Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
 
G.R. No. L-30727 July 15, 1975
THE CITY OF OZAMIZ, Represented by THE CITY MAYOR, MUNICIPAL BOARD, CITY TREASURER, and
CITY AUDITOR, petitioner-appellant,
vs.
SERAPIO S. LUMAPAS and HONORABLE GERONIMO R. MARAVE, respondents-appellees.
Assistant City Fiscal Artemio C. Engracia for petitioner-appellant.
Francisco D. Boter for respondents-appellees.

ANTONIO, J.:
Appeal by certiorari from the decision, dated March 18, 1969, of respondent Judge Geronimo R. Marave, of the
Court of First Instance of Misamis Occidental, Branch II, Ozamiz City, declaring Ordinance No. 466, series of
1964, of the Municipal Board of the City of Ozamiz, null and void (Civil Case No. OZ-159), and ordering
petitioner to return to respondent Serapio S. Lumapas the sum of P1,243.00, representing the amount collected
as parking fees, by virtue of the ordinance, without costs.
The facts of this case, which are not disputed, are as follows:
Respondent Serapio S. Lumapas is an operator of transportation buses for passengers and cargoes, under the
name of Romar Line, with Ozamiz City and Pagadian, Zamboanga del Sur, as terminal points, by virtue of a
certificate of public convenience issued to him by the Public Service Commission. On September 15, 1964, the
Municipal Board of Ozamiz City enacted the following:
ORDINANCE NO. 466
AN ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE PARKED ON ANY PORTION OF
THE EXISTING PARKING SPACE IN THE CITY OF OZAMIZ. Be it ordained by the Municipal Board of the
City of Ozamiz, that:
SECTION 1 — There is hereby imposed parking fees for all motor vehicles parked on any portion of the duly
designated parking areas in the City of Ozamiz;
SECTION 2. — Motor Vechicles' as used in this ordinance shall be construed to mean all vehicles run by engine
whether the same is offered for passengers or for cargoes of whatever kind or nature;
SECTION 3. — The word "Parking" as used in this ordinance shall be construed to mean, when a motor vehicle
of whatever kind is stopped on any portion of the existing parking areas for the purpose of loading and
unloading passengers or cargoes;
SECTION 4. — For purposes of the fee hereinabove provided, the following schedule of rates collectible daily
from the conductor, driver, operator and/or owner must be observed:
For Passenger
(a) Passenger Bus ........................................................................ P1.00
(b) Weapon Carrier, Baby Bus & others of similar nature ..... .70
(c) Pick Up, Jeepneys, PU Cars and others of similar
nature ....................................................................................................................... .50

For Cargoes
(a) Cargo Trucks .......................................................................... 1.00
(b) Pick Up, Jeeps, Jeepneys, Weapon Carriers & Others of similar
nature ...................................................................................................................... .70
SECTION 5. — That the City Treasurer or his authorized representative is hereby empowered to collect the
herein parking fees using any form of official receipt he may devise, from the conductor, driver, operator and/
or owner of the motor vehicles parked in said designated parking areas;
SECTION 6. — Any person or persons, violating any provision of this ordinance shall, upon conviction thereof,
be punished by an imprisonment of not less than two (2) months nor more than six (6) months, or by a fine in
the sum of not less than P100.00 but not more than P400.00 or both such fine and imprisonment at the
discretion of the Court;
SECTION 7. — This ordinance shall take effect immediately upon its approval.
Enacted, September 15, 1964,
Approved, October 7, 1964.1
After approval of the above-quoted ordinance, the City of Ozamiz began collecting the prescribed parking'
fees and collected from respondent-appellee Serapio S. Lumapas, who had paid under protest, the parking fees
at One Peso (P1.00) for each of his buses, from October 1964 to January 1967, or an aggregate amount of
P1,259.002 for which official receipts were issued by petitioner.
About four (4) years later, or on January 11, 1968, respondent Serapio S. Lumapas filed a complaint, dated
August 3, 19673 against the City of Ozamiz, represented by the City Mayor, Municipal Board, City Treasurer,
and City Auditor, with the Court of First instance of Misamis Occidental, Branch II (Civil Case No. OZ-159), for
recovery of parking fees, alleging, among others, that said Ordinance No. 466 is ulta vires, and praying that
judgment be issued (1) nullifying Ordinance No. 466, series of 1964, and (2) ordering the Municipal Board to
appropriate the amount of P1,459.00 for the reimbursement of P1,259.00 he had paid as parking fees, plus
P200.00 as attorney's fees.
On January 25, 1968, petitioner filed its answer, with affirmative defenses4 to which respondent-appellee
Serapio S. Lumapas filed his reply, dated January 30, 1968.5
On January 3, 1969, the parties, through their respective counsel, filed the following:
STIPULATION OF FACTS
COME NOW the plaintiff and the defendants, through their respective counsel, and unto this Honorable Court
respectfully submit this stipulation of facts, to wit:
(1) That the area enclosed in red pencil in the sketch is a market site of the City of Ozamiz which holds the
same in its proprietary character as evidenced by Tax Declaration No. 51234. This area is for public use.
(2) That the Zulueta Street is now extended up to the end of the market site passing a row of tiendas up to
the end marked "toilet" in the sketch plan of market site when the market building was constructed in 1969;
(3) That on the right side near the row of tiendas and near the toilet and marked with series of x's and where
the buses of plaintiff were parking waiting for passengers going to the south;
(4) That this space marked "rig parking" in the sketch plan marked "x" has been designated by City Ordinance
No. 233 as a parking place marked Exhibit "2";
(5) That the defendant City Government has been collecting parking fees and issued corresponding official
receipts to the plaintiff for each unit belonging to the plaintiff every time it left Ozamiz City from said
parking place but once a day at one peso per unit;

(6) That the total amount of parking fees collected from the plaintiff by the defendant is P1,243.00 as per
official receipts actually counted in the presence of both parties;
(7) That the plaintiff made a demand for the reimbursement of the total amount collected from 1964 to 1967
and this demand was received on September 1, 1967, by the City Treasurer and that the City Treasurer replied
by first indorsement dated September 11, 1967, asking for reference and verification; and
(8) That in reply to said first indorsement, the plaintiff sent a letter to the City Treasurer dated January 18,
1967, citing cases in support of the demand, and in answer to that letter, the City Treasurer in his
communication dated January 11, 1968, flatly denied payment of the demand.
(9) That the parties will file their respective memoranda within twenty days from today.
WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered based upon this
stipulation of facts after the parties shall have submitted their respective memoranda or after the lapse of
twenty days from today.
Ozamiz City, December 27, 1968.6
On the basis of the foregoing Stipulation of Facts, and of the court's finding, after an ocular inspection of the
parking area designated by Ordinance No. 286, series of 1956,7 superseding Ordinance No. 234, series of 1953,
that it is a municipal street, although part of the public market, said court rendered judgment on March 18,
1969 declaring that such parking fee is in the nature of toll fees for the use of public road and made in
violation of Section 59[b] of Republic Act No. 4136 (Land Transportation and Traffic Code), there being no
prior approval therefor by the President of the Philippines upon recommendation of the Secretary of Public
Works and Communications (now Public Works). Hence, the present appeal by certiorari.
Petitioner now contends that the lower court erred: (1) in declaring Ordinance No. 466, series of 1964, of
Ozamiz City, null and void; (2) in considering parking fees as road tolls under Section 59[b] of Republic Act No.
4136; (3) in declaring the parking area as a public street and not the patrimonial property of the city; and (4) in
ordering the reimbursement of parking fees paid by respondent-appellee.
Decisive of this controversy is whether the Municipal Board of the City of Ozamiz, herein petitioner-appellant,
had the power to enact said Ordinance No. 466.
Petitioner-appellant, in maintaining the affirmative view, contends: (1)that the ordinance is valid for the fees
collected thereunder are in the nature of property rentals for the use of parking spaces belonging to the City
in its proprietary character, as evidenced by Tax Declaration No. 51234, and are authorized by Section 2308
(f) of the Revised Administrative Code, 8(2) that Section 15 (y) of the Charter of Ozamiz City (Republic Act
No. 321) 9 also authorizes the Municipal Board to regulate the use of streets which carries with it the power
to impose fees for its implementation; (3) that, pursuant to such power, the Municipal Board passed said
Ordinance No. 234, the purpose of which is to minimize accidents, to avoid congestion of traffic, to enable the
passengers to know the exact time of the departure of trucks and, for this purpose, the Municipal Board
provided for parking areas for which the City has to have funds for the implementation of the purposes
abovestated; (4) that Section 2 of the Local Autonomy Law (Republic Act No. 2264)likewise empowers the local
governments to impose taxes and fees, except those that are enumerated therein, and parking fee is not among
the exceptions: and (5) that the word "toll" connotes the act of passing along the road and the collection of toll
fees may not be imposed unless approved by the President of the Philippines upon the recommendation of the
Secretary of Public Works, pursuant to Section 59[b] of Republic Act No. 4136; whereas the word "parking"
implies a stationary condition and the parking fees provided for in Ordinance No. 466 is for the privilege of
using the designated parking area, which is owned by the City of Ozamiz, as its patrimonial property.

On the other hand, respondent-appellee insists (1) that Ozamiz City has no power to impose parking fees on
motor vehicles parked on Zulueta Street, which is property for public use and, as such, Ordinance No. 466
imposing such fees is null and void; (2) that granting arguendo that Zulueta Street is part of the City's public
market site, its conversion into a street removes it from its category as patrimonial property to one for public
use; 10 (3) that the use of Zulueta Street as a parking place is only incidental to the free passage of motor
vehicles for, as soon as the buses are loaded with passengers, the vehicles start their journey to their
respective destinations and pay the toll clerk at a station about one hundred; (100) feet ahead along Zulueta
Street before they are allowed to get out of the City and as such, the prohibition to impose taxes or fees
embodied in Section 59[b] of Republic. Act No. 4136 applies to this case; (4) that Section 2308[f] of the
Revised Administrative Code providing that the "proceeds on income from the ... use or management of property
lawfully held by the municipality" accrue to the municipality, does not grant, either expressly or by implication,
to the municipality, the power to impose such tax, (5) that Section 15[y] of the Charter of Ozamiz City
(Republic Act No. 321) which authorizes the City, among others, "to regulate the use of a street," does not
empower the City to impose parking fees; besides, said section contains a proviso, i.e., "except as otherwise
provided by law", which, in this case, is Republic Act No. 4136; and (6) that, since the power to impose parking
fees is not among those conferred by the Local Autonomy Act on local government, said City cannot, therefore,
impose such parking fees.
After the filing of its brief, or on December 10, 1969, the petitioner- appellant, through its counsel, First
Assistant City Fiscal Artemio C. Engracia, filed the following Manifestation, dated November 27, 1969, praying
that the decision of the lower court be reversed in view of the approval by the President of the Philippines upon
the recommendation of the Secretary of Public Works of the ordinance in question that validates the same, to
wit:
1. That the decision of the lower court, marked Annex "E" of the petition, declaring Ordinance No. 466, series
of 1964, of Ozamiz City, marked Annex "G" of the petition, null and void is based on the non-compliance with
the provisions of Section 59[b] of Republic Act No. 4136, otherwise known as The Land Transportation Law,
which requires the approval by the President of the Philippines upon the recommendation of the Secretary of
Public Works of such kind of ordinance..
2. That the President of the Philippines has now approved the Ordinance in question. A certified copy of said
approval is hereunder quoted.
xxx xxx xxx
4th Indorsement
Manila, September 26, 1969
Respectfully returned to the Mayor, City of Ozamiz, hereby approving, as recommended in the 3rd indorsement
hereon of the Secretary of Public Works and Communications, Ordinance No. 466, series of 1964, of that city,
entitled: "AN ORDINANCE IMPOSING PARKING FEES FOR EVERY MOTOR VEHICLE PARKED ON ANY
PORTION OF THE EXISTING PARKING SPACE IN THE OZAMIZ."
By Authority of the President:
(Sgd.) FLORES BAYOT
Assistant Executive Secretary
3. That the approval by the President of the Philippines is based upon the recommendation of the Secretary of
Public Works. A certified copy of said recommendation is hereunder reproduced:
3rd Indorsement

June 3, 1969
Respectfully forwarded to His Excellency, the President of the Philippines, Malacañang, recommending
favorable action, in view of the representations herein made, on the within letter dated March 21, 1969 of
Mayor Hilarion A. Ramiro, Ozamiz City, requesting approval No. 466, series of 1964, passed by the Municipal
Board, same city regarding the collection of fees for the privilege of parking vehicles in the lots privately-
owned by said City.
(Sgd.) ANTONIO V. RAQUIZA
Secretary
4. That the action of the Secretary of Public Works is based upon the findings of the Commissioner of the Land
Transportation Commission. A certified copy of the same is herein reproduced:
xxx xxx xxx
2nd Indorsement
May 16, 1969
Respectfully returned to the Honorable Secretary, Department of Public Works and Communications, Manila,
with the statement that this Commission interposes no objection on the approval of Ordinance No. 466, series
of 1964, of Ozamiz City, considering that the schedule of rate collectible from the conductor, driver, operator
and/or owner as stated under Section 4 thereof appears to be reasonable.
It may be stated in this connection that on the Decision of the CFI of Misamis Occidental, Branch II, dated
March 18, 1969 under Civil Case No. OZ(159), the said Ordinance was declared null and void for failure to
comply with the provisions of Section 59[b] of R. A. 4136, regarding the required "approval by the President of
the Philippines upon recommendation of the Secretary of Public Works and Communications."
(Sgd.) ROMEO F. EDU
Commissioner
The rule is well-settled that municipal corporations, being mere creatures of the law, have only such powers as
are expressly granted to them and those which are necessarily implied or incidental to the exercise thereof,
and the power to tax is inherent upon the State and it can only be exercised by Congress, unless delegated or
conferred by it to a municipal corporation. As such, said corporation has only such powers as the legislative
department may have deemed fit to grant. By reason of the limited powers of local governments and the nature
thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising out of the terms
used in granting said powers must be construed against the municipality. 11
The implied powers which a municipal corporation possesses and can exercise are only those necessarily incident
to the powers expressly conferred. Inasmuch as a city has no power, except by delegation from Congress, in
order to enable it to impose a tax or license fee, the power must be expressly granted or be necessarily implied
in, or incident to, the powers expressly conferred upon the city.
Under Sec. 15[Y] of the Ozamiz City Charter (Rep. Act No. 321), the municipal board has the power "... to
regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries and other public
places; ...", and in subsection [nn] of the same section 15, the authority "To enact all ordinances it may deem
necessary and proper for the sanitation and safety, the furtherance of prosperity and the promotion of the
morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such
others as may be necessary to carry into effect and discharge the powers and duties conferred by this Charter
..." By this express legislative grant of authority, police power is delegated to the municipal corporation to be
exercised as a governmental function for municipal purposes.

It is, therefore, patent that the City of Ozamiz has been clothed with full power to control and regulate its
streets for the purpose of promoting the public health, safety and welfare. Indeed, municipal power to regulate
the use of streets is a delegation of the police power of the national government, and in the exercise of such
power, a municipal corporation can make all necessary and desirable regulations which are reasonable and
manifestly in the interest of public safety and convenience.
By virtue of the aforecited statutory grant of authority, the City of Ozamiz can regulate the time, place,
manner of parking in the streets and public places. It is, however, insisted that the ordinance did not charge a
parking fee but a toll fee for the use of the street. It is true that the term " parking" ordinarily implies
"something more than a mere temporary and momentary stoppage at a curb for the purpose of loading or
unloading passengers or merchandize; it involves the idea of using a portion of the street as storage space for
an automobile." 12
In the case at bar, the TPU buses of respondent-appellee Sergio S. Lumapas stopped on the extended portion
of Zulueta Street beside the public market (Exhibit "X-1" of Exhibit "X", Development Plan for Ozamiz Market
Site),and that as soon as the buses were loaded, they proceeded to the station, about one hundred (100) feet
away from the parking area, where a toll clerk of the City collected the "Parking" fee of P1.00 per bus once a
day, before said buses were allowed to proceed to their destination.
Section 3 of the questioned Ordinance No. 466 defines the word "'parking' to mean the stoppage of a motor
vehicle of whatever kind on any portion of the existing parking areas for the purpose of loading and unloading
passengers or cargoes." 13 (Emphasis supplied.)
The word "toll" when used in connection with highways has been defined as a duty imposed on goods and
passengers travelling public roads. 14 The toll for use of a toll road is for its use in travelling thereon, not for
its use as a parking place for vehicles. 15
It is not pretended, however, that the public utility vehicles are subject to the payment, if they pass without
stopping thru the aforesaid sections of Zulueta Street. Considering that the public utility vehicles are only
charged the fee when said vehicles stop on "any portion of the existing parking areas for the purpose of loading
or unloading passengers or cargoes", the fees collected are actually in the nature of parking fees and not toll
fees for the use of Zulueta Street. This is clear from the Stipulation of Facts which shows that fees were not
exacted for mere passage thru the street but for stopping in the designated parking areas therein to unload or
load passengers or cargoes. It was not, therefore a toll fee for the use of public roads, within the context of
Section 59[b] of Republic Act No. 4136, which requires the authorization of the President of the Philippines.
As adverted to above, the Municipal Board of Ozamiz City is expressly granted by its Charter the power to
regulate the use of its streets. The ordinance in question appears to have been enacted in pursuance of this
grant. The parking fee imposed is minimal in amount, the maximum being only P1.00 a day for each passenger bus
and P1.00 for each cargo truck, the rates being lower for smaller types of vehicles. This indicates that its
purpose is not for revenue but for regulation. Moreover, it is undeniable that by designating a specific place
wherein passenger and freight vehicles may load and unload passengers and cargoes, benefits are accorded to
the city's residents in the form of increased safety and convenience arising from the decongestion of traffic.
Undoubtedly the city may impose a fee sufficient in amount to include the expense of issuing the license and
the cost of necessary inspection or police surveillance connected with the business or calling licensed.
The fees charged in the case at bar are undeniably to cover the expenses for supervision, inspection and
control, to ensure the smooth flow of traffic in the environs of the public market, and for the safety and
convenience of the public.

 WHEREFORE, the appealed decision is hereby reversed and Ordinance No. 466, series of 1964 declared valid.
No pronouncement as to costs.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-24265 December 28, 1979
PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION, plaintiff-appellant,
vs.
THE MUNICIPALITY OF JAGNA, PROVINCE OF BOHOL, defendant-appellee.
Picazo, Agcaoili, Santayana, Reyes & Tayao for appellant.
Joel P. Tiangco and Jesus N. Borromeo for appellee.

MELENCIO-HERRERA, J.:
A direct appeal by plaintiff company from the judgment of the Court of First Instance of Manila, Branch VI,
upholding the validity of Ordinance No. 4, Series of 1957, enacted by defendant Municipality, which imposed
"storage fees on all exportable copra deposited in the bodega within the jurisdiction of the Municipality of
Jagna Bohol.
Plaintiff-appellant is a domestic corporation with principal offices in Manila. lt is a consolidated corporation of
Procter & Gamble Trading Company and Philippine Manufacturing Company, which later became Procter &
Gamble Trading Company, Philippines. It is engaged in the manufacture of soap, edible oil, margarine and other
similar products, and for this purpose maintains a "bodega" in defendant Municipality where it stores copra
purchased in the municipality and therefrom ships the same for its manufacturing and other operations.
On December 13, 1957, the Municipal Council of Jagna enacted Municipal Ordinance No. 4, Series of 1957,
quoted hereinbelow:
AN ORDINANCE IMPOSING STORAGE FEES OF ALL EXPORTABLE COPRA DEPOSITED IN THE BODEGA
WITHIN THE JURISDlCTI0N OF THE MUNICIPALITY OF JAGNA BOHOL.
Be it ordained by the Municipal Council of Jagna Bohol, that:
SECTION 1. Any person, firm or corporation having a deposit of exportable copra in the bodega, within the
jurisdiction of the Municipality of Jagna Bohol, shall pay to the Municipal Treasury a storage fee of TEN (P0.10)
CENTAVOS FOR EVERY HUNDRED (100) kilos;
SECTION 2. All exportable copra deposited in the bodega within the Municipality of Jagna Bohol, is part of the
surveillance and lookout of the Municipal Authorities;
SECTION 3. Any person, firm or corporation found violating the provision of the preceding section of this
Ordinance shall be punished by a fine of not less than TWO HUNDRED (P 200.00) PESOS, nor more than FOUR
HUNDRED (P400.00) PESOS, or an imprisonment of hot less than ONE MONTH, nor more than THREE
MONTHS, or both fines and imprisonment at the discretion of the court.
SECTION 4. This Ordinance shall take effect on January 1, 1958.
APPROVED December 13,1957.
(Sgd.) TEODORO B. GALACAR Municipal Mayor 1

 For a period of six years, from 1958 to 1963, plaintiff paid defendant Municipality, allegedly under protest,
storage fees in the total sum of 1142,265.13, broken down as follows:
Procter & Gamble Trading Co. Procter & Gamble Philippine Manufacturing Corp.

1958 5, 072.13 ___________

1959 7, 076.00 ___________

1960 9, 950.00 ___________

1961 7, 830.00 ___________

1962 3, 648.00 P5, 279.00

1963 ______ P3, 410. 00

P33, 576.13 P8, 689.00

TOTAL CLAIM P42, 265.13 2

On March 3, 1964, plaintiff filed this suit in the Court of First Instance of Manila, Branch VI, wherein it
prayed that 1) Ordinance No. 4 be declared inapplicable to it, or in the alter. native, that it be pronounced
ultra-vires and void for being beyond the power of the Municipality to enact; and 2) that defendant Municipality
be ordered to refund to it the amount of P42,265.13 which it had paid under protest; and costs.
For its part, defendant Municipality upheld its power to enact the Ordinance in question; questioned the
jurisdiction of the trial Court to take cognizance of the action under section 44(h) of the Judiciary Act in that
it seeks to enjoin the enforcement of a Municipal Ordinance; and pleaded prescription and laches for plaintiff's
failure to timely question the validity of the said Ordinance.
After the parties had agreed to submit the case for judgment on the pleadings, the trial Court upheld its
jurisdiction as well as defendant Municipality's power to enact the Ordinance in question under section 2238 of
the Revised Administrative Code, otherwise known as the general welfare clause, and declared that plaintiff's
right of action had prescribed under the 5-year period provided for by Article 1149 of the Civil Code.
In this appeal, plaintiff interposes the following Assignments of Error:
I
THE TRIAL COURT ERRED IN HOLDING THAT ORDINANCE NO. 4, SERIES OF 1957, ENACTED BY THE
DEFENDANT MUNICIPALITY OF JAGNA BOHOL, IS A VALID, LEGAL AND ENFORCEABLE ORDINANCE
AGAINST THE PLAINTIFF.
II
THE TRIAL COURT ERRED IN HOLDING THAT PAYMENT OF THE TAX UNDER ORDINANCE NO. 4, SERIES
OF 1957 WAS NOT DONE UNDER PROTEST.
III
THE TRIAL COURT ERRED IN HOLDING THAT THE ACTION OF THE PLAINTIFF TO ANNUL AND TO
DECLARE ORDINANCE NO. 4, SERIES OF 1957 OF THE DEFENDANT HAS ALREADY PRESCRIBED.
IV

AND, FINALLY, THE TRIAL COURT ERRED IN NOT HOLDING ORDINANCE NO. 4. SERIES OF 1957 ULTRA-
VIRES AND VOID AND IN NOT ORDERING THE REFUND OF TAXES PAID THEREUNDER. 3
It is plaintiff's submission that the subject Ordinance is inapplicable to it as it is not engaged in the business
or trade of storing copra for others for compensation or profit and that the only copra it stores is for its
exclusive use in connection with its business as manufacturer of soap, edible oil, margarine and other similar
products; that the levy is intended as an "export tax" as it is collected on "exportable copra' , and, therefore,
beyond the power of the Municipality to enact; and that the fee of P0.10 for every 100 kilos of copra stored in
the bodega is excessive, unreasonable and oppressive and is imposed more for revenue than as a regulatory fee.
The main question to determine is whether defendant Municipality was authorized to impose and collect the
storage fee provided for in the challenged Ordinance under the laws then prevailing.
The validity of the Ordinance must be upheld pursuant to the broad authority conferred upon municipalities by
Commonwealth Act No. 472, approved on June 16, 1939, which was the prevailing law when the Ordinance was
enacted (Procter & Gamble Trading Co. vs. Municipality of Medina, 43 SCRA 130 11972]). Section 1 thereof
reads:
Section 1. A municipal council or municipal district council shall have the authority to impose municipal license
taxes upon persons engaged in any occupation or business, or exercising privileges in the municipality or
municipal district, by requiring them to secure licenses at rates fixed by the municipal council, or municipal
district council, and to collect fees and charges for services rendered by the municipality or municipal district
and shall otherwise have power to levy for public local purposes, and for school purposes, including teachers'
salaries, just and uniform taxes other than percentage taxes and taxes on specified articles.
Under the foregoing provision, a municipality is authorized to impose three kinds of licenses: (1) a license for
regulation of useful occupation or enterprises; (2) license for restriction or regulation of non-useful
occupations or enterprises; and (3) license for revenue. 4 It is thus unnecessary, as plaintiff would have us do,
to determine whether the subject storage fee is a tax for revenue purposes or a license fee to reimburse
defendant Municipality for service of supervision because defendant Municipality is authorized not only to
impose a license fee but also to tax for revenue purposes.
The storage fee imposed under the question Ordinance is actually a municipal license tax or fee on persons,
firms and corporations, like plaintiff, exercising the privilege of storing copra in a bodega within the
Municipality's territorial jurisdiction. For the term "license tax" has not acquired a fixed meaning. It is often
used indiseriminately to designate impositions exacted for the exercise of various privileges. In many instances,
it refers to revenue-raising exactions on privileges or activities. 5
Not only is the imposition of the storage fee authorized by the general grant of authority under section 1 of CA
No. 472. Neither is the storage fee in question prohibited nor beyond the power of the municipal councils and
municipal district councils to impose, as listed in section 3 of said CA No. 472. 6
Moreover, the business of buying and selling and storing copra is property the subject of regulation within the
police power granted to municipalities under section 2238 of the Revised Administrative Code or the "general
welfare clause", which we quote hereunder:
Section 2238. General power of council to enact ordinances and make regulations. — The municipal council shall
enact such ordinances and make such regulations, not repugnant to law, as may be necessary to carry into
effect and discharge the powers and duties conferred upon it by law and such as shall seem necessary and
proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order,

comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property
therein.
For it has been held that a warehouse used for keeping or storing copra is an establishment likely to endanger
the public safety or likely to give rise to conflagration because the oil content of the copra when ignited is
difficult to put under control by water and the use of chemicals is necessary to put out the fire.7 And as the
Ordinance itself states, all exportable copra deposited within the municipality is "part of the surveillance and
lookout of municipal authorities.
Plaintiff's argument that the imposition of P0.10 per 100 kilos of copra stored in a bodega within defendant's
territory is beyond the cost of regulation and surveillance is not well taken. As enunciated in the case of
Victorias Milling Co. vs. Municipality of Victorias, supra.
The cost of regulation cannot be taken as a gauge, if the municipality really intended to enact a revenue
ordinance. For, 'if the charge exceeds the expense of issuance of a license and costs of regulation, it is a tax'.
And if it is, and it is validly imposed, 'the rule that license fees for regulation must bear a reasonable relation
to the expense of the regulation has no application'.
Municipal corporations are allowed wide discretion in determining the rates of imposable license fees even in
cases of purely police power measures. In the absence of proof as to municipal conditions and the nature of the
business being taxed as well as other factors relevant to the issue of arbitrariness or unreasonableness of the
questioned rates, Courts will go slow in writing off an Ordinance. 8 In the case at bar, appellant has not
sufficiently shown that the rate imposed by the questioned Ordinance is oppressive, excessive and prohibitive.
Plaintiff's averment that the Ordinance, even if presumed valid, is inapplicable to it because it is not engaged in
the business or occupation of buying or selling of copra but is only storing copra in connection with its main
business of manufacturing soap and other similar products, and that to be compelled to pay the storage fees
would amount to double taxation, does not inspire assent. The question of whether appellant is engaged in that
business or not is irrelevant because the storage fee, as previously mentioned, is an imposition on the privilege
of storing copra in a bodega within defendant municipality by persons, firms or corporations. Section 1 of the
Ordinance in question does not state that said persons, firms or corporations should be engaged in the business
or occupation of buying or selling copra. Moreover, by plaintiff's own admission that it is a consolidated
corporation with its trading company, it will be hard to segregate the copra it uses for trading from that it
utilizes for manufacturing.
Thus, it can be said that plaintiff's payment of storage fees imposed by the Ordinance in question does not
amount to double taxation. For double taxation to exist, the same property must be taxed twice, when it should
be taxed but once. Double taxation has also been defined as taxing the same person twice by the same
jurisdiction for the same thing. 9 Surely, a tax on plaintiff's products is different from a tax on the privilege
of storing copra in a bodega situated within the territorial boundary of defendant municipality.
Plaintiff's further contention that the storage fee imposed by the Ordinance is actually intended to be an
export tax, which is expressly prohibited by section 2287 of the Revised Administrative Code, is without merit.
Said provision reads as follows:
Section 2287 ...
It shall not be in the power of the municipal council to impose a tax in any form whatever upon goods and
merchandise carried into the municipality, or out of the same, and any attempt to impose an import or export
tax upon such goods in the guise of an unreasonable charge for wharfage use of bridges or otherwise, shall be
void.

xxx xxx xxx

We have held that only where there is a clear showing that what is being taxed is an export to any foreign
country would the prohibition come into play.10 When the Ordinance itself speaks of "exportable" copra, the
meaning conveyed is not exclusively export to a foreign country but shipment out of the municipality. The
storage fee impugned is not a tax on export because it is imposed not only upon copra to be exported but also
upon copra sold and to be used for domestic purposes if stored in any warehouse in the Municipality and the
weight thereof is 100 kilos or more. 11
Thus finding the Ordinance in question to be valid, legal and enforceable, we find it unnecessary to discuss the
ascribed error that the Court a quo erred in declaring that appellant had not paid the taxes under protest.
However, we find merit in plaintiff's contention that the lower Court erred in ruling that its action has
prescribed under Article 1149 of the Civil Code, which provides for a period of five years for all actions whose
periods are not fixed in that Code. The case of Municipality of Opon vs. Caltex Phil., 12 is authority for the view
that the period for prescription of actions to recover municipal license taxes is six years under Article 1145(2)
of the Civil Code. Thus, plaintiff's action brought within six years from the time the right of action first
accrued in 1958 has not yet prescribed.
WHEREFORE, affirming the judgment appealed, from, we sustain the validity of Ordinance No. 4, Series of
1957, of defendant Municipality of Jagna Bohol, under the laws then prevailing.
Costs against plaintiff-appellant.
SO ORDERED.

EN BANC

[G.R. No. L-13912. September 30, 1960.]

THE COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. CONSUELO L. VDA. DE PRIETO, Respondent.

Solicitor General Edilberto Barot, Solicitor F. R. Rosete and Special Atty. B. Gatdula, Jr. for Petitioner.

Formilleza & Latorre for Respondent.

SYLLABUS

1. TAXATION; DEFICIENCY INCOME TAX; REQUISITES IN ORDER THAT INTEREST MAY BE

DEDUCTIBLE. — For interest to be allowed as deduction from gross income, it must be shown that there be

indebtedness, that there should be interest upon it, and that what is claimed as an interest deduction should
have been paid or accrued within the year.

2. ID.; ID.; ID.; TAX AS AN INDEBTEDNESS; INTEREST PAID FOR LATE PAYMENT OF DONOR’S TAX
DEDUCTIBLE. — The term "indebtedness" as used in the Tax Code of the United States containing similar
provisions as in section 30 (b) (1) of our Tax Code, has been defined as an unconditional and legally enforceable
obligation for the payment of money. Within the meaning of that definition a tax may be considered an
indebtedness. Hence, interest paid for late payment of donor’s tax is deductible from gross income under said
section.

3. ID.; ID.; ID.; WHEN SECTION 80 OF REVENUE REGULATION NO. 2 IS NOT APPLICABLE. — Although
section 80 of Revenue Regulation No. 2 (known as Income Tax Regulations) promulgated by the Department of
Finance, which provides that "the word ‘taxes’ means taxes proper and no deductions should be allowed for
amounts representing interest, surcharge, or penalties incident to delinquency," implements section 30 (c) of
the Tax Code governing deductions of taxes, the same is inapplicable to a case where the taxpayer seeks to
come under section 30 (b) of the same Code providing for deduction of interest on indebtedness.

4. ID.; ID.; ID.; ID.; TAXPAYER NOT PRECLUDED FROM CLAIMING INTEREST PAYMENT AS DEDUCTION.
— Although interest payment for delinquency taxes is not deductible as tax under section 30 (c) of the Tax
Code and section 80 of the Income Tax Regulations, the taxpayer is not said interest payment as deduction
under section 30 (b) of the same code.

DECISION

GUTIERREZ DAVID, J.:

This is an appeal from a decision of the Court of Tax Appeals reversing the decision of the Commissioner of
Internal Revenue which held herein respondent Consuelo L. Vda. de Prieto liable for the payment of the sum of
P21,410.38 as deficiency income tax, plus penalties and monthly interest.

The case was submitted for decision in the court below upon a stipulation of facts, which for brevity is
summarized as follows: On December 4, 1945, the respondent conveyed by way of gifts to her four children,
namely, Antonio, Benito, Carmen and Mauro, all surnamed Prieto, real property with a total assessed value of
P892,497.50. After the filing of the gift tax returns on or about February 1, 1954, the petitioner Commissioner
of Internal Revenue appraised the real property donated for gift tax purposes at P1,231,268.00 and assessed
the total sum of P117,706.50 as donor’s gift tax, interests and compromises due thereon. Of the total sum of
P117,706.50 paid by respondent on April 29, 1954, the sum of P55,978.65 represents the total interest on
account of delinquency. This sum of P55,978.65 was claimed as deduction, among others, by respondent in her
1954 income tax return. Petitioner, however, disallowed the claim and as a consequence of such disallowance

assessed respondent for 1954 the total sum of P21,410.38 as deficiency income tax due on the aforesaid
P55,978.65, including interest up to March 31, 1957, surcharge and compromise for the late payment.

Under the law, for interest to be deductible, it must be shown that there be an indebtedness, that there
should be interest upon it, and that what is claimed as an interest deduction should have been paid or accrued
within the year. It is here conceded that the interest paid by respondent was in consequence of the late
payment of her donor’s tax, and the same was paid within the year it is sought to be deducted. The only
question to be determined, as stated by the parties, is whether or not such interest was paid upon an
indebtedness within the contemplation of section 30(b) (1) of the Tax Code, the pertinent part of which
reads:jgc:chanrobles.com.ph

"Sec. 30 Deductions from gross income. — In computing net income there shall be allowed as deductions —

x       x       x

"(b) Interest:jgc:chanrobles.com.ph

"(1) In general. — The amount of interest paid within the taxable year on indebtedness, except on indebtedness
incurred or continued to purchase or carry obligations the interest upon which is exempt from taxation as
income under this Title."cralaw virtua1aw library

The term "indebtedness" as used in the Tax Code of the United States containing similar provisions as in the
above-quoted section has been defined as an unconditional and legally enforceable obligation for the payment of
money. (Federal Taxes Vol. 2, p. 13,019, Prentice-Hall, Inc.; Mertens’ Law of Federal Income Taxation, Vol. 4, p.
542.) Within the meaning of that definition, it is apparent that a tax may be considered an indebtedness. As
stated by this Court in the case of Santiago Sambrano v. Court of Tax Appeals and Collector of Internal
Revenue (101 Phil., 1; 53 Off. Gaz., 4839) —

"Although taxes already due have not, strictly speaking, the same concept as debts, they are, however,
obligations that may be considered as such.

"‘The term "debt" is properly used in a comprehensive sense as embracing not merely money due by contract but
whatever one is bound to render to another, either for contract, or the requirement of the law. (Camben v. Fink
Coule & Coke Co. 61 LRA 584).

"Where statute imposes a personal liability for a tax, the tax becomes, at least in a board sense, a debt.
(Idem).

"‘A tax is a debt for which a creditor’s bill may be brought in a proper case.’ (State v. Georgia Co., 19 LEA
485)."cralaw virtua1aw library

It follows that the interest paid by herein respondent for the late payment of her donor’s tax is deductible
from her gross income under section 30 (b) of the Tax Code above quoted.

The above conclusion finds support in the established jurisprudence in the United States after whose laws our
Income Tax Law has been patterned. Thus, under sec. 23(b) of the Internal Revenue Code of 1939, as amended
1, which contains similarly worded provisions as sec. 30(b) of our Tax Code, the uniform ruling is that interest
on taxes is interest on indebtedness and is deductible. (U.S. v. Jaffray, 306 U.S. 276. See also Lustig v. U.S.,
138 F. Supp. 870; Commissioner of Internal Revenue v. Bryer, 151 F. 2d 267, 34 AFTR 151; Penrose v. U.S. 18 F.
Supp. 413, 18 AFTR 1289; Max Thomas Davis, Et. Al. v. Commissioner of Internal Revenue, 46, U.S. Board of Tax
Appeals Reports, p. 663, citing U.S. v. Jaffray, supra, Smith v. Commissioner of Internal Revenue, 6 Tax Court
of limited States Reports, p. 255; Armour v. Commissioner of Internal Revenue, 6 Tax Court of the United
States Reports, p. 359; The Koppers Coal Co. v. Commissioner of Internal Revenue, 7 Tax Court of United
States Reports, p. 1209; Toy v. Commissioner of Internal Revenue; Lucas v. Comm., 34 U.S. Board of Tax
Appeals Reports, 877; Evens & Howard Fire Brick Co. v. Commissioner of Internal Revenue, 8 U.S. Board of Tax
Appeals Reports, 867; Koppers Co. v. Commissioner of Internal Revenue, 3 Tax Court of United States Reports,
p. 62). The rule applies even though the tax is nondeductible. (Federal Taxes, Vol. 2, Prentice Hall, sec. 163,
13,022; see also Mertens’ Law of Federal Income Taxation, Vol. 5, pp. 23-24.)

To sustain the proposition that the interest payment in question is not deductible for the purpose of computing
respondent’s net income, petitioner relies heavily on section 80 of Revenue Regulation No. 2 (known as Income
Tax Regulation) promulgated by the Department of Finance, which provides that "the word ‘taxes’ means taxes
proper and no deductions should be allowed for amounts representing interest, surcharge, or penalties incident
to delinquency." The court below, however, held section 80 as inapplicable to the instant case because while it
implements sections 30(c) of the Tax Code governing deduction of taxes, the respondent taxpayer seeks to
come under section 30(b) of the same Code providing for deduction of interest on indebtedness. We find the
lower court’s ruling to be correct. Contrary to petitioner’s belief, the portion of section 80 of Revenue
Regulation No. 2 under consideration has been part and parcel of the development to the law on deduction of
taxes in the United States. (See Capital Bldg. & Loan Assn. v. Comm., 23 BTA 848. Thus, Mertens in his treatise
says: "Penalties are to be distinguished from taxes and they are not deductible under the heading of taxes.." . .
Interest on state taxes is not deductible as taxes." (Vol. 5, Law on Federal income Taxation, pp. 22-23, sec.
27.06, citing cases.) This notwithstanding, courts in that jurisdiction, however, have invariably held that
interest on deficiency taxes are deductible, not as taxes, but as interest. (U.S. v. Jaffray, Et Al., supra; see
also Mertens, sec. 26.09, Vol. 4, p. 552, and cases cited therein.) Section 80 of Revenue Regulation No. 2,
therefore, merely incorporated the established application of the tax deduction statute in the United States,
where deduction of "taxes" has always been limited to taxes proper and has never included interest on
delinquent taxes, penalties and surcharges.

To give to the quoted portion of section 80 of our Income Tax Regulations the meaning that the petitioner
gives it would run counter to the provision of section 30(b) of the Tax Code and the construction given to it by
courts in the United States. Such effect would thus make the regulation invalid for a "regulation which
operates to create a rule out of harmony with the statute, is a mere nullity." (Lynch v. Tilden Produce Co., 265
U.S. 315; Miller v. U.S., 294 U.S. 435.) As already stated, section 80 implements only section 30(c) of the Tax

 Code, or the provision allowing deduction of taxes, while herein respondent seeks to be allowed deduction under
section 30(b), which provides for deduction of interest on indebtedness.

In conclusion, we are of the opinion and so hold that although interest payment for delinquent taxes is not
deductible as tax under Section 30(c) of the Tax Code and section 80 of the Income Tax Regulations, the
taxpayer is not precluded thereby from claiming said interest payment as deduction under section 30(b) of the
same Code.

In view of the foregoing, the decision sought to be reviewed is affirmed, without pronouncement as to costs.

Bengzon, Bautista Angelo, Labrador, Barrera, Paredes, and Dizon, JJ., concur.

Paras, C.J., Concepión, and Reyes, J. B. L., JJ., concur in the result.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 184398               February 25, 2010
SILKAIR (SINGAPORE) PTE. LTD., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before the Court is a Petition for Review on Certiorari, assailing the May 27, 2008 Decision1 and the subsequent
September 5, 2008 Resolution2 of the Court of Tax Appeals (CTA) En Banc in C.T.A. E.B. No. 267. The decision
dated May 27, 2008 denied the petition for review filed by petitioner Silkair (Singapore) Pte. Ltd., on the
ground, among others, of failure to prove that it was authorized to operate in the Philippines for the period
June to December 2000, while the Resolution dated September 5, 2008 denied petitioner’s motion for
reconsideration for lack of merit.
The antecedent facts are as follows:
Petitioner, a foreign corporation organized under the laws of Singapore with a Philippine representative office
in Cebu City, is an online international carrier plying the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-
Singapore routes.
Respondent Commissioner of Internal Revenue is impleaded herein in his official capacity as head of the Bureau
of Internal Revenue (BIR), an attached agency of the Department of Finance which is duly authorized to
decide, approve, and grant refunds and/or tax credits of erroneously paid or illegally collected internal revenue
taxes.3
On June 24, 2002, petitioner filed with the BIR an administrative claim for the refund of Three Million Nine
Hundred Eighty-Three Thousand Five Hundred Ninety Pesos and Forty-Nine Centavos (₱3,983,590.49) in excise
taxes which it allegedly erroneously paid on its purchases of aviation jet fuel from Petron Corporation (Petron)
from June to December 2000. Petitioner used as basis therefor BIR Ruling No. 339-92 dated December 1,

1992, which declared that the petitioner’s Singapore-Cebu-Singapore route is an international flight by an
international carrier and that the petroleum products purchased by the petitioner should not be subject to
excise taxes under Section 135 of Republic Act No. 8424 or the 1997 National Internal Revenue Code (NIRC).
Since the BIR took no action on petitioner’s claim for refund, petitioner sought judicial recourse and filed on
June 27, 2002, a petition for review with the CTA (docketed as CTA Case No. 6491), to prevent the lapse of
the two-year prescriptive period within which to judicially claim a refund under Section 2294 of the NIRC.
Petitioner invoked its exemption from payment of excise taxes in accordance with the provisions of Section
135(b) of the NIRC, which exempts from excise taxes the entities covered by tax treaties, conventions and
other international agreements; provided that the country of said carrier or exempt entity likewise exempts
from similar taxes the petroleum products sold to Philippine carriers or entities. In this regard, petitioner
relied on the reciprocity clause under Article 4(2) of the Air Transport Agreement entered between the
Republic of the Philippines and the Republic of Singapore.
Section 135(b) of the NIRC provides:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. – Petroleum
products sold to the following are exempt from excise tax:
xxxx
(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for
their use or consumption: Provided, however, That the country of said foreign international carrier or exempt
entities or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or
agencies; x x x.
Article 4(2) of the Air Transport Agreement between the Philippines and Singapore, in turn, provides:
ART. 4. x x x.
xxxx
(2) Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board
aircraft in the territory of one Contracting Party by, or on behalf of, a designated airline of the other
Contracting Party and intended solely for use in the operation of the agreed services shall, with the exception
of charges corresponding to the service performed, be exempt from the same customs duties, inspection fees
and other duties or taxes imposed in the territory of the first Contracting Party, even when these supplies are
to be used on the parts of the journey performed over the territory of the Contracting Party in which they are
introduced into or taken on board. The materials referred to above may be required to be kept under customs
supervision and control.
In a Decision5 dated July 27, 2006, the CTA First Division found that petitioner was qualified for tax
exemption under Section 135(b) of the NIRC, as long as the Republic of Singapore exempts from similar taxes
petroleum products sold to Philippine carriers, entities or agencies under Article 4(2) of the Air Transport
Agreement quoted above. However, it ruled that petitioner was not entitled to the excise tax exemption for
failure to present proof that it was authorized to operate in the Philippines during the period material to the
case due to the non-admission of some of its exhibits, which were merely photocopies, including Exhibit "A"
which was petitioner’s Certificate of Registration with the Securities and Exchange Commission (SEC) and
Exhibits "P," "Q" and "R" which were its operating permits issued by the Civil Aeronautics Board (CAB) to fly
the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the period October 1999 to
October 2000.

 Petitioner filed a motion for reconsideration but the CTA First Division denied the same in a Resolution6 dated
January 17, 2007.
Thereafter, petitioner elevated the case before the CTA En Banc via a petition for review, which was initially
denied in a Resolution7 dated May 17, 2007 for failure of petitioner to establish its legal authority to appeal
the Decision dated July 27, 2006 and the Resolution dated January 17, 2007 of the CTA First Division.
Undaunted, petitioner moved for reconsideration. In the Resolution8 dated September 19, 2007, the CTA En
Banc set aside its earlier resolution dismissing the petition for review and reinstated the same. It also required
respondent to file his comment thereon.
On May 27, 2008, the CTA En Banc promulgated the assailed Decision and denied the petition for review, thus:
WHEREFORE, premises considered, the instant petition is hereby DENIED for lack of merit. The assailed
Decision dated July 27, 2006 dismissing the instant petition on ground of failure of petitioner to prove that it
was authorized to operate in the Philippines for the period from June to December 2000, is hereby AFFIRMED
WITH MODIFICATION that petitioner is further not found to be the proper party to file the instant claim
for refund.9
In a separate Concurring and Dissenting Opinion,10 CTA Presiding Justice Ernesto D. Acosta opined that
petitioner was exempt from the payment of excise taxes based on Section 135 of the NIRC and Article 4 of
the Air Transport Agreement between the Philippines and Singapore. However, despite said exemption,
petitioner’s claim for refund cannot be granted since it failed to establish its authority to operate in the
Philippines during the period subject of the claim. In other words, Presiding Justice Acosta voted to uphold in
toto the Decision of the CTA First Division.
Petitioner again filed a motion for reconsideration which was denied in the Resolution dated September 5,
2008. Hence, the instant petition for review on certiorari, which raises the following issues:
I
Whether or not petitioner has substantially proven its authority to operate in the Philippines.
II
Whether or not petitioner is the proper party to claim for the refund/tax credit of excise taxes paid on
aviation fuel.
Petitioner maintains that it has proven its authority to operate in the Philippines with the admission of its
Foreign Air Carrier’s Permit (FACP) as Exhibit "B" before the CTA, which, in part, reads:
[T]his Board RESOLVED, as it hereby resolves to APPROVE the petition of SILKAIR (SINGAPORE) PTE LTD.,
for issuance of a regular operating permit (Foreign Air Carrier’s Permit), subject to the approval of the
President, pursuant to Sec. 10 of R.A. 776, as amended by P.D. 1462.11
Moreover, petitioner argues that Exhibits "P," "Q" and "R," which it previously filed with the CTA, were merely
flight schedules submitted to the CAB, and were not its operating permits. Petitioner adds that it was through
inadvertence that only photocopies of these exhibits were introduced during the hearing.
Petitioner also asserts that despite its failure to present the original copy of its SEC Registration during the
hearings, the CTA should take judicial notice of its SEC Registration since the same was already offered and
admitted in evidence in similar cases pending before the CTA.
Petitioner further claims that the instant case involves a clear grant of tax exemption to it by law and by virtue
of an international agreement between two governments. Consequently, being the entity which was granted the
tax exemption and which made the erroneous tax payment of the excise tax, it is the proper party to file the
claim for refund.

In his Comment12 dated March 26, 2009, respondent states that the admission in evidence of petitioner’s FACP
does not change the fact that petitioner failed to formally offer in evidence the original copies or certified
true copies of Exhibit "A," its SEC Registration; and Exhibits "P," "Q" and "R," its operating permits issued by
the CAB to fly its Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes for the period
October 1999 to October 2000. Respondent emphasizes that petitioner’s failure to present these pieces of
evidence amounts to its failure to prove its authority to operate in the Philippines.
Likewise, respondent maintains that an excise tax, being an indirect tax, is the direct liability of the
manufacturer or producer. Respondent reiterates that when an excise tax on petroleum products is added to
the cost of goods sold to the buyer, it is no longer a tax but becomes part of the price which the buyer has to
pay to obtain the article. According to respondent, petitioner cannot seek reimbursement for its alleged
erroneous payment of the excise tax since it is neither the entity required by law nor the entity statutorily
liable to pay the said tax.
After careful examination of the records, we resolve to deny the petition.
Petitioner’s assertion that the CTA may take judicial notice of its SEC Registration, previously offered and
admitted in evidence in similar cases before the CTA, is untenable.
We quote with approval the disquisition of the CTA En Banc in its Decision dated May 27, 2008 on the non-
admission of petitioner’s Exhibits "A," "P," "Q" and "R," to wit:
Anent petitioner’s argument that the Court in Division should have taken judicial notice of the existence of
Exhibit "A" (petitioner’s SEC Certificate of Registration), although not properly identified during trial as this
has previously been offered and admitted in evidence in similar cases involving the subject matter between the
same parties before this Court, We are in agreement with the ruling of the Court in Division, as discussed in its
Resolution dated April 12, 2005 resolving petitioner’s Motion for Reconsideration on the court’s non-admission
of Exhibits "A", "P", "Q" and "R", wherein it said that:
"Each and every case is distinct and separate in character and matter although similar parties may have been
involved. Thus, in a pending case, it is not mandatory upon the courts to take judicial notice of pieces of
evidence which have been offered in other cases even when such cases have been tried or pending in the same
court. Evidence already presented and admitted by the court in a previous case cannot be adopted in a separate
case pending before the same court without the same being offered and identified anew.
The cases cited by petitioner concerned similar parties before the same court but do not cover the same claim.
A court is not compelled to take judicial notice of pieces of evidence offered and admitted in a previous case
unless the same are properly offered or have accordingly complied with the requirements on the rules of
evidence. In other words, the evidence presented in the previous cases cannot be considered in this instant
case without being offered in evidence.
Moreover, Section 3 of Rule 129 of the Revised Rules of Court provides that hearing is necessary before
judicial notice may be taken by the courts. To quote said section:
Sec. 3. Judicial notice, when hearing necessary. – During the trial, the court, on its own initiative, or on request
of a party, may announce its intention to take judicial notice of any matter and allow the parties to be heard
thereon.
After the trial, and before judgment or on appeal, the proper court, on its own initiative or on request of a
party, may take judicial notice of any matter and allow the parties to be heard thereon if such matter is
decisive of a material issue in the case.

Furthermore, petitioner admitted that Exhibit ‘A’ have (sic) been offered and admitted in evidence in similar
cases involving the same subject matter filed before this Court. Thus, petitioner is and should have been aware
of the rules regarding the offering of any documentary evidence before the same can be admitted in court.
As regards Exhibit[s] ‘P’, ‘Q’ and ‘R’, the original copies of these documents were not presented for comparison
and verification in violation of Section 3 of Rule 130 of the 1997 Revised Rules of Court. The said section
specifically provides that ‘when the subject of inquiry is the contents of a document, no evidence shall be
admissible other than the original document itself x x x’. It is an elementary rule in law that documents shall
not be admissible in evidence unless and until the original copies itself are offered or presented for verification
in cases where mere copies are offered, save for the exceptions provided for by law. Petitioner thus cannot
hide behind the veil of judicial notice so as to evade its responsibility of properly complying with the rules of
evidence. For failure of herein petitioner to compare the subject documents with its originals, the same may
not be admitted." (Emphasis Ours)
Likewise, in the Resolution dated July 15, 2005 of the Court in Division denying petitioner’s Omnibus Motion
seeking allowance to compare the denied exhibits with their certified true copies, the court a quo explained
that:
"Petitioner was already given enough time and opportunity to present the originals or certified true copies of
the denied documents for comparison. When petitioner received the resolution denying admission of the
provisionally marked exhibits, it should have submitted the originals or certified true copies for comparison,
considering that these documents were accordingly available. But instead of presenting these documents,
petitioner, in its Motion for Reconsideration, tried to hide behind the veil of judicial notice so as to evade its
responsibility of properly applying the rules on evidence. It was even submitted by petitioner that these
documents should be admitted for they were previously offered and admitted in similar cases involving the
same subject matter and parties. If this was the case, then, there should have been no reason for petitioner to
seasonably present the originals or certified true copies for comparison, or even, marking. x x x."
In view of the foregoing discussion, the Court en banc finds that indeed, petitioner indubitably failed to
establish its authority to operate in the Philippines for the period beginning June to December 2000.13
This Court finds no reason to depart from the foregoing findings of the CTA En Banc as petitioner itself
admitted on page 914 of its petition for review that "[i]t was through inadvertence that only photocopies of
Exhibits ‘P’, ‘Q’ and ‘R’ were introduced during the hearing" and that it was "rather unfortunate that petitioner
failed to produce the original copy of its SEC Registration (Exhibit ‘A’) for purposes of comparison with the
photocopy that was originally presented."
Evidently, said documents cannot be admitted in evidence by the court as the original copies were neither
offered nor presented for comparison and verification during the trial. Mere identification of the documents
and the markings thereof as exhibits do not confer any evidentiary weight on them as said documents have not
been formally offered by petitioner and have been denied admission in evidence by the CTA.
Furthermore, the documents are not among the matters which the law mandatorily requires the Court to take
judicial notice of, without any introduction of evidence, as petitioner would have the CTA do. Section 1, Rule 129
of the Rules of Court reads:
SECTION 1. Judicial notice, when mandatory. – A court shall take judicial notice, without the introduction of
evidence, of the existence and territorial extent of states, their political history, forms of government and
symbols of nationality, the law of nations, the admiralty and maritime courts of the world and their seals, the

political constitution and history of the Philippines, the official acts of the legislative, executive and judicial
departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions.
Neither could it be said that petitioner’s SEC Registration and operating permits from the CAB are documents
which are of public knowledge, capable of unquestionable demonstration, or ought to be known to the judges
because of their judicial functions, in order to allow the CTA to take discretionary judicial notice of the said
documents.15
Moreover, Section 3 of the same Rule16 provides that a hearing is necessary before judicial notice of any
matter may be taken by the court. This requirement of a hearing is needed so that the parties can be heard
thereon if such matter is decisive of a material issue in the case.
Given the above rules, it is clear that the CTA En Banc correctly did not admit petitioner’s SEC Registration
and operating permits from the CAB which were merely photocopies, without the presentation of the original
copies for comparison and verification. As aptly held by the CTA En Banc, petitioner cannot rely on the principle
of judicial notice so as to evade its responsibility of properly complying with the rules of evidence. Indeed,
petitioner’s contention that the said documents were previously marked in other cases before the CTA tended
to confirm that the originals of these documents were readily available and their non-presentation in these
proceedings was unjustified. Consequently, petitioner’s failure to compare the photocopied documents with
their original renders the subject exhibits inadmissible in evidence.
Going to the second issue, petitioner maintains that it is the proper party to claim for refund or tax credit of
excise taxes since it is the entity which was granted the tax exemption and which made the erroneous tax
payment. Petitioner anchors its claim on Section 135(b) of the NIRC and Article 4(2) of the Air Transport
Agreement between the Philippines and Singapore. Petitioner also asserts that the tax exemption, granted to it
as a buyer of a certain product, is a personal privilege which may not be claimed or availed of by the seller.
Petitioner submits that since it is the entity which actually paid the excise taxes, then it should be allowed to
claim for refund or tax credit.
At the outset, it is important to note that on two separate occasions, this Court has already put to rest the
issue of whether or not petitioner is the proper party to claim for the refund or tax credit of excise taxes it
allegedly paid on its aviation fuel purchases.17 In the earlier case of Silkair (Singapore) Pte, Ltd. v.
Commissioner of Internal Revenue,18 involving the same parties and the same cause of action but pertaining to
different periods of taxation, we have categorically held that Petron, not petitioner, is the proper party to
question, or seek a refund of, an indirect tax, to wit:
The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on
whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section
130 (A) (2) of the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be filed and the
excise tax paid by the manufacturer or producer before removal of domestic products from place of
production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund
based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and
Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair
for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.
In the second Silkair19 case, the Court explained that an excise tax is an indirect tax where the burden can be
shifted or passed on to the consumer but the tax liability remains with the manufacturer or seller. Thus, the
manufacturer or seller has the option of shifting or passing on the burden of the tax to the buyer. However,

where the burden of the tax is shifted, the amount passed on to the buyer is no longer a tax but a part of the
purchase price of the goods sold.
Petitioner contends that the clear intent of the provisions of the NIRC and the Air Transport Agreement is to
exempt aviation fuel purchased by petitioner as an exempt entity from the payment of excise tax, whether
such is a direct or an indirect tax. According to petitioner, the excise tax on aviation fuel, though initially
payable by the manufacturer or producer, attaches to the goods and becomes the liability of the person having
possession thereof.
We do not agree. The distinction between a direct tax and an indirect tax is relevant to this issue. In
Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company,20 this Court explained:
Based on the possibility of shifting the incidence of taxation, or as to who shall bear the burden of taxation,
taxes may be classified into either direct tax or indirect tax.
In context, direct taxes are those that are exacted from the very person who, it is intended or desired, should
pay them; they are impositions for which a taxpayer is directly liable on the transaction or business he is
engaged in.
On the other hand, indirect taxes are those that are demanded, in the first instance, from, or are paid by, one
person in the expectation and intention that he can shift the burden to someone else. Stated elsewise, indirect
taxes are taxes wherein the liability for the payment of the tax falls on one person but the burden thereof can
be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the
consumer who ultimately pays for it. When the seller passes on the tax to his buyer, he, in effect, shifts the
tax burden, not the liability to pay it, to the purchaser as part of the purchase price of goods sold or services
rendered.
Title VI of the NIRC deals with excise taxes on certain goods. Section 129 reads as follows:
SEC. 129. Goods Subject to Excise Taxes. – Excise taxes apply to goods manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition and to things imported. x x x.
As used in the NIRC, therefore, excise taxes refer to taxes applicable to certain specified or selected goods
or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other
disposition and to things imported into the Philippines. These excise taxes may be considered taxes on
production as they are collected only from manufacturers and producers. Basically an indirect tax, excise taxes
are directly levied upon the manufacturer or importer upon removal of the taxable goods from its place of
production or from the customs custody. These taxes, however, may be actually passed on to the end consumer
as part of the transfer value or selling price of the goods sold, bartered or exchanged.21
In Maceda v. Macaraig, Jr.,22 this Court declared:
"[I]ndirect taxes are taxes primarily paid by persons who can shift the burden upon someone else." For
example, the excise and ad valorem taxes that oil companies pay to the Bureau of Internal Revenue upon
removal of petroleum products from its refinery can be shifted to its buyer, like the NPC, by adding them to
the "cash" and/or "selling price."
And as noted by us in the second Silkair23 case mentioned above:
When Petron removes its petroleum products from its refinery in Limay, Bataan, it pays the excise tax due on
the petroleum products thus removed. Petron, as manufacturer or producer, is the person liable for the
payment of the excise tax as shown in the Excise Tax Returns filed with the BIR. Stated otherwise, Petron is
the taxpayer that is primarily, directly and legally liable for the payment of the excise taxes. However, since an

excise tax is an indirect tax, Petron can transfer to its customers the amount of the excise tax paid by
treating it as part of the cost of the goods and tacking it on the selling price.
As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc. v. Commissioner of Internal
Revenue:
"It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax
becomes part of the price which the purchaser must pay."
Even if the consumers or purchasers ultimately pay for the tax, they are not considered the taxpayers. The
fact that Petron, on whom the excise tax is imposed, can shift the tax burden to its purchasers does not make
the latter the taxpayers and the former the withholding agent.
Petitioner, as the purchaser and end-consumer, ultimately bears the tax burden, but this does not transform
petitioner’s status into a statutory taxpayer.
Thus, under Section 130(A)(2) of the NIRC, it is Petron, the taxpayer, which has the legal personality to claim
the refund or tax credit of any erroneous payment of excise taxes. Section 130(A)(2) states:
SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products. –
(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. –
(1) Persons Liable to File a Return. – x x x
(2) Time for Filing of Return and Payment of the Tax. – Unless otherwise specifically allowed, the return shall
be filed and the excise tax paid by the manufacturer or producer before removal of domestic products from
place of production: x x x. (Emphasis supplied.)
Furthermore, Section 204(C) of the NIRC provides a two-year prescriptive period within which a taxpayer may
file an administrative claim for refund or tax credit, to wit:
SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. – The
Commissioner may –
xxxx
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the
value of internal revenue stamps when they are returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon
proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or
penalty: Provided, however, That a return filed showing an overpayment shall be considered as a written claim
for credit or refund. (Emphasis supplied.)
From the foregoing discussion, it is clear that the proper party to question, or claim a refund or tax credit of
an indirect tax is the statutory taxpayer, which is Petron in this case, as it is the company on which the tax is
imposed by law and which paid the same even if the burden thereof was shifted or passed on to another. It
bears stressing that even if Petron shifted or passed on to petitioner the burden of the tax, the additional
amount which petitioner paid is not a tax but a part of the purchase price which it had to pay to obtain the
goods.
Time and again, we have held that tax refunds are in the nature of tax exemptions which represent a loss of
revenue to the government. These exemptions, therefore, must not rest on vague, uncertain or indefinite
inference, but should be granted only by a clear and unequivocal provision of law on the basis of language too
plain to be mistaken.24 Such exemptions must be strictly construed against the taxpayer, as taxes are the
lifeblood of the government.

 In fine, we quote from our ruling in the earlier Silkair25 case:

The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2) of the Air Transport
Agreement between RP and Singapore cannot, without a clear showing of legislative intent, be construed as
including indirect taxes. Statutes granting tax exemptions must be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority, and if an exemption is found to exist, it must not be
enlarged by construction.
This calls for the application of the doctrine, stare decisis et non quieta movere.1avvphi1 Follow past
precedents and do not disturb what has been settled. Once a case has been decided one way, any other case
involving exactly the same point at issue, as in the case at bar, should be decided in the same manner.26
WHEREFORE, the instant petition for review is DENIED. We affirm the assailed Decision dated May 27, 2008
and the Resolution dated September 5, 2008 of the Court of Tax Appeals En Banc in C.T.A. E.B. No. 267. No
pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-14264             April 30, 1963
RAYMUNDO B. TAN, JOSE ESGUERRA, ROMAN ABASTILLAS, ANTONIO QUEBRADO, ROMAN AGNES,
ELISEO AMANDY, NICOLAS SOTOMAYOR, INESTORIO TORRENUEVA and FELIPE TIOSAN, plaintiffs-
appellees,
vs.
THE MUNICIPALITY OF PAGBILAO, ELIAS PORNOBI as Municipal Mayor of Pagbilao and CEFERINO
CAPARROS as Municipal Treasurer of Pagbilao, defendants-appellants.
Jose D. Villena for plaintiffs-appellees.
Claro M. Recto for defendants-appellants.
PAREDES, J.:
Defendant municipal corporation was the owner and operator of a wharf (Exhs. E & F). On May 31, 1956, the
municipal council of defendant municipality enacted Ordinance No. 11, series of 1956, imposing certain charges
and/or fees on articles or merchandises landed upon, or loaded from the said wharf and on the strip of
shoreline adjacent thereto, measuring 300 meters. The plaintiffs, who were fishermen, merchants and
proprietors of Padre Burgos, Quezon, had to pass Pagbilao in order to bring their goods consisting of fish,
charcoal, copra, firewood and other merchandise to Lucena. The merchandise were transported in bancas or
motor boats from Padre Burgos and unloaded on the Pagbilao wharf or on the shoreline, from where they were
brought to Lucena by trucks.
Pursuant to the Ordinance, defendant municipality required plaintiffs to pay the charges and fees, which they
did under protest. On January 7, 1957, alleging that the Ordinance was ultra vires, in that the fees prescribed
therein partake of the nature of import or export taxes, in the guise of wharfage or rental fees, the plaintiffs,
instituted an action, with the CFI of Quezon Province, praying:
(1) That the said Municipal ordinance be declared null and void and of no legal effect; and

(2) Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of P1,800.00 for fees collected
and paid under protest.
Defendants answering the complaint, interposed the following special defenses:
1) that the fees collected at the wharf are intended for and actually being exclusively utilized in the repair,
improvement, and maintenance of the same;
2) that the municipality has made material and additional construction to date, and if the revenues raised from
these fees are sufficient, the wharf is intended to be lengthened along the 300 meters distance by the river;
3) the presence, day and night, of a municipal employee or of a policeman at the wharf, has resulted in the
prevailing peace, order, and security of cargoes, vessels, and of the operators therein;
4) the municipality also maintains a 300 candle power kerosene lantern at the wharf.
As counterclaim, defendants asked the payment of P6.00, for twelve truckloads of full-length bamboos, loaded
on a vessel at the wharf for which no payment had been made, in spite of repeated demands. The court a quo
rendered the following judgment:
xxx     xxx     xxx
In the light of the foregoing, the Court is therefore of the opinion that Ordinance No. 11, Series of 1956, of
defendant Municipality of Pagbilao, Quezon, is null and void for having been enacted without lawful authority ....
xxx     xxx     xxx
WHEREFORE, judgment is hereby rendered ordering defendant municipality of PagbiIao, Quezon, to pay to
plaintiff Raymundo B. Tan the amount of P774.25, with legal interest thereon from the filing of the complaint,
that is, from 4 February 1957, and dismissing defendants' counterclaim against plaintiffs, with the parties
bearing their own costs.
The above judgment is now before Us on appeal by the defendants, urging a reversal thereof on seven counts,
which converge on the following legal issues:
1) whether the defendant municipality can validly enact the ordinance in question and collect the charges
contained therein; and
2) whether plaintiff Tan is entitled to a refund of the fees paid to the defendant municipality.
Appellants contend that aside from the general powers of the council to enact ordinances and make regulations
(Sec. 2238 of the Administrative Code),certain provisions of said Code authorizes a municipality to establish a
wharf and collect wharfage fees, as compensation for its use, to wit —
SEC. 2242. Certain legislative powers of mandatory character.— It shall be the duty of the municipal council,
conformably with law:
xxx     xxx     xxx
(e) To regulate the construction, care, and use of streets, sidewalks, canals, wharves and piers of the
municipality, and prevent and remove obstacles and encroachment on the same.
SEC. 2318. Municipal ferries, wharves, markets, etc. — A municipal council shall have authority to acquire or
establish municipal ferries, wharves, markets, slaughterhouses, pounds, and cemeteries. Public utilities thus
owned by the municipality may be conducted by the municipal authorities upon stipulated return to private
parties.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered
by this stipulation of facts. 1äwphï1.ñët

SEC. 2320. Establishment of certain public utilities by private parties under license.— Where provision is not
made by a municipal council, pursuant to the provisions of the next two preceding sections hereof, for
maintaining or conducting ferries, wharves, markets, or slaughterhouses requisite for the needs of the
municipality, the council shall have authority, in its discretion, to let the privilege of establishing and
maintaining such utilities to private parties by license granted upon such terms as shall be fixed by the
council ....
Aside from the above provisions, Executive Order No. 255, dated April 1, 1940, states:
(6) Collection of berthing fees at municipal ports.-Municipalities may collect berthing fees at municipal ports,
pursuant to the provisions of section two thousand three hundred eighteen (2318) of the Revised
Administrative Code, not to exceed those specified in paragraph (3) hereof, provided that such collection shall
be credited to a special fund and used only for the maintenance and improvement of the port at which the
collections are made.
Appellants further contended that the wharfage fees which section 3(t), of Commonwealth Act No. 472,
prohibits a municipality from collecting, are customs charges levied in connection with the exportation or
importation of goods abroad, through ports of entry, as contemplated in the Tariff and Customs Code, but not
the ordinary wharfage rentals which a municipality may collect for the use of its wharf, in relation to local
trade and local products.
On the other hand, the appellees maintain that the appellant municipality was devoid one right to pass the
ordinance in question, since the Revised Administrative Code also prohibits the imposition of tax on any goods
or merchandise carried into or out of the municipality. Section 2287 thereof, provides —
SEC. 2287. Fundamental principles governing municipal taxation. — ... It shall not be in the power of the council
to impose a tax in any form whatever upon goods and merchandise carried into the municipality, or out of the
same, and any attempt to impose an import or export tax upon such goods in the guise of an unreasonable
charge for wharfage, use of bridges or otherwise shall be void.
Moreover, any power granted by the Administrative Code to municipalities had been impliedly repealed or
withdrawn by Commonwealth Act No. 472, the pertinent portions of which read —
SEC. 3. It shall be beyond the power of the municipal council and municipal district council to impose the
following taxes, charges and fees:
xxx     xxx     xxx
Customs duties, registration, wharfage, tonnage and other kinds of customs fees, charges and duties.
In the light of the legal provisions applicable, We are of the opinion that the ordinance in question, is ultra
vires, and hence, null and void. The ordinance calls for a specific tax. It charges a specific sum, ranging from
one centavo and up, by the head or number, and requires no assessment beyond a listing and classification of
the objects to be charged..
A tax which imposes a specific sum by the head or number, or some standard weight or measurement, and which
requires no assessment beyond a listing and classification of the objects to be taxed is specific tax. (We Wa Yu
v. City of Lipa, G.R. No. L-9167, Sept. 27, 1956)
Aside from being a specific tax, its nature as wharfage fee is also clear from the import of the ordinance,
specifically paragraph 1, which recites -.
PANGKAT 1.— Ang lahat na mayari o tagapangasiwa ng mga sasakyan sa pantalang bayan, ay dapat magbigay-alam
sa kinauukulang katiwala ng pamahalaan, upang maisaayos ang pagdaung, pagbaba at pagsakay ng mga kargamentos
at iba pa.

The phraseology of the above paragraph points to the fact that the charges collected pursuant thereto,
correspond to the words "berthing, unloading and loading of cargoes or merchandise" which fall under the
category of wharfage fees. The change or the designation of the said fees as "rental of municipal property" did
not change their basic character as "wharfage fees". Being a specific tax, the municipality has no right to
impose the same, for taxation is an attribute of sovereignty which municipal corporation do not enjoy (Santo
Lumber Co., et al v. City of Cebu, et al., L-10196, Jan. 22, 1958; 54 O.G. 5327; Saldana v. City of Iloilo, L-10470,
June 26, 1958). It shall not be in the power of the council to impose a tax in any form whatever upon goods and
merchandise carried into the municipality or out of the same, and any attempt to impose such tax in the guise
of wharfage fee or charge is void (Sec. 2287, Rev. Adm. Code). And being wharfage fee (Phil. Sugar Central v.
Coll. of Customs, 51 Phil. 131), it is likewise beyond the power of the municipal council and municipal district
council to impose (Sec. 3, Comm. Act No. 472, supra).
In the case at bar, aside from the fact that the right of the municipality to collect wharfage fees is doubtful
for, at most, its claim is based merely by inference, implications and deductions, which have no place in the
interpretation of the power to tax of a municipal corporation (Icard v. City Council of Baguio, et al., 46 Off.
Gaz., Suppl. No. 11, p. 320; Medina, et al. v. City of Baguio, 48 Off. Gaz., 11, p. 4729) no less than two
Secretaries of the Department of Justice, (Secretaries Jose Abad Santos & Bengzon) expressed the opinion
that, "in view of section 3, paragraph (t), Commonwealth Act No. 472, which expressly forbids municipalities
from imposing wharfage fees, a municipal ordinance levying wharfage or berthing fees is illegal and void, ...
(Opinion No. 373, series of 1940 and No. 165, series of 1951). Opinions and rulings of officials of the
government called upon to execute or implement administrative laws command much respect and weight
(Regalado v. Yulo, 61 Phil. 173; Grapilon v. Mun. Council of Carigara, L-12347, May 30, 1961)
It should be noted that previous to the ordinance in question (No. 11), ordinance No. 9 was enacted by the same
municipal council, providing for "wharfage fees" for goods and merchandise only. But because the Provincial
Board ruled the to be null and void, because the prescribed fees were unreasonable and were obviously export
or import taxes in the guise of wharfage fees which are contrary to the provisions of section 2287 of the
Administrative Code, the municipal council of Pagbilao enacted Ordinance No. 11, providing for the wharfage of
boats and vessels and of goods and merchandise; and while it fixed the fees or charges for loading and
unloading goods and merchandise, it did not state the berthing fees for boats and vessels carrying the goods,
all of which go to show that the council wanted only to impose specific tax on the goods and merchandise, which
was the same objective it had, when the annulled Ordinance No. 9 was promulgated.
The question as to whether or not the charges paid should be returned, must be answered in the affirmative.
Not only were the payments made under protest, but they were also collected under an invalid ordinance. In a
number of cases, We have ruled that monies collected under invalid acts or tax laws are refundable, even if the
payments were voluntary (East Asiatic Co., Ltd. v. City of Davao, L-16253, Aug. 21, 1962).
It is insinuated that invalidating the ordinance would leave the municipality with no means to defray the
expenses for operation, repair and maintenance of the wharf in question. It would seem, however, that the
municipality will not be absolutely helpless and hopeless, for there is always some remedy somewhere, and those
indicated in sections 2318 and 2320 of the Adm. Code, (supra) may be availed of.
IN VIEW OF ALL THE FOREGOING, we find that the decision appealed from is in conformity with the law and
jurisprudence on the matter. The same should be, as it is hereby affirmed, in all respects. No costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Barrera, Dizon and Regala, JJ., concur.
Makalintal, J., concurs in the result.
Padilla and Reyes, J.B.L., JJ., took no part.

EN BANC

[G.R. No. L-41383. August 15, 1988.]

PHILIPPINE AIRLINES, INC., Plaintiff-Appellant, v. ROMEO F. EDU, in his capacity as Land Transportation
Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, Defendants-Appellants.

Ricardo V . Puno, Jr. and Conrado A. Boro, for Plaintiff-Appellant.

SYLLABUS

1. STATUTORY CONSTRUCTION; TERM "FEES" IN REGISTRATION OF VEHICLES AS REGULATORY TAX;

EXPLAINED. — It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the
Land Transportation and Traffic Code that the legislative intent and purpose behind the law requiring owners of
vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways
and to a much lesser degree, pay for the operating expenses of the administering agency. On the other hand,
the Philippine Rabbit case mentions a presumption arising from the use of the term "fees" which appears to
have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section
13 of Rep. Act 4136 referring to taxes other than those imposed on the registration, operation or ownership of
a motor vehicle (Sec. 89, b, Rep. Act 4136, as amended). Fees may be properly regarded as taxes even though
they also serve as an instrument of regulation.

2. TAXATION; MOTOR VEHICLE REGISTRATION FEES; IF THE PURPOSE IS PRIMARILY REVENUE; THEN
THE EXACTION IS PROPERLY CALLED A TAX. — Taxation may be made the implement of the state’s police
power (Lutz v. Araneta, 98 Phil. 148). 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. Such is the case of motor vehicle
registration fees. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent
therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the
registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does
the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the

registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of
chauffeur . . ." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the
respondents, speak of an "additional tax," where the law could have referred to an original tax and not one in
addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep.
Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep.
Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit
fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11).
These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they
are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs’
license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in
the last proviso of Sec. 61.

3. ID.; ID.; NATURE AND PURPOSE. — We rule that motor vehicle registration fees as at present exacted
pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues of
government even if one fifth or less of the amount collected is set aside for the operating expenses of the
agency administering the program.

4. ID.; ID.; UNDER THE AMENDED FRANCHISE, PHILIPPINE AIRLINES IS NOT EXEMPTED FROM THE
PAYMENT OF ANY TAX, FEE, OR OTHER CHARGES ON THE REGISTRATION AND LICENSING OF MOTOR
VEHICLES. — The claim for refund is made for payments given in 1971. It is not clear from the records as to
what payments were made in succeeding 1968 and April 9, 1979, were correctly imposed because the tax
exemption in the franchise of PAL was repealed during that period. However, an amended franchise was given to
PAL in 1979. PAL’s current franchise is clear and specific. It has removed the ambiguity found in the earlier
law. Under Section 13 of Presidential Decree No. 1590, PAL is not exempt from the payment of any tax, fee, or
other charge on the registration and licensing of motor vehicles. Such payments are already included in the
basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590 and may no longer be
exacted. Hence, the prayer for refund of registration fees paid in 1991 is DENIED.

DECISION

GUTIERREZ, JR., J.:

What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?

This question has been brought before this Court in the past. The parties are, in effect, asking for a re-
examination of the latest decision on this issue.

This appeal was certified to us as one involving a pure question of law by the Court of Appeals in a case where
the then Court of First Instance of Rizal dismissed the plaintiff-appellant’s complaint for refund of
registration fees paid under protest.chanrobles virtual lawlibrary

The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Edu, pursuant to Section
8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code.

The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and
engaged in the air transportation business under a legislative franchise, Act No. 4271, as amended by Republic
Act Nos. 2360 and 2667. Under its franchise, PAL is exempt from the payment of taxes. The pertinent
provision of the franchise provides as follows:jgc:chanrobles.com.ph

"Section 13. In consideration of the franchise and rights hereby granted, the grantee shall pay to the National
(Government during the life of this franchise a tax of two per cent of the gross revenue or gross earning
derived by the grantee from its operations under this franchise. Such tax shall be due and payable quarterly
and shall be in lieu of all taxes of any kind, nature or description, levied, established or collected by any
municipal, provincial or national authority; Provided, that if, after the audit of the accounts of the grantee by
the Commissioner of Internal Revenue, a deficiency tax is shown to be due, the deficiency tax shall be payable
within the ten days from the receipt of the assessment. The grantee shall pay the tax on its real property in
conformity with existing law."cralaw virtua1aw library

On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956,
not been paying motor vehicle registration fees.

Sometime in 1971, however, appellee Commissioner Romeo F. Edu, issued a regulation requiring all tax exempt
entities, among them PAL to pay motor vehicle registration fees.

Despite PAL’s protestations, the appellee refused to register the appellant’s motor vehicles unless the amounts
imposed under Republic Act 4136 were paid. The appellant thus paid, under protest, the amount of P19,529.75
as registration fees of its motor vehicles.chanrobles virtual lawlibrary

After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Commissioner Edu
demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 [1951]) where it
was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by
virtue of its legislative franchise.

Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus
Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory
exactions and not revenue measures and, therefore, do not come within the exemption granted to PAL under its
franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National
Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil
Case No. Q-15862.

Appellee Romeo F. Edu, in his capacity as LTC Commissioner, and Ubaldo Carbonell, in his capacity as National
Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In support of the
motion to dismiss, defendants reiterated the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that
registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of
the police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax
except two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory
fees, such as motor vehicle registration fees. The resolution of the motion to dismiss was deferred by the
Court until after trial on the merits.

On April 24, 1973, the trial court rendered a decision dismissing the appellant’s complaint "guided by the later
ruling laid down by the Supreme Court in the case of Republic v. Philippine Rabbit Bus Lines, Inc. (supra)." From
this judgment, PAL appealed to the Court of Appeals which certified the case to us.

Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and
Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar.

Resolving the issue in the Philippine Rabbit case, this Court held:jgc:chanrobles.com.ph

"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor
Vehicle Law (Republic Act No. 587 [1950]). Its heading speaks of registration fees.’ The term is repeated four
times in the body thereof. Equally so, mention is made of the ‘fee for registration.’ (Ibid., Subsection G) A
subsection starts with a categorical statement No fees shall be charged.’ (Ibid., Subsection H) The conclusion
is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a
registration fee under the police power. Hence the inapplicability of the section relied upon by defendant-
appellee under the Back Pay Law. It is not held liable for a tax but for a registration fee. It therefore cannot
make use of a backpay certificate to meet such an obligation.

"Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by Republic Act
No. 5448. ([1968]. Section 3 thereof as to the imposition of additional tax on privately-owned passenger
automobiles, motorcycles and scooters was amended by Republic Act No. 5470 which is (sic) approved on May
30, 1969.) A special science fund was thereby created and its title expressly sets forth that a tax on privately-
owned passenger automobiles, motorcycles and scooters was imposed. The rates thereof were provided for in
its Section 3 which clearly specifies that additional tax’ was to be paid as distinguished from the registration
fee under the Motor Vehicle Act. There cannot be any clearer expression therefore of the legislative will, even
on the assumption that the earlier legislation could by stretching the point be susceptible of the interpretation
that a tax rather than a fee was levied. What is thus most apparent is that where the legislative body relies on
its authority to tax it expressly so states, and where it is enacting a regulatory measure, it is equally
explicit." (at p. 216)

In direct refutation is the ruling in Calalang v. Lorenzo (supra), where the Court, on the other hand,
held:jgc:chanrobles.com.ph

"The charges prescribed by the Revised Motor Vehicle Law for the registration of motor vehicles are in section
8 of that law called fees.’ But the appellation is no impediment to their being considered taxes if taxes they
really are. For not the name but the object of the charge determines whether it is a tax or a fee. Generally
speaking, taxes are for revenue, whereas fees are exactions for purposes of regulation and inspection and are
for that reason limited in amount to what is necessary to cover the cost of the services rendered in that
connection. Hence, ‘a charge fixed by statute for the service to be performed by an officer, where the charge
has no relation to the value of the services performed and where the amount collected eventually finds its way
into the treasury of the branch of the government whose officer or officers collected the charge, is not a fee
but a tax.’ (Cooley on Taxation, Vol. 1, 4th ed., p. 110.)

"From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are
but a small portion — about 5 per centum — of the total collections from motor vehicle registration fees. And
as proof that the money collected is not intended for the expenditures of that office, the law itself provides
that all such money shall accrue to the funds for the construction and maintenance of public roads, streets and
bridges. It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident
to the enforcement of regulations governing the operation of motor vehicles on public highways, for their
express object is to provide revenue with which the Government is to discharge one of its principal functions —
the construction and maintenance of public highways for everybody’s use. They are veritable taxes, not merely
fees.chanrobles virtual lawlibrary

"As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it provides
that ‘no other taxes or fees than those prescribed in this Act shall be imposed,’ thus implying that the charges
therein imposed — though called fees — are of the category of taxes. The provision is contained in section 70,
of subsection (b), of the law, as amended by section 17 of Republic Act 587, which reads:jgc:chanrobles.com.ph

"‘Sec. 70 (b) No other taxes or fees than those prescribed in this Act shall be imposed for the registration or
operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any
municipal corporation, the provisions of any city charter to the contrary notwithstanding: Provided, however,
That any provincial board, city or municipal council or board, or other competent authority may exact and
collect such reasonable and equitable toll fees for the use of such bridges and ferries, within their respective
jurisdiction, as may be authorized and approved by the Secretary of Public Works and Communications, and also
for the use of such public roads, as may be authorized by the President of the Philippines upon the
recommendation of the Secretary of Public Works and Communications, but in none of these cases, shall any toll
fees be charged or collected until and unless the approved schedule of tolls shall have been posted legibly in a
conspicuous place at such toll station.’" (at pp. 213-214)

Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992
[1932] as amended by Commonwealth Act 123 and Republic Acts Nos. 587 and 1603).chanrobles.com:cralaw:red

Today, the matter is governed by Rep. Act 4136 [1964] otherwise known as the Land Transportation Code, (as
amended by Rep. Acts Nos. 5715 and 6374, P.D. Nos. 382, 843, 896, 1057 and BP Blg. 43, 74 and 398).

Section 73 of Commonwealth Act 123 (which amended Sec. 73 of Act 3992 and remained unrevised by Rep. Act
Nos. 587 and 1603) states:chanrob1es virtual 1aw library

Section 73. Disposal of moneys collected. — Twenty per centum of the money collected under the provisions of
this Act shall accrue to the road and bridge funds of the different provinces and chartered cities in proportion
to the cedula sales during the next previous year and the remaining eighty per centum shall be deposited in the
Philippine Treasury to create a special fund for the construction and maintenance of national and provincial
roads and bridges, as well as the streets and bridges in the chartered cities to be alloted by the Secretary of
Public Works and Communications for projects recommended by the Director of Public Works in the different
provinces and chartered cities . . ."cralaw virtua1aw library

Presently, Sec. 61 of the Land Transportation and Traffic Code provides:jgc:chanrobles.com.ph

"Sec. 61. Disposal of Monies Collected. — Monies collected under the provisions of this Act shall be deposited in
a special trust account in the National Treasury to constitute the Highway Special Fund, which shall be
apportioned and expended in accordance with the provisions of the ‘Philippine Highway Act of 1935.’ Provided,
however, That the amount necessary to maintain and equip the Land Transportation Commission but not to
exceed twenty per cent of the total collection during one year, shall be set aside for the purpose. (As amended
by RA 6374, approved August 6 1971)."cralaw virtua1aw library

It appears clear from the above provisions that the legislative intent and purpose behind the law requiring
owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of
highways and to a much lesser degree, pay for the operating expenses of the administering agency. On the
other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees" which
appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned
in Section 13 of Rep. Act 4136 which reads:jgc:chanrobles.com.ph

"Sec. 13. Payment of taxes upon registration. — No original registration of motor vehicles subject to payment
of taxes, customs duties or other charges shall be accepted unless proof of payment of the taxes due thereon
has been presented to the Commission."cralaw virtua1aw library

referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle
(Sec. 59, b, Rep. Act 4136, as amended).chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Fees may be properly regarded as taxes even though they also serve as an Instrument of regulation. As stated
by a former presiding judge of the Court of Tax Appeals and writer on various aspects of
taxes:jgc:chanrobles.com.ph

"It is possible for an exaction to be both tax and regulation. License fees are often looked to as a source of
revenue as well as a means of regulation. (Sonzinsky v. U.S., 300 U.S. 506) This is true, for example, of
automobile license fees. In such case, the fees may properly be regarded as taxes even though they also serve

as an instrument of regulation. 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. (1955 CCH Fed. Tax Course, Par. 3101, citing
Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo, 97 Phil. 212; Lutz v. Araneta, 98 Phil. 198.) These
exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S.
Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.)" (Umali,
Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).

Indeed, taxation may be made the implement of the state’s police power (Lutz v. Araneta, 98 Phil.
148).chanroblesvirtualawlibrary

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 (Umali, id.) Such is the case of motor vehicle registration fees. The conclusions
become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision
appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in
mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor
vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is
a tax, Section 59(b) speaks of "taxes or fees . . . for the registration or operation or on the ownership of any
motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to impose a tax more
apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could
have referred to an original tax and not one in addition to the tax already imposed on the registration,
operation, or ownership of a motor vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136
were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136
also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and
additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees
are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like
the motor vehicle registration fee and chauffeurs’ license fee. Such fees are to go into the expenditures of the
Land Transportation Commission as provided for in the last proviso of sec. 61, aforequoted.

It is quite apparent that vehicle registration fees were originally simple exactions intended only for regulatory
purposes in the exercise of the State’s police powers. Over the years, however, as vehicular traffic exploded in
number and motor vehicles became absolute necessities without which modern life as we know it would stand
still, Congress found the registration of vehicles a very convenient way of raising much needed revenues.
Without changing the earlier denomination of registration payments as "fees," their nature has become that of
"taxes."cralaw virtua1aw library

In view of the foregoing, we rule that motor vehicle registration fees as at present exacted pursuant to the
Land Transportation and Traffic Code are actually taxes intended for additional revenues of government even
if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering
the program.cralawnad

May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?

The answer is NO.

The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments
were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5431, dated June 27, 1968,
repealed all earlier tax exemptions of corporate taxpayers found in legislative franchises similar to that
invoked by PAL in this case.

In Radio Communications of the Philippines, Inc. v. Court of Tax Appeals, Et. Al. (G.R. No. 60547, July 11, 1985),
this Court ruled:jgc:chanrobles.com.ph

"Under its original franchise, Republic Act No. 2036, enacted in 1957, petitioner Radio Communications of the
Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however, petitioner’s franchise
was amended by Republic Act No. 4054 to the effect that its franchise tax of one and one-half percentum
(1-1/2%) of all gross receipts was provided as ‘in lieu of any and all taxes of any kind, nature, or description
levied, established, or collected by any authority whatsoever, municipal, provincial, or national from which taxes
the grantee is hereby expressly exempted.’ The issue raised to this Court now is the validity of the respondent
court’s decision which ruled that the exemption under Republic Act No. 4054 was repealed by Section 24 of
Republic Act No. 5431, dated June 27, 1968 which reads:jgc:chanrobles.com.ph

"‘(d) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers
not specifically exempt under Sections 24 (c) (1) of this Code shall pay the rates provided in this section. All
corporations, agencies, or instrumentalities owned or controlled by the government, including the Government
Service Insurance System and the Social Security System but excluding educational institutions, shall pay such
rate of tax upon their taxable net income as are imposed by this section upon associations or corporations
engaged in a similar business or industry.’

"An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate
taxpayers to pay income tax as provided by the statute. There can be no doubt as to the power of Congress to
repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935 Constitution and Article XIV,
Section 5 of the Constitution as amended in 1973 expressly provide that no franchise shall be granted to any
individual, firm, or corporation except under the condition that it shall be subject to amendment. alteration, or
repeal by the legislature when the public interest so requires. There is no question as to the public interest
involved. The country needs increased revenues. The repealing clause is clear and unambiguous. There is a listing
of entities entitled to tax exemption. The petitioner is not covered by the provision. Considering the foregoing,
the Court Resolved to DENY the petition for lack of merit. The decision of the respondent court is
affirmed."cralaw virtua1aw library

Any registration fees collected between June 27, 1968 and April 9, 1979, were correctly imposed because the
tax exemption in the franchise of PAL was repealed during the period. However, an amended franchise was
given to PAL in 1979. Section 13 of Presidential Decree No. 1590 now provides:jgc:chanrobles.com.ph

"In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine
Government during the lifetime of this franchise whichever of subsections (a) and (b) hereunder will result in a
lower tax:jgc:chanrobles.com.ph

"‘(a) The basic corporate income tax based on the grantee’s annual net taxable income computed in accordance
with the provisions of the Internal Revenue Code; or

"‘(b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantees from all sources,
without distinction as to transport or nontransport corporations; provided that with respect to international
airtransport service, only the gross passengers, mail, and freight revenues from its outgoing flights shall be
subject to this law.

"The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties,
royalties, registration, license and other fees and charges of any kind, nature or description imposed, levied,
established, assessed, or collected by any municipal, city, provincial, or national authority or government agency,
now or in the future, including but not limited to the following:chanrob1es virtual 1aw library

x       x       x

"(5) All taxes, fees and other charges on the registration, licensing, acquisition, and transfer of aircraft,
equipment, motor vehicles, and all other personal or real property of the grantee." (Pres. Decree 1590, 75 OG
No. 15, 3259, April 9, 1979).

PAL’s current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now
exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor vehicles.
Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of
Section 13, P.D. 1590 and may no longer be exacted.chanrobles law library : red

WHEREFORE, the petition is hereby partially GRANTED.

The prayed for refund of registration fees paid in 1971 is DENIED. The Land Transportation Franchising and
Regulatory Board (LTFRB) is enjoined from collecting any tax, fee, or other charge on the registration and
licensing of the petitioner’s motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.

SO ORDERED.

Philippine Supreme Court Jurisprudence > Year 1990 > December 1990 Decisions > [G.R. Nos. 95203-05 :
December 18, 1990.] 192 SCRA 363 SENATOR ERNESTO MACEDA, Petitioner, vs. ENERGY REGULATORY
BOARD (ERB); MARCELO N. FERNANDO, ALEJANDRO B. AFURONG; REX V. TANTIONGCO; and OSCAR E.
ALA, in their collective official capacities as Chairman and Members of the Board (ERB), respectively;
CATALINO MACARAIG, in his quadruple official capacities as Executive Secretary, Chairman of Philippine

 National Oil Company; Office of the Energy Affairs, and with MANUEL ESTRELLA, in their respective official
capacities as Chairman and President of the Petron Corporation; PILIPINAS SHELL PETROLEUM
CORPORATION; with CESAR BUENAVENTURA and REY GAMBOA as chairman and President, respectively;
CALTEX PHILIPPINES with FRANCIS ABLAN, President and Chief Executive Officer; and the Presidents of
Philippine Petroleum Dealer's Association, Caltex Dealer's Co., Petron Dealer's Asso., Shell Dealer's Asso. of
the Phil., Liquefied Petroleum Gas Institute of the Phils., any and all concerned gasoline and petrol dealers or
stations; and such other persons, officials, and parties, acting for and on their behalf; or in representation of
and/or under their authority, Respondents. [G.R. Nos. 95119-21 : December 18, 1990.] 192 SCRA 363 OLIVER
O. LOZANO, Petitioner, vs. ENERGY REGULATORY BOARD (ERB), PILIPINAS SHELL PETROLEUM
CORPORATION, CALTEX (PHIL.), INC., and PETRON CORPORATION, Respondents.:

EN BANC
[G.R. Nos. 95203-05 :  December 18, 1990.]
192 SCRA 363
SENATOR ERNESTO MACEDA, Petitioner, vs. ENERGY REGULATORY BOARD (ERB); MARCELO N.
FERNANDO, ALEJANDRO B. AFURONG; REX V. TANTIONGCO; and OSCAR E. ALA, in their collective official
capacities as Chairman and Members of the Board (ERB), respectively; CATALINO MACARAIG, in his quadruple
official capacities as Executive Secretary, Chairman of Philippine National Oil Company; Office of the Energy
Affairs, and with MANUEL ESTRELLA, in their respective official capacities as Chairman and President of the
Petron Corporation; PILIPINAS SHELL PETROLEUM CORPORATION; with CESAR BUENAVENTURA and REY
GAMBOA as chairman and President, respectively; CALTEX PHILIPPINES with FRANCIS ABLAN, President
and Chief Executive Officer; and the Presidents of Philippine Petroleum Dealer's Association, Caltex Dealer's
Co., Petron Dealer's Asso., Shell Dealer's Asso. of the Phil., Liquefied Petroleum Gas Institute of the Phils., any
and all concerned gasoline and petrol dealers or stations; and such other persons, officials, and parties, acting
for and on their behalf; or in representation of and/or under their authority, Respondents.
[G.R. Nos. 95119-21 :  December 18, 1990.]
192 SCRA 363
OLIVER O. LOZANO, Petitioner, vs. ENERGY REGULATORY BOARD (ERB), PILIPINAS SHELL PETROLEUM
CORPORATION, CALTEX (PHIL.), INC., and PETRON CORPORATION, Respondents.
 
DECISION
 
SARMIENTO, J.:
 
The petitioners pray for injunctive relief, to stop the Energy Regulatory Board (Board hereinafter) from
implementing its Order, dated September 21, 1990, mandating a provisional increase in the prices of petroleum
and petroleum products, as follows:
 PRODUCTS IN PESOS PER LITER

  OPSF
 Premium Gasoline 1.7700
 Regular Gasoline 1.7700
 Avturbo 1.8664
 Kerosene 1.2400
 Diesel Oil 1.2400
 Fuel Oil 1.4900
 Feedstock 1.4900
 LPG 0.8487
 Asphalts 2.7160
 Thinners 1.7121 1
It appears that on September 10, 1990, Caltex (Philippines), Inc., Pilipinas Shell Petroleum Corporation, and
Petron Corporation proferred separate applications with the Board for permission to increase the wholesale
posted prices of petroleum products, as follows:
 Caltex P3.2697 per liter
 Shell 2.0338 per liter
 Petron 2.00 per liter 2
and meanwhile, for provisional authority to increase temporarily such wholesale posted prices pending further
proceedings.:-cralaw
On September 21, 1990, the Board, in a joint (on three applications) Order granted provisional relief as follows:
WHEREFORE, considering the foregoing, and pursuant to Section 8 of Executive Order No. 172, this Board
hereby grants herein applicants' prayer for provisional relief and, accordingly, authorizes said applicants a
weighted average provisional increase of ONE PESO AND FORTY-TWO CENTAVOS (P1.42) per liter in the
wholesale posted prices of their various petroleum products enumerated below, refined and/or marketed by
them locally. 3
The petitioners submit that the above Order had been issued with grave abuse of discretion, tantamount to
lack of jurisdiction, and correctible by Certiorari.
The petitioner, Senator Ernesto Maceda, 4 also submits that the same was issued without proper notice and
hearing in violation of Section 3, paragraph (e), of Executive Order No. 172; that the Board, in decreeing an
increase, had created a new source for the Oil Price Stabilization Fund (OPSF), or otherwise that it had levied
a tax, a power vested in the legislature, and/or that it had "re-collected", by an act of taxation, ad valorem
taxes on oil which Republic Act No. 6965 had abolished.
The petitioner, Atty. Oliver Lozano, 5 likewise argues that the Board's Order was issued without notice and
hearing, and hence, without due process of law.
The intervenor, the Trade Union of the Philippines and Allied Services (TUPAS/FSM)-W.F.T.U., 6 argues on the
other hand, that the increase cannot be allowed since the respondents oil companies had not exhausted their
existing oil stock which they had bought at old prices and that they cannot be allowed to charge new rates for
stock purchased at such lower rates.
The Court set the cases (in G.R. Nos. 95203-05) for hearing on October 25, 1990, in which Senator Maceda and
his counsel, Atty. Alexander Padilla, argued. The Solicitor General, on behalf of the Board, also presented his
arguments, together with Board Commissioner Rex Tantiangco. Attys. Federico Alikpala, Jr. and Joselia
Poblador represented the oil firms (Petron and Caltex, respectively).

The parties were thereafter required to submit their memorandums after which, the Court considered the
cases submitted for resolution.
On November 20, 1990, the Court ordered these cases consolidated.
On November 27, 1990, we gave due course to both petitions.
The Court finds no merit in these petitions.
Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, have overlooked the provisions of
Section 8 of Executive Order No. 172, which we quote:
"SECTION 8. Authority to Grant Provisional Relief . — The Board may, upon the filing of an application, petition
or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly
verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative,
without prejudice to a final decision after hearing, should the Board find that the pleadings, together with such
affidavits, documents and other evidence which may be submitted in support of the motion, substantially
support the provisional order: Provided, That the Board shall immediately schedule and conduct a hearing
thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.: nad
As the Order itself indicates, the authority for provisional increase falls within the above provision.
There is no merit in the Senator's contention that the "applicable" provision is Section 3, paragraph (e) of the
Executive Order, which we quote:
(e) Whenever the Board has determined that there is a shortage of any petroleum product, or when public
interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment
of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund created under
Presidential Decree No. 1956 by persons or entities engaged in the petroleum industry of such amounts as may
be determined by the Board, which will enable the importer to recover its cost of importation.
What must be stressed is that while under Executive Order No. 172, a hearing is indispensable, it does not
preclude the Board from ordering, ex parte, a provisional increase, as it did here, subject to its final disposition
of whether or not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny the application.
Section 37 paragraph (e) is akin to a temporary restraining order or a writ of preliminary attachment issued by
the courts, which are given ex parte, and which are subject to the resolution of the main case.
Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate exclusively of the
other, in that the Board may resort to one but not to both at the same time. Section 3(e) outlines the
jurisdiction of the Board and the grounds for which it may decree a price adjustment, subject to the
requirements of notice and hearing. Pending that, however, it may order, under Section 8, an authority to
increase provisionally, without need of a hearing, subject to the final outcome of the proceeding. The Board, of
course, is not prevented from conducting a hearing on the grant of provisional authority — which is of course,
the better procedure — however, it cannot be stigmatized later if it failed to conduct one. As we held in
Citizens' Alliance for Consumer Protection v. Energy Regulatory Board. 7
In the light of Section 8 quoted above, public respondent Board need not even have conducted formal hearings
in these cases prior to issuance of its Order of 14 August 1987 granting a provisional increase of prices. The
Board, upon its own discretion and on the basis of documents and evidence submitted by private respondents,
could have issued an order granting provisional relief immediately upon filing by private respondents of their
respective applications. In this respect, the Court considers the evidence presented by private respondents in
support of their applications — i.e., evidence showing that importation costs of petroleum products had gone up;
that the peso had depreciated in value; and that the Oil Price Stabilization Fund (OPSF) had by then been

depleted — as substantial and hence constitutive of at least prima facie basis for issuance by the Board of a
provisional relief order granting an increase in the prices of petroleum products. 8
We do not therefore find the challenged action of the Board to have been done in violation of the due process
clause. The petitioners may contest however, the applications at the hearings proper.
Senator Maceda's attack on the Order in question on premises that it constitutes an act of taxation or that it
negates the effects of Republic Act No. 6965, cannot prosper. Republic Act No. 6965 operated to lower taxes
on petroleum and petroleum products by imposing specific taxes rather than ad valorem taxes thereon; it is,
not, however, an insurance against an "oil hike", whenever warranted, or is it a price control mechanism on
petroleum and petroleum products. The statute had possibly forestalled a larger hike, but it operated no more.:
nad
The Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act
of taxation. It is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137, as
follows:
SECTION 8.  There is hereby created a Trust Account in the books of accounts of the Ministry of Energy to
be designated as Oil Price Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes
brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported
petroleum products. The Oil Price Stabilization Fund (OPSF) may be sourced from any of the following:
a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products
subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister
of Finance in consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as
may be determined by the Minister of Finance in consultation with the Board of Energy;
c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an
appropriate Order that may be issued by the Board of Energy requiring payment by persons or companies
engaged in the business of importing, manufacturing and/or marketing petroleum products;
d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of
crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange
rates as fixed by the Board of Energy.
Anent claims that oil companies cannot charge new prices for oil purchased at old rates, suffice it to say that
the increase in question was not prompted alone by the increase in world oil prices arising from tension in the
Persian Gulf. What the Court gathers from the pleadings as well as events of which it takes judicial notice, is
that: (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to
P28.00 to $1.00; (3) the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit is
at $2.855 Billion as of the first nine months of the year.
Evidently, authorities have been unable to collect enough taxes necessary to replenish the OPSF as provided by
Presidential Decree No. 1956, and hence, there was no available alternative but to hike existing prices.
The OPSF, as the Court held in the aforecited CACP cases, must not be understood to be a funding designed to
guarantee oil firms' profits although as a subsidy, or a trust account, the Court has no doubt that oil firms
make money from it. As we held there, however, the OPSF was established precisely to protect the consuming
public from the erratic movement of oil prices and to preclude oil companies from taking advantage of
fluctuations occurring every so often. As a buffer mechanism, it stabilizes domestic prices by bringing about a
uniform rate rather than leaving pricing to the caprices of the market.

 In all likelihood, therefore, an oil hike would have probably been imminent, with or without trouble in the Gulf,
although trouble would have probably aggravated it.: nad
The Court is not to be understood as having prejudged the justness of an oil price increase amid the above
premises. What the Court is saying is that it thinks that based thereon, the Government has made out a prima
facie case to justify the provisional increase in question. Let the Court therefore make clear that these
findings are not final; the burden, however, is on the petitioners' shoulders to demonstrate the fact that the
present economic picture does not warrant a permanent increase.
There is no doubt that the increase in oil prices in question (not to mention another one impending, which the
Court understands has been under consideration by policy-makers) spells hard(er) times for the Filipino people.
The Court can not, however, debate the wisdom of policy or the logic behind it (unless it is otherwise arbitrary),
not because the Court agrees with policy, but because the Court is not the suitable forum for debate. It is a
question best judged by the political leadership which after all, determines policy, and ultimately, by the
electorate, that stands to be better for it or worse off, either in the short or long run.
At this point, the Court shares the indignation of the people over the conspiracy of events and regrets its own
powerlessness, if by this Decision it has been powerless. The constitutional scheme of things has simply left it
with no choice.
In fine, we find no grave abuse of discretion committed by the respondent Board in issuing its questioned
Order.
WHEREFORE, these petitions are DISMISSED. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-46245 May 31, 1982
MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and
PROVINCIAL ASSESSOR OF LAGUNA, respondents.

AQUINO, J.:
In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision of the
Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman and the Secretaries
of Justice and Local Government and Community Development as members) dated May 6, 1976, holding that
Meralco Securities' oil pipeline is subject to realty tax.
The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act
No. 387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel
pipes joined together and buried not less than one meter below the surface along the shoulder of the public
highway. The portion passing through Laguna is about thirty kilometers long.

The pipes for white oil products measure fourteen inches in diameter by thirty-six feet with a maximum
capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches by forty-eight feet
with a maximum capacity of 100,000 barrels daily.
The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude breakage or
damage thereto and prevent leakage or seepage of the oil. The valves are welded to the pipes so as to make the
pipeline system one single piece of property from end to end.
In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by
means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where they are
buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof.
Hence, the pipes are permanently attached to the land.
However, Meralco Securities notes that segments of the pipeline can be moved from one place to another as
shown in the permit issued by the Secretary of Public Works and Communications which permit provides that
the government reserves the right to require the removal or transfer of the pipes by and at the
concessionaire's expense should they be affected by any road repair or improvement.
Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated the
pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478, Cabuyao;
7967-7971, Sta. Rosa; 9882-9885, Biñan and 15806-15810, Calamba, containing the assessed values of portions
of the pipeline.
Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna composed of the
register of deeds as chairman and the provincial auditor as member. That board in its decision of June 18, 1975
upheld the assessments (pp. 47-49, Rollo).
Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated, that
Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice
Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roño as members,
ruled that the pipeline is subject to realty tax (p. 40, Rollo).
A copy of that decision was served on Meralco Securities' counsel on August 27, 1976. Section 36 of the Real
Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, provides that the Board's
decision becomes final and executory after the lapse of fifteen days from the date of receipt of a copy of the
decision by the appellant.
Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70 O.G.
10085), a party may ask for the reconsideration of the Board's decision within fifteen days after receipt. On
September 7, 1976 (the eleventh day), Meralco Securities filed its motion for reconsideration.
Secretary of Finance Cesar Virata and Secretary Roño (Secretary Abad Santos abstained) denied the motion in
a resolution dated December 2, 1976, a copy of which was received by appellant's counsel on May 24, 1977 (p. 4,
Rollo). On June 6, 1977, Meralco Securities filed the instant petition for certiorari.
The Solicitor General contends that certiorari is not proper in this case because the Board acted within its
jurisdiction and did not gravely abuse its discretion and Meralco Securities was not denied due process of law.
Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the decision of
the Central Board of Assessment Appeals and because no judicial review of the Board's decision is provided for
in the Real Property Tax Code, Meralco Securities' recourse is to file a petition for certiorari.

We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to an inferior
court, board or officer exercising judicial or quasi-judicial functions whereby the record of a particular case is
ordered to be elevated for review and correction in matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777).
The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying power in the
courts to scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of
review is given by the statute (73 C.J.S. 506, note 56).
"The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions" (73 C.J.S. 507, See. 165). The review is a part of the
system of checks and balances which is a limitation on the separation of powers and which forestalls arbitrary
and unjust adjudications.
Judicial review of the decision of an official or administrative agency exercising quasi-judicial functions is
proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case the
administrative decision is corrupt, arbitrary or capricious (Mafinco Trading Corporation vs. Ople, L-37790,
March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64
SCRA 56, 60, Mun. Council of Lemery vs. Prov. Board of Batangas, 56 Phil. 260, 268).
The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and the provincial
board of assessment appeals that Meralco Securities' pipeline is subject to realty tax, reasoned out that the
pipes are machinery or improvements, as contemplated in the Assessment Law and the Real Property Tax Code;
that they do not fall within the category of property exempt from realty tax under those laws; that articles
415 and 416 of the Civil Code, defining real and personal property, have no application to this case; that even
under article 415, the steel pipes can be regarded as realty because they are constructions adhered to the soil
and things attached to the land in a fixed manner and that Meralco Securities is not exempt from realty tax
under the Petroleum Law (pp. 36-40).
Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property within the
meaning of article 415. This contention is not sustainable under the provisions of the Assessment Law, the Real
Property Tax Code and the Civil Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property, including land, buildings,
machinery, and other improvements" not specifically exempted in section 3 thereof. This provision is
reproduced with some modification in the Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax.— There shall be levied, assessed and collected in all provinces, cities
and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other
improvements affixed or attached to real property not hereinafter specifically exempted. *
It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real
property enumerated in section 3 of the Assessment Law and section 40 of the Real Property Tax Code.
Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely
divided solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of the soil in
which it is placed (Note 21[10],54 C.J.S. 561).
Article 415[l] and [3] provides that real property may consist of constructions of all kinds adhered to the soil
and everything attached to an immovable in a fixed manner, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object.

The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39, Rollo). It is
attached to the land in such a way that it cannot be separated therefrom without dismantling the steel pipes
which were welded to form the pipeline.
Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a sense
machinery within the meaning of the Real Property Tax Code.
It should be borne in mind that what are being characterized as real property are not the steel pipes but the
pipeline system as a whole. Meralco Securities has apparently two pipeline systems.
A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller County Highway,
etc., Dist. vs. Standard Pipe Line Co., 19 Fed. 2nd 3; Board of Directors of Red River Levee Dist. No. 1 of
Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86).
The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment of realty
taxes. The alleged exemption is predicated on the following provisions of that law which exempt Meralco
Securities from local taxes and make it liable for taxes of general application:
ART. 102. Work obligations, taxes, royalties not to be changed.— Work obligations, special taxes and royalties
which are fixed by the provisions of this Act or by the concession for any of the kinds of concessions to which
this Act relates, are considered as inherent on such concessions after they are granted, and shall not be
increased or decreased during the life of the concession to which they apply; nor shall any other special taxes
or levies be applied to such concessions, nor shall 0concessionaires under this Act be subject to any provincial,
municipal or other local taxes or levies; nor shall any sales tax be charged on any petroleum produced from the
concession or portion thereof, manufactured by the concessionaire and used in the working of his concession.
All such concessionaires, however, shall be subject to such taxes as are of general application in addition to
taxes and other levies specifically provided in this Act.
Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general application. This
argument is untenable because the realty tax has always been imposed by the lawmaking body and later by the
President of the Philippines in the exercise of his lawmaking powers, as shown in section 342 et seq. of the
Revised Administrative Code, Act No. 3995, Commonwealth Act No. 470 and Presidential Decree No. 464.
The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the
proceeds of the tax accrue to the province, city, municipality and barrio where the realty taxed is situated
(Sec. 86, P.D. No. 464). In contrast, a local tax is imposed by the municipal or city council by virtue of the Local
Tax Code, Presidential Decree No. 231, which took effect on July 1, 1973 (69 O.G. 6197).
We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion, did not
commit any error of law and acted within its jurisdiction in sustaining the holding of the provincial assessor and
the local board of assessment appeals that Meralco Securities' pipeline system in Laguna is subject to realty
tax.
WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No costs.
SO ORDERED.