CIR vs.

SAN MIGUEL CORPORATION

FACTS:

On October 19, 1999, Virgilio S. De Guzman (De Guzman), San Miguel Corporation's Former
Assistant Vice President for Finance, wrote the Bureau of Internal Revenue Excise Tax Services
Assistant Commissioner Leonardo B. Albar (Assistant Commissioner Albar) to request the
registration of and authority to manufacture "San Mig Light," to be taxed at ₱12.15 per
liter.9 The letter dated October 27, 1999 granted this request. 10

On November 3, 1999, De Guzman advised Assistant Commissioner Albar that "San Mig Light"
would be sold at a suggested net retail price of ₱21.15 per liter or ₱6.98 per bottle, less value-
added tax and specific tax. "San Mig Light" would also be classified under "Medium Priced
Brand" to be taxed at ₱9.15 per liter. 11

San Miguel Corporation was allowed to register, manufacture, and sell "San Mig Light" as a new
brand, had been paying its excise tax for a considerable length of time, and that the tax
classification and rate of "San Mig Light" as a new brand were in order. 14

However, on May 28, 2002, Edwin R. Abella (Assistant Commissioner Abella), Bureau of
Internal Revenue Large Taxpayers Service Assistant Commissioner, issued a Notice of
Discrepancy against San Miguel Corporation. The Notice stated that "San Mig Light" was a
variant of its existing beer products and must, therefore, be subjected to the higher excise tax rate
for variants.15 Specifically, for the year 1999, "San Mig Light" should be taxed at the rate of
₱19.91 per liter instead of ₱9.15 per liter; and for the year 2000, the 12% increase should be
based on the rate of Pl9.91 per liter under Section l 43(C)(2) of the Tax Code.

2. Ermita Manila Hotel vs. City of Manila

The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the
petitioners, Ermita-Malate Hotel and Motel Operators Association, one of its members, Hotel del
Mar Inc., and a certain Go Chiu
After which the alleged grievances against the ordinance were set forth in detail. There was the
assertion of its being beyond the powers of the Municipal Board of the City of Manila to enact
insofar as it would regulate motels, on the ground that in the revised charter of the City of Manila
or in any other law, no reference is made to motels; that Section 1 of the challenged ordinance is
unconstitutional and void for being unreasonable and violative of due process insofar as it would
impose P6,000.00 fee per annum for first class motels and P4,500.00 for second class motels;
that the provision in the same section which would require the owner, manager, keeper or duly
authorized representative of a hotel, motel, or lodging house to refrain from entertaining or
accepting any guest or customer or letting any room or other quarter to any person or persons
without his filling up the prescribed form in a lobby open to public view at all times and in his
presence, wherein the surname, given name and middle name, the date of birth, the address, the
occupation, the sex, the nationality, the length of stay and the number of companions in the
room, if any, with the name, relationship, age and sex would be specified, with data furnished as
to his residence certificate as well as his passport number, if any, coupled with a certification that
a person signing such form has personally filled it up and affixed his signature in the presence of
such owner, manager, keeper or duly authorized representative, with such registration forms and
records kept and bound together, it also being provided that the premises and facilities of such
hotels, motels and lodging houses would be open for inspection either by the City Mayor, or the
Chief of Police, or their duly authorized representatives is unconstitutional and void again on due
process grounds, not only for being arbitrary, unreasonable or oppressive but also for being
vague, indefinite and uncertain, and likewise for the alleged invasion of the right to privacy and
the guaranty against self-incrimination; that Section 2 of the challenged ordinance classifying
motels into two classes and requiring the maintenance of certain minimum facilities in first class
motels such as a telephone in each room, a dining room or, restaurant and laundry similarly
offends against the due process clause for being arbitrary, unreasonable and oppressive, a
conclusion which applies to the portion of the ordinance requiring second class motels to have a
dining room; that the provision of Section 2 of the challenged ordinance prohibiting a person less
than 18 years old from being accepted in such hotels, motels, lodging houses, tavern or common
inn unless accompanied by parents or a lawful guardian and making it unlawful for the owner,
manager, keeper or duly authorized representative of such establishments to lease any room or
portion thereof more than twice every 24 hours, runs counter to the due process guaranty for lack
of certainty and for its unreasonable, arbitrary and oppressive character; and that insofar as the
penalty provided for in Section 4 of the challenged ordinance for a subsequent conviction would,
cause the automatic cancellation of the license of the offended party, in effect causing the
destruction of the business and loss of its investments, there is once again a transgression of the
due process clause. (SUPER HABA NITO BUT BASTA YUNG ORDINANCE CINECLAIM
NILA NA VIOLATIVE OF DUE PROCESS THEREFORE UNCONSTITUTIOTNAL)
No evidence was produced by petitioners in order to prove such unconstitutionality.
ISSUE: W/N the said ordinance is unconstitutional
HELD: NO. he resumption of constitutionality must prevail in the absence of some factual
foundation of record for overthrowing the statute." No such factual foundation being laid in the
present case, the lower court deciding the matter on the pleadings and the stipulation of facts, the
presumption of validity must prevail and the judgment against the ordinance set aside. Nor may
petitioners assert with plausibility that on its face the ordinance is fatally defective as being
repugnant to the due process clause of the Constitution. The mantle of protection associated with
the due process guaranty does not cover petitioners. This particular manifestation of a police
power measure being specifically aimed to safeguard public morals is immune from such
imputation of nullity resting purely on conjecture and unsupported by anything of substance. To
hold otherwise would be to unduly restrict and narrow the scope of police power which has been
properly characterized as the most essential, insistent and the least limitable of
powers,4 extending as it does "to all the great public needs."5 It would be, to paraphrase another
leading decision, to destroy the very purpose of the state if it could be deprived or allowed itself
to be deprived of its competence to promote public health, public morals, public safety and the
genera welfare.6 Negatively put, police power is "that inherent and plenary power in the State
which enables it to prohibit all that is hurt full to the comfort, safety, and welfare of society.7
Admittedly there was a decided increase of the annual license fees provided for by the
challenged ordinance for hotels and motels, 150% for the former and over 200% for the latter,
first-class motels being required to pay a P6,000 annual fee and second-class motels, P4,500
yearly. It has been the settled law however, as far back as 1922 that municipal license fees could
be classified into those imposed for regulating occupations or regular enterprises, for the
regulation or restriction of non-useful occupations or enterprises and for revenue purposes only.
Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it
unlawful. it was intended to curb the opportunity for the immoral or illegitimate use to which
such premises could be, and, according to the explanatory note, are being devoted. How could it
then be arbitrary or oppressive when there appears a correspondence between the undeniable
existence of an undesirable situation and the legislative attempt at correction.
That is all then that this case presents. As it stands, with all due allowance for the arguments
pressed with such vigor and determination, the attack against the validity of the challenged
ordinance cannot be considered a success. Far from it. Respect for constitutional law principles
so uniformly held and so uninterruptedly adhered to by this Court compels a reversal of the
appealed decision.
3. CIR vs Central Luzon Drugstore

FACTS: In 1997, respondent operated 6 drugstores under the business name and style "Mercury
Drug."6 The respondent granted 20% sales discount to qualified senior citizens on their
purchases of medicines covering the calendar year 1997.

On 15 April 1998, respondent filed its 1997 Corporate Annual Income Tax Return reflecting a
nil income tax liability due to net loss incurred from business operations. Respondent filed its
1997 Income Tax Return under protest.9 Respondent filed with the petitioner a claim for refund
or credit of overpaid income tax for the taxable year 1997. They alleged that the overpaid tax
was the result of the wrongful implementation of RA 7432.

Respondent reasoned that RR 2-94, which is a mere implementing administrative regulation,

cannot modify, alter or amend the clear mandate of RA 7432. Consequently, Section 2(i) of RR
2-94 is without force and effect for being inconsistent with the law it seeks to implement.11

In his Answer, petitioner stated that the construction given to a statute by a specialized
administrative agency like the BIR is entitled to great respect and should be accorded great
weight.

On 15 April 2002, the CTA rendered a Decision ordering petitioner to issue a tax credit
certificate in favor of respondent.

The CTA stated that in a number of analogous cases, it has consistently ruled that the 20% senior
citizens' discount should be treated as tax credit instead of a mere deduction from gross income
The Court of Appeals affirmed the CTA's decision in toto.

The Court of Appeals disagreed with petitioner's contention that the CTA's decision applied a
literal interpretation of the law. It reasoned that under the verba legis rule, if the statute is clear,
plain, and free from ambiguity, it must be given its literal meaning and applied without
interpretation.

ISSUE: whether or not respondent, despite incurring a net loss, may still claim the 20 percent
sales discount as a tax credit

HELD: YES. A tax credit reduces the tax due, including - - whenever applicable - - the income
tax that is determined after applying the corresponding tax rates to taxable income.21 A tax
deduction, on the other, reduces the income that is subject to tax22 in order to arrive at taxable
income.23 To think of the former as the latter is to avoid, if not entirely confuse, the issue. A tax
credit is used only after the tax has been computed; a tax deduction, before.

In the present case, the tax authorities have given the term tax credit in Sections 2.i and 4 of RR
2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation has muddled
up the intent of Congress in granting a mere discount privilege, not a sales discount. The
administrative agency issuing these regulations may not enlarge, alter or restrict the provisions of
the law it administers; it cannot engraft additional requirements not contemplated by the
legislature.67

In case of conflict, the law must prevail.68 A "regulation adopted pursuant to law is
law."69 Conversely, a regulation or any portion thereof not adopted pursuant to law is no law and
has neither the force nor the effect of law.

As a result of the 20 percent discount imposed by RA 7432, respondent becomes entitled to

a just compensation. This term refers not only to the issuance of a tax credit certificate indicating
the correct amount of the discounts given, but also to the promptness in its release. Equivalent to
the payment of property taken by the State, such issuance - - when not done within a reasonable
time from the grant of the discounts - - cannot be considered as just compensation. In effect,
respondent is made to suffer the consequences of being immediately deprived of its revenues
while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope
with the reduction in its revenues.79

Besides, the taxation power can also be used as an implement for the exercise of the power of
eminent domain.80 Tax measures are but "enforced contributions exacted on pain of penal
sanctions"81 and "clearly imposed for a public purpose."82 In recent years, the power to tax has
indeed become a most effective tool to realize social justice, public welfare, and the equitable
distribution of wealth.83
4. People vs. Marti
FACTS: Marti and his common law wife went to Manila Packaging and Export Forwarders to
send package to their friend in Switzerland. The proprietor then asked if she could open and
check the parcel but Marti declined and assured her that the contents are safe. Before delivery to
the Bureau of Customs, the wife of Anita opened the package and smelled a peculiar odor inside
the box. He then squeezed the bundles and felt leaves inside. He then suspected that marijuana
was inside the parcel.
the NBI agents tried to locate appellant but to no avail. Appellant's stated address in his passport
being the Manila Central Post Office, the agents requested assistance from the latter's Chief
Security. On August 27, 1987, appellant, while claiming his mail at the Central Post Office, was
invited by the NBI to shed light on the attempted shipment of the seized dried leaves. On the
same day the Narcotics Section of the NBI submitted the dried leaves to the Forensic Chemistry
Section for laboratory examination. It turned out that the dried leaves were marijuana. Then an
information was filed against Marti in violation of RA 6425. Marti was convicted, therefore, he
filed for an appeal. Hence, the case at bar.
ISSUE: W/N Marti can invoke violation of the Constitution as regards unreasonable search and
seizures
Appellant contends that the evidence subject of the imputed offense had been obtained in
violation of his constitutional rights against unreasonable search and seizure and privacy of
communication (Sec. 2 and 3, Art. III, Constitution) and therefore argues that the same should be
held inadmissible in evidence (Sec. 3 (2), Art. III).
In a number of cases, the Court strictly adhered to the exclusionary rule and has struck down the
admissibility of evidence obtained in violation of the constitutional safeguard against
unreasonable searches and seizures. The case at bar assumes a peculiar character since the
evidence sought to be excluded was primarily discovered and obtained by a private person,
acting in a private capacity and without the intervention and participation of State authorities. 

May an act of a private individual, allegedly in violation of appellant's constitutional rights, be

invoked against the State? We hold in the negative. In the absence of governmental interference,
the liberties guaranteed by the Constitution cannot be invoked against the State. The contraband
in the case at bar having come into possession of the Government without the latter transgressing
appellant's rights against unreasonable search and seizure, the Court sees no cogent reason why
the same should not be admitted against him in the prosecution of the offense charged.

It will be recalled that after Reyes opened the box containing the illicit cargo, he took samples of
the same to the NBI and later summoned the agents to his place of business. Thereafter, he
opened the parcel containing the rest of the shipment and entrusted the care and custody thereof
to the NBI agents. Clearly, the NBI agents made no search and seizure, much less an illegal one,
contrary to the postulate of accused/appellant.
Second, the mere presence of the NBI agents did not convert the reasonable search effected by
Reyes into a warrantless search and seizure proscribed by the Constitution. Merely to observe
and look at that which is in plain sight is not a search. Having observed that which is open,
where no trespass has been committed in aid thereof, is not search

That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of
private individuals. The constitutional proscription against unlawful searches and seizures
therefore applies as a restraint directed only against the government and its agencies tasked with
the enforcement of the law. Thus, it could only be invoked against the State to whom the
restraint against arbitrary and unreasonable exercise of power is imposed.