.

It also appears from the records that MJCI properly notified the racehorse owners before the test was conducted.44 Those who failed
to comply were repeatedly warned of certain consequences and sanctions.

Furthermore, extant from the records are circumstances which allow respondents to determine from time to time the eligibility of
horses as race entries. The lease contract executed between petitioner and MJC contains a proviso reserving the right of the lessor,
MJCI in this case, the right to determine whether a particular horse is a qualified horse. In addition, Philracom’s rules and regulations
on horse racing provide that horses must be free from any contagious disease or illness in order to be eligible as race entries.
All told, we find no grave abuse of discretion on the part of Philracom in issuing the contested guidelines and on the part MJCI and
PRCI in complying with Philracom’s directive.

WHEREFORE, the petition is DISMISSED. Costs against petitioner William Dagan.

G. R. No. 151908 - August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION (PILTEL), Petitioners, vs. NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC), respondent.

x---------------------------------------------------------x

G.R. No. 152063 August 12, 2003

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC. (ISLACOM), Petitioners, vs. COURT OF APPEALS (The Former
6th Division) and the NATIONAL TELECOMMUNICATIONS COMMISSION, respondents.

YNARES-SANTIAGO, J.:

Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission (NTC) issued on June 16, 2000
Memorandum Circular No. 13-6-2000, promulgating rules and regulations on the billing of telecommunications services. Among its
pertinent provisions are the following:

(1) The billing statements shall be received by the subscriber of the telephone service not later than 30 days from the end of each
billing cycle. In case the statement is received beyond this period, the subscriber shall have a specified grace period within which to
pay the bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the service within the grace period.

(2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt, recorded message or similar facility excluding
the customer's own equipment.

(3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards. Prepaid call cards and SIM cards shall be
valid for at least 2 years from the date of first use. Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM
card is fully consumed but not beyond 2 years and 45 days from date of first use to replenish the SIM card, otherwise the SIM card
shall be rendered invalid. The validity of an invalid SIM card, however, shall be installed upon request of the customer at no
additional charge except the presentation of a valid prepaid call card.

(4) Subscribers shall be updated of the remaining value of their cards before the start of every call using the cards.

(5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid shall be reduced from 1 minute per pulse
to 6 seconds per pulse. The authorized rates per minute shall thus be divided by 10.1

The Memorandum Circular provided that it shall take effect 15 days after its publication in a newspaper of general circulation and
three certified true copies thereof furnished the UP Law Center. It was published in the newspaper, The Philippine Star, on June 22,
2000.2 Meanwhile, the provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit of billing
for cellular mobile telephone service took effect 90 days from the effectivity of the Memorandum Circular.

On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service (CMTS) operators which contained
measures to minimize if not totally eliminate the incidence of stealing of cellular phone units. The Memorandum directed CMTS
operators to:

a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and verification of the identity and addresses of
prepaid SIM card customers;

b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC 13-6-2000;

c. deny acceptance to your respective networks prepaid and/or postpaid customers using stolen cellphone units or cellphone units
registered to somebody other than the applicant when properly informed of all information relative to the stolen cellphone units;

d. share all necessary information of stolen cellphone units to all other CMTS operators in order to prevent the use of stolen
cellphone units; and

e. require all your existing prepaid SIM card customers to register and present valid identification cards.3

This was followed by another Memorandum dated October 6, 2000 addressed to all public telecommunications entities, which reads:

This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years
from date of first use pursuant to MC 13-6-2000.

In addition, all CMTS operators are reminded that all SIM packs used by subscribers of prepaid cards sold on 07 October 2000 and
beyond shall be valid for at least two (2) years from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective
07 October 2000.

For strict compliance.4

On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation filed against the National
Telecommunications Commission, Commissioner Joseph A. Santiago, Deputy Commissioner Aurelio M. Umali and Deputy
Commissioner Nestor C. Dacanay, an action for declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing
Circular) and the NTC Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction and
temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the Regional Trial Court of Quezon City,
Branch 77.5

Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale of consumer goods such as the
prepaid call cards since such jurisdiction belongs to the Department of Trade and Industry under the Consumer Act of the
Philippines; that the Billing Circular is oppressive, confiscatory and violative of the constitutional prohibition against deprivation of
property without due process of law; that the Circular will result in the impairment of the viability of the prepaid cellular service by
unduly prolonging the validity and expiration of the prepaid SIM and call cards; and that the requirements of identification of prepaid
card buyers and call balance announcement are unreasonable. Hence, they prayed that the Billing Circular be declared null and void
ab initio.

Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion for Leave to Intervene and to
Admit Complaint-in-Intervention.6 This was granted by the trial court.

On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from implementing Memorandum
Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.7

In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the ground of petitioners' failure to
exhaust administrative remedies.

Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's motion to dismiss, the trial
court issued on November 20, 2000 an Order, the dispositive portion of which reads:

WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for lack of merit. The plaintiffs' application for
the issuance of a writ of preliminary injunction is hereby granted. Accordingly, the defendants are hereby enjoined from
implementing NTC Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000, pending the issuance and
finality of the decision in this case. The plaintiffs and intervenors are, however, required to file a bond in the sum of FIVE HUNDRED
THOUSAND PESOS (P500,000.00), Philippine currency.

SO ORDERED.8

Defendants filed a motion for reconsideration, which was denied in an Order dated February 1, 2001.9

Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of Appeals, which was docketed as CA-
G.R. SP. No. 64274. On October 9, 2001, a decision was rendered, the decretal portion of which reads:

WHEREFORE, premises considered, the instant petition for certiorari and prohibition is GRANTED, in that, the order of the court a
quo denying the petitioner's motion to dismiss as well as the order of the court a quo granting the private respondents' prayer for a
writ of preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby ANNULLED and SET ASIDE. The
private respondents' complaint and complaint-in-intervention below are hereby DISMISSED, without prejudice to the referral of the
private respondents' grievances and disputes on the assailed issuances of the NTC with the said agency.

SO ORDERED.10

Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack of merit.11

Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No. 151908, anchored on the following
grounds:

A.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE NATIONAL TELECOMMUNICATIONS COMMISSION
(NTC) AND NOT THE REGULAR COURTS HAS JURISDICTION OVER THE CASE.

B.
THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN
AVAILABLE ADMINISTRATIVE REMEDY.

C.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS
UNCONSTITUTIONAL AND CONTRARY TO LAW AND PUBLIC POLICY.

D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE
RIGHT TO WARRANT THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.12

Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the following errors:

1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION
OF ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL
INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE
OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW.

2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE
REMEDIES DOES NOT APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.

3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE
REMEDIES DOES NOT APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN THERE IS NO OTHER
REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY.

4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE
REMEDIES AVAILABLE TO THEM.

5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE
AND ISLA HAVE A CLEAR RIGHT TO AN INJUNCTION.13

The two petitions were consolidated in a Resolution dated February 17, 2003.14

On March 24, 2003, the petitions were given due course and the parties were required to submit their respective memoranda.15

We find merit in the petitions.

Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory powers.
Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within
the confines of the granting statute and the doctrine of non-delegability and separability of powers.16

The rules and regulations that administrative agencies promulgate, which are the product of a delegated legislative power to create
new and additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted by the
legislature to the administrative agency. It is required that the regulation be germane to the objects and purposes of the law, and be
not in contradiction to, but in conformity with, the standards prescribed by law.17 They must conform to and be consistent with the
provisions of the enabling statute in order for such rule or regulation to be valid. Constitutional and statutory provisions control with
respect to what rules and regulations may be promulgated by an administrative body, as well as with respect to what fields are
subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a
statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a
statute. In case of conflict between a statute and an administrative order, the former must prevail.18

Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-judicial or administrative
adjudicatory power. This is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide
in accordance with the standards laid down by the law itself in enforcing and administering the same law. The administrative body
exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive or administrative
nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are required to
investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them as basis for their
official action and exercise of discretion in a judicial nature.19

In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust
administrative remedies before going to court. This principle applies only where the act of the administrative agency concerned was
performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative
power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,20 it was held:

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review, so strenuously urged by the
Solicitor General on behalf of respondent, has obviously no application here. The resolution in question was issued by the PCA in the
exercise of its rule- making or legislative power. However, only judicial review of decisions of administrative agencies made in the
exercise of their quasi-judicial function is subject to the exhaustion doctrine.

Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this case, the records reveal that
petitioners sufficiently complied with this requirement. Even during the drafting and deliberation stages leading to the issuance of
Memorandum Circular No. 13-6-2000, petitioners were able to register their protests to the proposed billing guidelines. They
submitted their respective position papers setting forth their objections and submitting proposed schemes for the billing circular.21
After the same was issued, petitioners wrote successive letters dated July 3, 200022 and July 5, 2000,23 asking for the suspension
and reconsideration of the so-called Billing Circular. These letters were not acted upon until October 6, 2000, when respondent NTC
issued the second assailed Memorandum implementing certain provisions of the Billing Circular. This was taken by petitioners as a
clear denial of the requests contained in their previous letters, thus prompting them to seek judicial relief.

In like manner, the doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or
adjudicatory function. Thus, in cases involving specialized disputes, the practice has been to refer the same to an administrative
agency of special competence pursuant to the doctrine of primary jurisdiction. The courts will not determine a controversy involving
a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative
tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience
and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential
to comply with the premises of the regulatory statute administered. The objective of the doctrine of primary jurisdiction is to guide a
court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined
some question or some aspect of some question arising in the proceeding before the court. It applies where the claim is originally
cognizable in the courts and comes into play whenever enforcement of the claim requires the resolution of issues which, under a
regulatory scheme, has been placed within the special competence of an administrative body; in such case, the judicial process is
suspended pending referral of such issues to the administrative body for its view.24

However, where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same. The determination of
whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare a law, treaty,
international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the courts, including the
regional trial courts.25 This is within the scope of judicial power, which includes the authority of the courts to determine in an
appropriate action the validity of the acts of the political departments.26 Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the
Government.27

In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its Memorandum dated October 6, 2000 was
pursuant to its quasi-legislative or rule-making power. As such, petitioners were justified in invoking the judicial power of the
Regional Trial Court to assail the constitutionality and validity of the said issuances. In Drilon v. Lim,28 it was held:

We stress at the outset that the lower court had jurisdiction to consider the constitutionality of Section 187, this authority being
embraced in the general definition of the judicial power to determine what are the valid and binding laws by the criterion of their
conformity to the fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all civil cases in which the
subject of the litigation is incapable of pecuniary estimation, even as the accused in a criminal action has the right to question in his
defense the constitutionality of a law he is charged with violating and of the proceedings taken against him, particularly as they
contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the Supreme Court appellate jurisdiction
over final judgments and orders of lower courts in all cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question.29

In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened Civil Code provisions on sales and
violated the constitutional prohibition against the deprivation of property without due process of law. These are within the
competence of the trial judge. Contrary to the finding of the Court of Appeals, the issues raised in the complaint do not entail highly
technical matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the workings of the
cellular telephone service, including prepaid SIM and call cards and this is judicially known to be within the knowledge of a good
percentage of our population and expertise in fundamental principles of civil law and the Constitution.

Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The Court of Appeals erred in setting
aside the orders of the trial court and in dismissing the case.

WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of the Court of Appeals in CA-G.R. SP
No. 64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are REVERSED and SET ASIDE. The Order dated
November 20, 2000 of the Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This case is
REMANDED to the court a quo for continuation of the proceedings.

SO ORDERED.

Davide, Jr., C.J., Vitug, and Carpio, JJ., concur.

Azcuna, J., took no part.

EN BANC

[G.R. No. 116422. November 4, 1996.]

AVELINA B. CONTE and LETICIA BOISER-PALMA, Petitioners, v. COMMISSION ON AUDIT (COA), Respondent.

DECISION

PANGANIBAN, J.:

Are the benefits provided for under Social Security System Resolution No. 56 to be considered simply as "financial assistance" for
retiring employees, or does such scheme constitute a supplementary retirement plan proscribed by Republic Act No. 4968?

The foregoing question is addressed by this Court in resolving the instant petition for certiorari which seeks to reverse and set aside
Decision No. 94-126 1 dated March 15, 1994 of respondent Commission on Audit, which denied petitioners’ request for
reconsideration of its adverse ruling disapproving claims for financial assistance under SSS Resolution No. 56.

The Facts

Petitioners Avelina B. Conte and Leticia Boiser-Palma were former employees of the Social Security System (SSS) who retired from
government service on May 9, 1990 and September 13, 1992, respectively. They availed of compulsory retirement benefits under
Republic Act No. 660. 2

In addition to retirement benefits provided under R.A. 660, petitioners also claimed SSS "financial assistance" benefits granted under
SSS Resolution No. 56, series of 1971.
A brief historical backgrounder is in order. SSS Resolution No. 56, 3 approved on January 21, 1971, provides financial incentive and
inducement to SSS employees qualified to retire to avail of retirement benefits under RA 660 as amended, rather than the retirement
benefits under RA 1616 as amended, by giving them "financial assistance" equivalent in amount to the difference between what a
retiree would have received under RA 1616, less what he was entitled to under RA 660. The said SSS Resolution No. 56 states:jgc

"RESOLUTION NO. 56

WHEREAS, the retirement benefits of SSS employees are provided for under Republic Acts 660 and 1616 as amended;

WHEREAS, SSS employees who are qualified for compulsory retirement at age 65 or for optional retirement at a lower age are
entitled to either the life annuity under R.A. 660, as amended, or the gratuity under R.A. 1616, as amended;

WHEREAS, a retirement benefit to be effective must be a periodic income as close as possible to the monthly income that would
have been due to the retiree during the remaining years of his life were he still employed;

WHEREAS, the life annuity under R.A. 660, as amended, being closer to the monthly income that was lost on account of old age than
the gratuity under R.A. 1616, as amended, would best serve the interest of the retiree;

WHEREAS, it is the policy of the Social Security Commission to promote and to protect the interest of all SSS employees, with a view
to providing for their well-being during both their working and retirement years;

WHEREAS, the availment of life annuities built up by premiums paid on behalf of SSS employees during their working years would
mean more savings to the SSS;

WHEREAS, it is a duty of the Social Security Commission to effect savings in every possible way for economical and efficient
operations;

WHEREAS, it is the right of every SSS employee to choose freely and voluntarily the benefit he is entitled to solely for his own benefit
and for the benefit of his family;

NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are simultaneously qualified for compulsory retirement at age 65
or for optional retirement at a lower age be encouraged to avail for themselves the life annuity under R.A. 660, as amended;

RESOLVED, FURTHER, That SSS employees who availed themselves of the said life annuity, in appreciation and recognition of their
long and faithful service, be granted financial assistance equivalent to the gratuity plus return of contributions under R.A. 1616, as
amended, less the five year guaranteed annuity under R.A. 660, as amended;

RESOLVED, FINALLY, That the Administrator be authorized to act on all applications for retirement submitted by SSS employees and
subject to availability of funds, pay the corresponding benefits in addition to the money value of all accumulated leaves." (Emphasis
supplied)

Long after the promulgation of SSS Resolution No. 56, respondent Commission on Audit (COA) issued a ruling, captioned as "3rd
Indorsement" dated July 10, 1989, 4 disallowing in audit "all such claims for financial assistance under SSS Resolution No. 56", for the
reason that: —

". . . the scheme of financial assistance authorized by the SSS is similar to those separate retirement plan or incentive/separation pay
plans adopted by other government corporate agencies which results in the increase of benefits beyond what is allowed under
existing retirement laws. In this regard, attention . . . is invited to the view expressed by the Secretary of Budget and Management
dated February 17, 1988 to the COA General Counsel against the proliferation of retirement plans which, in COA Decision No. 591
dated August 31, 1988, was concurred in by this Commission. . . .

Accordingly, all such claims for financial assistance under SSS Resolution No. 56 dated January 21, 1971 should be disallowed in
audit." (Emphasis supplied)

Despite the aforequoted ruling of respondent COA, then SSS Administrator Jose L. Cuisia, Jr. nevertheless wrote 5 on February 12,
1990 then Executive Secretary Catalino Macaraig, Jr., seeking "presidential authority for SSS to continue implementing its Resolution
No. 56 dated January 21, 1971 granting financial assistance to its qualified retiring employees" .

However, in a letter-reply dated May 28, 1990, 6 then Executive Secretary Macaraig advised Administrator Cuisia that the Office of
the President "is not inclined to favorably act on the herein request, let alone over-rule the disallowance by COA" of such claims,
because, aside from the fact that decisions, order or actions of the COA in the exercise of its audit functions are appealable to the
Supreme Court 7 pursuant to Sec. 50 of PD 1445, the benefits under said Res. 56, though referred to as ‘financial assistance’,
constituted additional retirement benefits, and the scheme partook of the nature of a supplementary pension/retirement plan
proscribed by law.

The law referred to above is RA 4968 (The Teves Retirement Law), which took effect June 17, 1967 and amended CA 186 (otherwise
known as the Government Service Insurance Act, or the GSIS Charter), making Sec. 28 (b) of the latter act read as follows:jgc

"(b) Hereafter, no insurance or retirement plan for officers or employees shall be created by employer. All supplementary
retirement or pension plans heretofore in force in any government office, agency or instrumentality or corporation owned or
controlled by the government, are hereby declared inoperative or abolished; Provided, That the rights of those who are already
eligible to retire thereunder shall not be affected." (Emphasis supplied)

On January 12, 1993, herein petitioners filed with respondent COA their "letter-appeal/protest" 8 seeking reconsideration of COA’s
ruling of July 10, 1989 disallowing claims for financial assistance under Res. 56.
On November 15, 1993, petitioner Conte sought payment from SSS of the benefits under Res. 56. On December 9, 1993, SSS
Administrator Renato C. Valencia denied 9 the request in consonance with the previous disallowance by respondent COA, but
assured petitioner that should the COA change its position, the SSS will resume the grant of benefits under said Res. 56.

On March 15, 1994, respondent COA rendered its COA Decision No. 94-126 denying petitioners’ request for reconsideration.

Thus this petition for certiorari under Rule 65 of the Rules of Court.

The Issues

The issues 10 submitted by petitioners may be simplified and re- stated thus: Did public respondent abuse its discretion when it
disallowed in audit petitioners’ claims for benefits under SSS Res. 56?

Petitioners argue that the financial assistance under Res. 56 is not a retirement plan prohibited by RA 4968, and that Res. 56 provides
benefits different from and "aside from" what a retiring SSS employee would be entitled to under RA 660. Petitioners contend that it
"is a social amelioration and economic upliftment measure undertaken not only for the benefit of the SSS but more so for the welfare
of its qualified retiring employees." As such, it "should be interpreted in a manner that would give the . . . most advantage to the
recipient — the retiring employees whose dedicated, loyal, lengthy and faithful service to the agency of government is recognized
and amply rewarded — the rationale for the financial assistance plan." Petitioners reiterate the argument in their letter dated
January 12, 1993 to COA that:jgc

"‘Motivation can be in the form of financial assistance, during their stay in the service or upon retirement, as in the SSS Financial
Assistance Plan. This is so, because Government has to have some attractive remuneration programs to encourage well-qualified
personnel to pursue a career in the government service, rather than in the private sector or in foreign countries . . .’

A more developmental view of the financial institutions’ grant of certain forms of financial assistance to its personnel, we believe,
would enable government administrators to see these financial forms of remuneration as contributory to the national developmental
efforts for effective and efficient administration of the personnel programs in different institutions.’" 11

The Court’s Ruling

Petitioners’ contentions are not supported by law. We hold that Res. 56 constitutes a supplementary retirement plan.

A cursory examination of the preambular clauses and provisions of Res. 56 provides a number of clear indications that its financial
assistance plan constitutes a supplemental retirement/pension benefits plan. In particular, the fifth preambular clause which
provides that "it is the policy of the Social Security Commission to promote and to protect the interest of all SSS employees, with a
view to providing for their well-being during both their working and retirement years", and the wording of the resolution itself which
states "Resolved, further, that SSS employees who availed themselves of the said life annuity (under RA 660), in appreciation and
recognition of their long and faithful service, be granted financial assistance . . ." can only be interpreted to mean that the benefit
being granted is none other than a kind of amelioration to enable the retiring employee to enjoy (or survive) his retirement years and
a reward for his loyalty and service. Moreover, it is plain to see that the grant of said financial assistance is inextricably linked with
and inseparable from the application for and approval of retirement benefits under RA 660, i.e., that availment of said financial
assistance under Res. 56 may not be done independently of but only in conjunction with the availment of retirement benefits under
RA 660, and that the former is in augmentation or supplementation of the latter benefits.

Likewise, then SSS Administrator Cuisia’s historical overview of the origins and purpose of Res. 56 is very instructive and sheds much
light on the controversy: 12

"Resolution No. 56, . . ., applies where a retiring SSS employee is qualified to claim under either RA 660 (pension benefit, that is, 5
year lump sum pension and after 5 years, life time pension), or RA 1616 (gratuity benefit plus return of contribution), at his option.
The benefits under RA 660 are entirely payable by GSIS while those under RA 1616 are entirely shouldered by SSS except the return
of contribution by GSIS.

Resolution No. 56 came about upon observation that qualified SSS employees have invariably opted to retire under RA 1616 instead
of RA 660 because the total benefit under the former is much greater than the 5-year lump sum under the latter. As a consequence,
the SSS usually ended up virtually paying the entire retirement benefit, instead of GSIS which is the main insurance carrier for
government employees. Hence, the situation has become so expensive for SSS that a study of the problem became inevitable.

As a result of the study and upon the recommendation of its Actuary, the SSS Management recommended to the Social Security
Commission that retiring employees who are qualified to claim under either RA 660 or 1616 should be ‘encouraged’ to avail for
themselves the life annuity under RA 660, as amended, with the SSS providing a ‘financial assistance’ equivalent to the difference
between the benefit under RA 1616 (gratuity plus return of contribution) and the 5-year lump sum pension under RA 660.

The Social Security Commission, as the policy-making body of the SSS approved the recommendation in line with its mandate to
‘insure the efficient, honest and economical administration of the provisions and purposes of this Act.’ (Section 3 (c) of the Social
Security Law).

Necessarily, the situation was reversed with qualified SSS employees opting to retire under RA No. 660 or RA 1146 instead of RA
1616, resulting in substantial savings for the SSS despite its having to pay ‘financial assistance’.

Until Resolution No. 56 was questioned by COA." (emphasis part of original text; italics ours)
Although such financial assistance package may have been instituted for noble, altruistic purposes as well as from self-interest and a
desire to cut costs on the part of the SSS, nevertheless, it is beyond any dispute that such package effectively constitutes a
supplementary retirement plan. The fact that it was designed to equalize the benefits receivable from RA 1616 with those payable
under RA 660 and make the latter program more attractive, merely confirms the foregoing finding.

That the Res. 56 package is labelled "financial assistance" does not change its essential nature. Retirement benefits are, after all, a
form of reward for an employee’s loyalty and service to the employer, and are intended to help the employee enjoy the remaining
years of his life, lessening the burden of worrying about his financial support or upkeep. 13 On the other hand, a pension partakes of
the nature of "retained wages" of the retiree for a dual purpose: to entice competent people to enter the government service, and to
permit them to retire from the service with relative security, not only for those who have retained their vigor, but more so for those
who have been incapacitated by illness or accident. 14

Is SSS Resolution No. 56 then within the ambit of and thus proscribed by Sec. 28 (b) of CA 186 as amended by RA 4968?

We answer in the affirmative. Said Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or
retirement plan — other than the GSIS — for government officers and employees, in order to prevent the undue and inequitous
proliferation of such plans. It is beyond cavil that Res. 56 contravenes the said provision of law and is therefore invalid, void and of no
effect. To ignore this and rule otherwise would be tantamount to permitting every other government office or agency to put up its
own supplementary retirement benefit plan under the guise of such "financial assistance" .

We are not unmindful of the laudable purposes for promulgating Res. 56, and the positive results it must have had, not only in
reducing costs and expenses on the part of the SSS in connection with the pay-out of retirement benefits and gratuities, but also in
improving the quality of life for scores of retirees. But it is simply beyond dispute that the SSS had no authority to maintain and
implement such retirement plan, particularly in the face of the statutory prohibition. The SSS cannot, in the guise of rule-making,
legislate or amend laws or worse, render them nugatory.

It is doctrinal that in case of conflict between a statute and an administrative order, the former must prevail. 15 A rule or regulation
must conform to and be consistent with the provisions of the enabling statute in order for such rule or regulation to be valid. 16 The
rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the
authority given it by the Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and
statutory provisions control with respect to what rules and regulations may be promulgated by such a body, as well as with respect to
what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the
Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the
purpose of a statute. 17 Though well-settled is the rule that retirement laws are liberally interpreted in favor of the retiree, 18
nevertheless, there is really nothing to interpret in either RA 4968 or Res. 56, and correspondingly, the absence of any doubt as to
the ultra-vires nature and illegality of the disputed resolution constrains us to rule against petitioners.

As a necessary consequence of the invalidity of Res. 56, we can hardly impute abuse of discretion of any sort to respondent
Commission for denying petitioners’ request for reconsideration of the 3rd Indorsement of July 10, 1989. On the contrary, we hold
that public respondent in its assailed Decision acted with circumspection in denying petitioners claim. It reasoned thus:jgc

"After a careful evaluation of the facts herein obtaining, this Commission finds the instant request to be devoid of merit. It bears
stress that the financial assistance contemplated under SSS Resolution No. 56 is granted to SSS employees who opt to retire under
R.A. No. 660. In fact, by the aggrieved parties’ own admission (page 2 of the request for reconsideration dated January 12, 1993), it is
a financial assistance granted by the SSS management to its employees, in addition to the retirement benefits under Republic Act.
No. 660." (underscoring supplied for emphasis) There is therefore no question, that the said financial assistance partakes of the
nature of a retirement benefit that has the effect of modifying existing retirement laws particularly R.A. No. 660.

Petitioners also asseverate that the scheme of financial assistance under Res. 56 may be likened to the monetary benefits of
government officials and employees who are paid, over and above their salaries and allowances as provided by statute, an additional
honorarium in varying amounts. We find this comparison baseless and misplaced. As clarified by the Solicitor General: 19

"Petitioners’ comparison of SSS Resolution No. 56 with the ‘honoraria’ given to government officials and employees of the ‘National
Prosecution Service of the Department of Justice’, Office of the Government Corporate Counsel and even in the ‘Office of the
Solicitor General’ is devoid of any basis. The monetary benefits or ‘honoraria’ given to these officials or employees are categorized as
travelling and/or representation expenses which are incurred by them in the course of handling cases, attending court/administrative
hearings, or performing other field work. These monetary benefits are given upon rendition of service while the ‘financial benefits’
under SSS Resolution No. 56 are given upon retirement from service."cralaw virtua1aw library

In a last-ditch attempt to convince this Court that their position is tenable, petitioners invoke equity. They "believe that they are
deserving of justice and equity in their quest for financial assistance under SSS Resolution No. 56, not so much because the SSS is one
of the very few stable agencies of government where no doubt this recognition and reputation is earned . . . but more so due to the
miserable scale of compensation granted to employees in various agencies to include those obtaining in the SSS." 20

We must admit we sympathize with petitioners in their financial predicament as a result of their misplaced decision to avail of
retirement benefits under RA 660, with the false expectation that "financial assistance" under the disputed Res. 56 will also
materialize. Nevertheless, this Court has always held that equity, which has been aptly described as "justice outside legality," is
applied only in the absence of, and never against, statutory law or judicial rules of procedure. 21 In this case, equity cannot be
applied to give validity and effect to Res. 56, which directly contravenes the clear mandate of the provisions of RA 4968.

Likewise, we cannot but be aware that the clear imbalance between the benefits available under RA 660 and those under RA 1616
has created an unfair situation for it has shifted the burden of paying such benefits from the GSIS (the main insurance carrier of
government employees) to the SSS. Without the corrective effects of Res. 56, all retiring SSS employees without exception will be
impelled to avail of benefits under RA 1616. The cumulative effect of such availments on the financial standing and stability of the
SSS is better left to actuarians. But the solution or remedy for such situation can be provided only by Congress. Judicial hands cannot,
on the pretext of showing concern for the welfare of government employees, bestow equity contrary to the clear provisions of law.

Nevertheless, insofar as herein petitioners are concerned, this Court cannot just sit back and watch as these two erstwhile
government employees, who after spending the best parts of their lives in public service have retired hoping to enjoy their remaining
years, face a financially dismal if not distressed future, deprived of what should have been due them by way of additional retirement
benefits, on account of a bureaucratic boo-boo improvidently hatched by their higher-ups. It is clear to our mind that petitioners
applied for benefits under RA 660 only because of the incentives offered by Res. 56, and that absent such incentives, they would
have without fail availed of RA 1616 instead. We likewise have no doubt that petitioners are simply innocent bystanders in this whole
bureaucratic rule-making/financial scheme-making drama, and that therefore, to the extent possible, petitioners ought not be
penalized or made to suffer as a result of the subsequently determined invalidity of Res. 56, the promulgation and implementation of
which they had nothing to do with.

And here is where "equity" may properly be invoked: since "SSS employees who are qualified for compulsory retirement at age 65 or
for optional retirement at a lower age are entitled to either the life annuity under R.A. 660, as amended, or the gratuity under R.A.
1616, as amended", 22 it appears that petitioners, being qualified to avail of benefits under RA 660, may also readily qualify under
RA 1616. It would therefore not be misplaced to enjoin the SSS to render all possible assistance to petitioners for the prompt
processing and approval of their applications under RA 1616, and in the meantime, unless barred by existing regulations, to advance
to petitioners the difference between the amounts due under RA 1616, and the amounts they already obtained, if any, under RA 660.

WHEREFORE, the petition is hereby DISMISSED for lack of merit, there having been no grave abuse of discretion on the part of
respondent Commission. The assailed Decision of public respondent is AFFIRMED, and SSS Resolution No. 56 is hereby declared
ILLEGAL, VOID AND OF NO EFFECT . The SSS is hereby urged to assist petitioners and facilitate their applications under RA 1616, and
to advance to them, unless barred by existing regulations, the corresponding amounts representing the difference between the two
benefits programs. No costs.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr. and
Torres, Jr., JJ., concur.

G.R. No. L-44291 August 15, 1936

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
AUGUSTO A. SANTOS, defendant-appellee.
Office of the Solicitor-General Hilado for appellant.
Arsenio Santos for appellee.
VILLA-REAL, J.:
This case is before us by virtue of an appeal taken by the prosecuting attorney from the order of the Court of First Instance of Cavite
which reads as follows:
ORDER
When this case was called for trial for the arraignment, counsel for the accused appeared stating that in view of the ruling laid down
by this court in criminal case No. 6785 of this court, holding that the penalty applicable is under section 83 of Act No. 4003 which
falls within the original jurisdiction of the justice of the peace court he requests that the case be remanded to the justice of the
peace court of Cavite which conducted the preliminary investigation, so that the latter may try it, being within its original jurisdiction.

We agree that it falls within the jurisdiction of the corresponding justice of the peace court, but it being alleged in the information
that the infraction was committed within the waters of the Island of Corregidor, the competent justice of the peace court is that of
Corregidor, not Cavite.

Wherefore, we decree the dismissal of this case, cancelling the bond filed by the accused, with costs de oficio, without prejudice to
the filing by the prosecuting attorney of a new information in the justice of the peace court of Corregidor, if he so deems convenient.
It is so ordered.

In support of his appeal the appellant assigns as the sole alleged error committed by the court a quo its having dismissed the case on
the ground that it does not fall within its original jurisdiction.

On June 18, 1930, the provincial fiscal of Cavite filed against the accused -appellee Augusta A. Santos an information which reads as
follows:

The undersigned Provincial Fiscal accuses Augusta A. Santos of violation of section 28 of Fish and Game Administrative Order No. 2
and penalized by section 29 thereof committed as follows:

That on or about April 29, 1935, within 1,500 yards north of Cavalry Point, Corregidor Island, Province of Cavite, P.I., the said accused
Augusta A. Santos, the registered owner of two fishing motor boats Malabon II and Malabon III, did then and there willfully,
unlawfully and criminally have his said boats, manned and operated by his fishermen, fish, loiter and anchor without permission
from the Secretary of Agriculture and Commerce within three (3) kilometers from the shore line of the Island of Corregidor over
which the naval and military authorities of the United States exercise jurisdiction.

Contrary to law.

Cavite, Cavite, June 18, 1935.

Section 28 of Administrative Order No. 2 relative to fish and game, issued by the Secretary of Agriculture and Commerce, provides as
follows:
28. Prohibited fishing areas. — No boats licensed in accordance with the provisions of Act No. 4003 and this order to catch, collect,
gather, take, or remove fish and other sea products from Philippine waters shall be allowed to fish, loiter, or anchor within 3
kilometers of the shore line of islands and reservations over which jurisdiction is exercised by naval or military authorities of the
United States, particularly Corregidor, Pulo Caballo, La Monja, El Fraile, and Carabao, and all other islands and detached rocks lying
between Mariveles Reservation on the north side of the entrance to Manila Bay and Calumpan Point Reservation on the south side of
said entrance: Provided, That boats not subject to license under Act No. 4003 and this order may fish within the areas mentioned
above only upon receiving written permission therefor, which permission may be granted by the Secretary of Agriculture and
Commerce upon recommendation of the military or naval authorities concerned.

A violation of this paragraph may be proceeded against under section 45 of the Federal Penal Code.

The above quoted provisions of Administrative, Order No. 2 were issued by the then Secretary of Agriculture and Natural Resources,
now Secretary of Agriculture and Commerce, by virtue of the authority vested in him by section 4 of Act No. 4003 which reads as
follows:

SEC. 4. Instructions, orders, rules and regulations. — The Secretary of Agriculture and Natural Resources shall from time to time issue
such instructions, orders, rules and regulations consistent with this Act, as may be necessary and proper to carry into effect the
provisions thereof and for the conduct of proceedings arising under such provisions.

The herein accused and appellee Augusto A. Santos is charged with having ordered his fishermen to manage and operate the motor
launches Malabon II and Malabon Ill registered in his name and to fish, loiter and anchor within three kilometers of the shore line of
the Island of Corregidor over which jurisdiction is exercised by naval and military authorities of the United States, without permission
from the Secretary of Agriculture and Commerce.

These acts constitute a violation of the conditional clause of section 28 above quoted, which reads as follows:

Provided, That boats not subject to license under Act No. 4003 and this order may fish within the areas mentioned above (within 3
kilometers of the shore line of islands and reservations over which jurisdiction is exercised by naval and military authorities of the
United States, particularly Corregidor) only upon receiving written permission therefor, which permission may be granted by the
Secretary of Agriculture and Commerce upon recommendation of the military and naval authorities of concerned. (Emphasis
supplied.)

Act No. 4003 contains no similar provision prohibiting boats not subject to license from fishing within three kilometers of the shore
line of islands and reservations over which jurisdiction is exercised by naval and military authorities of the United States, without
permission from the Secretary of Agriculture and Commerce upon recommendation of the military and naval authorities concerned.
Inasmuch as the only authority granted to the Secretary of Agriculture and Commerce, by section 4 of Act No. 4003, is to issue from
time to time such instructions, orders, rules, and regulations consistent with said Act, as may be necessary and proper to carry into
effect the provisions thereof and for the conduct of proceedings arising under such provisions; and inasmuch as said Act No. 4003, as
stated, contains no provisions similar to those contained in the above quoted conditional clause of section 28 of Administrative Order
No. 2, the conditional clause in question supplies a defect of the law, extending it. This is equivalent to legislating on the matter, a
power which has not been and cannot be delegated to him, it being exclusively reserved to the then Philippine Legislature by the
Jones Law, and now to the National Assembly by the Constitution of the Philippines. Such act constitutes not only an excess of the
regulatory power conferred upon the Secretary of Agriculture and Commerce, but also an exercise of a legislative power which he
does not have, and therefore said conditional clause is null and void and without effect (12 Corpus Juris, 845; Rubi vs. Provincial
Board of Mindoro, 39 Phil., 660; U.S. vs. Ang Tang Ho, 43 Phil., 1; U.S. vs. Barrias, 11 Phil., 327).

For the foregoing considerations, we are of the opinion and so hold that the conditional clause of section 28 of Administrative Order
No. 2. issued by the Secretary of Agriculture and Commerce, is null and void and without effect, as constituting an excess of the
regulatory power conferred upon him by section 4 of Act No. 4003 and an exercise of a legislative power which has not been and
cannot be delegated to him.

Wherefore, inasmuch as the facts with the commission of which Augusto A. Santos is charged do not constitute a crime or a violation
of some criminal law within the jurisdiction of the civil courts, the information filed against him is dismissed, with the costs de oficio.
So ordered.

Avanceña, C. J., Abad Santos, Imperial, Diaz, Recto, and Laurel, JJ., concur.

G.R. No. L-6791 March 29, 1954

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
QUE PO LAY, defendant-appellant.

Prudencio de Guzman for appellant.

First Assistant Solicitor General Ruperto Kapunan, Jr., and Solicitor Lauro G. Marquez for appellee.

MONTEMAYOR, J.:

Que Po Lay is appealing from the decision of the Court of First Instance of Manila, finding him guilty of violating Central Bank Circular
No. 20 in connection with section 34 of Republic Act No. 265, and sentencing him to suffer six months imprisonment, to pay a fine of
P1,000 with subsidiary imprisonment in case of insolvency, and to pay the costs.

The charge was that the appellant who was in possession of foreign exchange consisting of U.S. dollars, U.S. checks and U.S. money
orders amounting to about $7,000 failed to sell the same to the Central Bank through its agents within one day following the receipt
of such foreign exchange as required by Circular No. 20. the appeal is based on the claim that said circular No. 20 was not published
in the Official Gazette prior to the act or omission imputed to the appellant, and that consequently, said circular had no force and
effect. It is contended that Commonwealth Act. No., 638 and Act 2930 both require said circular to be published in the Official
Gazette, it being an order or notice of general applicability. The Solicitor General answering this contention says that Commonwealth
Act. No. 638 and 2930 do not require the publication in the Official Gazette of said circular issued for the implementation of a law in
order to have force and effect.

We agree with the Solicitor General that the laws in question do not require the publication of the circulars, regulations and notices
therein mentioned in order to become binding and effective. All that said two laws provide is that laws, resolutions, decisions of the
Supreme Court and Court of Appeals, notices and documents required by law to be of no force and effect. In other words, said two
Acts merely enumerate and make a list of what should be published in the Official Gazette, presumably, for the guidance of the
different branches of the Government issuing same, and of the Bureau of Printing.

However, section 11 of the Revised Administrative Code provides that statutes passed by Congress shall, in the absence of special
provision, take effect at the beginning of the fifteenth day after the completion of the publication of the statute in the Official
Gazette. Article 2 of the new Civil Code (Republic Act No. 386) equally provides that laws shall take effect after fifteen days following
the completion of their publication in the Official Gazette, unless it is otherwise provided. It is true that Circular No. 20 of the Central
Bank is not a statute or law but being issued for the implementation of the law authorizing its issuance, it has the force and effect of
law according to settled jurisprudence. (See U.S. vs. Tupasi Molina, 29 Phil., 119 and authorities cited therein.) Moreover, as a rule,
circulars and regulations especially like the Circular No. 20 of the Central Bank in question which prescribes a penalty for its violation
should be published before becoming effective, this, on the general principle and theory that before the public is bound by its
contents, especially its penal provisions, a law, regulation or circular must first be published and the people officially and specifically
informed of said contents and its penalties.

Our Old Civil code, ( Spanish Civil Code of 1889) has a similar provision about the effectivity of laws, (Article 1 thereof), namely, that
laws shall be binding twenty days after their promulgation, and that their promulgation shall be understood as made on the day of
the termination of the publication of the laws in the Gazette. Manresa, commenting on this article is of the opinion that the word
"laws" include regulations and circulars issued in accordance with the same. He says:

El Tribunal Supremo, ha interpretado el articulo 1. del codigo Civil en Sentencia de 22 de Junio de 1910, en el sentido de que bajo la
denominacion generica de leyes, se comprenden tambien los Reglamentos, Reales decretos, Instrucciones, Circulares y Reales
ordenes dictadas de conformidad con las mismas por el Gobierno en uso de su potestad. Tambien el poder ejecutivo lo ha venido
entendiendo asi, como lo prueba el hecho de que muchas de sus disposiciones contienen la advertencia de que empiezan a regir el
mismo dia de su publicacion en la Gaceta, advertencia que seria perfectamente inutil si no fuera de aplicacion al caso el articulo 1.o
del Codigo Civil. (Manresa, Codigo Civil Español, Vol. I. p. 52).

In the present case, although circular No. 20 of the Central Bank was issued in the year 1949, it was not published until November
1951, that is, about 3 months after appellant's conviction of its violation. It is clear that said circular, particularly its penal provision,
did not have any legal effect and bound no one until its publication in the Official Gazzette or after November 1951. In other words,
appellant could not be held liable for its violation, for it was not binding at the time he was found to have failed to sell the foreign
exchange in his possession thereof.

But the Solicitor General also contends that this question of non-publication of the Circular is being raised for the first time on appeal
in this Court, which cannot be done by appellant. Ordinarily, one may raise on appeal any question of law or fact that has been raised
in the court below and which is within the issues made by the parties in their pleadings. (Section 19, Rule 48 of the Rules of Court).
But the question of non-publication is fundamental and decisive. If as a matter of fact Circular No. 20 had not been published as
required by law before its violation, then in the eyes of the law there was no such circular to be violated and consequently appellant
committed no violation of the circular or committed any offense, and the trial court may be said to have had no jurisdiction. This
question may be raised at any stage of the proceeding whether or not raised in the court below.

In view of the foregoing, we reverse the decision appealed from and acquit the appellant, with costs de oficio.

Paras, C.J., Bengzon, Padilla, Reyes, Bautista Angelo, Labrador, Concepcion and Diokno, JJ., concur.

G.R. No. L-32166 October 18, 1977

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,
vs.
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO
and CARLO DEL ROSARIO, accused-appellees.

Office of the Solicitor General for appellant.

Rustics F. de los Reyes, Jr. for appellees.

AQUINO, J.:

This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water fisheries, promulgated by the
Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries under the old Fisheries Law and the law creating
the Fisheries Commission.

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito del Rosario were charged by a
Constabulary investigator in the municipal court of Sta. Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1.

It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to electro fishing in the waters of
Barrio San Pablo Norte, Sta. Cruz by "using their own motor banca, equipped with motor; with a generator colored green with
attached dynamo colored gray or somewhat white; and electrocuting device locally known as sensored with a somewhat webbed
copper wire on the tip or other end of a bamboo pole with electric wire attachment which was attached to the dynamo direct and
with the use of these devices or equipments catches fish thru electric current, which destroy any aquatic animals within its cuffed
reach, to the detriment and prejudice of the populace" (Criminal Case No. 5429).

Upon motion of the accused, the municipal court quashed the complaint. The prosecution appealed. The Court of First Instance of
Laguna affirmed the order of dismissal (Civil Case No. SC-36). The case is now before this Court on appeal by the prosecution under
Republic Act No. 5440.

The lower court held that electro fishing cannot be penalize because electric current is not an obnoxious or poisonous substance as
contemplated in section I I of the Fisheries Law and that it is not a substance at all but a form of energy conducted or transmitted by
substances. The lower court further held that, since the law does not clearly prohibit electro fishing, the executive and judicial
departments cannot consider it unlawful.

As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use of any obnoxious or poisonous
substance" in fishing.

Section 76 of the same law punishes any person who uses an obnoxious or poisonous substance in fishing with a fine of not more
than five hundred pesos nor more than five thousand, and by imprisonment for not less than six months nor more than five years.

It is noteworthy that the Fisheries Law does not expressly punish .electro fishing." Notwithstanding the silence of the law, the
Secretary of Agriculture and Natural Resources, upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries
Administrative Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all Philippine waters. The order is quoted below:

SUBJECT: PROHIBITING ELECTRO FISHING IN ALL WATERS

OF THE PHILIPPINES.

Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the following rules and regulations regarding the
prohibition of electro fishing in all waters of the Philippines are promulgated for the information and guidance of all concerned.

SECTION 1. — Definition. — Words and terms used in this Order 11 construed as follows:

(a) Philippine waters or territorial waters of the Philippines' includes all waters of the Philippine Archipelago, as defined in the
t between the United States and Spain, dated respectively the tenth of December, eighteen hundred ninety eight and the seventh of
November, nineteen hundred. For the purpose of this order, rivers, lakes and other bodies of fresh waters are included.

(b) Electro Fishing. — Electro fishing is the catching of fish with the use of electric current. The equipment used are of many
electrical devices which may be battery or generator-operated and from and available source of electric current.

(c) 'Persons' includes firm, corporation, association, agent or employee.

(d) 'Fish' includes other aquatic products.

SEC. 2. — Prohibition. — It shall be unlawful for any person to engage in electro fishing or to catch fish by the use of electric current
in any portion of the Philippine waters except for research, educational and scientific purposes which must be covered by a permit
issued by the Secretary of Agriculture and Natural Resources which shall be carried at all times.

SEC. 3. — Penalty. — Any violation of the provisions of this Administrative Order shall subject the offender to a fine of not exceeding
five hundred pesos (P500.00) or imprisonment of not extending six (6) months or both at the discretion of the Court.

SEC. 4. — Repealing Provisions. — All administrative orders or parts thereof inconsistent with the provisions of this Administrative
Order are hereby revoked.

SEC. 5. — Effectivity. — This Administrative Order shall take effect six (60) days after its publication in the Office Gazette.

On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the recommendation of the Fisheries Commission, issued
Fisheries Administrative Order No. 84-1, amending section 2 of Administrative Order No. 84, by restricting the ban against electro
fishing to fresh water fisheries (63 O.G. 9963).

Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the amendatory order to read as
follows: "in fresh water fisheries in the Philippines, such as rivers, lakes, swamps, dams, irrigation canals and other bodies of fresh
water."

The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is punishable under section 83 of the
Fisheries Law (not under section 76 thereof), which provides that any other violation of that law "or of any rules and regulations
promulgated thereunder shall subject the offender to a fine of not more than two hundred pesos (P200), or in t for not more than six
months, or both, in the discretion of the court."

That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 imposes a fm of not exceeding P500 on a
person engaged in electro fishing, which amount the 83. It seems that the Department of Fisheries prescribed their own penalty for
swift fishing which penalty is less than the severe penalty imposed in section 76 and which is not Identified to the at penalty imposed
in section 83.

Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime of electro fishing would be within
the exclusive original jurisdiction of the inferior court (Sec. 44 [f], Judiciary Law; People vs. Ragasi, L-28663, September 22,
We have discussed this pre point, not raised in the briefs, because it is obvious that the crime of electro fishing which is punishable
with a sum up to P500, falls within the concurrent original jurisdiction of the inferior courts and the Court of First instance (People vs.
Nazareno, L-40037, April 30, 1976, 70 SCRA 531 and the cases cited therein).

And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial capital, the order of d rendered by that
municipal court was directly appealable to the Court, not to the Court of First Instance of Laguna (Sec. 45 and last par. of section 87
of the Judiciary Law; Esperat vs. Avila, L-25992, June 30, 1967, 20 SCRA 596).

It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case. Its order affirming the municipal
court's order of dismissal is void for lack of motion. This appeal shall be treated as a direct appeal from the municipal court to this
Court. (See People vs. Del Rosario, 97 Phil. 67).

In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not issued under section 11 of the Fisheries
Law which, as indicated above, punishes fishing by means of an obnoxious or poisonous substance. This contention is not well-taken
because, as already stated, the Penal provision of Administrative Order No. 84 implies that electro fishing is penalized as a form of
fishing by means of an obnoxious or poisonous substance under section 11.

The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh water fisheries (1) the rule-making
power of the Department Secretary under section 4 of the Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce
the provisions of the Fisheries Law and the regulations Promulgated thereunder and to execute the rules and regulations consistent
with the purpose for the creation of the Fisheries Commission and for the development of fisheries (Sec. 4[c] and [h] Republic Act
No. 3512; (3) the declared national policy to encourage, Promote and conserve our fishing resources (Sec. 1, Republic Act No. 3512),
and (4) section 83 of the Fisheries Law which provides that "any other violation of" the Fisheries Law or of any rules and regulations
promulgated thereunder "shall subject the offender to a fine of not more than two hundred pesos, or imprisonment for not more
than six months, or both, in the discretion of the court."

As already pointed out above, the prosecution's reference to section 83 is out of place because the penalty for electro fishing under
Administrative order No. 84 is not the same as the penalty fixed in section 83.

We are of the opinion that the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries exceeded their
authority in issuing Fisheries Administrative Orders Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries
Commission, Republic Act No. 3512.

The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is not banned under that law, the
Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries are powerless to penalize it. In other words,
Administrative Orders Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any legal basis.

Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could have been easily embodied in the
old Fisheries Law.

That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2) unlawful fishing in deepsea fisheries;
(3) unlawful taking of marine molusca, (4) illegal taking of sponges; (5) failure of licensed fishermen to report the kind and quantity
of fish caught, and (6) other violations.

Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in punishing electro fishing, does not
contemplate that such an offense fails within the category of "other violations" because, as already shown, the penalty for electro
fishing is the penalty next lower to the penalty for fishing with the use of obnoxious or poisonous substances, fixed in section 76, and
is not the same as the penalty for "other violations" of the law and regulations fixed in section 83 of the Fisheries Law.

The lawmaking body cannot delegate to an executive official the power to declare what acts should constitute an offense. It can
authorize the issuance of regulations and the imposition of the penalty provided for in the law itself. (People vs. Exconde 101 Phil. 11
25, citing 11 Am. Jur. 965 on p. 11 32).

Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban against electro fishing was confined to
fresh water fisheries. The amendment created the impression that electro fishing is not condemnable per se. It could be tolerated in
marine waters. That circumstances strengthens the view that the old law does not eschew all forms of electro fishing.

However, at present, there is no more doubt that electro fishing is punishable under the Fisheries Law and that it cannot be
penalized merely by executive revolution because Presidential Decree No. 704, which is a revision and consolidation of all laws and
decrees affecting fishing and fisheries and which was promulgated on May 16, 1975 (71 O.G. 4269), expressly punishes electro fishing
in fresh water and salt water areas.

That decree provides:

SEC. 33. — Illegal fishing, dealing in illegally caught fish or fishery/aquatic products. — It shall he unlawful for any person to catch,
take or gather or cause to be caught, taken or gathered fish or fishery/aquatic products in Philippine waters with the use of
explosives, obnoxious or poisonous substance, or by the use of electricity as defined in paragraphs (1), (m) and (d), respectively, of
Section 3 hereof: ...

The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586, Presidential Decrees Nos. 43, 534 and 553, and
all , Acts, Executive Orders, rules and regulations or parts thereof inconsistent with it (Sec. 49, P. D. No. 704).
The inclusion in that decree of provisions defining and penalizing electro fishing is a clear recognition of the deficiency or silence on
that point of the old Fisheries Law. It is an admission that a mere executive regulation is not legally adequate to penalize electro
fishing.

Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries Administrative Order No. 84 and which is not
provided for the old Fisheries Law, is now found in section 3(d) of the decree. Note further that the decree penalty electro fishing by
"imprisonment from two (2) to four (4) years", a punishment which is more severe than the penalty of a time of not excluding P500
or imprisonment of not more than six months or both fixed in section 3 of Fisheries Administrative Order No. 84.

An examination of the rule-making power of executive officials and administrative agencies and, in particular, of the Secretary of
Agriculture and Natural Resources (now Secretary of Natural Resources) under the Fisheries Law sustains the view that he ex his
authority in penalizing electro fishing by means of an administrative order.

Administrative agent are clothed with rule-making powers because the lawmaking body finds it impracticable, if not impossible, to
anticipate and provide for the multifarious and complex situations that may be encountered in enforcing the law. All that is required
is that the regulation should be germane to the defects and purposes of the law and that it should conform to the standards that the
law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs. Muñ;oz, L-24796, June 28, 1968, 23 SCRA 1183, 1198;
Geukeko vs. Araneta, 102 Phil. 706, 712).

The lawmaking body cannot possibly provide for all the details in the enforcement of a particular statute (U.S. vs. Tupasi Molina, 29
Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506; Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6).

The grant of the rule-making power to administrative agencies is a relaxation of the principle of separation of powers and is an
exception to the nondeleption of legislative, powers. Administrative regulations or "subordinate legislation calculated to promote the
public interest are necessary because of "the growing complexity of modem life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the law" Calalang vs. Williams, 70 Phil. 726; People vs. Rosenthal and
Osmeñ;a, 68 Phil. 328).

Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of
the law, and should be for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself
cannot be extended. (U.S. vs. Tupasi Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo,
109 Phil. 419, 422; Teoxon vs. Members of the d of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General
Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L-21906, August 29, 1969, 29 SCRA 350).

The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it his been
enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered
by the statute. Rules that subvert the statute cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A 93 Phil. 376, 382,
citing 12 C.J. 845-46. As to invalid regulations, see of Internal Revenue vs. Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78 Phil. 655, 676;
Del March vs. Phil. Veterans Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349).

There is no question that the Secretary of Agriculture and Natural Resources has rule-making powers. Section 4 of the Fisheries law
provides that the Secretary "shall from time to time issue instructions, orders, and regulations consistent" with that law, "as may be
and proper to carry into effect the provisions thereof." That power is now vested in the Secretary of Natural Resources by on 7 of the
Revised Fisheries law, Presidential December No. 704.

Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute upon the approval of the Secretary of
Agriculture and Natural Resources, forms instructions, rules and regulations consistent with the purpose" of that enactment "and for
the development of fisheries."

Section 79(B) of the Revised Administrative Code provides that "the Department Head shall have the power to promulgate,
whenever he may see fit do so, all rules, regulates, orders, memorandums, and other instructions, not contrary to law, to regulate
the proper working and harmonious and efficient administration of each and all of the offices and dependencies of his Department,
and for the strict enforcement and proper execution of the laws relative to matters under the jurisdiction of said Department; but
none of said rules or orders shall prescribe penalties for the violation thereof, except as expressly authorized by law."

Administrative regulations issued by a Department Head in conformity with law have the force of law (Valerie vs. Secretary of culture
and Natural Resources, 117 Phil. 729, 733; Antique Sawmills, Inc. vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises
the rule-making power by delegation of the lawmaking body, it is a requisite that he should not transcend the bound demarcated by
the statute for the exercise of that power; otherwise, he would be improperly exercising legislative power in his own right and not as
a surrogate of the lawmaking body.

Article 7 of the Civil Code embodies the basic principle that administrative or executive acts, orders and regulations shall be valid only
when they are not contrary to the laws or the Constitution."

As noted by Justice Fernando, "except for constitutional officials who can trace their competence to act to the fundamental law itself,
a public office must be in the statute relied upon a grant of power before he can exercise it." "department zeal may not be permitted
to outrun the authority conferred by statute." (Radio Communications of the Philippines, Inc. vs. Santiago, L-29236, August 21, 1974,
58 SCRA 493, 496-8).

"Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by
law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so
because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions
intended by the legislature. The details and the manner of carrying out the law are oftentimes left to the administrative agency
entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to
create new or additional legal provisions that have the effect of law." The rule or regulation should be within the scope of the
statutory authority granted by the legislature to the administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victories
Milling Co., Inc. vs. Social Security Commission, 114 Phil. 555, 558).

In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails because
said rule or regulation cannot go beyond the terms and provisions of the basic law (People vs. Lim, 108 Phil. 1091).

This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the attention of technical men in the executive
departments, who draft rules and regulations, to the importance and necessity of closely following the legal provisions which they
intend to implement so as to avoid any possible misunderstanding or confusion.

The rule is that the violation of a regulation prescribed by an executive officer of the government in conformity with and based upon
a statute authorizing such regulation constitutes an offense and renders the offender liable to punishment in accordance with the
provisions of the law (U.S. vs. Tupasi Molina, 29 Phil. 119, 124).

In other words, a violation or infringement of a rule or regulation validly issued can constitute a crime punishable as provided in the
authorizing statute and by virtue of the latter (People vs. Exconde 101 Phil. 1125, 1132).

It has been held that "to declare what shall constitute a crime and how it shall be punished is a power vested exclusively in the
legislature, and it may not be delegated to any other body or agency" (1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73
F. Supp. 527).

In the instant case the regulation penalizing electro fishing is not strictly in accordance with the Fisheries Law, under which the
regulation was issued, because the law itself does not expressly punish electro fishing.

The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section 28 of Fish and Game Administrative
Order No. 2 issued by the Secretary of Agriculture and Natural Resources pursuant to the aforementioned section 4 of the Fisheries
Law.

Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and under the said administrative order may
fish within three kilometers of the shoreline of islands and reservations over which jurisdiction is exercised by naval and military
reservations authorities of the United States only upon receiving written permission therefor, which permission may be granted by
the Secretary upon recommendation of the military or naval authorities concerned. A violation of the proviso may be proceeded
against under section 45 of the Federal Penal Code.

Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite for having caused his two fishing boats
to fish, loiter and anchor without permission from the Secretary within three kilometers from the shoreline of Corrigidor Island.

This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing within three kilometers of the
shoreline of islands and reservations over which jurisdiction is exercised by naval and military authorities of the United States,
without permission from the Secretary of Agriculture and Natural Resources upon recommendation of the military and naval
authorities concerned.

As the said law does not penalize the act mentioned in section 28 of the administrative order, the promulgation of that provision by
the Secretary "is equivalent to legislating on the matter, a power which has not been and cannot be delegated to him, it being
expressly reserved" to the lawmaking body. "Such an act constitutes not only an excess of the regulatory power conferred upon the
Secretary but also an exercise of a legislative power which he does not have, and therefore" the said provision "is null and void and
without effect". Hence, the charge against Santos was dismiss.

A penal statute is strictly construed. While an administrative agency has the right to make ranks and regulations to carry into effect a
law already enacted, that power should not be confused with the power to enact a criminal statute. An administrative agency can
have only the administrative or policing powers expressly or by necessary implication conferred upon it. (Glustrom vs. State, 206 Ga.
734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130).

Where the legislature has delegated to executive or administrative officers and boards authority to promulgate rules to carry out an
express legislative purpose, the rules of administrative officers and boards, which have the effect of extending, or which conflict with
the authority granting statute, do not represent a valid precise of the rule-making power but constitute an attempt by an
administrative body to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd 51).

In a prosecution for a violation of an administrative order, it must clearly appear that the order is one which falls within the scope of
the authority conferred upon the administrative body, and the order will be scrutinized with special care. (State vs. Miles supra).

The Miles case involved a statute which authorized the State Game Commission "to adopt, promulgate, amend and/or repeal, and
enforce reasonable rules and regulations governing and/or prohibiting the taking of the various classes of game.

Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer, pay or receive any reward, prize or
compensation for the hunting, pursuing, taking, killing or displaying of any game animal, game bird or game fish or any part thereof."

Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to the person displaying the largest deer
in his store during the open for hunting such game animals. For that act, he was charged with a violation of the rule Promulgated by
the State Game Commission.

It was held that there was no statute penalizing the display of game. What the statute penalized was the taking of game. If the
lawmaking body desired to prohibit the display of game, it could have readily said so. It was not lawful for the administrative board
to extend or modify the statute. Hence, the indictment against Miles was quashed. The Miles case is similar to this case.
WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate jurisdiction and the order of dismissal
rendered by the municipal court of Sta. Cruz, Laguna in Criminal Case No. 5429 is affirmed. Costs de oficio.

SO ORDERED.

G.R. No. 95832 August 10, 1992

MAYNARD R. PERALTA, petitioner,

vs.
CIVIL SERVICE COMMISSION, respondent.

Tranquilino F. Meris Law Office for petitioner.

PADILLA, J.:

Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of Trade and Industry (DTI). His appointment
was classified as "Reinstatement/Permanent". Before said appointment, he was working at the Philippine Cotton Corporation, a
government-owned and controlled corporation under the Department of Agriculture.

On 8 December 1989, petitioner received his initial salary, covering the period from 25 September to 31 October 1989. Since he had
no accumulated leave credits, DTI deducted from his salary the amount corresponding to his absences during the covered period,
namely, 29 September 1989 and 20 October 1989, inclusive of Saturdays and Sundays. More specifically, the dates of said absences
for which salary deductions were made, are as follows:

1. 29 September 1989 — Friday

2. 30 September 1989 — Saturday

3. 01 October 1989 — Sunday

4. 20 October 1989 — Friday

5. 21 October 1989 — Saturday

6. 22 October 1989 — Sunday

Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service) on 15 December 1989 inquiring as to the
law on salary deductions, if the employee has no leave credits.

Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990 citing Chapter 5.49 of the Handbook of
Information on the Philippine Civil Service which states that "when an employee is on leave without pay on a day before or on a day
immediately preceding a Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday shall also be without pay (CSC, 2nd Ind.,
February 12, 1965)."

Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission (CSC) Chairman Patricia A. Sto. Tomas
raising the following question:

Is an employee who was on leave of absence without pay on a day before or on a day time immediately preceding a Saturday, Sunday
or Holiday, also considered on leave of absence without pay on such Saturday, Sunday or Holiday?1

Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave Law as contained in the Revised
Administrative Code, as well as the old Civil Service Law (Republic Act No. 2260), the Civil Service Decree (Presidential Decree No.
807), and the Civil Service Rules and Regulation fails to disclose a specific provision which supports the CSC rule at issue. That being
the case, the petitioner contented that he cannot be deprived of his pay or salary corresponding to the intervening Saturdays,
Sundays or Holidays (in the factual situation posed), and that the withholding (or deduction) of the same is tantamount to a
deprivation of property without due process of law.

On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that the action of the DTI in deducting from the
salary of petitioner, a part thereof corresponding to six (6) days (September 29, 30, October 1, 20, 21, 22, 1989) is in order. 2 The CSC
stated that:

In a 2nd Indorsement dated February 12, 1965 of this Commission, which embodies the policy on leave of absence without pay
incurred on a Friday and Monday, reads:

Mrs. Rosalinda Gonzales is not entitled to payment of salary corresponding to January 23 and 24, 1965, Saturday and Sunday,
respectively, it appearing that she was present on Friday, January 22, 1965 but was on leave without pay beginning January 25, the
succeeding Monday. It is the view of this Office that an employee who has no more leave credit in his favor is not entitled to the
payment of salary on Saturdays, Sundays or holidays unless such non-working days occur within the period of service actually
rendered. (Emphasis supplied)

The rationale for the above ruling which applies only to those employees who are being paid on monthly basis, rests on the
assumption that having been absent on either Monday or Friday, one who has no leave credits, could not be favorably credited with
intervening days had the same been working days. Hence, the above policy that for an employee on leave without pay to be entitled
to salary on Saturdays, Sundays or holidays, the same must occur between the dates where the said employee actually renders
service. To rule otherwise would allow an employee who is on leave of absent (sic) without pay for a long period of time to be
entitled to payment of his salary corresponding to Saturdays, Sundays or holidays. It also discourages the employees who have
exhausted their leave credits from absenting themselves on a Friday or Monday in order to have a prolonged weekend, resulting in
the prejudice of the government and the public in general. 3

Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent Commission denied said motion for lack
of merit. The respondent Commission in explaining its action held:

The Primer on the Civil Service dated February 21, 1978, embodies the Civil Service Commission rulings to be observed whenever an
employee of the government who has no more leave credits, is absent on a Friday and/or a Monday is enough basis for the
deduction of his salaries corresponding to the intervening Saturdays and Sundays. What the Commission perceived to be without
basis is the demand of Peralta for the payment of his salaries corresponding to Saturdays and Sundays when he was in fact on leave
of absence without pay on a Friday prior to the said days. A reading of Republic Act No. 2260 (sic) does not show that a government
employee who is on leave of absence without pay on a day before or immediately preceding Saturdays, Sunday or legal holiday is
entitled to payment of his salary for said days. Further, a reading of Senate Journal No. 67 dated May 4, 1960 of House Bill No. 41
(Republic Act No. 2625) reveals that while the law excludes Saturdays, Sundays and holidays in the computation of leave credits, it
does not, however, include a case where the leave of absence is without pay. Hence, applying the principle of inclusio unius est
exclusio alterius, the claim of Peralta has no merit. Moreover, to take a different posture would be in effect giving more premium to
employees who are frequently on leave of absence without pay, instead of discouraging them from incurring further absence without
pay. 4

Petitioner's motion for reconsideration having been denied, petitioner filed the present petition.

What is primarily questioned by the petitioner is the validity of the respondent Commission's policy mandating salary deductions
corresponding to the intervening Saturdays, Sundays or Holidays where an employee without leave credits was absent on the
immediately preceding working day.

During the pendency of this petition, the respondent Commission promulgated Resolution No. 91-540 dated 23 April 1991 amending
the questioned policy, considering that employees paid on a monthly basis are not required to work on Saturdays, Sunday or
Holidays. In said amendatory Resolution, the respondent Commission resolved "to adopt the policy that when an employee,
regardless of whether he has leave credits or not, is absent without pay on day immediately preceding or succeeding Saturday,
Sunday or holiday, he shall not be considered absent on those days." Memorandum Circular No. 16 Series of 1991 dated 26 April
1991, was also issued by CSC Chairman Sto. Tomas adopting and promulgating the new policy and directing the Heads of
Departments, Bureaus and Agencies in the national and local governments, including government-owned or controlled corporations
with original charters, to oversee the strict implementation of the circular.

Because of these developments, it would seem at first blush that this petition has become moot and academic since the very CSC
policy being questioned has already been amended and, in effect, Resolutions No. 90-497 and 90-797, subject of this petition for
certiorari, have already been set aside and superseded. But the issue of whether or not the policy that had been adopted and in
force since 1965 is valid or not, remains unresolved. Thus, for reasons of public interest and public policy, it is the duty of the Court to
make a formal ruling on the validity or invalidity of such questioned policy.

The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil Service the following powers and duties:

Sec. 16 (e) with the approval by the President to prescribe, amend and enforce suitable rules and regulations for carrying into
effect the provisions of this Civil Service Law, and the rules prescribed pursuant to the provisions of this law shall become effective
thirty days after publication in the Official Gazette;

xxx xxx xxx

(k) To perform other functions that properly belong to a central personnel agency. 5

Pursuant to the foregoing provisions, the Commission promulgated the herein challenged policy. Said policy was embodied in a 2nd
Indorsement dated 12 February 1965 of the respondent Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent
Commission ruled that an employee who has no leave credits in his favor is not entitled to the payment of salary on Saturdays,
Sundays or Holidays unless such non-working days occur within the period of service actually rendered. The same policy is reiterated
in the Handbook of Information on the Philippine Civil Service. 6 Chapter Five on leave of absence provides that:

5.51. When intervening Saturday, Sunday or holiday considered as leave without pay — when an employee is on leave without
pay on a day before or on a day immediately preceding a Saturday, Sunday or holiday, such Saturday, Sunday or holiday shall also be
without pay. (CSC, 2nd Ind., Feb. 12, 1965).

It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to Questions and Answers on Leave of Absences,
which states the following:

27. How is leave of an employee who has no more leave credits computed if:

(1) he is absent on a Friday and the following Monday?

(2) if he is absent on Friday but reports to work the following Monday?

(3) if he is absent on a Monday but present the preceding Friday?

- (1) He is considered on leave without pay for 4 days covering Friday to Monday;

- (2) He is considered on leave without pay for 3 days from Friday to Sunday;
- (3) He is considered on leave without pay for 3 days from Saturday to Monday.

When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing
law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means.
8 It has also been held that interpretative regulations need not be published. 9

In promulgating as early as 12 February 1965 the questioned policy, the Civil Service Commission interpreted the provisions of
Republic Act No. 2625 (which took effect on 17 June 1960) amending the Revised Administrative Code, and which stated as follows:

Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-A of the Administrative Code, as amended, are further
amended to read as follows:

Sec. 284. After at least six months' continues (sic) faithful, and satisfactory service, the President or proper head of department, or
the chief of office in the case of municipal employees may, in his discretion, grant to an employee or laborer, whether permanent or
temporary, of the national government, the provincial government, the government of a chartered city, of a municipality, of a
municipal district or of government-owned or controlled corporations other than those mentioned in Section two hundred sixty-
eight, two hundred seventy-one and two hundred seventy-four hereof, fifteen days vacation leave of absence with full pay, exclusive
of Saturdays, Sundays and holidays, for each calendar year of service.

Sec. 285-A. In addition to the vacation leave provided in the two preceding sections each employee or laborer, whether
permanent or temporary, of the national government, the provincial government, the government of a chartered city, of a
municipality or municipal district in any regularly and specially organized province, other than those mentioned in Section two
hundred sixty-eight, two hundred seventy-one and two hundred seventy-four hereof, shall be entitled to fifteen days of sick leave for
each year of service with full pay, exclusive of Saturdays, Sundays and holidays: Provided, That such sick leave will be granted by the
President, Head of Department or independent office concerned, or the chief of office in case of municipal employees, only on
account of sickness on the part of the employee or laborer concerned or of any member of his immediate family.

The Civil Service Commission in its here questioned Resolution No. 90-797 construed R.A. 2625 as referring only to government
employees who have earned leave credits against which their absences may be charged with pay, as its letters speak only of leaves of
absence with full pay. The respondent Commission ruled that a reading of R.A. 2625 does not show that a government employee
who is on leave of absence without pay on a day before or immediately preceding a Saturday, Sunday or legal holiday is entitled to
payment of his salary for said days.

Administrative construction, if we may repeat, is not necessarily binding upon the courts. Action of an administrative agency may be
disturbed or set aside by the judicial department if there is an error of law, or abuse of power or lack of jurisdiction or grave abuse of
discretion clearly conflicting with either the letter or the spirit of a legislative enactment. 10

We find this petition to be impressed with merit.

As held in Hidalgo vs. Hidalgo: 11

. . . . where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such
intent or spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence
to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute.

The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among others, the sponsorship speech of
Senator Arturo M. Tolentino during the second reading of House Bill No. 41 (which became R.A. 2625). He said:

The law actually provides for sick leave and vacation leave of 15 days each year of service to be with full pay. But under the present
law, in computing these periods of leaves, Saturday, Sunday and holidays are included in the computation so that if an employee
should become sick and absent himself on a Friday and then he reports for work on a Tuesday, in the computation of the leave the
Saturday and Sunday will be included, so that he will be considered as having had a leave of Friday, Saturday, Sunday and Monday, or
four days.

The purpose of the present bill is to exclude from the computation of the leave those days, Saturdays and Sundays, as well as
holidays, because actually the employee is entitled not to go to office during those days. And it is unfair and unjust to him that those
days should be counted in the computation of leaves. 12

With this in mind, the construction by the respondent Commission of R.A. 2625 is not in accordance with the legislative intent. R.A.
2625 specifically provides that government employees are entitled to fifteen (15) days vacation leave of absence with full pay and
fifteen (15) days sick leave with full pay, exclusive of Saturdays, Sundays and Holidays in both cases. Thus, the law speaks of the
granting of a right and the law does not provide for a distinction between those who have accumulated leave credits and those who
have exhausted their leave credits in order to enjoy such right. Ubi lex non distinguit nec nos distinguere debemus. The fact remains
that government employees, whether or not they have accumulated leave credits, are not required by law to work on Saturdays,
Sundays and Holidays and thus they can not be declared absent on such non-working days. They cannot be or are not considered
absent on non-working days; they cannot and should not be deprived of their salary corresponding to said non-working days just
because they were absent without pay on the day immediately prior to, or after said non-working days. A different rule would
constitute a deprivation of property without due process.

Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the Revised Administrative Code applied to all
government employee without any distinction. It follows that the effect of the amendment similarly applies to all employees
enumerated in Sections 284 and 285-A, whether or not they have accumulated leave credits.
As the questioned CSC policy is here declared invalid, we are next confronted with the question of what effect such invalidity will
have. Will all government employees on a monthly salary basis, deprived of their salaries corresponding to Saturdays, Sundays or
legal holidays (as herein petitioner was so deprived) since 12 February 1965, be entitled to recover the amounts corresponding to
such non-working days?

The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no
protection; it creates no office; it is in legal contemplation as inoperative as though it had never been passed. 13

But, as held in Chicot County Drainage District vs. Baxter State

Bank:14

. . . . It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken
with qualifications. The actual existence of a statute, prior to such determination is an operative fact and may have consequences
which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling
as to invalidity may have to be considered in various aspects — with respect to particular relations, individual and corporate; and
particular conduct, private and official.

To allow all the affected government employees, similarly situated as petitioner herein, to claim their deducted salaries resulting
from the past enforcement of the herein invalidated CSC policy, would cause quite a heavy financial burden on the national and local
governments considering the length of time that such policy has been effective. Also, administrative and practical considerations
must be taken into account if this ruling will have a strict restrospective application. The Court, in this connection, calls upon the
respondent Commission and the Congress of the Philippines, if necessary, to handle this problem with justice and equity to all
affected government employees.

It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of 1991 — amending the herein invalidated
policy — was promulgated on 26 April 1991, deductions from salaries made after said date in contravention of the new CSC policy
must be restored to the government employees concerned.

WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are declared NULL and VOID. The respondent
Commission is directed to take the appropriate action so that petitioner shall be paid the amounts previously but unlawfully
deducted from his monthly salary as above indicated. No costs.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Feliciano, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon and Bellosillo, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 102549 August 10, 1992

EDWIN B. JAVELLANA, petitioner,

vs.
DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND LUIS T. SANTOS, SECRETARY, respondents.

Reyes, Lozada and Sabado for petitioner.

GRIÑO-AQUINO, J.:

This petition for review on certiorari involves the right of a public official to engage in the practice of his profession while employed in
the Government.

Attorney Erwin B. Javellana was an elected City Councilor of Bago City, Negros Occidental. On October 5, 1989, City Engineer Ernesto
C. Divinagracia filed Administrative Case No. C-10-90 against Javellana for: (1) violation of Department of Local Government (DLG)
Memorandum Circular No. 80-38 dated June 10, 1980 in relation to DLG Memorandum Circular No. 74-58 and of Section 7,
paragraph b, No. 2 of Republic Act No. 6713, otherwise known as the "Code of Conduct and Ethical Standards for Public Officials and
Employees," and (2) for oppression, misconduct and abuse of authority.

Divinagracia's complaint alleged that Javellana, an incumbent member of the City Council or Sanggunian Panglungsod of Bago City,
and a lawyer by profession, has continuously engaged in the practice of law without securing authority for that purpose from the
Regional Director, Department of Local Government, as required by DLG Memorandum Circular No. 80-38 in relation to DLG
Memorandum Circular No. 74-58 of the same department; that on July 8, 1989, Javellana, as counsel for Antonio Javiero and Rolando
Catapang, filed a case against City Engineer Ernesto C. Divinagracia of Bago City for "Illegal Dismissal and Reinstatement with
Damages" putting him in public ridicule; that Javellana also appeared as counsel in several criminal and civil cases in the city, without
prior authority of the DLG Regional Director, in violation of DLG Memorandum Circular No. 80-38 which provides:

MEMORANDUM CIRCULAR NO. 80-38

TO ALL: PROVINCIAL GOVERNORS, CITY AND MUNICIPALITY MAYORS, KLGCD REGIONAL DIRECTORS AND ALL CONCERNED

SUBJECT: AMENDING MEMORANDUM CIRCULAR NO. 80-18 ON SANGGUNIAN SESSIONS, PER DIEMS, ALLOWANCES, STAFFING AND
OTHER RELATED MATTERS

In view of the issuance or Circular No. 5-A by the Joint Commission on Local Government Personnel Administration which affects
certain provisions of MC 80-18, there is a need to amend said Memorandum Circular to substantially conform to the pertinent
provisions of Circular No. 9-A.

xxx xxx xxx

C. Practice of Profession

The Secretary (now Minister) of Justice in an Opinion No. 46 Series of 1973 stated inter alia that "members of local legislative bodies,
other than the provincial governors or the mayors, do not keep regular office hours." "They merely attend meetings or sessions of
the provincial board or the city or municipal council" and that provincial board members are not even required "to have an office in
the provincial building." Consequently, they are not therefore to required to report daily as other regular government employees do,
except when they are delegated to perform certain administrative functions in the interest of public service by the Governor or
Mayor as the case may be. For this reason, they may, therefore, be allowed to practice their professions provided that in so doing an
authority . . . first be secured from the Regional Directors pursuant to Memorandum Circular No. 74-58, provided, however, that no
government personnel, property, equipment or supplies shall be utilized in the practice of their professions. While being authorized
to practice their professions, they should as much as possible attend regularly any and all sessions, which are not very often, of their
Sanggunians for which they were elected as members by their constituents except in very extreme cases, e.g., doctors who are called
upon to save a life. For this purpose it is desired that they always keep a calendar of the dates of the sessions, regular or special of
their Sanggunians so that conflicts of attending court cases in the case of lawyers and Sanggunian sessions can be avoided.

As to members of the bar the authority given for them to practice their profession shall always be subject to the restrictions provided
for in Section 6 of Republic Act 5185. In all cases, the practice of any profession should be favorably recommended by the Sanggunian
concerned as a body and by the provincial governors, city or municipal mayors, as the case may be. (Emphasis ours, pp. 28-30, Rollo.)

On August 13, 1990, a formal hearing of the complaint was held in Iloilo City in which the complainant, Engineer Divinagracia, and
the respondent, Councilor Javellana, presented their respective evidence.

Meanwhile, on September 10, 1990, Javellana requested the DLG for a permit to continue his practice of law for the reasons stated in
his letter-request. On the same date, Secretary Santos replied as follows:

1st Indorsement
September 10, 1990

Respectfully returned to Councilor Erwin B. Javellana, Bago City, his within letter dated September 10, 1990, requesting for a permit
to continue his practice of law for reasons therein stated, with this information that, as represented and consistent with law, we
interpose no objection thereto, provided that such practice will not conflict or tend to conflict with his official functions.

LUIS T. SANTOS
Secretary.

(p. 60, Rollo.)

On September 21, 1991, Secretary Luis T. Santos issued Memorandum Circular No. 90-81 setting forth guidelines for the practice of
professions by local elective officials as follows:

TO: All Provincial Governors, City and Municipal Mayors, Regional Directors and All Concerned.

SUBJECT: Practice of Profession and Private Employment of Local Elective Officials

Section 7 of Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees), states, in part, that "In
addition to acts and omission of public officials . . . now prescribed in the Constitution and existing laws, the following shall constitute
prohibited acts and transactions of any public officials . . . and are hereby declared to be unlawful: . . . (b) Public Officials . . . during
their incumbency shall not: (1) . . . accept employment as officer, employee, consultant, counsel, broker, agent, trustee or nominee in
any private enterprise regulated, supervised or licensed by their office unless expressly allowed by law; (2) Engage in the private
practice of their profession unless authorized by the Constitution or law, provided that such practice will not conflict or tend to
conflict with their official functions: . . .

xxx xxx xxx

Under Memorandum Circular No. 17 of the Office of the President dated September 4, 1986, the authority to grant any permission,
to accept private employment in any capacity and to exercise profession, to any government official shall be granted by the head of
the Ministry (Department) or agency in accordance with Section 12, Rule XVIII of the Revised Civil Service Rules, which provides, in
part, that:

No officer shall engage directly in any . . . vocation or profession . . . without a written permission from the head of the Department:
Provided, that this prohibition will be absolute in the case of those officers . . . whose duties and responsibilities require that their
entire time be at the disposal of the Government: Provided, further, That if an employee is granted permission to engage in outside
activities, the time so devoted outside of office should be fixed by the Chief of the agency to the end that it will not impair in anyway
the efficiency of the officer or employee . . . subject to any additional conditions which the head of the office deems necessary in
each particular case in the interest of the service, as expressed in the various issuances of the Civil Service Commission.

Conformably with the foregoing, the following guidelines are to be observed in the grant of permission to the practice of profession
and to the acceptance of private employment of local elective officials, to wit:

1) The permission shall be granted by the Secretary of Local Government;

2) Provincial Governors, City and Municipal Mayors whose duties and responsibilities require that their entire time be at the
disposal of the government in conformity with Sections 141, 171 and 203 of the Local Government Code (BP 337), are prohibited to
engage in the practice of their profession and to accept private employment during their incumbency:

3) Other local elective officials may be allowed to practice their profession or engage in private employment on a limited
basis at the discretion of the Secretary of Local Government, subject to existing laws and to the following conditions:

a) That the time so devoted outside of office hours should be fixed by the local chief executive concerned to the end that it
will not impair in any way the efficiency of the officials concerned;

b) That no government time, personnel, funds or supplies shall be utilized in the pursuit of one's profession or private
employment;

c) That no conflict of interests between the practice of profession or engagement in private employment and the official
duties of the concerned official shall arise thereby;

d) Such other conditions that the Secretary deems necessary to impose on each particular case, in the interest of public
service. (Emphasis supplied, pp. 31-32, Rollo.)

On March 25, 1991, Javellana filed a Motion to Dismiss the administrative case against him on the ground mainly that DLG
Memorandum Circulars Nos. 80-38 and 90-81 are unconstitutional because the Supreme Court has the sole and exclusive authority
to regulate the practice of law.

In an order dated May 2, 1991, Javellana's motion to dismiss was denied by the public respondents. His motion for reconsideration
was likewise denied on June 20, 1991.

Five months later or on October 10, 1991, the Local Government Code of 1991 (RA 7160) was signed into law, Section 90 of which
provides:

Sec. 90. Practice of Profession. — (a) All governors, city and municipal mayors are prohibited from practicing their profession or
engaging in any occupation other than the exercise of their functions as local chief executives.

(b) Sanggunian members may practice their professions, engage in any occupation, or teach in schools except during session
hours: Provided, That sanggunian members who are members of the Bar shall not:

(1) Appear as counsel before any court in any civil case wherein a local government unit or any office, agency, or
instrumentality of the government is the adverse party;

(2) Appear as counsel in any criminal case wherein an officer or employee of the national or local government is accused of
an offense committed in relation to his office;

(3) Collect any fee for their appearance in administrative proceedings involving the local government unit of which he is an
official; and

(4) Use property and personnel of the Government except when the sanggunian member concerned is defending the interest
of the Government.

(c) Doctors of medicine may practice their profession even during official hours of work only on occasions of emergency:
Provided, That the officials concerned do not derive monetary compensation therefrom. (Emphasis ours.)

Administrative Case No. C-10-90 was again set for hearing on November 26, 1991. Javellana thereupon filed this petition for
certiorari praying that DLG Memorandum Circulars Nos. 80-38 and 90-81 and Section 90 of the new Local Government Code (RA
7160) be declared unconstitutional and null void because:

(1) they violate Article VIII, Section 5 of the 1987 Constitution, which provides:

Sec. 5. The Supreme Court shall have the following powers:

xxx xxx xxx

(5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in
all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged. Such rules shall
provide a simplified and inexpensive procedure for the speedy disposition of cases, shall be uniform for all courts of the same grade,
and shall not diminish, increase, or modify substantive rights. Rules of procedure of special courts and quasi-judicial bodies shall
remain effective unless disapproved by the Supreme Court.
(2) They constitute class legislation, being discriminatory against the legal and medical professions for only sanggunian
members who are lawyers and doctors are restricted in the exercise of their profession while dentists, engineers, architects,
teachers, opticians, morticians and others are not so restricted (RA 7160, Sec. 90 [b-1]).

In due time, the Solicitor General filed his Comment on the petition and the petitioner submitted a Reply. After deliberating on the
pleadings of the parties, the Court resolved to dismiss the petition for lack of merit.

As a matter of policy, this Court accords great respect to the decisions and/or actions of administrative authorities not only because
of the doctrine of separation of powers but also for their presumed knowledgeability and expertise in the enforcement of laws and
regulations entrusted to their jurisdiction (Santiago vs. Deputy Executive Secretary, 192 SCRA 199, citing Cuerdo vs. COA, 166 SCRA
657). With respect to the present case, we find no grave abuse of discretion on the part of the respondent, Department of Interior
and Local Government (DILG), in issuing the questioned DLG Circulars Nos. 80-30 and 90-81 and in denying petitioner's motion to
dismiss the administrative charge against him.

In the first place, complaints against public officers and employees relating or incidental to the performance of their duties are
necessarily impressed with public interest for by express constitutional mandate, a public office is a public trust. The complaint for
illegal dismissal filed by Javiero and Catapang against City Engineer Divinagracia is in effect a complaint against the City Government
of Bago City, their real employer, of which petitioner Javellana is a councilman. Hence, judgment against City Engineer Divinagracia
would actually be a judgment against the City Government. By serving as counsel for the complaining employees and assisting them
to prosecute their claims against City Engineer Divinagracia, the petitioner violated Memorandum Circular No. 74-58 (in relation to
Section 7[b-2] of RA 6713) prohibiting a government official from engaging in the private practice of his profession, if such practice
would represent interests adverse to the government.

Petitioner's contention that Section 90 of the Local Government Code of 1991 and DLG Memorandum Circular No. 90-81 violate
Article VIII, Section 5 of the Constitution is completely off tangent. Neither the statute nor the circular trenches upon the Supreme
Court's power and authority to prescribe rules on the practice of law. The Local Government Code and DLG Memorandum Circular
No. 90-81 simply prescribe rules of conduct for public officials to avoid conflicts of interest between the discharge of their public
duties and the private practice of their profession, in those instances where the law allows it.

Section 90 of the Local Government Code does not discriminate against lawyers and doctors. It applies to all provincial and municipal
officials in the professions or engaged in any occupation. Section 90 explicitly provides that sanggunian members "may practice their
professions, engage in any occupation, or teach in schools expect during session hours." If there are some prohibitions that apply
particularly to lawyers, it is because of all the professions, the practice of law is more likely than others to relate to, or affect, the area
of public service.

WHEREFORE, the petition is DENIED for lack of merit. Costs against the petitioner.

SO ORDERED.
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.

VITUG, J.:p

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.

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:

BRAND AD VALOREM TAX RATE

E.O. 22 and E.O. 273 RA 6956
06-23-86 07-25-87 06-18-90
07-01-86 01-01-88 07-05-90

Hope Luxury M. 100's

Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
Sec. 142, (c), (2) 40% 45%
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
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20% 5

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. —

xxx xxx xxx

(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:

(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.

xxx xxx xxx

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 (Emphasis 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, ". . . the listing of brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern. . . ."

"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) Rettig-Strenberg, 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.

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.

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:

. . . 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.

(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 not bearing 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 intrepreted 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.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

RMC NO. 10-86

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; Nangyang, 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 . . . Why were these brand
not reclassified at 55 if your want to give a level playing filed 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 question
but 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. (Emphasis supplied)

(Exhibit "FF-2-C," pp. V-5 TO V-6, VI-1 to VI-3).

xxx xxx xxx

MS. CHATO. . . . 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. . . (emphasis supplied) (Exhibit "FF-2d," page
IX-1)

xxx xxx xxx

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. (Emphasis 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.

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

SO ORDERED.

Kapunan, J., concurs.

Separate Opinions

BELLOSILLO, J.: separate opinion:

RA 7654 was enacted by Congress on 10 June 1993, signed into law by the President on 14 June 1993, and took effect 3 July 1993. It
amended partly Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read —

Sec. 142. Cigars and cigarettes. — . . . . (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.

(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 percent (55%) provided that the minimum tax shall not be less than Five
Pesos (P5.00) per pack (emphasis supplied).

(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.

Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium More and Champion were considered local brands
subjected to an ad valorem tax at the rate of 20-45%. However, on 1 July 1993 or two (2) days before RA 7654 took effect, petitioner
Commissioner of Internal Revenue issued RMC 37-93 reclassifying "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." 1 RMC 37-93 in effect subjected Hope Luxury, Premium More and Champion cigarettes to the provisions of Sec. 142, par.
(c), subpar. (1), NIRC, as amended by RA 7654, imposing upon these cigarette brands an ad valorem tax of "fifty-five percent (55%)
provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack."

On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours before the effectivity of RA 7654, a copy of RMC 37-93 with
a cover letter signed by Deputy Commissioner Victor A. Deoferio of the Bureau of Internal Revenue was sent by facsimile to the
factory of respondent corporation in Parang, Marikina, Metro Manila. It appears that the letter together with a copy of RMC 37-93
did not immediately come to the knowledge of private respondent as it was addressed to no one in particular. It was only when the
reclassification of respondent corporation's cigarette brands was reported in the column of Fil C. Sionil in Business Bulletin on 4 July
1993 that the president of respondent corporation learned of the matter, prompting him to inquire into its veracity and to request
from petitioner a copy of RMC 37-93. On 15 July 1993 respondent corporation received by ordinary mail a certified machine copy of
RMC 37-93.

Respondent corporation sought a review, reconsideration and recall of RMC 37-93 but was forthwith denied by the Appellate Division
of the Bureau of Internal Revenue. As a consequence, on 30 July 1993 private respondent was assessed an ad valorem tax deficiency
amounting to P9,598,334.00. Respondent corporation went to the Court of Tax Appeals (CTA) on a petition for review.

On 10 August 1994, after due hearing, the CTA found the petition meritorious and ruled —

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 . . . . 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 cancelled for
lack of legal basis. 2

The CTA held that petitioner Commissioner of Internal Revenue failed to observe due process of law in issuing RMC 37-93 as there
was no prior notice and hearing, and that RMC 37-93 was in itself discriminatory. The motion to reconsider its decision was denied by
the CTA for lack of merit. On 31 March 1995 respondent Court of Appeals affirmed in toto the decision of the CTA. 3 Hence, the
instant petition for review.

Petitioner now submits through the Solicitor General that RMC 37-93 reclassifying Hope Luxury, Premium More and Champion as
locally manufactured cigarettes bearing brands is merely an interpretative ruling which needs no prior notice and hearing as held in
Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary. 4 It maintains that neither is the assailed
revenue memorandum circular discriminatory as it merely "lays down the test in determining whether or not a locally manufactured
cigarette bears a foreign brand using (only) the cigarette brands Hope, More and Champion as specific examples." 5

Respondent corporation on the other hand contends that RMC 37-93 is not a mere interpretative ruling but is adjudicatory in nature
where prior notice and hearing are mandatory, and that Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance
Secretary on which the Solicitor General relies heavily is not applicable. Respondent Fortune Tobacco Corporation also argues that
RMC 37-93 discriminates against its cigarette brands since those of its competitors which are similarly situated have not been
reclassified.

The main issues before us are (a) whether RMC 37-93 is merely an interpretative rule the issuance of which needs no prior notice
and hearing, or an adjudicatory ruling which calls for the twin requirements of prior notice and hearing, and, (b) whether RMC 37-93
is discriminatory in nature.

A brief discourse on the powers and functions of administrative bodies may be instructive.

Administrative agencies posses quasi-legislative or rule making powers and quasi-judicial or administrative adjudicatory powers.
Quasi-legislative or rule making power is the power to make rules and regulations which results in delegated legislation that is within
the confines of the granting statute and the doctrine of nondelegability and separability of powers.

Interpretative rule, one of the three (3) types of quasi-legislative or rule making powers of an administrative agency (the other two
being supplementary or detailed legislation, and contingent legislation), is promulgated by the administrative agency to interpret,
clarify or explain statutory regulations under which the administrative body operates. The purpose or objective of an interpretative
rule is merely to construe the statute being administered. It purports to do no more than interpret the statute. Simply, the rule tries
to say what the statute means. Generally, it refers to no single person or party in particular but concerns all those belonging to the
same class which may be covered by the said interpretative rule. It need not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to enforce the law and is intended merely to clarify statutory provisions
for proper observance by the people. In Tañada v. Tuvera, 6 this Court expressly said that "[i]interpretative regulations . . . . need not
be published."

Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the
rights of persons before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to
decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. 7 The
administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive
or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the
executive or administrative duty entrusted to it. 8 In carrying out their quasi-judicial functions the administrative officers or bodies
are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them
as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are affected it is
elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct of the proceedings.

The importance of due process cannot be underestimated. Too basic is the rule that no person shall be deprived of life, liberty or
property without due process of law. Thus when an administrative proceeding is quasi-judicial in character, notice and fair open
hearing are essential to the validity of the proceeding. The right to reasonable prior notice and hearing embraces not only the right
to present evidence but also the opportunity to know the claims of the opposing party and to meet them. The right to submit
arguments implies that opportunity otherwise the right may as well be considered impotent. And those who are brought into contest
with government in a quasi-judicial proceeding aimed at the control of their activities are entitled to be fairy advised of what the
government proposes and to be heard upon its proposal before it issues its final command.

There are cardinal primary rights which must be respected in administrative proceedings. The landmark case of Ang Tibay v. The
Court of Industrial Relations 9 enumerated these rights: (1) the right to a hearing, which includes the right of the party interested or
affected to present his own case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3)
the decision must have something to support itself; (4) the evidence must be substantial; (5) the decision must be rendered on the
evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal or any of
its judges must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision; and, (7) the tribunal should in all controversial questions render its decision in such
manner that the parties to the proceeding may know the various issues involved and the reasons for the decision rendered.

In determining whether RMC No. 37-93 is merely an interpretative rule which requires no prior notice and hearing, or an
adjudicatory rule which demands the observance of due process, a close examination of RMC 37-93 is in order. Noticeably, petitioner
Commissioner of Internal Revenue at first interprets Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and
clarifying or explaining what it means —

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,
". . . the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern . . ."

Then petitioner makes a factual finding by declaring that Hope (Luxury), (Premium) More and Champion are manufactured by other
foreign manufacturers —

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) Rettig-Strenberg, 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.

From this finding, petitioner thereafter formulates an inference that since it cannot be determined who among the manufacturers
are the real owners of the brands in question, then these cigarette brands should be considered foreign brands —

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."

Finally, petitioner caps RMC 37-93 with a disposition specifically directed at respondent corporation reclassifying its cigarette brands
as locally manufactured bearing foreign brands —

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.

It is evident from the foregoing that in issuing RMC 37-93 petitioner Commissioner of Internal Revenue was exercising her quasi-
judicial or administrative adjudicatory power. She cited and interpreted the law, made a factual finding, applied the law to her given
set of facts, arrived at a conclusion, and issued a ruling aimed at a specific individual. Consequently prior notice and hearing are
required. It must be emphasized that even the text alone of RMC 37-93 implies that reception of evidence during a hearing is
appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated August 24, 1988, which provides that "in cases where it
cannot be established or there is dearth of evidence as to whether a brand is foreign or not . . . ." Indeed, it is difficult to determine
whether a brand is foreign or not if it is not established by, or there is dearth of, evidence because no hearing has been called and
conducted for the reception of such evidence. In fine, by no stretch of the imagination can RMC 37-93 be considered purely as an
interpretative rule — requiring no previous notice and hearing and simply interpreting, construing, clarifying or explaining statutory
regulations being administered by or under which the Bureau of Internal Revenue operates.

It is true that both RMC 47-91 in Misamis Oriental Association of Coco Traders v. Department of Finance Secretary, and RMC 37-93 in
the instant case reclassify certain products for purposes of taxation. But the similarity between the two revenue memorandum
circulars ends there. For in properly determining whether a revenue memorandum circular is merely an interpretative rule or an
adjudicatory rule, its very tenor and text, and the circumstances surrounding its issuance will have no to be considered.

We quote RMC 47-91 promulgated 11 June 1991 —

Revenue Memorandum Circular No. 47-91

SUBJECT : Taxability of Copra

TO : All Revenue Officials and Employees and Others Concerned.

For the information and guidance of all officials and employees and others concerned, quoted hereunder in its entirety is VAT Ruling
No. 190-90 dated August 17, 1990:

COCOFED MARKETING RESEARCH CORPORATION

6th Floor Cocofed Building
144 Amorsolo Street
Legaspi Village, Makati
Metro Manila

Attention: Ms. Esmyrna E. Reyes

Vice President — Finance

Sirs:
This has reference to your letter dated January 16, 1990 wherein you represented that inspite of your VAT registration of your copra
trading company, you are supposed to be exempt from VAT on the basis of BIR Ruling dated January 8, 1988 which considered copra
as an agricultural food product in its original state. In this connection, you request for a confirmation of your opinion as aforestated.

In reply, please be informed that copra, being an agricultural non-food product, is exempt from VAT only if sale is made by the
primary producer pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading company and a subsequent seller, your
sale of copra is already subject to VAT pursuant to Section 9(b) (1) of Revenue Regulations 5-27.

This revokes VAT Ruling Nos. 009-88 and 279-88.

Very truly yours,

(Sgd.) JOSE U. ONG

Commissioner of Internal Revenue

As a clarification, this is the present and official stand of this Office unless sooner revoked or amended. All revenue officials and
employees are enjoined to give this Circular as wide a publicity as possible.

(Sgd.) JOSE U. ONG

Commissioner of Internal Revenue

Quite obviously, the very text of RMC 47-91 itself shows that it is merely an interpretative rule as it simply quotes a VAT Ruling and
reminds those concerned that the ruling is the present and official stand of the Bureau of Internal Revenue. Unlike in RMC 37-93
where petitioner Commissioner manifestly exercised her quasi-judicial or administrative adjudicatory power, in RMC 47-91 there
were no factual findings, no application of laws to a given set of facts, no conclusions of law, and no dispositive portion directed at
any particular party.

Another difference is that in the instant case, the issuance of the assailed revenue memorandum circular operated to subject the
taxpayer to the new law which was yet to take effect, while in Misamis, the disputed revenue memorandum circular was issued
simply to restate and then clarify the prevailing position and ruling of the administrative agency, and no new law yet to take effect
was involved. It merely interpreted an existing law which had already been in effect for some time and which was not set to be
amended. RMC 37-93 is thus prejudicial to private respondent alone.

A third difference, and this likewise resolves the issue of discrimination, is that RMC 37-93 was ostensibly issued to subject the
cigarette brands of respondent corporation to a new law as it was promulgated two days before the expiration of the old law and a
few hours before the effectivity of the new law. That RMC 37-93 is particularly aimed only at respondent corporation and its three (3)
cigarette brands can be seen from the dispositive portion of the assailed revenue memorandum circular —

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.

Thus the argument of the Solicitor General that RMC 37-93 is not discriminatory as "[i]t merely lays down the test in determining
whether or not a locally manufactured cigarette bears a foreign brand using the cigarette brands Hope, More and Champion as
specific examples," cannot be accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous effect on respondent
corporation — and solely on respondent corporation — as its deficiency ad valorem tax assessment on its removals of Hope, Luxury,
Premium More, and Champion cigarettes for six (6) hours alone, i.e., from six o'clock in the evening of 2 July 1993 which is
presumably the time respondent corporation was supposed to have received the facsimile message sent by Deputy Commissioner
Victor A. Deoferio, until twelve o'clock midnight upon the effectivity of the new law, was already P9,598,334.00. On the other hand,
RMC 47-91 was issued with no purpose except to state and declare what has been the official stand of the administrative agency on
the specific subject matter, and was indiscriminately directed to all copra traders with no particular individual in mind.

That petitioner Commissioner of Internal Revenue is an expert in her filed is not attempted to be disputed; hence, we do not
question the wisdom of her act in reclassifying the cigarettes. Neither do we deny her the exercise of her quasi-legislative or quasi-
judicial powers. But most certainly, by constitutional mandate, the Court must check the exercise of these powers and ascertain
whether petitioner has gone beyond the legitimate bounds of her authority.

In the final analysis, the issue before us in not the expertise, the authority to promulgate rules, or the wisdom of petitioner as
Commissioner of Internal Revenue is reclassifying the cigarettes of private respondents. It is simply the faithful observance by
government by government of the basic constitutional right of a taxpayer to due process of law and equal protection of the laws. This
is what distresses me no end — the manner and the circumstances under which the cigarettes of private respondent were
reclassified and correspondingly taxed under RMC 37-93, and adjudicatory rule which therefore requires reasonable notice and
hearing before its issuance. It should not be confused with RMC 47-91, which is a mere interpretative rule.

In the earlier case of G.R. No. 119322, which practically involved the same opposing interests, I also voted to uphold the
constitutional right of the taxpayer concerned to due process and equal protection of the laws. By a vote of 3-2, that view prevailed.
In sequela, we in the First Division who constituted the majority found ourselves unjustly drawn into the vortex of a nightmarish
episode. The strong ripples whipped up by my opinion expressed therein — and of the majority — have yet to varnish when we are
again in the imbroglio of a similar dilemma. The unpleasant experience should be reason enough to simply steer clear of this
controversy and surf on a pretended loss of judicial objectivity. Such would have been an easy way out, a gracious exit, so to speak,
albeit lame. But to camouflage my leave with a sham excuse would be to turn away from a professional vow I keep at all times; I
would not be true to myself, and to the people I am committed to serve. Thus, as I have earlier expressed, if placed under similar
circumstances in some future time, I shall have to brave again the prospect of another vilification and a tarnished image if only to
show proudly to the whole world that under the present dispensation judicial independence in our country is a true component of
our democracy.

In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as well as the effect of such issuance. For it cannot be
denied that the circumstances clearly demonstrate that it was hastily issued — without prior notice and hearing, and singling out
private respondent alone — when two days before a new tax law was to take effect petitioner reclassified and taxed the cigarette
brands of private respondent at a higher rate. Obviously, this was to make it appear that even before the anticipated date of
effectivity of the statute — which was undeniably priorly known to petitioner — these brands were already currently classified and
taxed at fifty-five percent (55%), thus shoving them into the purview of the law that was to take effect two days after!

For sure, private respondent was not properly informed before the issuance of the questioned memorandum circular that its
cigarette brands Hope Luxury, Premium More and Champion were being reclassified and subjected to a higher tax rate. Naturally, the
result would be to lose financially because private respondent was still selling its cigarettes at a price based on the old, lower tax rate.
Had there been previous notice and hearing, as claimed by private respondent, it could have very well presented its side, either by
opposing the reclassification, or by acquiescing thereto but increasing the price of its cigarettes to adjust to the higher tax rate. The
reclassification and the ensuing imposition of a tax rate increase therefore could not be anything but confiscatory if we are also to
consider the claim of private respondent that the new tax is even higher than the cost of its cigarettes.

Accordingly, I vote to deny the petition.

HERMOSISIMA, JR., J.: dissenting

Private respondent Fortune Tobacco Corporation in the instant case disputes its liability for deficiency ad valorem excise taxes on its
removals of "Hope," "More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July 2, 1993, in the total amount of
P9,598,334.00. It claims that the circular, upon which the assessment was based and made, is defective, invalid and unenforceable
for having been issued without notice and hearing and in violation of the equal protection clause guaranteed by the Constitution.

The majority upholds these claims of private respondent, convinced that the Circular in question, in the first place, did not give prior
notice and hearing, and so, it could not have been valid and effective. It proceeds to affirm the factual findings of the Court of Tax
Appeals, which findings were considered correct by respondent Court of Appeals, to the effect that the petitioner Commissioner of
Internal Revenue had indeed blatantly failed to comply with the said twin requirements of notice and hearing, thereby rendering the
issuance of the questioned Circular to be in violation of the due process clause of the Constitution. It is also its dominant opinion that
the questioned Circular discriminates against private respondent Fortune Tobacco Corporation insofar as it seems to affect only its
"Hope," "More," and "Champion" cigarettes, to the exclusion of other cigarettes apparently of the same kind or classification as these
cigarettes manufactured by private respondent.

With all due respect, I disagree with the majority in its disquisition of the issues and its resulting conclusions.

Section 245 of the National Internal Revenue Code,

as amended, empowers the Commissioner of Internal
Revenue to issue the questioned Circular

Section 245 of the National Internal Revenue Code, as amended, provides:

Sec. 245. Authority of Secretary of Finance to promulgate rules and regulations. — The Secretary of Finance, upon recommendation
of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code . .
. without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar
purposes.

The subject of the questioned Circular is the reclassification of cigarettes subject to excise taxes. It was issued in connection with
Section 142 (c) (1) of the National Internal Revenue Code, as amended, which imposes ad valorem excise taxes on locally
manufactured cigarettes bearing a foreign brand. The same provision prescribes the ultimate criterion that determines which
cigarettes are to be considered "locally manufactured cigarettes bearing a foreign brand." It provides:

. . . 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.

There is only one World Tobacco Directory for a given current year, and the same is mandated by law to be the BIR Commissioner's
controlling basis for determining whether or not a particular locally manufactured cigarette is one bearing a foreign brand. In so
making a determination, petitioner should inquire into the entries in the World Tobacco Directory for the given current year and shall
be held bound by such entries therein. She is not required to subject the results of her inquiries to feedback from the concerned
cigarette manufacturers, and it is doubtlessly not desirable nor managerially sound to court dispute thereon when the law does not,
in the first place, require debate or hearing thereon. Petitioner may make such a determination because she is the Chief Executive
Officer of the administrative agency that is the Bureau of Internal Revenue in which are vested quasi-legislative powers entrusted to
it by the legislature in recognition of its more encompassing and unequalled expertise in the field of taxation.

The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable and
oppressive. It has been necessitated by "the growing complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72,
79). More and more administrative bodies are necessary to help in the regulation of society's ramified activities. "Specialized in the
particular field assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected
from the legislature or the courts of justice" . . . 1
Statutorily empowered to issue rulings or opinions embodying the proper determination in respect to classifying articles, including
cigarettes, for purposes of tax assessment and collection, petitioner was acting well within her prerogatives when she issued the
questioned Circular. And in the exercise of such prerogatives under the law, she has in her favor the presumption of regular
performance of official duty which must be overcome by clearly persuasive evidence of stark error and grave abuse of discretion in
order to be overturned and disregarded.

It is irrelevant that the Court of Tax Appeals makes much of the effect of the passing of Republic Act No. 7654 2 on petitioner's power
to classify cigarettes. Although the decisions assailed and sought to be reviewed, as well as the pleadings of private respondent, are
replete with alleged admissions of our legislators to the effect that the said Act was intended to freeze the current classification of
cigarettes and make the same an integral part of the said Act, certainly the repeal, if any, of petitioner's power to classify cigarettes
must be reckoned from the effectivity of the said Act and not before. Suffice it to say that indisputable is the plain fact that the
questioned Circular was issued on July 1, 1993, while the said Act took effect on July 3, 1993.

The contents of the questioned circular have not

been proven to be erroneous or illegal as to render
issuance thereof an act of grave abuse of
discretion on the part of petitioner Commissioner

Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National Internal Revenue Code, as amended, levies the following
ad valorem taxes on cigarettes in accordance with their predetermined classifications as established by the Commissioner of Internal
Revenue:

. . . based on the manufacturer's registered wholesale price:

(1) 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.

(2) Other locally manufactured cigarettes, forty five percent (45%).

xxx xxx xxx

Prior to the issuance of the questioned Circular, assessed against and paid by private respondent as ad valorem excise taxes on their
removals of "Hope," "More," and "Champion" cigarettes were amounts based on paragraph (2) above, i.e., the tax rate made
applicable on the said cigarettes was 45% at the most. The reason for this is that apparently, petitioner's predecessors have all made
determinations to the effect that the said cigarettes were to be considered "other locally manufactured cigarettes" and not "locally
manufactured cigarettes bearing a foreign brand." Even petitioner, until her issuance of the questioned Circular, adhered to her
predecessors' determination as to the proper classification of the above-mentioned cigarettes for purposes of ad valorem excise
taxes. Apparently, the past determination that the said cigarettes were to be classified as "other locally manufactured cigarettes" was
based on private respodnent's convenient move of changing the names of "Hope" to "Hope Luxury" and "More" to "Premium More."
It also submitted proof that "Champion" was an original Fortune Tobacco Corporation register and, therefore, a local brand. Having
registered these brands with the Philippine Patent Office and with corresponding evidence to the effect, private respondent paid ad
valorem excise taxes computed at the rate of not more than 45% which is the rate applicable to cigarettes considered as locally
manufactured brands.

How these past determinations pervaded notwithstanding their erroneous basis is only tempered by their innate quality of being
merely errors in interpretative ruling, the formulation of which does not bind the government. Advantage over such errors may
precipitously be withdrawn from those who have been benefiting from them once the same have been discovered and rectified.

Petitioner correctly emphasizes that:

. . . the registration of said brands in the name of private respondent is proof only that it is the exclusive owner thereof in the
Philippines; it does not necessarily follow, however, that it is the exclusive owner thereof in the whole world. Assuming arguendo
that private respondent is the exclusive owner of said brands in the Philippines, it does not mean that they are local. Otherwise, they
would not have been listed in the WTD as international brands manufactured by different entities in different countries. Moreover, it
cannot be said that the brands registered in the names of private respondent are not the same brands listed in the WTD because
private respondent is one of the manufacturers of said brands listed in the WTD. 3

Private respondent attempts to cast doubt on the determination made by petitioner in the questioned Circular that Japan is a
manufacturer of "Hope" cigarettes. Private respondent's own inquiry into the World Tobacco Directory reveals that Japan is not a
manufacturer of "Hope" cigarettes. In pointing this out, private respondent concludes that the entire Circular is erroneous and makes
such error the principal proof of its claim that the nature of the determination embodied in the questioned Circular requires a
hearing on the facts and a debate on the applicable law. Such a determination is adjudicatory in nature and, therefore, requires
notice and hearing. Private respondent is, however, apparently only eager to show error on the part of petitioner for acting with
grave abuse of discretion. Private respondent conveniently forgets that petitioner, equipped with the expertise in taxation,
recognized in that expertise by the legislature that vested in her the power to make rules respecting classification of articles for
taxation purposes, and presumed to have regularly exercised her prerogatives within the scope of her statutory power to issue
determinations specifically under Section 142 (c) (1) in relation to Section 245 of the National Internal Revenue Code, as amended,
simply followed the law as she understood it. Her task was to determine which cigarette brands were foreign, and she was directed
by the law to look into the World Tobacco Directory. Foreign cigarette brands were legislated to be taxed at higher rates because of
their more extensive public exposure and international reputation; their competitive edge against local brands may easily be checked
by imposition of higher tax rates. Private respondent makes a mountain of the mole hill circumstance that "Hope" is listed, not as
being "manufactured" by Japan but as being "used" by Japan. Whether manufactured or used by Japan, however, "Hope" remains a
cigarette brand that can not be said to be limited to local manufacture in the Philippines. The undeniable fact is that it is a foreign
brand the sales in the Philippines of which are greatly boosted by its international exposure and reputation. The petitioner was well
within her prerogatives, in the exercise of her rule-making power, to classify articles for taxation purposes, to interpret the laws
which she is mandated to administer. In interpreting the same, petitioner must, in general, be guided by the principles underlying
taxation, i.e., taxes are the lifeblood of Government, and revenue laws ought to be interpreted in favor of the Government, for
Government can not survive without the funds to underwrite its varied operational expenses in pursuit of the welfare of the society
which it serves and protects.

Private respondent claims that its business will be destroyed by the imposition of additional ad valorem taxes as a result of the
effectivity of the questioned Circular. It claims that under the vested rights theory, it cannot now be made to pay higher taxes after
having been assessed for less in the past. Of course private respondent will trumpet its losses, its interests, after all, being its sole
concern. What private respondent fails to see is the loss of revenue by the Government which, because of erroneous determinations
made by its past revenue commissioners, collected lesser taxes than what it was entitled to in the first place. It is every citizen's duty
to pay the correct amount of taxes. Private respondent will not be shielded by any vested rights, for there are not vested rights to
speak of respecting a wrong construction of the law by administrative officials, and such wrong interpretation does not place the
Government in estoppel to correct or overrule the same. 4

The Questioned Circular embodies an interpretative

ruling of petitioner Commissioner which as such does
not require notice and hearing

As one of the public offices of the Government, the Bureau of Internal Revenue, through its Commissioner, has grown to be a typical
administrative agency vested with a fusion of different governmental powers: the power to investigate, initiate action and control the
range of investigation, the power to promulgate rules and regulations to better carry out statutory policies, and the power to
adjudicate controversies within the scope of their activities. 5 In the realm of administrative law, we understand that such an
empowerment of administrative agencies was evolved in response to the needs of a changing society. This development arose as the
need for broad social control over complex conditions and activities became more and more pressing, and such complexity could no
longer be dealt with effectivity and directly by the legislature or the judiciary. The theory which underlies the empowerment of
administrative agencies like the Bureau of Internal Revenue, is that the issues with which such agencies deal ought to be decided by
experts, and not be a judge, at least not in the first instance or until the facts have been sifted and arranged. 6

One of the powers of administrative agencies like the Bureau of Internal Revenue, is the power to make rules. The necessity for
vesting administrative agencies with this power stems from the impracticability of the lawmakers providing general regulations for
various and varying details pertinent to a particular legislation. 7

The rules that administrative agencies may promulgate may either be legislative or interpretative. The former is a form of
subordinate legislation whereby the administrative agency is acting in a legislative capacity, supplementing the statute, filling in the
details, pursuant to a specific delegation of legislative power. 8

Interpretative rules, on the other hand, are "those which purport to do no more than interpret the statute being administered, to say
what it means." 9

There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of
a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations,
it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it
merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis Administrative Law, p. 194). Rules and regulations when
promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a
statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually
couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The
details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In
this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal
provisions that have the effect of law. (Davis, op. cit. p. 194.)

A rule is binding on the courts as long as the procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom
(Davis, op. cit. pp. 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts
that finally determine what the law means. 10

"Whether a given statutory delegation authorizes legislative or interpretative regulations depends upon whether the statute places
specific 'sanctions' behind the regulations authorized, as for example, by making it a criminal offense to disobey them, or by making
conformity with their provisions a condition of the exercise of legal privileges." 11 This is because interpretative regulations are by
nature simply statutory interpretations, which have behind them no statutory sanction. Such regulations, whether so expressly
authorized by statute or issued only as an incident of statutory administration, merely embody administrative findings of law which
are always subject to judicial determination as to whether they are erroneous or not, even when their issuance is authorized by
statute.

The questioned Circular has undisputedly been issued by petitioner in pursuance of her rule-making powers under Section 245 of the
National Internal Revenue Code, as amended. Exercising such powers, petitioner re-classified "Hope," "More" and "Champion"
cigarettes as locally manufactured cigarettes bearing foreign brands. The re-classification, as previously explained, is the correct
interpretation of Section 142 (c) (1) of the said Code. The said legal provision is not accompanied by any penal sanction, and no detail
had to be filled in by petitioner. The basis for the classification of cigarettes has been provided for by the legislature, and all petitioner
has to do, on behalf of the government agency she heads, is to proceed to make the proper determination using the criterion
stipulated by the lawmaking body. In making the proper determination, petitioner gave it a liberal construction consistent with the
rule that revenue laws are to be construed in favor of the Government whose survival depends on the contributions that taxpayers
give to the public coffers that finance public services and other governmental operations.
The Bureau of Internal Revenue which petitioner heads, is the government agency charged with the enforcement of the laws
pertinent to this case and so, the opinion of the Commissioner of Internal Revenue, in the absence of a clear showing that it is plainly
wrong, is entitled to great weight. Private respondent claims that its rights under previous interpretations of Section 142 (c) (1) may
not abruptly be cut by a new interpretation of the said section, but precisely the said section is subject to various and changing
construction, and hence, any ruling issued by petitioner thereon is necessarily interpretative and not legislative. Private respondent
insists that the questioned circular is adjudicatory in nature because it determined the rights of private respondent in a controversy
involving his tax liability. It also asseverates that the questioned circular involved administrative action that is particular and
immediate, thereby rendering it subject to the requirements of notice and hearing in compliance with the due process clause of the
Constitution.

We find private respondent's arguments to be rather strained.

Petitioner made a determination as to the classification of cigarettes as mandated by the aforecited provisions in the National
Internal Revenue Code, as amended. Such determination was an interpretation by petitioner of the said legal provisions. If in the
course of making the interpretation and embodying the same in the questioned circular which the petitioner subsequently issued
after making such a determination, private respondent's cigarettes products, by their very nature of being foreign brands as
evidenced by their enlistment in the World Tobacco Directory, which is the controlling basis for the proper classification of cigarettes
as stipulated by the law itself, have come to be classified as locally manufactured cigarettes bearing foreign brands and as such
subject to a tax rate higher than what was previously imposed thereupon based on past rulings of other revenue commissioners,
such a situation is simply a consequence of the performance by petitioner of here duties under the law. No adjudication took place,
much less was there any controversy ripe for adjudication. The natural consequences of making a classification in accordance with
law may not be used by private respondent in arguing that the questioned circular is in fact adjudicatory in nature. Such an exercise
in driving home a point is illogical as it is fallacious and misplaced.

Private respondent concedes that under general rules of administrative law, "a ruling which is merely 'interpretative' in character
may not require prior notice to affected parties before its issuance as well as a hearing" and "for this reason, in most instances,
interpretative regulations are not given the force of law." 12 Indeed, "interpretative regulations and those merely internal in nature
. . . need not be published." 13 And it is now settled that only legislative regulations and not interpretative rulings must have the
benefit of public
hearing. 14

Because (1) the questioned circular merely embodied an interpretation or a way of reading and giving meaning to Section 142 (c) (1)
of the National Internal Revenue Code, as amended; (2) petitioner did not fill in any details in the aforecited section but only
classified cigarettes on the basis of the World Tobacco Directory in the light of the paramount principle of construing revenue laws in
favor of the Government to the end that Government collects as much tax money as it is entitled to in order to fulfill its public
purposes for the general good of its citizens; (3) no penal sanction is provided in the aforecited section that was construed by
petitioner in the questioned circular; and (4) a similar circular declassifying copra from being an agricultural food to non-food product
for purposes of the value added tax laws, resulting in the revocation of an exemption previously enjoyed by copra traders, has been
ruled by us to be merely an interpretative ruling and not a legislative, much less, an adjudicatory, action on the part of the revenue
commissioner, 15 this Court must not be blind to the fact that the questioned Circular is indeed an interpretative ruling not subject to
notice and hearing.

Neither is the questioned Circular tainted by a

violation of the equal protection clause under the
Constitution

Private respondent anchors its claim of violation of its equal protection rights upon the too obvious fact that only its cigarette brands,
i.e., "Hope," "More" and "Champion," are mentioned in the questioned circular. Because only the cigarettes that they manufacture
are enumerated in the questioned circular, private respondent proceeded to attack the same as being discriminatory against it. On
the surface, private respondent seems to have a point there. A scrutiny of the questioned Circular, however, will show that it is
undisputedly one of general application for all cigarettes that are similarly situated as private respondent's brands. The new
interpretation of Section 142 (1) (c) has been well illustrated in its application upon private respondent's brands, which illustration is
properly a subject of the questioned Circular. Significantly, indicated as the subject of the questioned circular is the "reclassification
of cigarettes subject to excise taxes." The reclassification resulted in the foregrounding of private respondent's cigarette brands,
which incidentally is largely due to the controversy spawned no less by private respondent's own action of conveniently changing its
brand names to avoid falling under a classification that would subject it to higher ad valorem tax rates. This caused then
Commissioner Bienvenido Tan to depart from his initial determination that private respondent's cigarette brands are foreign brands.
The consequent specific mention of such brands in the questioned Circular, does not change the fact that the questioned Circular has
always been intended for and did cover, all cigarettes similarly situated as "Hope," "More" and "Champion." Petitioner is thus correct
in stating that:

. . . RMC 37-93 is not discriminatory. It lays down the test in determining whether or not a locally manufactured cigarette bears a
foreign brand using the cigarette brands "Hope," More and "Champion" as specific examples. Such test applies to all locally
manufactured cigarette brands similarly situated as the cigarette brands aforementioned. While it is true that only "Hope," "More"
and "Champion" cigarettes are actually determined as locally manufactured cigarettes bearing a foreign brand, RMC 37-93 does not
state that ONLY cigarettes fall under such classification to the exclusion of other cigarettes similarly situated. Otherwise stated, RMC
37-93 does not exclude the coverage of other cigarettes similarly situated. Otherwise stated, RMC 37-93 does not exclude the
coverage of other cigarettes similarly situated as locally manufactured cigarettes bearing a foreign brand. Hence, in itself, RMC 37-93
is not discriminatory. 16

Both the respondent Court of Appeals and the Court of Tax Appeals held that the questioned Circular reclassifying "Hope," "More"
and "Champion" cigarettes, is defective, invalid and unenforceable and has rendered the assessment against private respondent of
deficiency ad valorem excise taxes to be without legal basis. The majority agrees with private respondent and respondent Courts. As
the foregoing opinion chronicles the fatal flaws in private respondent's arguments, it becomes more apparent that the questioned
Circular is in fact a valid and subsisting interpretative ruling that the petitioner had power to promulgate and enforce.

WHEREFORE, I vote to grant the petition and set aside the decisions of the Court of Tax Appeals and the Court of Appeals,
respectively, and to reinstate the decision of petitioner Commissioner of Internal Revenue denying private respondent's request for a
review, reconsideration and recall of Revenue Memorandum Circular No. 37-93 dated July 1, 1993.

Padilla, J., concurs.

Separate Opinions

BELLOSILLO, J.: separate opinion:

RA 7654 was enacted by Congress on 10 June 1993, signed into law by the President on 14 June 1993, and took effect 3 July 1993. It
amended partly Sec. 142, par. (c), of the National Internal Revenue Code (NIRC) to read —

Sec. 142. Cigars and cigarettes. — . . . . (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.

(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 percent (55%) provided that the minimum tax shall not be less than Five
Pesos (P5.00) per pack (emphasis supplied).

(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.

Prior to the effectivity of RA 7654, cigarette brands Hope Luxury, Premium More and Champion were considered local brands
subjected to an ad valorem tax at the rate of 20-45%. However, on 1 July 1993 or two (2) days before RA 7654 took effect, petitioner
Commissioner of Internal Revenue issued RMC 37-93 reclassifying "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." 1 RMC 37-93 in effect subjected Hope Luxury, Premium More and Champion cigarettes to the provisions of Sec. 142, par.
(c), subpar. (1), NIRC, as amended by RA 7654, imposing upon these cigarette brands an ad valorem tax of "fifty-five percent (55%)
provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack."

On 2 July 1993, Friday, at about five-fifty in the afternoon, or a few hours before the effectivity of RA 7654, a copy of RMC 37-93 with
a cover letter signed by Deputy Commissioner Victor A. Deoferio of the Bureau of Internal Revenue was sent by facsimile to the
factory of respondent corporation in Parang, Marikina, Metro Manila. It appears that the letter together with a copy of RMC 37-93
did not immediately come to the knowledge of private respondent as it was addressed to no one in particular. It was only when the
reclassification of respondent corporation's cigarette brands was reported in the column of Fil C. Sionil in Business Bulletin on 4 July
1993 that the president of respondent corporation learned of the matter, prompting him to inquire into its veracity and to request
from petitioner a copy of RMC 37-93. On 15 July 1993 respondent corporation received by ordinary mail a certified machine copy of
RMC 37-93.

Respondent corporation sought a review, reconsideration and recall of RMC 37-93 but was forthwith denied by the Appellate Division
of the Bureau of Internal Revenue. As a consequence, on 30 July 1993 private respondent was assessed an ad valorem tax deficiency
amounting to P9,598,334.00. Respondent corporation went to the Court of Tax Appeals (CTA) on a petition for review.

On 10 August 1994, after due hearing, the CTA found the petition meritorious and ruled —

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 . . . . 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 cancelled for
lack of legal basis. 2

The CTA held that petitioner Commissioner of Internal Revenue failed to observe due process of law in issuing RMC 37-93 as there
was no prior notice and hearing, and that RMC 37-93 was in itself discriminatory. The motion to reconsider its decision was denied by
the CTA for lack of merit. On 31 March 1995 respondent Court of Appeals affirmed in toto the decision of the CTA. 3 Hence, the
instant petition for review.

Petitioner now submits through the Solicitor General that RMC 37-93 reclassifying Hope Luxury, Premium More and Champion as
locally manufactured cigarettes bearing brands is merely an interpretative ruling which needs no prior notice and hearing as held in
Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary. 4 It maintains that neither is the assailed
revenue memorandum circular discriminatory as it merely "lays down the test in determining whether or not a locally manufactured
cigarette bears a foreign brand using (only) the cigarette brands Hope, More and Champion as specific examples." 5

Respondent corporation on the other hand contends that RMC 37-93 is not a mere interpretative ruling but is adjudicatory in nature
where prior notice and hearing are mandatory, and that Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance
Secretary on which the Solicitor General relies heavily is not applicable. Respondent Fortune Tobacco Corporation also argues that
RMC 37-93 discriminates against its cigarette brands since those of its competitors which are similarly situated have not been
reclassified.

The main issues before us are (a) whether RMC 37-93 is merely an interpretative rule the issuance of which needs no prior notice
and hearing, or an adjudicatory ruling which calls for the twin requirements of prior notice and hearing, and, (b) whether RMC 37-93
is discriminatory in nature.

A brief discourse on the powers and functions of administrative bodies may be instructive.

Administrative agencies posses quasi-legislative or rule making powers and quasi-judicial or administrative adjudicatory powers.
Quasi-legislative or rule making power is the power to make rules and regulations which results in delegated legislation that is within
the confines of the granting statute and the doctrine of nondelegability and separability of powers.

Interpretative rule, one of the three (3) types of quasi-legislative or rule making powers of an administrative agency (the other two
being supplementary or detailed legislation, and contingent legislation), is promulgated by the administrative agency to interpret,
clarify or explain statutory regulations under which the administrative body operates. The purpose or objective of an interpretative
rule is merely to construe the statute being administered. It purports to do no more than interpret the statute. Simply, the rule tries
to say what the statute means. Generally, it refers to no single person or party in particular but concerns all those belonging to the
same class which may be covered by the said interpretative rule. It need not be published and neither is a hearing required since it is
issued by the administrative body as an incident of its power to enforce the law and is intended merely to clarify statutory provisions
for proper observance by the people. In Tañada v. Tuvera, 6 this Court expressly said that "[i]interpretative regulations . . . . need not
be published."

Quasi-judicial or administrative adjudicatory power on the other hand is the power of the administrative agency to adjudicate the
rights of persons before it. It is the power to hear and determine questions of fact to which the legislative policy is to apply and to
decide in accordance with the standards laid down by the law itself in enforcing and administering the same law. 7 The
administrative body exercises its quasi-judicial power when it performs in a judicial manner an act which is essentially of an executive
or administrative nature, where the power to act in such manner is incidental to or reasonably necessary for the performance of the
executive or administrative duty entrusted to it. 8 In carrying out their quasi-judicial functions the administrative officers or bodies
are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them
as basis for their official action and exercise of discretion in a judicial nature. Since rights of specific persons are affected it is
elementary that in the proper exercise of quasi-judicial power due process must be observed in the conduct of the proceedings.

The importance of due process cannot be underestimated. Too basic is the rule that no person shall be deprived of life, liberty or
property without due process of law. Thus when an administrative proceeding is quasi-judicial in character, notice and fair open
hearing are essential to the validity of the proceeding. The right to reasonable prior notice and hearing embraces not only the right
to present evidence but also the opportunity to know the claims of the opposing party and to meet them. The right to submit
arguments implies that opportunity otherwise the right may as well be considered impotent. And those who are brought into contest
with government in a quasi-judicial proceeding aimed at the control of their activities are entitled to be fairy advised of what the
government proposes and to be heard upon its proposal before it issues its final command.

There are cardinal primary rights which must be respected in administrative proceedings. The landmark case of Ang Tibay v. The
Court of Industrial Relations 9 enumerated these rights: (1) the right to a hearing, which includes the right of the party interested or
affected to present his own case and submit evidence in support thereof; (2) the tribunal must consider the evidence presented; (3)
the decision must have something to support itself; (4) the evidence must be substantial; (5) the decision must be rendered on the
evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected; (6) the tribunal or any of
its judges must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision; and, (7) the tribunal should in all controversial questions render its decision in such
manner that the parties to the proceeding may know the various issues involved and the reasons for the decision rendered.

In determining whether RMC No. 37-93 is merely an interpretative rule which requires no prior notice and hearing, or an
adjudicatory rule which demands the observance of due process, a close examination of RMC 37-93 is in order. Noticeably, petitioner
Commissioner of Internal Revenue at first interprets Sec. 142, par. (c), subpar. (1), of the NIRC, as amended, by citing the law and
clarifying or explaining what it means —

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,
". . . the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern . . ."

Then petitioner makes a factual finding by declaring that Hope (Luxury), (Premium) More and Champion are manufactured by other
foreign manufacturers —

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) Rettig-Strenberg, 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.

From this finding, petitioner thereafter formulates an inference that since it cannot be determined who among the manufacturers
are the real owners of the brands in question, then these cigarette brands should be considered foreign brands —

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."

Finally, petitioner caps RMC 37-93 with a disposition specifically directed at respondent corporation reclassifying its cigarette brands
as locally manufactured bearing foreign brands —

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.

It is evident from the foregoing that in issuing RMC 37-93 petitioner Commissioner of Internal Revenue was exercising her quasi-
judicial or administrative adjudicatory power. She cited and interpreted the law, made a factual finding, applied the law to her given
set of facts, arrived at a conclusion, and issued a ruling aimed at a specific individual. Consequently prior notice and hearing are
required. It must be emphasized that even the text alone of RMC 37-93 implies that reception of evidence during a hearing is
appropriate if not necessary since it invokes BIR Ruling No. 410-88, dated August 24, 1988, which provides that "in cases where it
cannot be established or there is dearth of evidence as to whether a brand is foreign or not . . . ." Indeed, it is difficult to determine
whether a brand is foreign or not if it is not established by, or there is dearth of, evidence because no hearing has been called and
conducted for the reception of such evidence. In fine, by no stretch of the imagination can RMC 37-93 be considered purely as an
interpretative rule — requiring no previous notice and hearing and simply interpreting, construing, clarifying or explaining statutory
regulations being administered by or under which the Bureau of Internal Revenue operates.

It is true that both RMC 47-91 in Misamis Oriental Association of Coco Traders v. Department of Finance Secretary, and RMC 37-93 in
the instant case reclassify certain products for purposes of taxation. But the similarity between the two revenue memorandum
circulars ends there. For in properly determining whether a revenue memorandum circular is merely an interpretative rule or an
adjudicatory rule, its very tenor and text, and the circumstances surrounding its issuance will have no to be considered.

We quote RMC 47-91 promulgated 11 June 1991 —

Revenue Memorandum Circular No. 47-91

SUBJECT : Taxability of Copra

TO : All Revenue Officials and Employees and Others Concerned.

For the information and guidance of all officials and employees and others concerned, quoted hereunder in its entirety is VAT Ruling
No. 190-90 dated August 17, 1990:

COCOFED MARKETING RESEARCH CORPORATION

6th Floor Cocofed Building
144 Amorsolo Street
Legaspi Village, Makati
Metro Manila

Attention: Ms. Esmyrna E. Reyes

Vice President — Finance

Sirs:

This has reference to your letter dated January 16, 1990 wherein you represented that inspite of your VAT registration of your copra
trading company, you are supposed to be exempt from VAT on the basis of BIR Ruling dated January 8, 1988 which considered copra
as an agricultural food product in its original state. In this connection, you request for a confirmation of your opinion as aforestated.

In reply, please be informed that copra, being an agricultural non-food product, is exempt from VAT only if sale is made by the
primary producer pursuant to Section 103 (a) of the Tax Code, as amended. Thus as a trading company and a subsequent seller, your
sale of copra is already subject to VAT pursuant to Section 9(b) (1) of Revenue Regulations 5-27.

This revokes VAT Ruling Nos. 009-88 and 279-88.

Very truly yours,

(Sgd.) JOSE U. ONG

Commissioner of Internal Revenue

As a clarification, this is the present and official stand of this Office unless sooner revoked or amended. All revenue officials and
employees are enjoined to give this Circular as wide a publicity as possible.
(Sgd.) JOSE U. ONG
Commissioner of Internal Revenue

Quite obviously, the very text of RMC 47-91 itself shows that it is merely an interpretative rule as it simply quotes a VAT Ruling and
reminds those concerned that the ruling is the present and official stand of the Bureau of Internal Revenue. Unlike in RMC 37-93
where petitioner Commissioner manifestly exercised her quasi-judicial or administrative adjudicatory power, in RMC 47-91 there
were no factual findings, no application of laws to a given set of facts, no conclusions of law, and no dispositive portion directed at
any particular party.

Another difference is that in the instant case, the issuance of the assailed revenue memorandum circular operated to subject the
taxpayer to the new law which was yet to take effect, while in Misamis, the disputed revenue memorandum circular was issued
simply to restate and then clarify the prevailing position and ruling of the administrative agency, and no new law yet to take effect
was involved. It merely interpreted an existing law which had already been in effect for some time and which was not set to be
amended. RMC 37-93 is thus prejudicial to private respondent alone.

A third difference, and this likewise resolves the issue of discrimination, is that RMC 37-93 was ostensibly issued to subject the
cigarette brands of respondent corporation to a new law as it was promulgated two days before the expiration of the old law and a
few hours before the effectivity of the new law. That RMC 37-93 is particularly aimed only at respondent corporation and its three (3)
cigarette brands can be seen from the dispositive portion of the assailed revenue memorandum circular —

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.

Thus the argument of the Solicitor General that RMC 37-93 is not discriminatory as "[i]t merely lays down the test in determining
whether or not a locally manufactured cigarette bears a foreign brand using the cigarette brands Hope, More and Champion as
specific examples," cannot be accepted, much less sustained. Without doubt, RMC 37-93 has a tremendous effect on respondent
corporation — and solely on respondent corporation — as its deficiency ad valorem tax assessment on its removals of Hope, Luxury,
Premium More, and Champion cigarettes for six (6) hours alone, i.e., from six o'clock in the evening of 2 July 1993 which is
presumably the time respondent corporation was supposed to have received the facsimile message sent by Deputy Commissioner
Victor A. Deoferio, until twelve o'clock midnight upon the effectivity of the new law, was already P9,598,334.00. On the other hand,
RMC 47-91 was issued with no purpose except to state and declare what has been the official stand of the administrative agency on
the specific subject matter, and was indiscriminately directed to all copra traders with no particular individual in mind.

That petitioner Commissioner of Internal Revenue is an expert in her filed is not attempted to be disputed; hence, we do not
question the wisdom of her act in reclassifying the cigarettes. Neither do we deny her the exercise of her quasi-legislative or quasi-
judicial powers. But most certainly, by constitutional mandate, the Court must check the exercise of these powers and ascertain
whether petitioner has gone beyond the legitimate bounds of her authority.

In the final analysis, the issue before us in not the expertise, the authority to promulgate rules, or the wisdom of petitioner as
Commissioner of Internal Revenue is reclassifying the cigarettes of private respondents. It is simply the faithful observance by
government by government of the basic constitutional right of a taxpayer to due process of law and equal protection of the laws. This
is what distresses me no end — the manner and the circumstances under which the cigarettes of private respondent were
reclassified and correspondingly taxed under RMC 37-93, and adjudicatory rule which therefore requires reasonable notice and
hearing before its issuance. It should not be confused with RMC 47-91, which is a mere interpretative rule.

In the earlier case of G.R. No. 119322, which practically involved the same opposing interests, I also voted to uphold the
constitutional right of the taxpayer concerned to due process and equal protection of the laws. By a vote of 3-2, that view prevailed.
In sequela, we in the First Division who constituted the majority found ourselves unjustly drawn into the vortex of a nightmarish
episode. The strong ripples whipped up by my opinion expressed therein — and of the majority — have yet to varnish when we are
again in the imbroglio of a similar dilemma. The unpleasant experience should be reason enough to simply steer clear of this
controversy and surf on a pretended loss of judicial objectivity. Such would have been an easy way out, a gracious exit, so to speak,
albeit lame. But to camouflage my leave with a sham excuse would be to turn away from a professional vow I keep at all times; I
would not be true to myself, and to the people I am committed to serve. Thus, as I have earlier expressed, if placed under similar
circumstances in some future time, I shall have to brave again the prospect of another vilification and a tarnished image if only to
show proudly to the whole world that under the present dispensation judicial independence in our country is a true component of
our democracy.

In fine, I am greatly perturbed by the manner RMC No. 37-93 was issued as well as the effect of such issuance. For it cannot be
denied that the circumstances clearly demonstrate that it was hastily issued — without prior notice and hearing, and singling out
private respondent alone — when two days before a new tax law was to take effect petitioner reclassified and taxed the cigarette
brands of private respondent at a higher rate. Obviously, this was to make it appear that even before the anticipated date of
effectivity of the statute — which was undeniably priorly known to petitioner — these brands were already currently classified and
taxed at fifty-five percent (55%), thus shoving them into the purview of the law that was to take effect two days after!

For sure, private respondent was not properly informed before the issuance of the questioned memorandum circular that its
cigarette brands Hope Luxury, Premium More and Champion were being reclassified and subjected to a higher tax rate. Naturally, the
result would be to lose financially because private respondent was still selling its cigarettes at a price based on the old, lower tax rate.
Had there been previous notice and hearing, as claimed by private respondent, it could have very well presented its side, either by
opposing the reclassification, or by acquiescing thereto but increasing the price of its cigarettes to adjust to the higher tax rate. The
reclassification and the ensuing imposition of a tax rate increase therefore could not be anything but confiscatory if we are also to
consider the claim of private respondent that the new tax is even higher than the cost of its cigarettes.
Accordingly, I vote to deny the petition.

HERMOSISIMA, JR., J.: dissenting

Private respondent Fortune Tobacco Corporation in the instant case disputes its liability for deficiency ad valorem excise taxes on its
removals of "Hope," "More," and "Champion" cigarettes from 6:00 p.m. to 12:00 midnight of July 2, 1993, in the total amount of
P9,598,334.00. It claims that the circular, upon which the assessment was based and made, is defective, invalid and unenforceable
for having been issued without notice and hearing and in violation of the equal protection clause guaranteed by the Constitution.

The majority upholds these claims of private respondent, convinced that the Circular in question, in the first place, did not give prior
notice and hearing, and so, it could not have been valid and effective. It proceeds to affirm the factual findings of the Court of Tax
Appeals, which findings were considered correct by respondent Court of Appeals, to the effect that the petitioner Commissioner of
Internal Revenue had indeed blatantly failed to comply with the said twin requirements of notice and hearing, thereby rendering the
issuance of the questioned Circular to be in violation of the due process clause of the Constitution. It is also its dominant opinion that
the questioned Circular discriminates against private respondent Fortune Tobacco Corporation insofar as it seems to affect only its
"Hope," "More," and "Champion" cigarettes, to the exclusion of other cigarettes apparently of the same kind or classification as these
cigarettes manufactured by private respondent.

With all due respect, I disagree with the majority in its disquisition of the issues and its resulting conclusions.

Section 245 of the National Internal Revenue Code,

as amended, empowers the Commissioner of Internal
Revenue to issue the questioned Circular

Section 245 of the National Internal Revenue Code, as amended, provides:

Sec. 245. Authority of Secretary of Finance to promulgate rules and regulations. — The Secretary of Finance, upon recommendation
of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code . .
. without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar
purposes.

The subject of the questioned Circular is the reclassification of cigarettes subject to excise taxes. It was issued in connection with
Section 142 (c) (1) of the National Internal Revenue Code, as amended, which imposes ad valorem excise taxes on locally
manufactured cigarettes bearing a foreign brand. The same provision prescribes the ultimate criterion that determines which
cigarettes are to be considered "locally manufactured cigarettes bearing a foreign brand." It provides:

. . . 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.

There is only one World Tobacco Directory for a given current year, and the same is mandated by law to be the BIR Commissioner's
controlling basis for determining whether or not a particular locally manufactured cigarette is one bearing a foreign brand. In so
making a determination, petitioner should inquire into the entries in the World Tobacco Directory for the given current year and shall
be held bound by such entries therein. She is not required to subject the results of her inquiries to feedback from the concerned
cigarette manufacturers, and it is doubtlessly not desirable nor managerially sound to court dispute thereon when the law does not,
in the first place, require debate or hearing thereon. Petitioner may make such a determination because she is the Chief Executive
Officer of the administrative agency that is the Bureau of Internal Revenue in which are vested quasi-legislative powers entrusted to
it by the legislature in recognition of its more encompassing and unequalled expertise in the field of taxation.

The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable and
oppressive. It has been necessitated by "the growing complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72,
79). More and more administrative bodies are necessary to help in the regulation of society's ramified activities. "Specialized in the
particular field assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected
from the legislature or the courts of justice" . . . 1

Statutorily empowered to issue rulings or opinions embodying the proper determination in respect to classifying articles, including
cigarettes, for purposes of tax assessment and collection, petitioner was acting well within her prerogatives when she issued the
questioned Circular. And in the exercise of such prerogatives under the law, she has in her favor the presumption of regular
performance of official duty which must be overcome by clearly persuasive evidence of stark error and grave abuse of discretion in
order to be overturned and disregarded.

It is irrelevant that the Court of Tax Appeals makes much of the effect of the passing of Republic Act No. 7654 2 on petitioner's power
to classify cigarettes. Although the decisions assailed and sought to be reviewed, as well as the pleadings of private respondent, are
replete with alleged admissions of our legislators to the effect that the said Act was intended to freeze the current classification of
cigarettes and make the same an integral part of the said Act, certainly the repeal, if any, of petitioner's power to classify cigarettes
must be reckoned from the effectivity of the said Act and not before. Suffice it to say that indisputable is the plain fact that the
questioned Circular was issued on July 1, 1993, while the said Act took effect on July 3, 1993.

The contents of the questioned circular have not

been proven to be erroneous or illegal as to render
issuance thereof an act of grave abuse of
discretion on the part of petitioner Commissioner
Prior to the effectivity of R.A. No. 7654, Section 142 (c) (1) of the National Internal Revenue Code, as amended, levies the following
ad valorem taxes on cigarettes in accordance with their predetermined classifications as established by the Commissioner of Internal
Revenue:

. . . based on the manufacturer's registered wholesale price:

(1) 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.

(2) Other locally manufactured cigarettes, forty five percent (45%).

xxx xxx xxx

Prior to the issuance of the questioned Circular, assessed against and paid by private respondent as ad valorem excise taxes on their
removals of "Hope," "More," and "Champion" cigarettes were amounts based on paragraph (2) above, i.e., the tax rate made
applicable on the said cigarettes was 45% at the most. The reason for this is that apparently, petitioner's predecessors have all made
determinations to the effect that the said cigarettes were to be considered "other locally manufactured cigarettes" and not "locally
manufactured cigarettes bearing a foreign brand." Even petitioner, until her issuance of the questioned Circular, adhered to her
predecessors' determination as to the proper classification of the above-mentioned cigarettes for purposes of ad valorem excise
taxes. Apparently, the past determination that the said cigarettes were to be classified as "other locally manufactured cigarettes" was
based on private respodnent's convenient move of changing the names of "Hope" to "Hope Luxury" and "More" to "Premium More."
It also submitted proof that "Champion" was an original Fortune Tobacco Corporation register and, therefore, a local brand. Having
registered these brands with the Philippine Patent Office and with corresponding evidence to the effect, private respondent paid ad
valorem excise taxes computed at the rate of not more than 45% which is the rate applicable to cigarettes considered as locally
manufactured brands.

How these past determinations pervaded notwithstanding their erroneous basis is only tempered by their innate quality of being
merely errors in interpretative ruling, the formulation of which does not bind the government. Advantage over such errors may
precipitously be withdrawn from those who have been benefiting from them once the same have been discovered and rectified.

Petitioner correctly emphasizes that:

. . . the registration of said brands in the name of private respondent is proof only that it is the exclusive owner thereof in the
Philippines; it does not necessarily follow, however, that it is the exclusive owner thereof in the whole world. Assuming arguendo
that private respondent is the exclusive owner of said brands in the Philippines, it does not mean that they are local. Otherwise, they
would not have been listed in the WTD as international brands manufactured by different entities in different countries. Moreover, it
cannot be said that the brands registered in the names of private respondent are not the same brands listed in the WTD because
private respondent is one of the manufacturers of said brands listed in the WTD. 3

Private respondent attempts to cast doubt on the determination made by petitioner in the questioned Circular that Japan is a
manufacturer of "Hope" cigarettes. Private respondent's own inquiry into the World Tobacco Directory reveals that Japan is not a
manufacturer of "Hope" cigarettes. In pointing this out, private respondent concludes that the entire Circular is erroneous and makes
such error the principal proof of its claim that the nature of the determination embodied in the questioned Circular requires a
hearing on the facts and a debate on the applicable law. Such a determination is adjudicatory in nature and, therefore, requires
notice and hearing. Private respondent is, however, apparently only eager to show error on the part of petitioner for acting with
grave abuse of discretion. Private respondent conveniently forgets that petitioner, equipped with the expertise in taxation,
recognized in that expertise by the legislature that vested in her the power to make rules respecting classification of articles for
taxation purposes, and presumed to have regularly exercised her prerogatives within the scope of her statutory power to issue
determinations specifically under Section 142 (c) (1) in relation to Section 245 of the National Internal Revenue Code, as amended,
simply followed the law as she understood it. Her task was to determine which cigarette brands were foreign, and she was directed
by the law to look into the World Tobacco Directory. Foreign cigarette brands were legislated to be taxed at higher rates because of
their more extensive public exposure and international reputation; their competitive edge against local brands may easily be checked
by imposition of higher tax rates. Private respondent makes a mountain of the mole hill circumstance that "Hope" is listed, not as
being "manufactured" by Japan but as being "used" by Japan. Whether manufactured or used by Japan, however, "Hope" remains a
cigarette brand that can not be said to be limited to local manufacture in the Philippines. The undeniable fact is that it is a foreign
brand the sales in the Philippines of which are greatly boosted by its international exposure and reputation. The petitioner was well
within her prerogatives, in the exercise of her rule-making power, to classify articles for taxation purposes, to interpret the laws
which she is mandated to administer. In interpreting the same, petitioner must, in general, be guided by the principles underlying
taxation, i.e., taxes are the lifeblood of Government, and revenue laws ought to be interpreted in favor of the Government, for
Government can not survive without the funds to underwrite its varied operational expenses in pursuit of the welfare of the society
which it serves and protects.

Private respondent claims that its business will be destroyed by the imposition of additional ad valorem taxes as a result of the
effectivity of the questioned Circular. It claims that under the vested rights theory, it cannot now be made to pay higher taxes after
having been assessed for less in the past. Of course private respondent will trumpet its losses, its interests, after all, being its sole
concern. What private respondent fails to see is the loss of revenue by the Government which, because of erroneous determinations
made by its past revenue commissioners, collected lesser taxes than what it was entitled to in the first place. It is every citizen's duty
to pay the correct amount of taxes. Private respondent will not be shielded by any vested rights, for there are not vested rights to
speak of respecting a wrong construction of the law by administrative officials, and such wrong interpretation does not place the
Government in estoppel to correct or overrule the same. 4

The Questioned Circular embodies an interpretative

ruling of petitioner Commissioner which as such does
not require notice and hearing

As one of the public offices of the Government, the Bureau of Internal Revenue, through its Commissioner, has grown to be a typical
administrative agency vested with a fusion of different governmental powers: the power to investigate, initiate action and control the
range of investigation, the power to promulgate rules and regulations to better carry out statutory policies, and the power to
adjudicate controversies within the scope of their activities. 5 In the realm of administrative law, we understand that such an
empowerment of administrative agencies was evolved in response to the needs of a changing society. This development arose as the
need for broad social control over complex conditions and activities became more and more pressing, and such complexity could no
longer be dealt with effectivity and directly by the legislature or the judiciary. The theory which underlies the empowerment of
administrative agencies like the Bureau of Internal Revenue, is that the issues with which such agencies deal ought to be decided by
experts, and not be a judge, at least not in the first instance or until the facts have been sifted and arranged. 6

One of the powers of administrative agencies like the Bureau of Internal Revenue, is the power to make rules. The necessity for
vesting administrative agencies with this power stems from the impracticability of the lawmakers providing general regulations for
various and varying details pertinent to a particular legislation. 7

The rules that administrative agencies may promulgate may either be legislative or interpretative. The former is a form of
subordinate legislation whereby the administrative agency is acting in a legislative capacity, supplementing the statute, filling in the
details, pursuant to a specific delegation of legislative power. 8

Interpretative rules, on the other hand, are "those which purport to do no more than interpret the statute being administered, to say
what it means." 9

There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of
a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations,
it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it
merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis Administrative Law, p. 194). Rules and regulations when
promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a
statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually
couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The
details and the manner of carrying out the law are often times left to the administrative agency entrusted with its enforcement. In
this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal
provisions that have the effect of law. (Davis, op. cit. p. 194.)

A rule is binding on the courts as long as the procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom
(Davis, op. cit. pp. 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts
that finally determine what the law means. 10

"Whether a given statutory delegation authorizes legislative or interpretative regulations depends upon whether the statute places
specific 'sanctions' behind the regulations authorized, as for example, by making it a criminal offense to disobey them, or by making
conformity with their provisions a condition of the exercise of legal privileges." 11 This is because interpretative regulations are by
nature simply statutory interpretations, which have behind them no statutory sanction. Such regulations, whether so expressly
authorized by statute or issued only as an incident of statutory administration, merely embody administrative findings of law which
are always subject to judicial determination as to whether they are erroneous or not, even when their issuance is authorized by
statute.

The questioned Circular has undisputedly been issued by petitioner in pursuance of her rule-making powers under Section 245 of the
National Internal Revenue Code, as amended. Exercising such powers, petitioner re-classified "Hope," "More" and "Champion"
cigarettes as locally manufactured cigarettes bearing foreign brands. The re-classification, as previously explained, is the correct
interpretation of Section 142 (c) (1) of the said Code. The said legal provision is not accompanied by any penal sanction, and no detail
had to be filled in by petitioner. The basis for the classification of cigarettes has been provided for by the legislature, and all petitioner
has to do, on behalf of the government agency she heads, is to proceed to make the proper determination using the criterion
stipulated by the lawmaking body. In making the proper determination, petitioner gave it a liberal construction consistent with the
rule that revenue laws are to be construed in favor of the Government whose survival depends on the contributions that taxpayers
give to the public coffers that finance public services and other governmental operations.

The Bureau of Internal Revenue which petitioner heads, is the government agency charged with the enforcement of the laws
pertinent to this case and so, the opinion of the Commissioner of Internal Revenue, in the absence of a clear showing that it is plainly
wrong, is entitled to great weight. Private respondent claims that its rights under previous interpretations of Section 142 (c) (1) may
not abruptly be cut by a new interpretation of the said section, but precisely the said section is subject to various and changing
construction, and hence, any ruling issued by petitioner thereon is necessarily interpretative and not legislative. Private respondent
insists that the questioned circular is adjudicatory in nature because it determined the rights of private respondent in a controversy
involving his tax liability. It also asseverates that the questioned circular involved administrative action that is particular and
immediate, thereby rendering it subject to the requirements of notice and hearing in compliance with the due process clause of the
Constitution.

We find private respondent's arguments to be rather strained.

Petitioner made a determination as to the classification of cigarettes as mandated by the aforecited provisions in the National
Internal Revenue Code, as amended. Such determination was an interpretation by petitioner of the said legal provisions. If in the
course of making the interpretation and embodying the same in the questioned circular which the petitioner subsequently issued
after making such a determination, private respondent's cigarettes products, by their very nature of being foreign brands as
evidenced by their enlistment in the World Tobacco Directory, which is the controlling basis for the proper classification of cigarettes
as stipulated by the law itself, have come to be classified as locally manufactured cigarettes bearing foreign brands and as such
subject to a tax rate higher than what was previously imposed thereupon based on past rulings of other revenue commissioners,
such a situation is simply a consequence of the performance by petitioner of here duties under the law. No adjudication took place,
much less was there any controversy ripe for adjudication. The natural consequences of making a classification in accordance with
law may not be used by private respondent in arguing that the questioned circular is in fact adjudicatory in nature. Such an exercise
in driving home a point is illogical as it is fallacious and misplaced.

Private respondent concedes that under general rules of administrative law, "a ruling which is merely 'interpretative' in character
may not require prior notice to affected parties before its issuance as well as a hearing" and "for this reason, in most instances,
interpretative regulations are not given the force of law." 12 Indeed, "interpretative regulations and those merely internal in nature
. . . need not be published." 13 And it is now settled that only legislative regulations and not interpretative rulings must have the
benefit of public
hearing. 14

Because (1) the questioned circular merely embodied an interpretation or a way of reading and giving meaning to Section 142 (c) (1)
of the National Internal Revenue Code, as amended; (2) petitioner did not fill in any details in the aforecited section but only
classified cigarettes on the basis of the World Tobacco Directory in the light of the paramount principle of construing revenue laws in
favor of the Government to the end that Government collects as much tax money as it is entitled to in order to fulfill its public
purposes for the general good of its citizens; (3) no penal sanction is provided in the aforecited section that was construed by
petitioner in the questioned circular; and (4) a similar circular declassifying copra from being an agricultural food to non-food product
for purposes of the value added tax laws, resulting in the revocation of an exemption previously enjoyed by copra traders, has been
ruled by us to be merely an interpretative ruling and not a legislative, much less, an adjudicatory, action on the part of the revenue
commissioner, 15 this Court must not be blind to the fact that the questioned Circular is indeed an interpretative ruling not subject to
notice and hearing.

Neither is the questioned Circular tainted by a

violation of the equal protection clause under the
Constitution

Private respondent anchors its claim of violation of its equal protection rights upon the too obvious fact that only its cigarette brands,
i.e., "Hope," "More" and "Champion," are mentioned in the questioned circular. Because only the cigarettes that they manufacture
are enumerated in the questioned circular, private respondent proceeded to attack the same as being discriminatory against it. On
the surface, private respondent seems to have a point there. A scrutiny of the questioned Circular, however, will show that it is
undisputedly one of general application for all cigarettes that are similarly situated as private respondent's brands. The new
interpretation of Section 142 (1) (c) has been well illustrated in its application upon private respondent's brands, which illustration is
properly a subject of the questioned Circular. Significantly, indicated as the subject of the questioned circular is the "reclassification
of cigarettes subject to excise taxes." The reclassification resulted in the foregrounding of private respondent's cigarette brands,
which incidentally is largely due to the controversy spawned no less by private respondent's own action of conveniently changing its
brand names to avoid falling under a classification that would subject it to higher ad valorem tax rates. This caused then
Commissioner Bienvenido Tan to depart from his initial determination that private respondent's cigarette brands are foreign brands.
The consequent specific mention of such brands in the questioned Circular, does not change the fact that the questioned Circular has
always been intended for and did cover, all cigarettes similarly situated as "Hope," "More" and "Champion." Petitioner is thus correct
in stating that:

. . . RMC 37-93 is not discriminatory. It lays down the test in determining whether or not a locally manufactured cigarette bears a
foreign brand using the cigarette brands "Hope," More and "Champion" as specific examples. Such test applies to all locally
manufactured cigarette brands similarly situated as the cigarette brands aforementioned. While it is true that only "Hope," "More"
and "Champion" cigarettes are actually determined as locally manufactured cigarettes bearing a foreign brand, RMC 37-93 does not
state that ONLY cigarettes fall under such classification to the exclusion of other cigarettes similarly situated. Otherwise stated, RMC
37-93 does not exclude the coverage of other cigarettes similarly situated. Otherwise stated, RMC 37-93 does not exclude the
coverage of other cigarettes similarly situated as locally manufactured cigarettes bearing a foreign brand. Hence, in itself, RMC 37-93
is not discriminatory. 16

Both the respondent Court of Appeals and the Court of Tax Appeals held that the questioned Circular reclassifying "Hope," "More"
and "Champion" cigarettes, is defective, invalid and unenforceable and has rendered the assessment against private respondent of
deficiency ad valorem excise taxes to be without legal basis. The majority agrees with private respondent and respondent Courts. As
the foregoing opinion chronicles the fatal flaws in private respondent's arguments, it becomes more apparent that the questioned
Circular is in fact a valid and subsisting interpretative ruling that the petitioner had power to promulgate and enforce.

WHEREFORE, I vote to grant the petition and set aside the decisions of the Court of Tax Appeals and the Court of Appeals,
respectively, and to reinstate the decision of petitioner Commissioner of Internal Revenue denying private respondent's request for a
review, reconsideration and recall of Revenue Memorandum Circular No. 37-93 dated July 1, 1993.

Padilla, J., concurs.

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 179579 February 1, 2012

COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC, Petitioners,
vs.
HYPERMIX FEEDS CORPORATION, Respondent.
DECISION

SERENO, J.:

Before us is a Petition for Review under Rule 45,1 assailing the Decision2 and the Resolution3 of the Court of Appeals (CA), which
nullified the Customs Memorandum Order (CMO) No. 27-20034 on the tariff classification of wheat issued by petitioner
Commissioner of Customs.

The antecedent facts are as follows:

On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the Memorandum, for tariff purposes,
wheat was classified according to the following: (1) importer or consignee; (2) country of origin; and (3) port of discharge.5 The
regulation provided an exclusive list of corporations, ports of discharge, commodity descriptions and countries of origin. Depending
on these factors, wheat would be classified either as food grade or feed grade. The corresponding tariff for food grade wheat was 3%,
for feed grade, 7%.

CMO 27-2003 further provided for the proper procedure for protest or Valuation and Classification Review Committee (VCRC) cases.
Under this procedure, the release of the articles that were the subject of protest required the importer to post a cash bond to cover
the tariff differential.6

A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition for Declaratory Relief7 with the
Regional Trial Court (RTC) of Las Piñas City. It anticipated the implementation of the regulation on its imported and perishable
Chinese milling wheat in transit from China.8 Respondent contended that CMO 27-2003 was issued without following the mandate
of the Revised Administrative Code on public participation, prior notice, and publication or registration with the University of the
Philippines Law Center.

Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier without the benefit of prior
assessment and examination; thus, despite having imported food grade wheat, it would be subjected to the 7% tariff upon the arrival
of the shipment, forcing them to pay 133% more than was proper.

Furthermore, respondent claimed that the equal protection clause of the Constitution was violated when the regulation treated non-
flour millers differently from flour millers for no reason at all.

Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in nature.

On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for twenty (20) days from notice.9

Petitioners thereafter filed a Motion to Dismiss.10 They alleged that: (1) the RTC did not have jurisdiction over the subject matter of
the case, because respondent was asking for a judicial determination of the classification of wheat; (2) an action for declaratory relief
was improper; (3) CMO 27-2003 was an internal administrative rule and not legislative in nature; and (4) the claims of respondent
were speculative and premature, because the Bureau of Customs (BOC) had yet to examine respondent’s products. They likewise
opposed the application for a writ of preliminary injunction on the ground that they had not inflicted any injury through the issuance
of the regulation; and that the action would be contrary to the rule that administrative issuances are assumed valid until declared
otherwise.

On 28 February 2005, the parties agreed that the matters raised in the application for preliminary injunction and the Motion to
Dismiss would just be resolved together in the main case. Thus, on 10 March 2005, the RTC rendered its Decision11 without having
to resolve the application for preliminary injunction and the Motion to Dismiss.

The trial court ruled in favor of respondent, to wit:

WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject Customs Memorandum Order 27-2003 is declared
INVALID and OF NO FORCE AND EFFECT. Respondents Commissioner of Customs, the District Collector of Subic or anyone acting in
their behalf are to immediately cease and desist from enforcing the said Customs Memorandum Order 27-2003.

SO ORDERED.12

The RTC held that it had jurisdiction over the subject matter, given that the issue raised by respondent concerned the quasi-
legislative powers of petitioners. It likewise stated that a petition for declaratory relief was the proper remedy, and that respondent
was the proper party to file it. The court considered that respondent was a regular importer, and that the latter would be subjected
to the application of the regulation in future transactions.

With regard to the validity of the regulation, the trial court found that petitioners had not followed the basic requirements of hearing
and publication in the issuance of CMO 27-2003. It likewise held that petitioners had "substituted the quasi-judicial determination of
the commodity by a quasi-legislative predetermination."13 The lower court pointed out that a classification based on importers and
ports of discharge were violative of the due process rights of respondent.

Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the same allegations in defense of CMO 27-
2003.14 The appellate court, however, dismissed the appeal. It held that, since the regulation affected substantial rights of
petitioners and other importers, petitioners should have observed the requirements of notice, hearing and publication.

Hence, this Petition.

Petitioners raise the following issues for the consideration of this Court:
I. THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS NOT IN ACCORD WITH THE LAW AND PREVAILING
JURISPRUDENCE.

II. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE TRIAL COURT HAS JURISDICTION OVER THE CASE.

The Petition has no merit.

We shall first discuss the propriety of an action for declaratory relief.

Rule 63, Section 1 provides:

Who may file petition. – Any person interested under a deed, will, contract or other written instrument, or whose rights are affected
by a statute, executive order or regulation, ordinance, or any other governmental regulation may, before breach or violation thereof,
bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a
declaration of his rights or duties, thereunder.

The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable controversy; (2) the controversy
must be between persons whose interests are adverse; (3) the party seeking declaratory relief must have a legal interest in the
controversy; and (4) the issue involved must be ripe for judicial determination.15 We find that the Petition filed by respondent before
the lower court meets these requirements.

First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner Commissioner of Customs. In Smart
Communications v. NTC,16 we held:

The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law or the
constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the power
to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation in the
courts, including the regional trial courts. This is within the scope of judicial power, which includes the authority of the courts to
determine in an appropriate action the validity of the acts of the political departments. Judicial power includes the duty of the courts
of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)

Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary,17 we said:

xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details
thereof. xxx

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.

Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether the rule is within the delegated
authority of the administrative agency; (ii) whether it is reasonable; and (iii) whether it was issued pursuant to proper procedure. But
the court is not free to substitute its judgment as to the desirability or wisdom of the rule for the legislative body, by its delegation of
administrative judgment, has committed those questions to administrative judgments and not to judicial judgments. In the case of an
interpretative rule, the inquiry is not into the validity but into the correctness or propriety of the rule. As a matter of power a court,
when confronted with an interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the opposite extreme and
substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the interpretative rule. (Emphasis supplied)

Second, the controversy is between two parties that have adverse interests. Petitioners are summarily imposing a tariff rate that
respondent is refusing to pay.

Third, it is clear that respondent has a legal and substantive interest in the implementation of CMO 27-2003. Respondent has
adequately shown that, as a regular importer of wheat, on 14 August 2003, it has actually made shipments of wheat from China to
Subic. The shipment was set to arrive in December 2003. Upon its arrival, it would be subjected to the conditions of CMO 27-2003.
The regulation calls for the imposition of different tariff rates, depending on the factors enumerated therein. Thus, respondent
alleged that it would be made to pay the 7% tariff applied to feed grade wheat, instead of the 3% tariff on food grade wheat. In
addition, respondent would have to go through the procedure under CMO 27-2003, which would undoubtedly toll its time and
resources. The lower court correctly pointed out as follows:

xxx As noted above, the fact that petitioner is precisely into the business of importing wheat, each and every importation will be
subjected to constant disputes which will result into (sic) delays in the delivery, setting aside of funds as cash bond required in the
CMO as well as the resulting expenses thereof. It is easy to see that business uncertainty will be a constant occurrence for petitioner.
That the sums involved are not minimal is shown by the discussions during the hearings conducted as well as in the pleadings filed. It
may be that the petitioner can later on get a refund but such has been foreclosed because the Collector of Customs and the
Commissioner of Customs are bound by their own CMO. Petitioner cannot get its refund with the said agency. We believe and so find
that Petitioner has presented such a stake in the outcome of this controversy as to vest it with standing to file this petition.18
(Emphasis supplied)

Finally, the issue raised by respondent is ripe for judicial determination, because litigation is inevitable19 for the simple and
uncontroverted reason that respondent is not included in the enumeration of flour millers classified as food grade wheat importers.
Thus, as the trial court stated, it would have to file a protest case each time it imports food grade wheat and be subjected to the 7%
tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the circumstances of the case.

Considering that the questioned regulation would affect the substantive rights of respondent as explained above, it therefore follows
that petitioners should have applied the pertinent provisions of Book VII, Chapter 2 of the Revised Administrative Code, to wit:

Section 3. Filing. – (1) Every agency shall file with the University of the Philippines Law Center three (3) certified copies of every rule
adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months from that date shall
not thereafter be the bases of any sanction against any party of persons.

xxx xxx xxx

Section 9. Public Participation. - (1) 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.

(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.

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.20

Likewise, in Tañada v. Tuvera,21 we held:

The clear object of the above-quoted provision is to give the general public adequate notice of the various laws which are to regulate
their actions and conduct as citizens. Without such notice and publication, there would be no basis for the application of the maxim
"ignorantia legis non excusat." It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a
law of which he had no notice whatsoever, not even a constructive one.

Perhaps at no time since the establishment of the Philippine Republic has the publication of laws taken so vital significance that at
this time when the people have bestowed upon the President a power heretofore enjoyed solely by the legislature. While the people
are kept abreast by the mass media of the debates and deliberations in the Batasan Pambansa – and for the diligent ones, ready
access to the legislative records – no such publicity accompanies the law-making process of the President. Thus, without publication,
the people have no means of knowing what presidential decrees have actually been promulgated, much less a definite way of
informing themselves of the specific contents and texts of such decrees. (Emphasis supplied)

Because petitioners failed to follow the requirements enumerated by the Revised Administrative Code, the assailed regulation must
be struck down.

Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for being violative of the equal protection
clause of the Constitution.

The equal protection clause means that no person or class of persons shall be deprived of the same protection of laws enjoyed by
other persons or other classes in the same place in like circumstances. Thus, the guarantee of the equal protection of laws is not
violated if there is a reasonable classification. For a classification to be reasonable, it must be shown that (1) it rests on substantial
distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to existing conditions only; and (4) it applies equally to all
members of the same class.22

Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat is affected by who imports
it, where it is discharged, or which country it came from.

Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade wheat, the product would still be
declared as feed grade wheat, a classification subjecting them to 7% tariff. On the other hand, even if the importers listed under CMO
27-2003 have imported feed grade wheat, they would only be made to pay 3% tariff, thus depriving the state of the taxes due. The
regulation, therefore, does not become disadvantageous to respondent only, but even to the state.

It is also not clear how the regulation intends to "monitor more closely wheat importations and thus prevent their misclassification."
A careful study of CMO 27-2003 shows that it not only fails to achieve this end, but results in the opposite. The application of the
regulation forecloses the possibility that other corporations that are excluded from the list import food grade wheat; at the same
time, it creates an assumption that those who meet the criteria do not import feed grade wheat. In the first case, importers are
unnecessarily burdened to prove the classification of their wheat imports; while in the second, the state carries that burden.

Petitioner Commissioner of Customs also went beyond his powers when the regulation limited the customs officer’s duties mandated
by Section 1403 of the Tariff and Customs Law, as amended. The law provides:

Section 1403. – Duties of Customs Officer Tasked to Examine, Classify, and Appraise Imported Articles. – The customs officer tasked
to examine, classify, and appraise imported articles shall determine whether the packages designated for examination and their
contents are in accordance with the declaration in the entry, invoice and other pertinent documents and shall make return in such a
manner as to indicate whether the articles have been truly and correctly declared in the entry as regard their quantity,
measurement, weight, and tariff classification and not imported contrary to law. He shall submit samples to the laboratory for
analysis when feasible to do so and when such analysis is necessary for the proper classification, appraisal, and/or admission into the
Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in which they are usually bought and sold, and appraise the
imported articles in accordance with Section 201 of this Code.

Failure on the part of the customs officer to comply with his duties shall subject him to the penalties prescribed under Section 3604
of this Code.1âwphi1

The provision mandates that the customs officer must first assess and determine the classification of the imported article before
tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before the customs officer had the chance
to examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by the Tariff and Customs Code with
regard to wheat importation when it no longer required the customs officer’s prior examination and assessment of the proper
classification of the wheat.

It is well-settled that rules and regulations, which are the product of a delegated power to create new and additional legal provisions
that have the effect of law, should be within the scope of the statutory authority granted by the legislature to the administrative
agency. It is required that the regulation be germane to the objects and purposes of the law; and that it be not in contradiction to,
but in conformity with, the standards prescribed by law.23

In summary, petitioners violated respondent’s right to due process in the issuance of CMO 27-2003 when they failed to observe the
requirements under the Revised Administrative Code. Petitioners likewise violated respondent’s right to equal protection of laws
when they provided for an unreasonable classification in the application of the regulation. Finally, petitioner Commissioner of
Customs went beyond his powers of delegated authority when the regulation limited the powers of the customs officer to examine
and assess imported articles.

WHEREFORE, in view of the foregoing, the Petition is DENIED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-16704 March 17, 1962

VICTORIAS MILLING COMPANY, INC., petitioner-appellant,

vs.
SOCIAL SECURITY COMMISSION, respondent-appellee.

Ross, Selph and Carrascoso for petitioner-appellant.

Office of the Solicitor General and Ernesto T. Duran for respondent-appellee.

BARRERA, J.:

On October 15, 1958, the Social Security Commission issued its Circular No. 22 of the following tenor: .

Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the
Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will
comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a
maximum of P500 for any one month.

Upon receipt of a copy thereof, petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in
effect protesting against the circular as contradictory to a previous Circular No. 7, dated October 7, 1957 expressly excluding
overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions, and
submitting, "In order to assist your System in arriving at a proper interpretation of the term 'compensation' for the purposes of" such
computation, their observations on Republic Act 1161 and its amendment and on the general interpretation of the words
"compensation", "remuneration" and "wages". Counsel further questioned the validity of the circular for lack of authority on the part
of the Social Security Commission to promulgate it without the approval of the President and for lack of publication in the Official
Gazette.

Overruling these objections, the Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the
approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the
statute, a mere statement of general policy or opinion as to how the law should be construed.

Not satisfied with this ruling, petitioner comes to this Court on appeal.

The single issue involved in this appeal is whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of
Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President
such rules and regulations as may be necessary to carry out the provisions and purposes of this Act."

There can be no doubt that there is a distinction between an administrative rule or regulation and an administrative interpretation of
a law whose enforcement is entrusted to an administrative body. When an administrative agency promulgates rules and regulations,
it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it
merely interprets a pre-existing law (Parker, Administrative Law, p. 197; Davis, Administrative Law, p. 194). Rules and regulations
when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the
nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes
are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the
legislature. The details and the manner of carrying out the law are often times left to the administrative agency entrusted with its
enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or
additional legal provisions that have the effect of law. (Davis, op. cit., p. 194.) .

A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom
(Davis, op. cit., 195-197). On the other hand, administrative interpretation of the law is at best merely advisory, for it is the courts
that finally determine what the law means.

Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social
Security Law defining the term "compensation" contained in Section 8 (f) of Republic Act No. 1161 which, before its amendment,
reads as follows: .

(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than
cash except (1) that part of the remuneration in excess of P500 received during the month; (2) bonuses, allowances or overtime pay;
and (3) dismissal and all other payments which the employer may make, although not legally required to do so.

Republic Act No. 1792 changed the definition of "compensation" to:

(f) Compensation — All remuneration for employment include the cash value of any remuneration paid in any medium other than
cash except that part of the remuneration in excess of P500.00 received during the month.

It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or
base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion was
deleted by the amendatory law. It thus became necessary for the Social Security Commission to interpret the effect of such deletion
or elimination. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the
Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law
as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed. 1äwphï1.ñët

The case of People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does not support its contention that
the circular in question is a rule or regulation. What was there said was merely that a regulation may be incorporated in the form of a
circular. Such statement simply meant that the substance and not the form of a regulation is decisive in determining its nature. It
does not lay down a general proposition of law that any circular, regardless of its substance and even if it is only interpretative,
constitutes a rule or regulation which must be published in the Official Gazette before it could take effect.

The case of People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present case, because the penalty that
may be incurred by employers and employees if they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which
the employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific legal
provisions contained in Section 27(c) and (f) of Republic Act No. 1161.

We find, therefore, that Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the
amendment of the law, they should include in determining the monthly compensation of their employees upon which the social
security contributions should be based, and that such circular did not require presidential approval and publication in the Official
Gazette for its effectivity.

It hardly need be said that the Commission's interpretation of the amendment embodied in its Circular No. 22, is correct. The express
elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the
"compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's
remuneration in pursuance of the amendatory law. It is true that in previous cases, this Court has held that bonus is not demandable
because it is not part of the wage, salary, or compensation of the employee. But the question in the instant case is not whether
bonus is demandable or not as part of compensation, but whether, after the employer does, in fact, give or pay bonus to his
employees, such bonuses shall be considered compensation under the Social Security Act after they have been received by the
employees. While it is true that terms or words are to be interpreted in accordance with their well-accepted meaning in law,
nevertheless, when such term or word is specifically defined in a particular law, such interpretation must be adopted in enforcing
that particular law, for it can not be gainsaid that a particular phrase or term may have one meaning for one purpose and another
meaning for some other purpose. Such is the case that is now before us. Republic Act 1161 specifically defined what "compensation"
should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in
the original Act. By virtue of this express substantial change in the phraseology of the law, whatever prior executive or judicial
construction may have been given to the phrase in question should give way to the clear mandate of the new law.

IN VIEW OF THE FOREGOING, the Resolution appealed from is hereby affirmed, with costs against appellant. So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon and De Leon, JJ., concur.

Republic of the Philippines

SUPREME COURT

FIRST DIVISION

G.R. No. 163448. March 08, 2005

NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional Director, NFA Regional Office No. 1, San Juan,
La Union, Petitioners,
vs.
MASADA SECURITY AGENCY, INC., represented by its Acting President & General Manager, COL. EDWIN S. ESPEJO (RET.),
Respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the February 12, 2004 decision1 of the Court of Appeals in
CA-G.R. CV No. 76677, which dismissed the appeal filed by petitioner National Food Authority (NFA) and its April 30, 2004 resolution
denying petitioner’s motion for reconsideration.

The antecedent facts show that on September 17, 1996, respondent MASADA Security Agency, Inc., entered into a one year2
contract3 to provide security services to the various offices, warehouses and installations of NFA within the scope of the NFA Region
I, comprised of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of said contract, the
parties extended the effectivity thereof on a monthly basis under same terms and condition.4

Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage
rate. Accordingly, respondent requested NFA for a corresponding upward adjustment in the monthly contract rate consisting of the
increases in the daily minimum wage of the security guards as well as the corresponding raise in their overtime pay, holiday pay, 13th
month pay, holiday and rest day pay. It also claimed increases in Social Security System (SSS) and Pag-ibig premiums as well as in the
administrative costs and margin. NFA, however, granted the request only with respect to the increase in the daily wage by multiplying
the amount of the mandated increase by 30 days and denied the same with respect to the adjustments in the other benefits and
remunerations computed on the basis of the daily wage.

Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of the
Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National Wages and
Productivity Commission. Despite the advisory5 of said offices sustaining the claim of respondent that the increase mandated by
Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA maintained its stance
that it is not liable to pay the corresponding adjustments in the wage related benefits of respondent’s security guards.

On May 4, 2001, respondent filed with the Regional Trial Court of Quezon, City, Branch 83, a case for recovery of sum of money
against NFA. Docketed as Civil Case No. Q-01-43988, the complaint6 sought reimbursement of the following amounts allegedly paid
by respondent to the security guards, to wit: P2,949,302.84, for unpaid wage related benefits brought about by the effectivity of
Wage Order Nos. RB 1-05 and RB CAR-04;7 RB 1-06 and RB CAR-05;8 RB 1-07 and RB CAR-06;9 and P975,493.04 for additional cost
and margin, plus interest. It also prayed for damages and litigation expenses.10

In its answer with counterclaim,11 NFA denied that respondent paid the security guards their wage related benefits and that it
shouldered the additional costs and margin arising from the implementation of the wage orders. It admitted, however, that it heeded
respondent’s request for adjustment only with respect to increase in the minimum wage and not with respect to the other wage
related benefits. NFA argued that respondent cannot demand an adjustment on said salary related benefits because it is bound by
their contract expressly limiting NFA’s obligation to pay only the increment in the daily wage.

At the pre-trial, the only issue raised was whether or not respondent is entitled to recover from NFA the wage related benefits of the
security guards.12

On September 19, 2002, the trial court rendered a decision13 in favor of respondent holding that NFA is liable to pay the security
guards’ wage related benefits pursuant to RA 6727, because the basis of the computation of said benefits, like overtime pay, holiday
pay, SSS and Pag-ibig premium, is the increased minimum wage. It also found NFA liable for the consequential adjustments in
administrative costs and margin. The trial court absolved defendant Juanito M. David having been impleaded in his official capacity as
Regional Director of NFA Regional Office No. 1, San Juan, La Union. The dispositive portion thereof, reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff MASADA Security Agency, Inc., and against defendant National Food
Authority ordering said defendant to make the corresponding adjustment in the contract price in accordance with the increment
mandated under the various wage orders, particularly Wage Order Nos. RBI-05, RBCAR-04, RBI-06, RBCAR-05, RBI-07 and RBCAR-06
and to pay plaintiff the amounts representing the adjustments in the wage-related benefits of the security guards and consequential
increase in its administrative cost and margin upon presentment by plaintiff of the corresponding voucher claims.

Plaintiff’s claims for damages and attorney’s fees and defendants counterclaim for damages are hereby denied.

Defendant Juanito M. David is hereby absolved from any liability.

SO ORDERED.14

NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. The appellate court held that the proper
recourse of NFA is to file a petition for review under Rule 45 with this Court, considering that the appeal raised a pure question of
law. Nevertheless, it proceeded to discuss the merits of the case for "purposes of academic discussion" and eventually sustained the
ruling of the trial court that NFA is under obligation to pay the administrative costs and margin and the wage related benefits of the
respondent’s security guards.15

On April 30, 2004, the Court of Appeals denied NFA’s motion for reconsideration.16 Hence, the instant petition.
The issue for resolution is whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage
orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the minimum wage.

At the outset, it should be noted that the proper remedy of NFA from the adverse decision of the trial court is a petition for review
under Rule 45 directly with this Court because the issue involved a question of law. However, in the interest of justice we deem it
wise to overlook the procedural technicalities if only to demonstrate that despite the procedural infirmity, the instant petition is
impressed with merit.17

RA 672718 (Wage Rationalization Act), which took effect on July 1, 1989,19 declared it a policy of the State to rationalize the fixing of
minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industrial dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth.20

In line with its declared policy, RA 6727, created the National Wages and Productivity Commission (NWPC),21 vested, inter alia, with
the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the
regional, provincial or industry levels;22 and the Regional Tripartite Wages and Productivity Boards (RTWPB) which, among others,
determine and fix the minimum wage rates applicable in their respective region, provinces, or industries therein and issue the
corresponding wage orders, subject to the guidelines issued by the NWPC.23 Pursuant to its wage fixing authority, the RTWPB issue
wage orders which set the daily minimum wage rates.24

Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. Section 6 of RA 6727, however,
expressly lodged said obligation to the principals or indirect employers in construction projects and establishments providing
security, janitorial and similar services. Substantially the same provision is incorporated in the wage orders issued by the RTWPB.25
Section 6 of RA 6727, provides:

SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in
the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall
be deemed amended accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates, the
construction/service contractor shall be jointly and severally liable with his principal or client. (Emphasis supplied)

NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in the statutory
minimum wage rate, i.e., the rate for a regular eight (8) hour work day.

The contention is meritorious.

In construing the word "wage" in Section 6 of RA 6727, reference must be had to Section 4 (a) of the same Act. It states:

SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers and employees in the private sector,
whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day … (Emphasis supplied)

The term "wage" as used in Section 6 of RA 6727 pertains to no other than the "statutory minimum wage" which is defined under
the Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker.26 The basis thereof
under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the prescribed
increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or amount added to the
remuneration of an employee for an 8-hour work.

Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation
or construction, be extended to others.27 Since the increase in wage referred to in Section 6 pertains to the "statutory minimum
wage" as defined herein, principals in service contracts cannot be made to pay the corresponding wage increase in the overtime pay,
night shift differential, holiday and rest day pay, premium pay and other benefits granted to workers. While basis of said
remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the
subject provision.

The settled rule in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal
meaning and applied without interpretation. This plain meaning rule or verba legis derived from the maxim index animi sermo est
(speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly
express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of
the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. Verba
legis non est recedendum, or from the words of a statute there should be no departure.28

The presumption therefore is that lawmakers are well aware that the word "wage" as used in Section 6 means the statutory
minimum wage. If their intention was to extend the obligation of principals in service contracts to the payment of the increment in
the other benefits and remuneration of workers, it would have so expressly specified. In not so doing, the only logical conclusion is
that the legislature intended to limit the additional obligation imposed on principals in service contracts to the payment of the
increment in the statutory minimum wage.

The general rule is that construction of a statute by an administrative agency charged with the task of interpreting or applying the
same is entitled to great weight and respect. The Court, however, is not bound to apply said rule where such executive
interpretation, is clearly erroneous, or when there is no ambiguity in the law interpreted, or when the language of the words used is
clear and plain, as in the case at bar. Besides, administrative interpretations are at best advisory for it is the Court that finally
determines what the law means.29 Hence, the interpretation given by the labor agencies in the instant case which went as far as
supplementing what is otherwise not stated in the law cannot bind this Court.
It is not within the province of this Court to inquire into the wisdom of the law for indeed, we are bound by the words of the
statute.30 The law is applied as it is. At any rate, the interest of the employees will not be adversely affected if the obligation of
principals under the subject provision will be limited to the increase in the statutory minimum wage. This is so because all
remuneration and benefits other than the increased statutory minimum wage would be shouldered and paid by the employer or
service contractor to the workers concerned. Thus, in the end, all allowances and benefits as computed under the increased rate
mandated by RA 6727 and the wage orders will be received by the workers.

Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service contractors. Under
the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the prescribed wage rates, the
service contractor shall be held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of the Labor Code provides:

ART. 106. Contractor or Subcontractor. – Whenever an employer enters into contract with another person for the performance of the
former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees directly employed by him.

ART. 107. Indirect Employer. – The provisions of the immediately preceding Article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work,
task, job or project.

ART. 109. Solidary Liability. – The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer
shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of
determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the liability of the
principal. So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum wage is complied
with, the Wage Rationalization Act is not violated.

In the instant case, Article IV.4 of the service contract provides:

IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the PADPAO rate, the AGENCY may
negotiate for an adjustment in the contract price. Any adjustment shall be applicable only to the increment, based on published and
circulated rates and not on mere certification.31

In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:

3. For purposes of wage adjustments, consider only the rate based on the wage Order issued by the Regional Tripartite Wage
Productivity Board (RTWPB). Unless otherwise provided in the Wage Order issued by the RTWPB, the wage adjustment shall be
limited to the increment in the legislated minimum wage;32

The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA 6727.
There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to the
payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.33
Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having discharged its obligation
to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent. The latter’s complaint for
collection of remuneration and benefits other than the increased minimum wage rate, should therefore be dismissed for lack of
cause of action.

The same goes for respondent’s claim for administrative cost and margin. Considering that respondent failed to establish a clear
obligation on the part of NFA to pay the same as well as to substantiate the amount thereof with documentary evidence, the claim
should be denied.

WHEREFORE, the petition is GRANTED. The February 12, 2004 decision and the April 30, 2004 resolution of the Court of Appeals
which dismissed petitioner National Food Authority’s appeal and motion for reconsideration, respectively, in CA-G.R. CV No. 76677,
are REVERSED and SET ASIDE. The complaint filed by respondent MASADA Security Agency, Inc., docketed as Civil Case No. Q-01-
43988, before the Regional Trial Court of Quezon, City, Branch 83, is ordered DISMISSED.

SO ORDERED.

Davide Jr., C.J., (Chairman), Quisumbing, Carpio and Azcuna, JJ., concur.

PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

[G.R. No. 126999. August 30, 2000.]

SGMC REALTY CORPORATION, Petitioner, v. OFFICE OF THE PRESIDENT (OP), RIDGEVIEW REALTY CORPORATION, SM INVESTMENTS
CORPORATION, MULTI-REALTY DEVELOPMENT CORP., HENRY SY SR., HENRY SY JR., HANS T. SY, MARY UY TY and VICTOR LIM,
Respondents.
RESOLUTION

QUISUMBING, J.:

In this special civil action for certiorari, petitioner seeks to set aside the decision 1 of public respondent rendered on June 18, 1996,
in OP Case No. 95-L-6333, and its order 2 dated October 1, 1996, denying the motion for reconsideration.

The records disclose that on March 29, 1994, petitioner filed before the Housing and Land Use Regulatory Board (HLURB) a complaint
for breach of contract, violation of property rights and damages against private respondents. After the parties filed their pleadings
and supporting documents, the arbiter rendered a decision dismissing petitioner’s complaint as well as private respondents’
counterclaim.

Petitioner then filed a petition for review with the Board of Commissioners of the HLURB which, however, dismissed said petition. On
October 23, 1995, petitioner received a copy of said decision of the Board of Commissioners. On November 20, 1995, petitioner filed
an appeal with public Respondent. After the parties filed their memorandum, they filed their respective draft decisions as ordered by
public Respondent.

On June 18, 1996, public respondent, without delving into the merits of the case, rendered the assailed decision which reads:jgc

"IN VIEW OF THE FOREGOING, the appeal is hereby DISMISSED for being filed out of time.

"SO ORDERED." 3

Petitioner seasonably filed a motion for reconsideration which was denied. Undaunted, petitioner filed the instant petition, alleging
that public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction:chanrob1es virtual 1aw
library

[I]

. . . IN HOLDING THAT THE PERIOD TO APPEAL FROM THE HOUSING AND LAND USE REGULATORY BOARD TO THE OFFICE OF THE
PRESIDENT IS FIFTEEN (15) DAYS AND NOT THIRTY (30) DAYS AS MANDATED IN THE 1994 RULES OF PROCEDURE ADOPTED BY THE
HOUSING AND LAND USE REGULATORY BOARD, AN ADMINISTRATIVE AGENCY UNDER THE SUPERVISION AND CONTROL OF PUBLIC
RESPONDENT OFFICE OF THE PRESIDENT.

[II]

. . . IN DISREGARDING THE 1994 RULES OF PROCEDURE OF THE HOUSING AND LAND USE REGULATORY BOARD WITHOUT DECLARING
THE SAME ILLEGAL AND/OR INVALID, AND IN DISREGARDING THE WELL-ESTABLISHED DOCTRINE OF LIBERAL CONSTRUCTION OF THE
ADMINISTRATIVE RULES OF PROCEDURE IN ORDER TO PROMOTE THEIR OBJECT AND TO ASSIST THE PARTIES IN CLAIMING JUST,
SPEEDY AND INEXPENSIVE DETERMINATION OF THEIR RESPECTIVE CLAIMS AND DEFENSES. 4

The fundamental issue for resolution is whether or not public respondent committed grave abuse of discretion in ruling that the
reglementary period within which to appeal the decision of HLURB to public respondent is fifteen days.

Petitioner contends that the period of appeal from the HLURB to the Office of the President is thirty (30) days from receipt by the
aggrieved party of the decision appealed from in accordance with Section 27 of the 1994 Rules of Procedure of HLURB and Section 1
of Administrative Order No. 18, series of 1987, of the Office of the President.

However, we find petitioner’s contention bereft of merit, because of its reliance on a literal reading of cited rules without correlating
them to current laws as well as presidential decrees on the matter.

Section 27 of the 1994 HLURB Rules of Procedure provides as follows:jgc

"Section 27. Appeal to the Office of the President. — Any party may, upon notice to the Board and the other party, appeal
the decision of the Board of Commissioners or its division to the Office of the President within thirty (30) days from receipt thereof
pursuant to and in accordance with Administrative Order No. 18, of the Office of the President dated February 12, 1987. Decision of
the President shall be final subject only to review by the Supreme Court on certiorari or on questions of law." 5

On the other hand, Administrative Order No. 18, series of 1987, issued by public respondent reads:jgc

"Section 1. Unless otherwise governed by special laws, an appeal to the Office of the President shall be taken within thirty (30) days
from receipt by the aggrieved party of the decision/resolution/order complained of or appealed from." 6

As pointed out by public respondent, the aforecited administrative order allows aggrieved party to file its appeal with the Office of
the President within thirty (30) days from receipt of the decision complained of. Nonetheless, such thirty-day period is subject to the
qualification that there are no other statutory periods of appeal applicable. If there are special laws governing particular cases which
provide for a shorter or longer reglementary period, the same shall prevail over the thirty-day period provided for in the
administrative order. This is in line with the rule in statutory construction that an administrative rule or regulation, in order to be
valid, must not contradict but conform to the provisions of the enabling law. 7

We note that indeed there are special laws that mandate a shorter period of fifteen (15) days within which to appeal a case to public
Respondent. First, Section 15 of Presidential Decree No. 957 provides that the decisions of the National Housing Authority (NHA)
shall become final and executory after the lapse of fifteen (15) days from the date of receipt of the decision. Second, Section 2 of
Presidential Decree No. 1344 states that decisions of the National Housing Authority shall become final and executory after the lapse
of fifteen (15) days from the date of its receipt. The latter decree provides that the decisions of NHA is appealable only to the Office
of the President. Further, we note that the regulatory functions of NHA relating to housing and land development has been
transferred to Human Settlements Regulatory Commission, now known as HLURB. 8 Thus, said presidential issuances providing for a
reglementary period of appeal of fifteen days apply in this case. Accordingly, the period of appeal of thirty (30) days set forth in
Section 27 of HLURB 1994 Rules of Procedure no longer holds true for being in conflict with the provisions of aforesaid presidential
decrees. For it is axiomatic that administrative rules derive their validity from the statute that they are intended to implement. Any
rule which is not consistent with statute itself is null and void. 9

In this case, petitioner received a copy of the decision of HLURB on October 23, 1995. Considering that the reglementary period to
appeal is fifteen days, petitioner has only until November 7, 1995, to file its appeal. Unfortunately, petitioner filed its appeal with
public respondent only on November 20, 1995 or twenty-eight days from receipt of the appealed decision, which is obviously filed
out of time.

As the appeal filed by petitioner was not taken within the reglementary period, the prescriptive period for perfecting an appeal
continues to run. Consequently, the decision of the HLURB became final and executory upon the lapse of fifteen days from receipt of
the decision. Hence, the decision became immutable; it can no longer be amended nor altered by public Respondent. Accordingly,
inasmuch as the timely perfection of an appeal is a jurisdictional requisite, public respondent has no more authority to entertain the
petitioner’s appeal. Otherwise, any amendment or alteration made which substantially affects the final and executory judgment
would be null and void for lack of jurisdiction. 10

Thus, in this case public respondent cannot be faulted of grave abuse of discretion in ruling that the period of appeal is fifteen days
and in forthrightly dismissing petitioner’s appeal as the same was clearly filed out of time.
Worth mentioning, just days prior to the promulgation of the assailed decision of public respondent, the HLURB adopted on June 10,
1996, its 1996 Rules of Procedure. Significantly, Section 2, Rule XVIII of said rules provides that any party may, upon notice to the
HLURB and the other party, appeal a decision rendered by the Board of Commissioners en banc or by one of its divisions to the Office
of the President within fifteen 15 calendar days from receipt thereof in accordance with P.D. 1344 and A.O. 18, series of 1987. 11
Apparently, the amendment was made pursuant to the pronouncements of public respondent in earlier cases 12 it decided that
appeals to the Office of the President from the decision of HLURB should be filed within fifteen (15) days from receipt thereof. At
present therefore, decisions rendered by HLURB is appealable to the Office of the President within fifteen (15) calendar days from
receipt thereof.

Finally, we find that the instant petition ought not to have been directly filed with this Court. For while we have concurrent
jurisdiction with the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, this concurrence is not to be taken as
an unrestrained freedom of choice concerning the court to which application for the writ will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the
appropriate forum for petitions for the extraordinary writs. 13 A direct invocation of the Supreme Court’s original jurisdiction to issue
these extraordinary writs is allowed only when there are special and important reasons therefor, clearly and specifically set out in the
petition. 14

WHEREFORE, the instant petition is DISMISSED for utter lack of merit. Costs against petitioner.

SO ORDERED.
.R. No. 159694 January 27, 2006

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.
AZUCENA T. REYES, Respondent.

x -- -- -- -- -- -- -- -- -- -- -- -- -- x

G.R. No. 163581 January 27, 2006

AZUCENA T. REYES, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

PANGANIBAN, CJ.:

Under the present provisions of the Tax Code and pursuant to elementary due process, taxpayers must be informed in writing of the
law and the facts upon which a tax assessment is based; otherwise, the assessment is void. Being invalid, the assessment cannot in
turn be used as a basis for the perfection of a tax compromise.

The Case

Before us are two consolidated1 Petitions for Review2 filed under Rule 45 of the Rules of Court, assailing the August 8, 2003
Decision3 of the Court of Appeals (CA) in CA-GR SP No. 71392. The dispositive portion of the assailed Decision reads as follows:

"WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Tax Appeals is ANNULLED and SET ASIDE without
prejudice to the action of the National Evaluation Board on the proposed compromise settlement of the Maria C. Tancinco estate’s
tax liability."4
The Facts

The CA narrated the facts as follows:

"On July 8, 1993, Maria C. Tancinco (or ‘decedent’) died, leaving a 1,292 square-meter residential lot and an old house thereon (or
‘subject property’) located at 4931 Pasay Road, Dasmariñas Village, Makati City.

"On the basis of a sworn information-for-reward filed on February 17, 1997 by a certain Raymond Abad (or ‘Abad’), Revenue District
Office No. 50 (South Makati) conducted an investigation on the decedent’s estate (or ‘estate’). Subsequently, it issued a Return
Verification Order. But without the required preliminary findings being submitted, it issued Letter of Authority No. 132963 for the
regular investigation of the estate tax case. Azucena T. Reyes (or ‘[Reyes]’), one of the decedent’s heirs, received the Letter of
Authority on March 14, 1997.

"On February 12, 1998, the Chief, Assessment Division, Bureau of Internal Revenue (or ‘BIR’), issued a preliminary assessment notice
against the estate in the amount of P14,580,618.67. On May 10, 1998, the heirs of the decedent (or ‘heirs’) received a final estate tax
assessment notice and a demand letter, both dated April 22, 1998, for the amount of P14,912,205.47, inclusive of surcharge and
interest.

"On June 1, 1998, a certain Felix M. Sumbillo (or ‘Sumbillo’) protested the assessment [o]n behalf of the heirs on the ground that the
subject property had already been sold by the decedent sometime in 1990.

"On November 12, 1998, the Commissioner of Internal Revenue (or ‘[CIR]’) issued a preliminary collection letter to [Reyes], followed
by a Final Notice Before Seizure dated December 4, 1998.

"On January 5, 1999, a Warrant of Distraint and/or Levy was served upon the estate, followed on February 11, 1999 by Notices of
Levy on Real Property and Tax Lien against it.

"On March 2, 1999, [Reyes] protested the notice of levy. However, on March 11, 1999, the heirs proposed a compromise settlement
of P1,000,000.00.

"In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay 50% of the basic tax due, citing the heirs’ inability to pay the
tax assessment. On March 20, 2000, [the CIR] rejected [Reyes’s] offer, pointing out that since the estate tax is a charge on the estate
and not on the heirs, the latter’s financial incapacity is immaterial as, in fact, the gross value of the estate amounting to
P32,420,360.00 is more than sufficient to settle the tax liability. Thus, [the CIR] demanded payment of the amount of P18,034,382.13
on or before April 15, 2000[;] otherwise, the notice of sale of the subject property would be published.

"On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to pay 100% of the basic tax due in the amount of
P5,313,891.00. She reiterated the proposal in a letter dated May 18, 2000.

"As the estate failed to pay its tax liability within the April 15, 2000 deadline, the Chief, Collection Enforcement Division, BIR, notified
[Reyes] on June 6, 2000 that the subject property would be sold at public auction on August 8, 2000.

"On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division. Assailing the scheduled auction sale, she asserted that x x x
the assessment, letter of demand[,] and the whole tax proceedings against the estate are void ab initio. She offered to file the
corresponding estate tax return and pay the correct amount of tax without surcharge [or] interest.

"Without acting on [Reyes’s] protest and offer, [the CIR] instructed the Collection Enforcement Division to proceed with the August 8,
2000 auction sale. Consequently, on June 28, 2000, [Reyes] filed a [P]etition for [R]eview with the Court of Tax Appeals (or ‘CTA’),
docketed as CTA Case No. 6124.

"On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of Preliminary Injunction or Status Quo Order, which was granted
by the CTA on July 26, 2000. Upon [Reyes’s] filing of a surety bond in the amount of P27,000,000.00, the CTA issued a [R]esolution
dated August 16, 2000 ordering [the CIR] to desist and refrain from proceeding with the auction sale of the subject property or from
issuing a [W]arrant of [D]istraint or [G]arnishment of [B]ank [A]ccount[,] pending determination of the case and/or unless a contrary
order is issued.

"[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the CTA no longer has jurisdiction over the case[,] because
the assessment against the estate is already final and executory; and (ii) that the petition was filed out of time. In a [R]esolution
dated November 23, 2000, the CTA denied [the CIR’s] motion.

"During the pendency of the [P]etition for [R]eview with the CTA, however, the BIR issued Revenue Regulation (or ‘RR’) No. 6-2000
and Revenue Memorandum Order (or ‘RMO’) No. 42-2000 offering certain taxpayers with delinquent accounts and disputed
assessments an opportunity to compromise their tax liability.

"On November 25, 2000, [Reyes] filed an application with the BIR for the compromise settlement (or ‘compromise’) of the
assessment against the estate pursuant to Sec. 204(A) of the Tax Code, as implemented by RR No. 6-2000 and RMO No. 42-2000.

"On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement of the hearing before the CTA scheduled on January 9,
2001, citing her pending application for compromise with the BIR. The motion was granted and the hearing was reset to February 6,
2001.

"On January 29, 2001, [Reyes] moved for postponement of the hearing set on February 6, 2001, this time on the ground that she had
already paid the compromise amount of P1,062,778.20 but was still awaiting approval of the National Evaluation Board (or ‘NEB’).
The CTA granted the motion and reset the hearing to February 27, 2001.
"On February 19, 2001, [Reyes] filed a Motion to Declare Application for the Settlement of Disputed Assessment as a Perfected
Compromise. In said motion, she alleged that [the CIR] had not yet signed the compromise[,] because of procedural red tape
requiring the initials of four Deputy Commissioners on relevant documents before the compromise is signed by the [CIR]. [Reyes]
posited that the absence of the requisite initials and signature[s] on said documents does not vitiate the perfected compromise.

"Commenting on the motion, [the CIR] countered that[,] without the approval of the NEB, [Reyes’s] application for compromise with
the BIR cannot be considered a perfected or consummated compromise.

"On March 9, 2001, the CTA denied [Reyes’s] motion, prompting her to file a Motion for Reconsideration Ad Cautelam. In a
[R]esolution dated April 10, 2001, the CTA denied the [M]otion for [R]econsideration with the suggestion that[,] for an orderly
presentation of her case and to prevent piecemeal resolutions of different issues, [Reyes] should file a [S]upplemental [P]etition for
[R]eview[,] setting forth the new issue of whether there was already a perfected compromise.

"On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the CTA, followed on June 4, 2001 by its Amplificatory
Arguments (for the Supplemental Petition for Review), raising the following issues:

‘1. Whether or not an offer to compromise by the [CIR], with the acquiescence by the Secretary of Finance, of a tax liability pending
in court, that was accepted and paid by the taxpayer, is a perfected and consummated compromise.

‘2. Whether this compromise is covered by the provisions of Section 204 of the Tax Code (CTRP) that requires approval by the BIR
[NEB].’

"Answering the Supplemental Petition, [the CIR] averred that an application for compromise of a tax liability under RR No. 6-2000
and RMO No. 42-2000 requires the evaluation and approval of either the NEB or the Regional Evaluation Board (or ‘REB’), as the case
may be.

"On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings; the motion was granted on July 11, 2001. After submission
of memoranda, the case was submitted for [D]ecision.

"On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of which pertinently reads:

‘WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview is hereby DENIED. Accordingly, [Reyes] is hereby
ORDERED to PAY deficiency estate tax in the amount of Nineteen Million Five Hundred Twenty Four Thousand Nine Hundred Nine
and 78/100 (P19,524,909.78), computed as follows:

xxxxxxxxx

‘[Reyes] is likewise ORDERED to PAY 20% delinquency interest on deficiency estate tax due of P17,934,382.13 from January 11, 2001
until full payment thereof pursuant to Section 249(c) of the Tax Code, as amended.’

"In arriving at its decision, the CTA ratiocinated that there can only be a perfected and consummated compromise of the estate’s tax
liability[,] if the NEB has approved [Reyes’s] application for compromise in accordance with RR No. 6-2000, as implemented by RMO
No. 42-2000.

"Anent the validity of the assessment notice and letter of demand against the estate, the CTA stated that ‘at the time the questioned
assessment notice and letter of demand were issued, the heirs knew very well the law and the facts on which the same were based.’
It also observed that the petition was not filed within the 30-day reglementary period provided under Sec. 11 of Rep. Act No. 1125
and Sec. 228 of the Tax Code."5

Ruling of the Court of Appeals

In partly granting the Petition, the CA said that Section 228 of the Tax Code and RR 12-99 were mandatory and unequivocal in their
requirement. The assessment notice and the demand letter should have stated the facts and the law on which they were based;
otherwise, they were deemed void.6 The appellate court held that while administrative agencies, like the BIR, were not bound by
procedural requirements, they were still required by law and equity to observe substantive due process. The reason behind this
requirement, said the CA, was to ensure that taxpayers would be duly apprised of -- and could effectively protest -- the basis of tax
assessments against them.7 Since the assessment and the demand were void, the proceedings emanating from them were likewise
void, and any order emanating from them could never attain finality.

The appellate court added, however, that it was premature to declare as perfected and consummated the compromise of the estate’s
tax liability. It explained that, where the basic tax assessed exceeded P1 million, or where the settlement offer was less than the
prescribed minimum rates, the National Evaluation Board’s (NEB) prior evaluation and approval were the conditio sine qua non to the
perfection and consummation of any compromise.8 Besides, the CA pointed out, Section 204(A) of the Tax Code applied to all
compromises, whether government-initiated or not.9 Where the law did not distinguish, courts too should not distinguish.

Hence, this Petition.10

The Issues

In GR No. 159694, petitioner raises the following issues for the Court’s consideration:

"I.

Whether petitioner’s assessment against the estate is valid.

"II.

Whether respondent can validly argue that she, as well as the other heirs, was not aware of the facts and the law on which the
assessment in question is based, after she had opted to propose several compromises on the estate tax due, and even prematurely
acting on such proposal by paying 20% of the basic estate tax due."11

The foregoing issues can be simplified as follows: first, whether the assessment against the estate is valid; and, second, whether the
compromise entered into is also valid.

The Court’s Ruling

The Petition is unmeritorious.

First Issue:

Validity of the Assessment Against the Estate

The second paragraph of Section 228 of the Tax Code12 is clear and mandatory. It provides as follows:

"Sec. 228. Protesting of Assessment. --

xxxxxxxxx

"The taxpayers shall be informed in writing of the law and the facts on which the assessment is made: otherwise, the assessment
shall be void."

In the present case, Reyes was not informed in writing of the law and the facts on which the assessment of estate taxes had been
made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of former Section 22913 prior to
its amendment by Republic Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

First, RA 8424 has already amended the provision of Section 229 on protesting an assessment. The old requirement of merely
notifying the taxpayer of the CIR’s findings was changed in 1998 to informing the taxpayer of not only the law, but also of the facts on
which an assessment would be made; otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was issued against the estate. On April 22, 1998, the final estate
tax assessment notice, as well as demand letter, was also issued. During those dates, RA 8424 was already in effect. The notice
required under the old law was no longer sufficient under the new law.

To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment of the estate
taxes due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act cannot be taken to
mean that Reyes already knew the law and the facts on which the assessment was based. It does not at all conform to the
compulsory requirement under Section 228. Moreover, the Letter of Authority received by respondent on March 14, 1997 was for
the sheer purpose of investigation and was not even the requisite notice under the law.

The procedure for protesting an assessment under the Tax Code is found in Chapter III of Title VIII, which deals with remedies. Being
procedural in nature, can its provision then be applied retroactively? The answer is yes.

The general rule is that statutes are prospective. However, statutes that are remedial, or that do not create new or take away vested
rights, do not fall under the general rule against the retroactive operation of statutes.14 Clearly, Section 228 provides for the
procedure in case an assessment is protested. The provision does not create new or take away vested rights. In both instances, it can
surely be applied retroactively. Moreover, RA 8424 does not state, either expressly or by necessary implication, that pending actions
are excepted from the operation of Section 228, or that applying it to pending proceedings would impair vested rights.

Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is of no moment, considering that it merely
implements the law.

A tax regulation is promulgated by the finance secretary to implement the provisions of the Tax Code.15 While it is desirable for the
government authority or administrative agency to have one immediately issued after a law is passed, the absence of the regulation
does not automatically mean that the law itself would become inoperative.

At the time the pre-assessment notice was issued to Reyes, RA 8424 already stated that the taxpayer must be informed of both the
law and facts on which the assessment was based. Thus, the CIR should have required the assessment officers of the Bureau of
Internal Revenue (BIR) to follow the clear mandate of the new law. The old regulation governing the issuance of estate tax
assessment notices ran afoul of the rule that tax regulations -- old as they were -- should be in harmony with, and not supplant or
modify, the law.16

It may be argued that the Tax Code provisions are not self-executory. It would be too wide a stretch of the imagination, though, to
still issue a regulation that would simply require tax officials to inform the taxpayer, in any manner, of the law and the facts on which
an assessment was based. That requirement is neither difficult to make nor its desired results hard to achieve.

Moreover, an administrative rule interpretive of a statute, and not declarative of certain rights and corresponding obligations, is given
retroactive effect as of the date of the effectivity of the statute.17 RR 12-99 is one such rule. Being interpretive of the provisions of
the Tax Code, even if it was issued only on September 6, 1999, this regulation was to retroact to January 1, 1998 -- a date prior to the
issuance of the preliminary assessment notice and demand letter.
Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax Code.

No doubt, Section 228 has replaced Section 229. The provision on protesting an assessment has been amended. Furthermore, in case
of discrepancy between the law as amended and its implementing but old regulation, the former necessarily prevails.18 Thus,
between Section 228 of the Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand because it cannot go beyond
the provision of the law. The law must still be followed, even though the existing tax regulation at that time provided for a different
procedure. The regulation then simply provided that notice be sent to the respondent in the form prescribed, and that no
consequence would ensue for failure to comply with that form.

Fourth, petitioner violated the cardinal rule in administrative law that the taxpayer be accorded due process. Not only was the law
here disregarded, but no valid notice was sent, either. A void assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing
a valid assessment is evidently violative of the cardinal principle in administrative investigations: that taxpayers should be able to
present their case and adduce supporting evidence.19 In the instant case, respondent has not been informed of the basis of the
estate tax liability. Without complying with the unequivocal mandate of first informing the taxpayer of the government’s claim, there
can be no deprivation of property, because no effective protest can be made.20 The haphazard shot at slapping an assessment,
supposedly based on estate taxation’s general provisions that are expected to be known by the taxpayer, is utter chicanery.

Even a cursory review of the preliminary assessment notice, as well as the demand letter sent, reveals the lack of basis for -- not to
mention the insufficiency of -- the gross figures and details of the itemized deductions indicated in the notice and the letter. This
Court cannot countenance an assessment based on estimates that appear to have been arbitrarily or capriciously arrived at.
Although taxes are the lifeblood of the government, their assessment and collection "should be made in accordance with law as any
arbitrariness will negate the very reason for government itself."21

Fifth, the rule against estoppel does not apply. Although the government cannot be estopped by the negligence or omission of its
agents, the obligatory provision on protesting a tax assessment cannot be rendered nugatory by a mere act of the CIR .

Tax laws are civil in nature.22 Under our Civil Code, acts executed against the mandatory provisions of law are void, except when the
law itself authorizes the validity of those acts.23 Failure to comply with Section 228 does not only render the assessment void, but
also finds no validation in any provision in the Tax Code. We cannot condone errant or enterprising tax officials, as they are expected
to be vigilant and law-abiding.

Second Issue:

Validity of Compromise

It would be premature for this Court to declare that the compromise on the estate tax liability has been perfected and
consummated, considering the earlier determination that the assessment against the estate was void. Nothing has been settled or
finalized. Under Section 204(A) of the Tax Code, where the basic tax involved exceeds one million pesos or the settlement offered is
less than the prescribed minimum rates, the compromise shall be subject to the approval of the NEB composed of the petitioner and
four deputy commissioners.

Finally, as correctly held by the appellate court, this provision applies to all compromises, whether government-initiated or not. Ubi
lex non distinguit, nec nos distinguere debemos. Where the law does not distinguish, we should not distinguish.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No pronouncement as to costs.

SO ORDERED.

[G.R. NO. 175451 : September 28, 2007]

ROSARIO L. DADULO, Petitioner, v. THE HON. COURT OF APPEALS, OFFICE OF THE OMBUDSMAN, HON. FELICIANO BELMONTE, JR., in
his capacity as City Mayor of Quezon City and GLORIA PATANGUI, Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

For resolution is the motion for reconsideration filed by petitioner Rosario Dadulo of the Decision dated April 13, 2007 which
disposed of the case as follows:

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 89909 affirming the March 4, 2003
Decision of the Office of the Ombudsman in OMB-C-A-0470-J which found petitioner Rosario Dadulo guilty of conduct prejudicial to
the best interest of the service and imposed upon her the penalty of suspension for six months is AFFIRMED.

SO ORDERED.1

Petitioner insists that the decision of the Office of the Ombudsman which found her guilty of conduct prejudicial to the best interest
of the service and imposed upon her the penalty of suspension for six months, which was affirmed by the Court of Appeals in the
assailed April 13, 2007 Decision, was not supported by substantial evidence and that the implementation of the suspension Order is
premature.

We deny the motion for reconsideration.

The factual findings of the Office of the Ombudsman upon which its decision on petitioner's administrative liability was based are
supported by the evidence on record. These include the affidavits of the parties to the instant case including those of respondent
Gloria Patangui and Jessica Patangui, and the counter-affidavits of petitioner and of the other Barangay Security Development
Officers (BSDO).

Respondent Gloria Patangui testified that on September 22, 2002, the construction materials were taken from her house and were
brought to the barangay outpost. Patangui was informed by a BSDO that petitioner ordered the seizure.

Jessica, respondent's 9 year-old daughter, testified that she witnessed the actual taking of the construction materials; that she saw
two men enter their premises and take the construction materials while a woman was supervising the activity. She later identified
these men as the co-accused of petitioner.

Efren Pagabao, one of the BSDO administratively charged with petitioner, admitted that they went to the residence of respondent
upon orders of petitioner on September 22, 2002 to verify whether respondent has a barangay permit for the house construction
they were undertaking. This established the presence of the barangay officials at the respondent's residence and that they were
there upon orders of petitioner.

On the other hand, other than a sweeping general denial of the charges against her, petitioner merely alleged that respondent was a
professional squatter. She did not specifically deny any of the acts imputed against her nor did she explain why the construction
materials were later found at the barangay outpost.

Thus, contrary to petitioner's claim, there is substantial evidence on record sufficient to hold her administratively liable.

As to the alleged premature implementation of the suspension order, the same is likewise bereft of merit.

Petitioner argues that her appeal has the effect of staying the execution of the decision of the Ombudsman hence, the immediate
implementation of the suspension order before it has become final and executory, was premature. She cited the cases of Lapid v.
Court of Appeals2 and Laxina v. Court of Appeals3 where this Court ruled against the immediate implementation of the
Ombudsman's dismissal orders in view of Section 274 of Republic Act No. 6770.5

As correctly observed by the Solicitor General, at the time the Lapid and Laxina cases were decided, Section 7, Rule III of the Rules of
Procedure of the Office of the Ombudsman was silent as to the execution of its decisions pending appeal. This was later amended by
Administrative Order No. 17 and Administrative Order No. 14-A as implemented by Memorandum Circular No. 1 s. 2006. Hence, as
amended, Section 7 of Rule III now reads:

Section 7. Finality and execution of decision. - Where the respondent is absolved of the charge, and in case of conviction where the
penalty imposed is public censure or reprimand, suspension of not more than one month, or a fine equivalent to one month salary,
the decision shall be final, executory and unappealable. In all other cases, the decision may be appealed to the Court of Appeals on a
verified Petition for Review under the requirements and conditions set forth in Rule 43 of the Rules of Court, within fifteen (15) days
from receipt of the written Notice of the Decision or Order denying the Motion for Reconsideration.

An appeal shall not stop the decision from being executory. In case the penalty is suspension or removal and the respondent wins
such appeal, he shall be considered as having been under preventive suspension and shall be paid the salary and such other
emoluments that he did not receive by reason of the suspension or removal.

A decision of the Office of the Ombudsman in administrative cases shall be executed as a matter of course.

The Office of the Ombudsman shall ensure that the decision shall be strictly enforced and properly implemented. The refusal or
failure by any officer without just cause to comply with an order of the Office of the Ombudsman to remove, suspend, demote, fine,
or censure shall be a ground for disciplinary action against said officer.

In the case of In the Matter to Declare in Contempt of Court Hon. Simeon A. Datumanong, Secretary of DPWH,6 we held that:

The Rules of Procedure of the Office of the Ombudsman are clearly procedural and no vested right of the petitioner is violated as he
is considered preventively suspended while his case is on appeal. Moreover, in the event he wins on appeal, he shall be paid the
salary and such other emoluments that he did not receive by reason of the suspension or removal. Besides, there is no such thing as
a vested interest in an office, or even an absolute right to hold office. Excepting constitutional offices which provide for special
immunity as regards salary and tenure, no one can be said to have any vested right in an office.7

Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive application of procedural
laws cannot be considered violative of any personal rights because no vested right may attach to nor arise therefrom.8

Following the ruling in the above cited case, this Court, in Buencamino v. Court of Appeals,9 upheld the resolution of the Court of
Appeals denying Buencamino's application for preliminary injunction against the immediate implementation of the suspension order
against him. The Court stated therein that considering that an appeal under Administrative Order No. 17, the amendatory rule, shall
not stop the Decision of the Office of the Ombudsman from being executory, the Court of Appeals did not commit grave abuse of
discretion in denying petitioner's application for injunctive relief.

Finally, the appeal of the decision of the Ombudsman to the Court of Appeals is through a Petition for Review under Rule 43 of the
Rules of Court, Section 12 of which categorically provides that the appeal shall not stay the award, judgment, final order or resolution
sought to be reviewed unless the Court of Appeals shall direct otherwise upon such terms as it may deem just.

WHEREFORE, the instant motion for reconsideration is DENIED with FINALITY.

SO ORDERED.