Caltex v COA (208 SCRA 755)

FACTS

The Commission on Audit (COA) ordered Caltex Philippines to remit to the OPSF
its collection of additional tax on petroleum products as authorized under P.D.
1956. Pending such remittance, all CPI’s claims for reimbursement would be held
in abeyance, too, and Caltex should desist from further offsetting the taxes it
collected against its own outstanding claims for reimbursement.

Caltex argued that it should be allowed to offset its claims from the OPSF against
its contributions to the fund as this had been allowed in the past. But COA insisted
that there can be no offsetting of taxes against the claims that a taxpayer may
have against the government, as taxes do not arise from contracts or depend
upon the will of the taxpayer, but are imposed by law.

RULING

The Supreme Court ruled in favor of COA.

A taxpayer may not offset taxes due from the claims that he may have against the
government. Taxes cannot be the subject of compensation because the
government and taxpayer are not mutual creditors and debtors of each other,
and a claim for taxes is not such a debt, demand, contract or judgment as is
allowed to be set off. Too, Caltex's position that the OPSF contributions are not
for public purpose is untenable.

The SC said that taxation is no longer envisioned as a measure merely to raise

revenue to support the existence of the government; taxes may be levied with a
regulatory purpose to provide means for the rehabilitation and stabilization of a
threatened industry, which is affected with public interest as to be within the
police power of the state.

Pascual v Sec. of Public Works (110 Phil. 331)

FACTS

Wenceslao Pascual, Provincial Governor of Rizal, filed an action for declaratory

relief with injunction on the ground that RA 920 (An Act Appropriating Funds for
Public Works) contained in Section 1-C (a) an item of P85,000 “for the
construction, reconstruction, repair, extension and improvement” of Pasig feeder
road terminals privately owned by respondent Zulueta. The latter filed a motion
to dismiss on the ground that Pascual had no legal capacity to sue, and that the
petition did not state a cause of action. The lower court granted the said motion.
RULING

The Supreme Court ruled in favor of Pascual.

As a taxpayer, Pascual had legal standing. The SC also ruled that the subject
appropriation was illegal because it appropriated public funds for the
improvement of private property. The right of the legislature to appropriate funds
is correlative with its right to tax, and under constitutional provisions against
taxation except for public purposes. Taxing power must be exercised for public
purposes only.

The test of the constitutionality of a statute requiring the use of public funds is
whether the statute is designed to promote the public interest, as opposed to the
furtherance of the advantage of individuals, although each advantage to
individuals might incidentally serve the public.

Planters Products, Inc. v. Fertiphil Corporation ( 548 SCRA 485)

FACTS: 
Petitioner PPI and respondent Fertiphil are private corporations both engaged in
the importation and distribution of fertilizers, pesticides and agricultural
chemicals. Marcos issued Letter of Instruction (LOI) 1465, imposing a capital
recovery component of Php10.00 per bag of fertilizer. The levy was to continue
until adequate capital was raised to make PPI financially viable. Fertiphil remitted
to the Fertilizer and Pesticide Authority (FPA), which was then remitted the
depository bank of PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986.After
the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy.
Fertiphil demanded from PPI a refund of the amount it remitted, however PPI
refused. Fertiphil filed a complaint for collection and damages, questioning the
constitutionality of LOI 1465, claiming that it was unjust, unreasonable,
oppressive, invalid and an unlawful imposition that amounted to a denial of due
process. PPI argues that Fertiphil has no locus standi to question the
constitutionality of LOI No. 1465 because it does not have a “personal and
substantial interest in the case or will sustain direct injury as a result of its
enforcement.” It asserts that Fertiphil did not suffer any damage from the
imposition because “incidence of the levy fell on the ultimate consumer or the
farmers themselves, not on the seller fertilizer company.

ISSUE: 
Whether or not Fertiphil has locus standi to question the constitutionality of LOI
No. 1465.What is the power of taxation?

RULING: 
Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a
mere procedural technicality which may be waived. The imposition of the levy
was an exercise of the taxation power of the state. While it is true that the power
to tax can be used as an implement of police power, the primary purpose of the
levy was revenue generation. If the purpose is primarily revenue, or if revenue is,
at least, one of the real and substantial purposes, then the exaction is properly
called a tax.
Police power and the power of taxation are inherent powers of the State. These
powers are distinct and have different tests for validity. Police power is the power
of the State to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare, while the power of taxation is
the power to levy taxes to be used for public purpose. The main purpose of police
power is the regulation of a behavior or conduct, while taxation is revenue
generation. The “lawful subjects” and “lawful means” tests are used to determine
the validity of a law enacted under the police power. The power of taxation,
on the other hand, is circumscribed by inherent and constitutional limitations.

Tio v. Videogram Regulatory Board (151 SCRA 208)

Facts

PD No. 1994 amended the National Internal Revenue. SEC. 134 states that,
there shall be collected on each processed video-tape cassette ready for
playback regardless of legth, an annual tax of P5.00; Provided that locally
manufactured or imported blank video tapes shall be subject to sales tax.
This in relation to proliferation and unregulated circulation of videograms
that is affecting movie houses and theaters and loss or drop in sales. Further,
videograms earns P600M per annum from rentals, sales and disposition
which are no subjected to tax, therefore depriving the government to collect
taxes.

Tio claimed that that Section 10 is unconstitutional because the tax imposed
is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in
violation of the due process clause of the constitution

Issue:
WON the taxation was validly exercised

Ruling:

Yes. Tax does not cease to be valid merely because it regulates discourages
or even definitely deters the activities taxed. The power to impose taxes is
one so unlimited in force and so searching in extent that the courts scarcely
venture to declare that it is subject to any restrictions whatever, except such
as rest in the discretion of the authority which it exercises it
The tax imposed by the Decree is not only a regulatory but also a revenue
measure prompted by the realization that earnings of videograms deprived
the government of an additional source of income.

It is inherent in the power to tax that a state be free to select the subjects of
taxation and it has been repeatedly held that inequities which result from
singling out of one particular class for taxation or exemption infringe no
constitutional limitation.

2. Inherently legislative

General Rule: Power to tax may not be delegated

Commissioner v Santos and Guild of Phil. Jewelers, Inc. (277 SCRA 617)

Facts:
The Commissioner of Internal Revenue and the Commissioner of Customs jointly
seek the reversal of the Decision of herein public respondent, Hon. Apolinario B.
Santos, Presiding Judge of RTC Pasig City, declaring Section 150(a) of Executive
Order No. 273 inoperative and without force and effect insofar as petitioners are
concerned. This EO subjected jewelry to a 20% excise tax in addition to a 10%
value-added tax under the old law.

Issue:
Can the Regional Trial Courts declare a law inoperative and without force and
effect or otherwise unconstitutional?

Held:
No. This is a matter on which the RTC is not competent to rule. As Cooley
observed: “Debatable questions are for the legislature to decide. The courts do
not sit to resolve the merits of conflicting issues.” In Angara vs. Electoral
Commission, Justice Laurel made it clear that “the judiciary does not pass upon
questions of wisdom, justice or expediency of legislation.” And fittingly so, for in
the exercise of judicial power, we are allowed only “to settle actual controversies
involving rights which are legally demandable and enforceable,” and may not
annul an act of the political departments simply because we feel it is unwise or
impractical. This is not to say that Regional Trial Courts have no power
whatsoever to declare a law unconstitutional. In J.M. Tuason and Co. v. Court of
Appeals, we said that “[p]lainly the Constitution contemplates that the inferior
courts should have jurisdiction in cases involving constitutionality of any treaty or
law, for it speaks of appellate review of final judgments of inferior courts in cases
where such constitutionality happens to be in issue.”
This authority of lower courts to decide questions of constitutionality in the first
instance was reaffirmed in Ynot v. Intermediate Appellate Court. But this
authority does not extend to deciding questions which pertain to legislative
policy.

The trial court is not the proper forum for the ventilation of the issues raised by
the private respondents. The arguments they presented focus on the wisdom of
the provisions of law which they seek to nullify. Regional Trial Courts can only
look into the validity of a provision, that is , whether or not it has been passed
according to the procedures laid down by law, and thus cannot inquire as to the
reasons for its existence. Granting arguendothat the private respondents may
have provided convincing arguments why the jewelry industry in the Philippines
should not be taxed as it is, it is to the legislature that they must resort to for
relief, since with the legislature primarily lies the discretion to determine the
nature (kind), object (purpose), extent (rate), coverage (subjects) and situs(place)
of taxation. This Court cannot freely delve into those matters which, by
constitutional fiat, rightly rest on legislative judgment.

As succinctly put in Lim vs. Pacquing: “Where a controversy may be settled on a

platform other than one involving constitutional adjudication, the court should
exercise becoming modesty and avoid the constitutional question.” As judges, we
can only interpret and apply the law and, despite our doubts about its wisdom,
cannot repeal or amend it.

The respondents presented an exhaustive study on the tax rates on jewelry levied
by different Asian countries. This is meant to convince us that compared to other
countries, the tax rates imposed on said industry in the Philippines is oppressive
and confiscatory. This Court, however, cannot subscribe to the theory that the
tax rates of other countries should be used as a yardstick in determining what
may be the proper subjects of taxation in our own country. It should be pointed
out that in imposing the aforementioned taxes and duties, the State, acting
through the legislative and executive branches, is exercising its sovereign
prerogative. It is inherent in the power to tax that the State be free to select the
subjects of taxation, and it has been repeatedly held that “inequalities which
result from a singling out of one particular class for taxation, or exemption,
infringe no constitutional limitation.”

Kapatiran v Tan ( 163 SCRA 372)

FACTS:

The four consolidated cases questions the validity of the VAT (Executive Order
273) for being unconstitutional in that its enactment is not allegedly within the
powers of the President; that the VAT is oppressive, discriminatory, regressive,
and violates the due process and equal protection clauses and other provisions of
the 1987 Constitution.

The Solicitor General prays for the dismissal of the petitions on the ground that
the petitioners have failed to show justification for the exercise of its judicial
powers. He also questions the legal standing of the petitioners who, he contends,
are merely asking for an advisory opinion from the Court, there being no
justiciable controversy for resolution.

ISSUE: Whether VAT is unconstitutional.

RULING:
No. First, the Court held that the President had authority to issue EO 273 as it was
provided in the Provisional constitution that the President shall have legislative
powers.

Second, petitioners have failed to show that EO 273 was issued capriciously and
whimsically or in an arbitrary or despotic manner by reason of passion or personal
hostility. It appears that a comprehensive study of the VAT had been extensively
discussed by this framers and other government agencies involved in its
implementation, even under the past administration.

Lastly, petitioners also failed to prove that EO 273 is oppressive, discriminatory,

unjust and regressive, in violation of the equal protection clause. Petitioners
merely rely upon newspaper articles which are actually hearsay and have
evidentiary value. To justify the nullification of a law. there must be a clear and
unequivocal breach of the Constitution, not a doubtful and argumentative
implication. As the Court sees it, EO 273 satisfies all the requirements of a valid
tax.

In any event, if petitioners seriously believe that the adoption and continued
application of the VAT are prejudicial to the general welfare or the interests of the
majority of the people, they should seek recourse and relief from the political
branches of the government. The Court, following the time-honored doctrine of
separation of powers, cannot substitute its judgment for that of the President as
to the wisdom, justice and advisability of the adoption of the VAT. The Court can
only look into and determine whether or not EO 273 was enacted and made
effective as law, in the manner required by, and consistent with, the Constitution,
and to make sure that it was not issued in grave abuse of discretion amounting to
lack or excess of jurisdiction; and, in this regard, the Court finds no reason to
impede its application or continued implementation.