1

ST
CASE

SECOND DIVISION

COMMISSIONER OF INTERNAL G.R. Nos. 167274-75
REVENUE,
Petitioner, Present:

QUISUMBING, J.,
Chairperson,
YNARES-SANTIAGO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

FORTUNE TOBACCO
CORPORATION, Promulgated:
Respondent.
July 21, 2008

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


D E C I S I O N

TINGA, J.:


Simple and uncomplicated is the central issue involved, yet whopping is the
amount at stake in this case.

After much wrangling in the Court of Tax Appeals (CTA) and the Court of
Appeals, Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax
refund or tax credit representing specific taxes erroneously collected from its
tobacco products. The tax refund is being re-claimed by the Commissioner of
Internal Revenue (Commissioner) in this petition.

The following undisputed facts, summarized by the Court of Appeals, are
quoted in the assailed Decision
[1]
dated 28 September 2004:

CAG.R. SP No. 80675

x x x x

Petitioner
[2]
is a domestic corporation duly organized and existing under
and by virtue of the laws of the Republic of the Philippines, with principal
address at Fortune Avenue, Parang, Marikina City.

Petitioner is the manufacturer/producer of, among others, the following
cigarette brands, with tax rate classification based on net retail price prescribed
by Annex D to R.A. No. 4280, to wit:

Brand Tax Rate
Champion M 100 P1.00
Salem M 100 P1.00
Salem M King P1.00
Camel F King P1.00
Camel Lights Box 20s P1.00
Camel Filters Box 20s P1.00
Winston F Kings P5.00
Winston Lights P5.00

Immediately prior to January 1, 1997, the above-mentioned cigarette
brands were subject to ad valorem tax pursuant to then Section 142 of the Tax
Code of 1977, as amended. However, onJanuary 1, 1997, R.A. No. 8240 took
effect whereby a shift from the ad valorem tax (AVT) system to the specific tax
system was made and subjecting the aforesaid cigarette brands to specific tax
under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax Code of
1997, pertinent provisions of which are quoted thus:






Section 145. Cigars and Cigarettes-

(A) Cigars. There shall be levied, assessed and collected on
cigars a tax of One peso (P1.00) per cigar.

(B) Cigarettes packed by hand. There shall be levied,
assessesed and collected on cigarettes packed by hand a tax of Forty
centavos (P0.40) per pack.

(C) Cigarettes packed by machine. There shall be levied,
assessed and collected on cigarettes packed by machine a tax at the rates
prescribed below:

(1) If the net retail price (excluding the excise tax and the value-
added tax) is above Ten pesos (P10.00) per pack, the tax shall be Twelve
(P12.00) per pack;

(2) If the net retail price (excluding the excise tax and the value
added tax) exceeds Six pesos and Fifty centavos (P6.50) but does not
exceed Ten pesos (P10.00) per pack, the tax shall beEight Pesos (P8.00)
per pack.

(3) If the net retail price (excluding the excise tax and the value-
added tax) is Five pesos (P5.00) but does not exceed Six Pesos and fifty
centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-
added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso
(P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in
the domestic market after the effectivity of R.A. No. 8240 shall be
taxed under the highest classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three
(3) years from the effectivity of R.A. No. 8240 shall not be lower than the
tax, which is due from each brand on October 1, 1996. Provided, however,
that in cases were (sic) the excise tax rate imposed in paragraphs (1), (2),
(3) and (4) hereinabove will result in an increase in excise tax of more
than seventy percent (70%), for a brand of cigarette, the increase shall
take effect in two tranches: fifty percent (50%) of the increase shall be
effective in 1997 and one hundred percent (100%) of the increase shall be
effective in 1998.



Duly registered or existing brands of cigarettes or new brands
thereof packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under
paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve
percent (12%) on January 1, 2000. (Emphasis supplied)
New brands shall be classified according to their current net retail
price.
For the above purpose, net retail price shall mean the price at
which the cigarette is sold on retail in twenty (20) major supermarkets in
Metro Manila (for brands of cigarettes marketed nationally), excluding the
amount intended to cover the applicable excise tax and value-added
tax. For brands which are marketed only outside Metro [M]anila, the net
retail price shall mean the price at which the cigarette is sold in five (5)
major supermarkets in the region excluding the amount intended to cover
the applicable excise tax and the value-added tax.
The classification of each brand of cigarettes based on its average
retail price as of October 1, 1996, as set forth in Annex D, shall remain
in force until revised by Congress.
Variant of a brand shall refer to a brand on which a modifier is
prefixed and/or suffixed to the root name of the brand and/or a different
brand which carries the same logo or design of the existing brand.
To implement the provisions for a twelve percent (12%) increase of excise
tax on, among others, cigars and cigarettes packed by machines by January 1,
2000, the Secretary of Finance, upon recommendation of the respondent
Commissioner of Internal Revenue, issued Revenue Regulations No. 17-99, dated
December 16, 1999, which provides the increase on the applicable tax rates on
cigar and cigarettes as follows:


SECTION DESCRIPTION OF
ARTICLES
PRESENT
SPECIFIC TAX
RATE PRIOR
TO JAN. 1, 2000
NEW
SPECIFIC
TAX RATE
EFFECTIVE
JAN. 1, 2000
145 (A) P1.00/cigar P1.12/cigar
(B)Cigarettes packed
by machine
(1) Net retail price
(excluding VAT and
excise)
exceedsP10.00 per
pack
(2) Exceeds P10.00
per pack
(3) Net retail price
(excluding VAT and
excise) is P5.00
toP6.50 per pack
(4) Net Retail Price
(excluding VAT and
excise) is
belowP5.00 per pack



P12.00/pack

P8.00/pack

P5.00/pack


P1.00/pack




P13.44/ pack

P8.96/pack

P5.60/pack


P1.12/pack


Revenue Regulations No. 17-99 likewise provides in the last paragraph
of Section 1 thereof, (t)hat the new specific tax rate for any existing brand
of cigars, cigarettes packed by machine, distilled spirits, wines and
fermented liquor shall not be lower than the excise tax that is actually
being paid prior to January 1, 2000.
For the period covering January 1-31, 2000, petitioner allegedly paid
specific taxes on all brands manufactured and removed in the total amounts
of P585,705,250.00.



On February 7, 2000, petitioner filed with respondents Appellate
Division a claim for refund or tax credit of its purportedly overpaid excise tax
for the month of January 2000 in the amount ofP35,651,410.00
On June 21, 2001, petitioner filed with respondents Legal Service a
letter dated June 20, 2001 reiterating all the claims for refund/tax credit of its
overpaid excise taxes filed on various dates, including the present claim for the
month of January 2000 in the amount of P35,651,410.00.
As there was no action on the part of the respondent, petitioner filed the
instant petition for review with this Court on December 11, 2001, in order to
comply with the two-year period for filing a claim for refund.
In his answer filed on January 16, 2002, respondent raised the following
Special and Affirmative Defenses;
4. Petitioners alleged claim for refund is subject to administrative
routinary investigation/examination by the Bureau;
5. The amount of P35,651,410 being claimed by petitioner as
alleged overpaid excise tax for the month of January 2000 was
not properly documented.
6. In an action for tax refund, the burden of proof is on the taxpayer
to establish its right to refund, and failure to sustain the burden is
fatal to its claim for refund/credit.
7. Petitioner must show that it has complied with the provisions of
Section 204(C) in relation [to] Section 229 of the Tax Code on
the prescriptive period for claiming tax refund/credit;
8. Claims for refund are construed strictly against the claimant for
the same partake of tax exemption from taxation; and
9. The last paragraph of Section 1 of Revenue Regulation[s]
[No.]17-99 is a valid implementing regulation which has the
force and effect of law.

CA G.R. SP No. 83165
The petition contains essentially similar facts, except that the said case
questions the CTAs December 4, 2003 decision in CTA Case No. 6612 granting
respondents
[3]
claim for refund of the amount of P355,385,920.00 representing
erroneously or illegally collected specific taxes covering the period January 1,
2002 to December 31, 2002, as well as its March 17, 2004 Resolution denying a
reconsideration thereof.
x x x x
In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court
of Tax Appeals reduced the issues to be resolved into two as stipulated by
the parties, to wit: (1) Whether or not the last paragraph of Section 1 of Revenue
Regulation[s] [No.] 17-99 is in accordance with the pertinent provisions of Republic
Act [No.] 8240, now incorporated in Section 145 of the Tax Code of 1997; and (2)
Whether or not petitioner is entitled to a refund of P35,651,410.00 as alleged
overpaid excise tax for the month of January 2000.
x x x x
Hence, the respondent CTA in its assailed October 21, 2002 [twin]
Decisions[s] disposed in CTA Case Nos. 6365 & 6383:
WHEREFORE, in view of the foregoing, the court finds
the instant petition meritorious and in accordance with law.
Accordingly, respondent is hereby ORDERED to REFUND to
petitioner the amount of P35,651.410.00 representing erroneously
paid excise taxes for the period January 1 to January 31, 2000.
SO ORDERED.
Herein petitioner sought reconsideration of the above-quoted
decision. In [twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an
apparent change of heart, granted the petitioners consolidated motions for
reconsideration, thereby denying the respondents claim for refund.


However, on consolidated motions for reconsideration filed by the
respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution was set
aside, and the Tax Court ruled, this time with a semblance of finality, that the
respondent is entitled to the refund claimed. Hence, in a resolution dated November
4, 2003, the tax court reinstated its December 21, 2002 Decision and disposed as
follows:
WHEREFORE, our Decisions in CTA Case Nos. 6365
and 6383 are hereby REINSTATED. Accordingly, respondent is
hereby ORDERED to REFUND petitioner the total amount
of P680,387,025.00 representing erroneously paid excise taxes for
the period January 1, 2000 to January 31, 2000 and February 1,
2000 to December 31, 2001.
SO ORDERED.
Meanwhile, on December 4, 2003, the Court of Tax Appeals
rendered decision in CTA Case No. 6612 granting the prayer for the refund of the
amount of P355,385,920.00 representing overpaid excise tax for the period
covering January 1, 2002 to December 31, 2002. The tax court disposed of the case
as follows:
IN VIEW OF THE FOREGOING, the Petition for Review
is GRANTED. Accordingly, respondent is hereby ORDERED to
REFUND to petitioner the amount ofP355,385,920.00 representing
overpaid excise tax for the period covering January 1,
2002 to December 31, 2002.
SO ORDERED.
Petitioner sought reconsideration of the decision, but the same was
denied in a Resolution dated March 17, 2004.
[4]
(Emphasis supplied) (Citations
omitted)


The Commissioner appealed the aforesaid decisions of the CTA. The
petition questioning the grant of refund in the amount of P680,387,025.00 was
docketed as CA-G.R. SP No. 80675, whereas that assailing the grant of refund in
the amount of P355,385,920.00 was docketed as CA-G.R. SP No. 83165. The
petitions were consolidated and eventually denied by the Court of Appeals. The
appellate court also denied reconsideration in its Resolution
[5]
dated 1
March 2005.
In its Memorandum
[6]
22 dated November 2006, filed on behalf of the
Commissioner, the Office of the Solicitor General (OSG) seeks to convince the
Court that the literal interpretation given by the CTA and the Court of Appeals of
Section 145 of the Tax Code of 1997 (Tax Code) would lead to a lower tax
imposable on 1 January 2000 than that imposable during the transition
period. Instead of an increase of 12% in the tax rate effective on 1 January 2000 as
allegedly mandated by the Tax Code, the appellate courts ruling would result in a
significant decrease in the tax rate by as much as 66%.
The OSG argues that Section 145 of the Tax Code admits of several
interpretations, such as:
1. That by January 1, 2000, the excise tax on cigarettes should be the higher tax
imposed under the specific tax system and the tax imposed under the ad
valorem tax system plus the 12% increase imposed by par. 5, Sec. 145 of the
Tax Code;
2. The increase of 12% starting on January 1, 2000 does not apply to the brands
of cigarettes listed under Annex D referred to in par. 8, Sec. 145 of the Tax
Code;
3. The 12% increment shall be computed based on the net retail price as
indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if the
resulting figure will be lower than the amount already being paid at the end of
the transition period. This is the interpretation followed by both the CTA and
the Court of Appeals.
[7]


This being so, the interpretation which will give life to the legislative intent to raise
revenue should govern, the OSG stresses.
Finally, the OSG asserts that a tax refund is in the nature of a tax exemption
and must, therefore, be construed strictly against the taxpayer, such as Fortune
Tobacco.
In its Memorandum
[8]
dated 10 November 2006, Fortune Tobacco argues
that the CTA and the Court of Appeals merely followed the letter of the law when
they ruled that the basis for the 12% increase in the tax rate should be the net retail
price of the cigarettes in the market as outlined in paragraph C, sub paragraphs
(1)-(4), Section 145 of the Tax Code. The Commissioner allegedly has gone
beyond his delegated rule-making power when he promulgated, enforced and
implemented Revenue Regulation No. 17-99, which effectively created a separate
classification for cigarettes based on the excise tax actually being paid prior
to January 1, 2000.
[9]


It should be mentioned at the outset that there is no dispute between the fact
of payment of the taxes sought to be refunded and the receipt thereof by the Bureau
of Internal Revenue (BIR). There is also no question about the mathematical
accuracy of Fortune Tobaccos claim since the documentary evidence in support of
the refund has not been controverted by the revenue agency. Likewise, the claims
have been made and the actions have been filed within the two (2)-year
prescriptive period provided under Section 229 of the Tax Code.
The power to tax is inherent in the State, such power being inherently
legislative, based on the principle that taxes are a grant of the people who are
taxed, and the grant must be made by the immediate representatives of the people;
and where the people have laid the power, there it must remain and be exercised.
[10]

This entire controversy revolves around the interplay between Section 145 of
the Tax Code and Revenue Regulation 17-99. The main issue is an inquiry into
whether the revenue regulation has exceeded the allowable limits of legislative
delegation.
For ease of reference, Section 145 of the Tax Code is again reproduced in
full as follows:


Section 145. Cigars and Cigarettes-

(A) Cigars.There shall be levied, assessed and collected on cigars a tax
of One peso (P1.00) per cigar.

(B). Cigarettes packed by hand.There shall be levied, assessed and
collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.

(C) Cigarettes packed by machine.There shall be levied, assessed and
collected on cigarettes packed by machine a tax at the rates prescribed below:

(1) If the net retail price (excluding the excise tax and the value-added tax)
is above Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) per
pack;
(2) If the net retail price (excluding the excise tax and the value added
tax) exceeds Six pesos and Fifty centavos (P6.50) but does not exceed Ten pesos
(P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.

(3) If the net retail price (excluding the excise tax and the value-added tax)
is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per
pack, the tax shall be Five pesos (P5.00) per pack;
(4) If the net retail price (excluding the excise tax and the value-added tax)
is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;
Variants of existing brands of cigarettes which are introduced in the
domestic market after the effectivity of R.A. No. 8240 shall be taxed under the
highest classification of any variant of that brand.
The excise tax from any brand of cigarettes within the next three (3) years
from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due
from each brand on October 1, 1996.Provided, however, That in cases where the
excise tax rates imposed in paragraphs (1), (2), (3) and (4) hereinabove will result
in an increase in excise tax of more than seventy percent (70%), for a brand of
cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the
increase shall be effective in 1997 and one hundred percent (100%) of the
increase shall be effective in 1998.

Duly registered or existing brands of cigarettes or new brands thereof
packed by machine shall only be packed in twenties.
The rates of excise tax on cigars and cigarettes under paragraphs (1),
(2) (3) and (4) hereof, shall be increased by twelve percent (12%) on January
1, 2000.
New brands shall be classified according to their current net retail price.
For the above purpose, net retail price shall mean the price at which the
cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila (for
brands of cigarettes marketed nationally), excluding the amount intended to cover
the applicable excise tax and value-added tax. For brands which are marketed
only outside Metro Manila, the net retail price shall mean the price at which the
cigarette is sold in five (5) major intended to cover the applicable excise tax and
the value-added tax.
The classification of each brand of cigarettes based on its average retail
price as of October 1, 1996, as set forth in Annex D, shall remain in force until
revised by Congress.
Variant of a brand shall refer to a brand on which a modifier is prefixed
and/or suffixed to the root name of the brand and/or a different brand which
carries the same logo or design of the existing brand.
[11]
(Emphasis supplied)

Revenue Regulation 17-99, which was issued pursuant to the unquestioned
authority of the Secretary of Finance to promulgate rules and regulations for the
effective implementation of the Tax Code,
[12]
interprets the above-quoted provision
and reflects the 12% increase in excise taxes in the following manner:


SECTION DESCRIPTION OF
ARTICLES
PRESENT
SPECIFIC TAX
RATES PRIOR
TO JAN. 1, 2000
NEW
SPECIFIC
TAX RATE
Effective Jan..
1, 2000
145 (A) Cigars P1.00/cigar P1.12/cigar
(B)Cigarettes packed
by Machine
(1) Net Retail Price




(excluding VAT and
Excise)
exceedsP10.00 per
pack
(2) Net Retail Price
(excluding VAT and
Excise) is P6.51 up
toP10.00 per pack
(3) Net Retail Price
(excluding VAT and
excise) is P5.00
toP6.50 per pack
(4) Net Retail Price
(excluding VAT and
excise) is
below P5.00 per
pack)

P12.00/pack


P8.00/pack

P5.00/pack


P1.00/pack


P13.44/pack


P8.96/pack

P5.60/pack


P1.12/pack


This table reflects Section 145 of the Tax Code insofar as it mandates a 12%
increase effective on 1 January 2000 based on the taxes indicated under paragraph
C, sub-paragraph (1)-(4). However, Revenue Regulation No. 17-99 went further
and added that [T]he new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not
be lower than the excise tax that is actually being paid prior to January 1,
2000.
[13]

Parenthetically, Section 145 states that during the transition
period, i.e., within the next three (3) years from the effectivity of the Tax Code, the
excise tax from any brand of cigarettes shall not be lower than the tax due from
each brand on 1 October 1996. This qualification, however, is conspicuously
absent as regards the 12% increase which is to be applied on cigars and cigarettes
packed by machine, among others, effective on 1 January 2000. Clearly and
unmistakably, Section 145 mandates a new rate of excise tax for cigarettes packed
by machine due to the 12% increase effective on 1 January 2000 without regard to
whether the revenue collection starting from this period may turn out to be lower
than that collected prior to this date.
By adding the qualification that the tax due after the 12% increase becomes
effective shall not be lower than the tax actually paid prior to 1 January 2000,
Revenue Regulation No. 17-99 effectively imposes a tax which is the higher
amount between the ad valorem tax being paid at the end of the three (3)-year
transition period and the specific tax under paragraph C, sub-paragraph (1)-(4), as
increased by 12%a situation not supported by the plain wording of Section 145
of the Tax Code.

This is not the first time that national revenue officials had ventured in the
area of unauthorized administrative legislation.

In Commissioner of Internal Revenue v. Reyes,
[14]
respondent was not
informed in writing of the law and the facts on which the assessment of estate taxes
was made pursuant to Section 228 of the 1997 Tax Code, as amended by Republic
Act (R.A.) No. 8424. She was merely notified of the findings by the
Commissioner, who had simply relied upon the old provisions of the law and
Revenue Regulation No. 12-85 which was based on the old provision of the law.
The Court held that in case of discrepancy between the law as amended and the
implementing regulation based on the old law, the former necessarily prevails. The
law must still be followed, even though the existing tax regulation at that time
provided for a different procedure.
[15]

In Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,
[16]
the tax authorities gave the term tax credit in Sections 2(i) and 4
of Revenue Regulation 2-94 a meaning utterly disparate from what R.A. No. 7432
provides. Their interpretation muddled up the intent of Congress to grant a mere
discount privilege and not a sales discount. The Court, striking down the revenue
regulation, held that an administrative agency issuing regulations may not enlarge,
alter or restrict the provisions of the law it administers, and it cannot engraft
additional requirements not contemplated by the legislature. The Court
emphasized that tax administrators are not allowed to expand or contract the
legislative mandate and that the plain meaning rule or verba legis in statutory
construction should be applied such that where the words of a statute are clear,
plain and free from ambiguity, it must be given its literal meaning and applied
without attempted interpretation.
As we have previously declared, rule-making power must be confined to
details for regulating the mode or proceedings in order to carry into effect the law
as it has been enacted, and it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the statute. Administrative
regulations must always be in harmony with the provisions of the law because any
resulting discrepancy between the two will always be resolved in favor of the basic
law.
[17]

In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop,
Inc.,
[18]
Commissioner Jose Ong issued Revenue Memorandum Order (RMO) No.
15-91, as well as the clarificatory Revenue Memorandum Circular (RMC) 43-91,
imposing a 5% lending investors tax under the 1977 Tax Code, as amended by
Executive Order (E.O.) No. 273, on pawnshops. The Commissioner anchored the
imposition on the definition of lending investors provided in the 1977 Tax Code
which, according to him, was broad enough to include pawnshop
operators. However, the Court noted that pawnshops and lending investors were
subjected to different tax treatments under the Tax Code prior to its amendment by
the executive order; that Congress never intended to treat pawnshops in the same
way as lending investors; and that the particularly involved section of the Tax
Code explicitly subjected lending investors and dealers in securities only to
percentage tax. And so the Court affirmed the invalidity of the challenged
circulars, stressing that administrative issuances must not override, supplant or
modify the law, but must remain consistent with the law they intend to carry
out.
[19]

In Philippine Bank of Communications v. Commissioner of Internal
Revenue,
[20]
the then acting Commissioner issued RMC 7-85, changing the
prescriptive period of two years to ten years for claims of excess quarterly income
tax payments, thereby creating a clear inconsistency with the provision of Section
230 of the 1977 Tax Code. The Court nullified the circular, ruling that the BIR did
not simply interpret the law; rather it legislated guidelines contrary to the statute
passed by Congress. The Court held:
It bears repeating that Revenue memorandum-circulars are
considered administrative rulings (in the sense of more specific and less general
interpretations of tax laws) which are issued from time to time by the
Commissioner of Internal Revenue. It is widely accepted that the interpretation
placed upon a statute by the executive officers, whose duty is to enforce it, is
entitled to great respect by the courts. Nevertheless, such interpretation is not
conclusive and will be ignored if judicially found to be erroneous. Thus, courts
will not countenance administrative issuances that override, instead of remaining
consistent and in harmony with, the law they seek to apply and implement.
[21]


In Commissioner of Internal Revenue v. CA, et al.,
[22]
the central issue was
the validity of RMO 4-87 which had construed the amnesty coverage under E.O.
No. 41 (1986) to include only assessments issued by the BIR after the
promulgation of the executive order on 22 August 1986 and not assessments made
to that date. Resolving the issue in the negative, the Court held:

x x x all such issuances must not override, but must remain consistent and
in harmony with, the law they seek to apply and implement. Administrative rules
and regulations are intended to carry out, neither to supplant nor to modify, the
law.
[23]


x x x

If, as the Commissioner argues, Executive Order No. 41 had not been
intended to include 1981-1985 tax liabilities already assessed (administratively)
prior to 22 August 1986, the law could have simply so provided in its
exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the
executive order has been designed to be in the nature of a general grant of tax
amnesty subject only to the cases specifically excepted by it.
[24]



In the case at bar, the OSGs argument that by 1 January 2000, the excise tax
on cigarettes should be the higher tax imposed under the specific tax system and
the tax imposed under the ad valorem tax system plus the 12% increase imposed
by paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify
what is clearly an impermissible incursion into the limits of administrative
legislation. Such an interpretation is not supported by the clear language of the law
and is obviously only meant to validate the OSGs thesis that Section 145 of the
Tax Code is ambiguous and admits of several interpretations.
The contention that the increase of 12% starting on 1 January 2000 does not
apply to the brands of cigarettes listed under Annex
D is likewise unmeritorious, absurd even. Paragraph 8, Section 145 of the
Tax Code simply states that, [T]he classification of each brand of cigarettes based
on its average net retail price as of October 1, 1996, as set forth in Annex D, shall
remain in force until revised by Congress. This declaration certainly does not
lend itself to the interpretation given to it by the OSG. As plainly worded, the
average net retail prices of the listed brands under Annex D, which classify
cigarettes according to their net retail price into low, medium or high, obviously
remain the bases for the application of the increase in excise tax rates effective
on 1 January 2000.
The foregoing leads us to conclude that Revenue Regulation No. 17-99 is
indeed indefensibly flawed. The Commissioner cannot seek refuge in his claim that
the purpose behind the passage of the Tax Code is to generate additional revenues
for the government. Revenue generation has undoubtedly been a major
consideration in the passage of the Tax Code. However, as borne by the legislative
record,
[25]
the shift from the ad valorem system to the specific tax system
is likewise meant to promote fair competition among the players in the
industries concerned, to ensure an equitable distribution of the tax burden and to
simplify tax administration by classifying cigarettes, among others, into high,
medium and low-priced based on their net retail price and accordingly graduating
tax rates.
At any rate, this advertence to the legislative record is merely gratuitous
because, as we have held, the meaning of the law is clear on its face and free from
the ambiguities that the Commissioner imputes. We simply cannot disregard the
letter of the law on the pretext of pursuing its spirit.
[26]


Finally, the Commissioners contention that a tax refund partakes the nature
of a tax exemption does not apply to the tax refund to which Fortune Tobacco is
entitled. There is parity between tax refund and tax exemption only when the
former is based either on a tax exemption statute or a tax refund
statute. Obviously, that is not the situation here. Quite the contrary, Fortune
Tobaccos claim for refund is premised on its erroneous payment of the tax, or
better still the governments exaction in the absence of a law.

Tax exemption is a result of legislative grace. And he who claims an
exemption from the burden of taxation must justify his claim by showing that the
legislature intended to exempt him by words too plain to be mistaken.
[27]
The rule
is that tax exemptions must be strictly construed such that the exemption will not
be held to be conferred unless the terms under which it is granted clearly and
distinctly show that such was the intention.
[28]


A claim for tax refund may be based on statutes granting tax exemption or
tax refund. In such case, the rule of strict interpretation against the taxpayer is
applicable as the claim for refund partakes of the nature of an exemption, a
legislative grace, which cannot be allowed unless granted in the most explicit and
categorical language. The taxpayer must show that the legislature intended to
exempt him from the tax by words too plain to be mistaken.
[29]


Tax refunds (or tax credits), on the other hand, are not founded principally
on legislative grace but on the legal principle which underlies all quasi-contracts
abhorring a persons unjust enrichment at the expense of another.
[30]
The dynamic
of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio
indebiti, which covers not only mistake in fact but also mistake in law.
[31]


The Government is not exempt from the application of solutio
indebiti.
[32]
Indeed, the taxpayer expects fair dealing from the Government, and the
latter has the duty to refund without any unreasonable delay what it has
erroneously collected.
[33]
If the State expects its taxpayers to observe fairness and
honesty in paying their taxes, it must hold itself against the same standard in
refunding excess (or erroneous) payments of such taxes. It should not unjustly
enrich itself at the expense of taxpayers.
[34]
And so, given its essence, a claim for
tax refund necessitates only preponderance of evidence for its approbation like in
any other ordinary civil case.

Under the Tax Code itself, apparently in recognition of the pervasive quasi-
contract principle, a claim for tax refund may be based on the following: (a)
erroneously or illegally assessed or collected internal revenue taxes; (b) penalties
imposed without authority; and (c) any sum alleged to have been excessive or in
any manner wrongfully collected.
[35]


What is controlling in this case is the well-settled doctrine of strict
interpretation in the imposition of taxes, not the similar doctrine as applied to tax
exemptions. The rule in the interpretation of tax laws is that a statute will not be
construed as imposing a tax unless it does so clearly, expressly, and
unambiguously. A tax cannot be imposed without clear and express words for that
purpose. Accordingly, the general rule of requiring adherence to the letter in
construing statutes applies with peculiar strictness to tax laws and the provisions of
a taxing act are not to be extended by implication. In answering the question of
who is subject to tax statutes, it is basic that in case of doubt, such statutes are to be
construed most strongly against the government and in favor of the subjects or
citizens because burdens are not to be imposed nor presumed to be imposed
beyond what statutes expressly and clearly import.
[36]
As burdens, taxes should not
be unduly exacted nor assumed beyond the plain meaning of the tax laws.
[37]

WHEREFORE, the petition is DENIED. The Decision of the Court of
Appeals in CA G.R. SP No. 80675, dated 28 September 2004, and its Resolution,
dated 1 March 2005, are AFFIRMED. No pronouncement as to costs.
SO ORDERED.




DANTE O.
TINGA
Associate Justice


WE CONCUR:






LEONARDO A. QUISUMBING
Associate Justice
Chairperson





CONSUELO YNARES-SANTIAGO CONCHITA CARPIO MORALES
Associate Justice Associate Justice





PRESBITERO J. VELASCO, JR.
Associate Justice


ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.




LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division


CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairpersons Attestation, it is hereby certified that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.



REYNATO S. PUNO
Chief Justice











[1]
Rollo, pp. 59-93; penned by Associate Justice Jose L. Sabio, Jr. and concurred in by Associate Justices
Eubulo G. Verzola and Monina Arevalo-Zenarosa.


[2]
Herein respondent, Fortune Tobacco Corporation.

[3]
Herein respondent, Fortune Tobacco Corporation.


[4]
Rollo, pp. 60-73.


[5]
Id. at 95-101.


[6]
Id. at 456-495.

[7]
Rollo,, pp. 484, 486 and 487.


[8]
Id. at 407-455.

[9]
Id. at 409.


[10]
1 COOLEY TAXATION, 3
rd
Ed., p. 43 cited in DIMAAMPAO, TAX PRINCIPLE AND REMEDIES,
p. 13.

[11]
TAX CODE, Sec. 145.


[12]
TAX CODE, Sec. 244, provides:

Sec. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations.The Secretary of
Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the
effective enforcement of the provisions of this Code.

See ABAKADA Guro Party List Officers v. Ermita, G.R. No. 168056, 1 September 2005, 469 SCRA 1.


[13]
Rollo, p. 104.

[14]
G.R. No. 159694, 27 January 2006, 480 SCRA 382.

[15]
Id. at 396. Citing Philippine Petroleum Corp. v. Municipality of Pililla, Rizal, 198 SCRA 82, 88, 3 June
1991, citing Shell Philippines, Inc. v. Central Bank of the Philippines, 162 SCRA 628, 634, 27 June 1988.



[16]
G.R. No. 159647, 15 April 2005, 456 SCRA 414.


[17]
Landbank of the Philippines v. Court of Appeals, 327 Phil. 1047, 1052 (1996).

[18]
453 Phil. 1043 (2003).


[19]
Id. at 1052. Citing Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 108358, 20 January
1995, 240 SCRA 368, 372; Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles v. Home Development
Mutual Fund, G.R. No. 131082, 19 June 2000; 333 SCRA 777, 786.


[20]
361 Phil. 916 (1999).


[21]
Id. at 928-929.

[22]
310 Phil. 392 (1995).

[23]
Id. at 399. This ruling was reiterated in Republic v. Court of Appeals, 381 Phil. 248 (2000).

[24]
Id. at 397.



[25]
Record of the Senate, pp. 224-225.


[26]
Taada and Macapagal v. Cuenco, et al., 103 Phil. 1051, 1086 (1957), citing 82 C.J.S., 613.

[27]
Surigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue and Court of Tax Appeals,
119 Phil. 33, 37 (1963).

[28]
Phil. Acetylene Co. v. Commission of Internal Revenue, et al., 127 Phil. 461, 472
(1967); Manila Electric Company v. Vera, G.R. No. L-29987, 22 October 1975, 67 SCRA 351, 357-358; Surigao
Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue, supra.

[29]
See Surigao Consolidated Mining Co. Inc. v. CIR, supra at 732-733; Philex Mining Corp. v. .
Commissioner of Internal Revenue, 365 Phil. 572, 579 (1999); Davao Gulf Lumber Corp. v. . Commissioner of
Internal Revenue, 354 Phil. 891-892 (1998); . Commissioner of Internal Revenue v. Tokyo Shipping Co., Ltd., 314
Phil. 220, 228 (1995).

[30]
Ramie Textiles, Inc. v. Hon. Mathay, Sr., 178 Phil. 482 (1979); Puyat & Sons v. City of Manila, et al.,
117 Phil. 985 (1963).

[31]
CIVIL CODE, Arts. 2142, 2154 and 2155.

[32]
Commissioner of Internal Revenue v. Firemans Fund Insurance Co., G.R. No. L-30644, 9 March 1987,
148 SCRA 315, 324-325; Ramie Textiles, Inc. v. Mathay, supra; Gonzales Puyat & Sons v. City of Manila, supra.

[33]
Commissioner of Internal Revenue v. Tokyo Shipping Co., supra at 338.

[34]
AB Leasing and Finance Corporation v. . Commissioner of Internal Revenue, 453 Phil. 297.. Citing BPI-
Family Savings Bank, Inc. v. Court of Appeals, 330 SCRA 507, 510, 518 (200).

[35]
TAX CODE (1997), Secs. 204(c) and 229.


[36]
CIR v. Court of Appeals, 338 Phil. 322, 330-331 (1997).


[37]
CIR v. Philippine American Accident Insurance Company, Inc., G.R. No. 141658, March 18, 2005, 453
SCRA 668, 680.

CIR vs. Fortune Tobacco Corporation, [G.R.
Nos. 167274-75, July 21, 2008]
Post under case digests, Taxation at Tuesday, February 21, 2012 Posted by Schizophrenic Mind
Facts: Respondent FTC is a domestic corporation that
manufactures cigarettes packed by machine under several
brands. Prior to January 1, 1997, Section 142 of the
1977 Tax Code subjected said cigarette brands to ad
valorem tax. Annex D of R.A. No. 4280 prescribed
the cigarette brands tax classification rates based on their
net retail price. On January 1, 1997, R.A. No. 8240 took
effect. Sec. 145 thereof now subjects the cigarette
brands to specific tax and also provides that: (1)
the excise tax from any brand of cigarettes within the next
three (3) years from the effectivity of R.A. No. 8240 shall
not be lower than the tax, which is due from each brand on
October 1, 1996; (2) the rates of excise tax on
cigarettes enumerated therein shall be increased by 12%
on January 1, 2000; and (3) the classification of each
brand of cigarettes based on its average retail price as of
October 1, 1996, as set forth in Annex D shall remain in
force until revised by Congress.

The Secretary of Finance issued RR No. 17-99 to
implement the provision for the 12% excise tax increase.
RR No. 17-99 added the qualification that the new
specific tax rate xxx shall not be lower than the excise
tax that is actually being paid prior to January 1, 2000. In
effect, it provided that the 12% tax increase must be
based on the excise tax actually being paid prior to
January 1, 2000 and not on their actual net retail price.

FTC filed 2 separate claims for refund or tax credit of its
purportedly overpaid excise taxes for the month of
January 2000 and for the period January 1-December 31,
2002. It assailed the validity of RR No. 17-99 in that it
enlarges Section 145 by providing the aforesaid
qualification. In this petition, petitioner CIR alleges that the
literal interpretation given by the CTA and the CA of
Section 145 would lead to a lower tax imposable on 1
January 2000 than that imposable during the transition
period, which is contrary to the legislative intent to raise
revenue.

Issue: Should the 12% tax increase be based on the
net retail priceof the cigarettes in the market as outlined in
Section 145 of the 1997Tax Code?

Held: YES. Section 145 is clear and unequivocal. It states
that during the transition period, i.e., within the next 3
years from the effectivity of the 1997 Tax Code, the excise
tax from any brand ofcigarettes shall not be lower than the
tax due from each brand on 1 October 1996. This
qualification, however, is conspicuously absent as regards
the 12% increase which is to be applied on cigars
andcigarettes packed by machine, among others, effective
on 1 January 2000.

Clearly, Section 145 mandates a new rate of excise
tax for cigarettespacked by machine due to the 12%
increase effective on 1 January 2000 without regard to
whether the revenue collection starting from this period
may turn out to be lower than that collected prior to this
date.

The qualification added by RR No. 17-99 imposes a tax
which is the higher amount between the ad valorem
tax being paid at the end of the 3-year transition period
and the specific tax under Section 145, as increased by
12%a situation not supported by the plain wording of
Section 145 of the 1997 Tax Code. Administrative
issuances must not override, supplant or modify the law,
but must remain consistent with the law they intend to
carry out.

Revenue generation is not the sole purpose of the
passage of the 1997 Tax Code. The shift from the ad
valorem system to the specific tax system in the Code is
likewise meant to promote fair competition among the
players in the industries concerned and to ensure an
equitable distribution of the tax burden.


2
ND
CASE

EN BANC


ROSALINDA A. PENERA,
Petitioner,
G.R. No. 181613


Present:

PUNO, C.J.,
CARPIO,
CORONA,
CARPIO MORALES,
CHICO-NAZARIO,
VELASCO, JR.,
- versus - NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD, and
VILLARAMA, JR., JJ.


COMMISSION ON ELECTIONS Promulgated:
and EDGAR T. ANDANAR,
Respondents. November 25, 2009

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


R E S O L U T I O N

CARPIO, J.:

We grant Rosalinda A. Peneras (Penera) motion for reconsideration
of this Courts Decision of 11 September 2009 (Decision).

The assailed Decision dismissed Peneras petition and affirmed the
Resolution dated 30 July 2008 of the COMELEC En Banc as well as the
Resolution dated 24 July 2007 of the COMELEC Second Division. The
Decision disqualified Penera from running for the office of Mayor in Sta.
Monica, Surigao del Norte and declared that the Vice-Mayor should
succeed Penera.

In support of her motion for reconsideration, Penera submits the
following arguments:

1. Penera was not yet a candidate at the time of the incident under Section 11
of RA 8436 as amended by Section 13 of RA 9369.
2. The petition for disqualification failed to submit convincing and substantial
evidence against Penera for violation of Section 80 of the Omnibus Election Code.
3. Penera never admitted the allegations of the petition for disqualification and
has consistently disputed the charge of premature campaigning.
4. The admission that Penera participated in a motorcade is not the same as
admitting she engaged in premature election campaigning.

Section 79(a) of the Omnibus Election Code defines a candidate as any
person aspiring for or seeking an elective public office, who has filed a certificate
of candidacy x x x. The second sentence, third paragraph, Section 15 of RA
8436, as amended by Section 13 of RA 9369, provides that [a]ny person who
files his certificate of candidacy within [the period for filing] shall only be
considered as a candidate at the start of the campaign period for which he
filed his certificate of candidacy. The immediately succeeding proviso in the
same third paragraph states that unlawful acts or omissions applicable to a
candidate shall take effect only upon the start of the aforesaid campaign
period. These two provisions determine the resolution of this case.

The Decision states that [w]hen the campaign period starts and [the person
who filed his certificate of candidacy] proceeds with his/her candidacy, his/her
intent turning into actuality, we can already consider his/her acts, after the filing
of his/her COC and prior to the campaign period, as the promotion of his/her
election as a candidate, hence, constituting premature campaigning, for which
he/she may be disqualified.
[1]


Under the Decision, a candidate may already be liable for premature
campaigning after the filing of the certificate of candidacy but even before the
start of the campaign period. From the filing of the certificate of candidacy,
even long before the start of the campaign period, the Decision considers the
partisan political acts of a person so filing a certificate of candidacy as the
promotion of his/her election as a candidate. Thus, such person can be
disqualified for premature campaigning for acts done before the start of the
campaign period. In short, the Decision considers a person who files a
certificate of candidacy already a candidate even before the start of the
campaign period.

The assailed Decision is contrary to the clear intent and letter of the law.

The Decision reverses Lanot v. COMELEC,
[2]
which held that a person who
files a certificate of candidacy is not a candidate until the start of the
campaign period. In Lanot, this Court explained:

Thus, the essential elements for violation of Section 80 of the Omnibus
Election Code are: (1) a person engages in an election campaign or partisan
political activity; (2) the act is designed to promote the election or defeat of a
particular candidate or candidates; (3) the act is done outside the campaign period.
The second element requires the existence of a candidate. Under Section 79(a), a
candidate is one who has filed a certificate of candidacy to an elective public
office. Unless one has filed his certificate of candidacy, he is not a candidate. The
third element requires that the campaign period has not started when the election
campaign or partisan political activity is committed.
Assuming that all candidates to a public office file their certificates of candidacy on
the last day, which under Section 75 of the Omnibus Election Code is the day before
the start of the campaign period, then no one can be prosecuted for violation of
Section 80 for acts done prior to such last day. Before such last day, there is no
particular candidate or candidates to campaign for or against. On the day
immediately after the last day of filing, the campaign period starts and Section 80
ceases to apply since Section 80 covers only acts done outside the campaign
period.
Thus, if all candidates file their certificates of candidacy on the last day, Section 80
may only apply to acts done on such last day, which is before the start of the
campaign period and after at least one candidate has filed his certificate of candidacy.
This is perhaps the reason why those running for elective public office usually file
their certificates of candidacy on the last day or close to the last day.
There is no dispute that Eusebios acts of election campaigning or partisan political
activities were committed outside of the campaign period. The only question is
whether Eusebio, who filed his certificate of candidacy on 29 December 2003, was a
candidate when he committed those acts before the start of the campaign period on
24 March 2004.
Section 11 of Republic Act No. 8436 (RA 8436) moved the deadline for the
filing of certificates of candidacy to 120 days before election day. Thus, the original
deadline was moved from 23 March 2004 to 2 January 2004, or 81 days earlier. The
crucial question is: did this change in the deadline for filing the certificate of
candidacy make one who filed his certificate of candidacy before 2 January 2004
immediately liable for violation of Section 80 if he engaged in election campaign or
partisan political activities prior to the start of the campaign period on 24 March
2004?
Section 11 of RA 8436 provides:
SECTION 11. Official Ballot. The Commission shall
prescribe the size and form of the official ballot which shall
contain the titles of the positions to be filled and/or the
propositions to be voted upon in an initiative, referendum or
plebiscite. Under each position, the names of candidates shall be
arranged alphabetically by surname and uniformly printed using
the same type size. A fixed space where the chairman of the Board
of Election Inspectors shall affix his/her signature to authenticate
the official ballot shall be provided.
Both sides of the ballots may be used when necessary.
For this purpose, the deadline for the filing of certificate of candidacy/petition
for registration/ manifestation to participate in the election shall not be later
than one hundred twenty (120) days before the elections: Provided, That, any
elective official, whether national or local, running for any office other than the one
which he/she is holding in a permanent capacity, except for president and vice-
president, shall be deemed resigned only upon the start of the campaign period
corresponding to the position for which he/she is running: Provided, further, That,
unlawful acts or omissions applicable to a candidate shall take effect upon the start of
the aforesaid campaign period: Provided, finally, That, for purposes of the May 11,
1998 elections, the deadline for filing of the certificate of candidacy for the positions
of President, Vice-President, Senators and candidates under the party-list system as
well as petitions for registration and/or manifestation to participate in the party-list
system shall be on February 9, 1998 while the deadline for the filing of certificate of
candidacy for other positions shall be on March 27, 1998.
The official ballots shall be printed by the National Printing Office and/or
the Bangko Sentral ng Pilipinas at the price comparable with that of private printers
under proper security measures which the Commission shall adopt. The
Commission may contract the services of private printers upon certification by the
National Printing Office/Bangko Sentral ng Pilipinas that it cannot meet the printing
requirements. Accredited political parties and deputized citizens arms of the
Commission may assign watchers in the printing, storage and distribution of official
ballots.
To prevent the use of fake ballots, the Commission through
the Committee shall ensure that the serial number on the ballot
stub shall be printed in magnetic ink that shall be easily detectable
by inexpensive hardware and shall be impossible to reproduce on a
photocopying machine, and that identification marks, magnetic
strips, bar codes and other technical and security markings, are
provided on the ballot.
The official ballots shall be printed and distributed to each
city/municipality at the rate of one (1) ballot for every registered
voter with a provision of additional four (4) ballots per precinct.
Under Section 11 of RA 8436, the only purpose for the early filing of
certificates of candidacy is to give ample time for the printing of official
ballots. This is clear from the following deliberations of the Bicameral
Conference Committee:
SENATOR GONZALES. Okay. Then, how about the campaign
period, would it be the same[,] uniform for local and national
officials?
THE CHAIRMAN (REP. TANJUATCO). Personally, I would agree to retaining it at
the present periods.
SENATOR GONZALES. But the moment one files a certificate of candidacy, hes
already a candidate, and there are many prohibited acts on the part of candidate.
THE CHAIRMAN (REP. TANJUATCO). Unless we. . . .
SENATOR GONZALES. And you cannot say that the campaign period has not yet
began (sic).
THE CHAIRMAN (REP. TANJUATCO). If we dont provide that the filing of the
certificate will not bring about ones being a candidate.
SENATOR GONZALES. If thats a fact, the law cannot change a fact.
THE CHAIRMAN (REP. TANJUATCO). No, but if we can provide that the filing
of the certificate of candidacy will not result in that official vacating his position,
we can also provide that insofar he is concerned, election period or his being a
candidate will not yet commence. Because here, the reason why we are doing an
early filing is to afford enough time to prepare this machine readable ballots.
So, with the manifestations from the Commission on Elections, Mr. Chairman, the
House Panel will withdraw its proposal and will agree to the 120-day period
provided in the Senate version.
THE CHAIRMAN (SENATOR FERNAN). Thank you, Mr. Chairman.
x x x x
SENATOR GONZALES. How about prohibition against campaigning or doing
partisan acts which apply immediately upon being a candidate?
THE CHAIRMAN (REP. TANJUATCO). Again, since the intention of this
provision is just to afford the Comelec enough time to print the ballots, this
provision does not intend to change the campaign periods as presently, or rather
election periods as presently fixed by existing law.
THE ACTING CHAIRMAN (SEN. FERNAN). So, it should be subject to the other
prohibition.
THE CHAIRMAN (REP. TANJUATCO). Thats right.
THE ACTING CHAIRMAN (SEN. FERNAN). Okay.
THE CHAIRMAN (REP. TANJUATCO). In other words, actually, there would be
no conflict anymore because we are talking about the 120-day period before election
as the last day of filing a certificate of candidacy, election period starts 120 days also.
So that is election period already. But he will still not be considered as a candidate.
Thus, because of the early deadline of 2 January 2004 for purposes of
printing of official ballots, Eusebio filed his certificate of candidacy on 29
December 2003. Congress, however, never intended the filing of a certificate of
candidacy before 2 January 2004 to make the person filing to become
immediately a candidate for purposes other than the printing of ballots. This
legislative intent prevents the immediate application of Section 80 of the
Omnibus Election Code to those filing to meet the early deadline. The clear
intention of Congress was to preserve the election periods as x x x fixed by
existing law prior to RA 8436 and that one who files to meet the early deadline
will still not be considered as a candidate.
[3]
(Emphasis in the original)

Lanot was decided on the ground that one who files a certificate of
candidacy is not a candidate until the start of the campaign period. This ground
was based on the deliberations of the legislators who explained the intent of the
provisions of RA 8436, which laid the legal framework for an automated election
system. There was no express provision in the original RA 8436 stating that one
who files a certificate of candidacy is not a candidate until the start of the
campaign period.

When Congress amended RA 8436, Congress decided to expressly
incorporate the Lanot doctrine into law, realizing that Lanot merely relied on the
deliberations of Congress in holding that

The clear intention of Congress was to preserve the election periods as x x x
fixed by existing law prior to RA 8436 and that one who files to meet the early
deadline will still not be considered as a candidate.
[4]
(Emphasis supplied)

Congress wanted to insure that no person filing a certificate of candidacy
under the early deadline required by the automated election system would be
disqualified or penalized for any partisan political act done before the start of the
campaign period. Thus, in enacting RA 9369, Congress expressly wrote
the Lanot doctrine into the second sentence, third paragraph of the amended
Section 15 of RA 8436, thus:

x x x
For this purpose, the Commission shall set the deadline for the filing of certificate
of candidacy/petition for registration/manifestation to participate in the
election. Any person who files his certificate of candidacy within this
period shall only be considered as a candidate at the start of the campaign
period for which he filed his certificate of candidacy: Provided, That, unlawful
acts or omissions applicable to a candidate shall take effect only upon the start of the
aforesaid campaign period: Provided, finally, That any person holding a public
appointive office or position, including active members of the armed forces, and
officers and employees in government-owned or -controlled corporations, shall be
considered ipso facto resigned from his/her office and must vacate the same at the
start of the day of the filing of his/her certificate of candidacy. (Boldfacing and
underlining supplied)

Congress elevated the Lanot doctrine into a statute by specifically inserting it
as the second sentence of the third paragraph of the amended Section 15 of RA
8436, which cannot be annulled by this Court except on the sole ground of its
unconstitutionality. The Decision cannot reverse Lanot without repealing
this second sentence, because to reverse Lanot would mean repealing this second
sentence.

The assailed Decision, however, in reversing Lanot does not claim that
this second sentence or any portion of Section 15 of RA 8436, as amended by RA
9369, is unconstitutional. In fact, the Decision considers the entire Section 15
good law. Thus, the Decision is self-contradictory reversing Lanot but
maintaining the constitutionality of the second sentence, which embodies
the Lanot doctrine. In so doing, the Decision is irreconcilably in conflict with the
clear intent and letter of the second sentence, third paragraph, Section 15 of RA
8436, as amended by RA 9369.

In enacting RA 9369, Congress even further clarified the first proviso in the
third paragraph of Section 15 of RA 8436. The original provision in RA 8436
states



x x x Provided, further, That, unlawful acts or omissions applicable to a candidate
shall take effect upon the start of the aforesaid campaign period, x x x.

In RA 9369, Congress inserted the word only so that the first proviso now reads


x x x Provided, That, unlawful acts or omissions applicable to a candidate shall
take effect only upon the start of the aforesaid campaign period x x
x. (Emphasis supplied)


Thus, Congress not only reiterated but also strengthened its mandatory
directive that election offenses can be committed by a candidate only upon the
start of the campaign period. This clearly means that before the start of the
campaign period, such election offenses cannot be so committed.

When the applicable provisions of RA 8436, as amended by RA 9369, are
read together, these provisions of law do not consider Penera a candidate for
purposes other than the printing of ballots, until the start of the campaign
period. There is absolutely no room for any other interpretation.

We quote with approval the Dissenting Opinion of Justice Antonio T.
Carpio:

x x x The definition of a candidate in Section 79(a) of the Omnibus
Election Code should be read together with the amended Section 15 of RA
8436. A candidate refers to any person aspiring for or seeking an elective
public office, who has filed a certificate of candidacy by himself or through an
accredited political party, aggroupment or coalition of parties. However, it is no
longer enough to merely file a certificate of candidacy for a person to be
considered a candidate because any person who files his certificate of
candidacy within [the filing] period shall only be considered a candidate at the
start of the campaign period for which he filed his certificate of
candidacy. Any person may thus file a certificate of candidacy on any day
within the prescribed period for filing a certificate of candidacy yet that person
shall be considered a candidate, for purposes of determining ones possible
violations of election laws, only during the campaign period. Indeed, there is
no election campaign or partisan political activity designed to promote the
election or defeat of a particular candidate or candidates to public office simply
because there is no candidate to speak of prior to the start of the campaign
period. Therefore, despite the filing of her certificate of candidacy, the law does
not consider Penera a candidate at the time of the questioned motorcade which
was conducted a day before the start of the campaign period. x x x
The campaign period for local officials began on 30 March 2007 and ended on 12
May 2007. Penera filed her certificate of candidacy on 29 March 2007. Penera was
thus a candidate on 29 March 2009 only for purposes of printing the ballots. On 29
March 2007, the law still did not consider Penera a candidate for purposes other
than the printing of ballots. Acts committed by Penera prior to 30 March 2007, the
date when she became a candidate, even if constituting election campaigning or
partisan political activities, are not punishable under Section 80 of the Omnibus
Election Code. Such acts are within the realm of a citizens protected freedom of
expression. Acts committed by Penera within the campaign period are not covered
by Section 80 as Section 80 punishes only acts outside the campaign period.
[5]


The assailed Decision gives a specious reason in explaining away the
first proviso in the third paragraph, the amended Section 15 of RA 8436
that election offenses applicable to candidates take effect only upon the start of
the campaign period. The Decision states that:

x x x [T]he line in Section 15 of Republic Act No. 8436, as amended,
which provides that any unlawful act or omission applicable to a candidate
shall take effect only upon the start of the campaign period, does not mean that
the acts constituting premature campaigning can only be committed, for which the
offender may be disqualified, during the campaign period. Contrary to the
pronouncement in the dissent, nowhere in said proviso was it stated that
campaigning before the start of the campaign period is lawful, such that the
offender may freely carry out the same with impunity.
As previously established, a person, after filing his/her COC but prior to his/her
becoming a candidate (thus, prior to the start of the campaign period), can already
commit the acts described under Section 79(b) of the Omnibus Election Code as
election campaign or partisan political activity, However, only after said person
officially becomes a candidate, at the beginning of the campaign period, can said
acts be given effect as premature campaigning under Section 80 of the Omnibus
Election Code. Only after said person officially becomes a candidate, at the start
of the campaign period, can his/her disqualification be sought for acts
constituting premature campaigning. Obviously, it is only at the start of the
campaign period, when the person officially becomes a candidate, that the undue and
iniquitous advantages of his/her prior acts, constituting premature campaigning, shall
accrue to his/her benefit. Compared to the other candidates who are only about to
begin their election campaign, a candidate who had previously engaged in premature
campaigning already enjoys an unfair headstart in promoting his/her
candidacy.
[6]
(Emphasis supplied)

It is a basic principle of law that any act is lawful unless expressly
declared unlawful by law. This is specially true to expression or speech, which
Congress cannot outlaw except on very narrow grounds involving clear, present
and imminent danger to the State. The mere fact that the law does not declare an
act unlawful ipso facto means that the act is lawful. Thus, there is no need for
Congress to declare in Section 15 of RA 8436, as amended by RA 9369, that
political partisan activities before the start of the campaign period are lawful. It is
sufficient for Congress to state that any unlawful act or omission applicable to
a candidate shall take effect only upon the start of the campaign period. The
only inescapable and logical result is that the same acts, if done before the start of
the campaign period, are lawful.

In laymans language, this means that a candidate is liable for an election
offense only for acts done during the campaign period, not before. The law is
clear as daylight any election offense that may be committed by a candidate
under any election law cannot be committed before the start of the campaign
period. In ruling that Penera is liable for premature campaigning for partisan
political acts before the start of the campaigning, the assailed Decision ignores the
clear and express provision of the law.

The Decision rationalizes that a candidate who commits premature
campaigning can be disqualified or prosecuted only after the start of the campaign
period. This is not what the law says. What the law says is any unlawful act or
omission applicable to a candidate shall take effect only upon the start of the
campaign period. The plain meaning of this provision is that the effective date
when partisan political acts become unlawful as to a candidate is when the
campaign period starts. Before the start of the campaign period, the same partisan
political acts are lawful.

The law does not state, as the assailed Decision asserts, that partisan political
acts done by a candidate before the campaign period are unlawful, but may be
prosecuted only upon the start of the campaign period. Neither does the law state
that partisan political acts done by a candidate before the campaign period
are temporarily lawful, but becomes unlawful upon the start of the campaign
period. This is clearly not the language of the law. Besides, such a law as
envisioned in the Decision, which defines a criminal act and curtails freedom of
expression and speech, would be void for vagueness.

Congress has laid down the law a candidate is liable for election offenses
only upon the start of the campaign period. This Court has no power to ignore the
clear and express mandate of the law that any person who files his certificate of
candidacy within [the filing] period shall only be considered a candidate at the
start of the campaign period for which he filed his certificate of
candidacy. Neither can this Court turn a blind eye to the express and clear
language of the law that any unlawful act or omission applicable to a
candidate shall take effect only upon the start of the campaign period.

The forum for examining the wisdom of the law, and enacting remedial
measures, is not this Court but the Legislature. This Court has no recourse but to
apply a law that is as clear, concise and express as the second sentence, and its
immediately succeeding proviso, as written in the third paragraph of Section 15 of
RA 8436, as amended by RA 9369.

WHEREFORE, we GRANT petitioner Rosalinda A. Peneras Motion for
Reconsideration. We SET ASIDE the Decision of this Court in G.R. No. 181613
promulgated on 11 September 2009, as well as the Resolutions dated 24 July 2007
and 30 January 2008 of the COMELEC Second Division and the COMELEC En
Banc, respectively, in SPA No. 07-224. Rosalinda A. Penera shall continue as
Mayor of Sta. Monica, Surigao del Norte.

SO ORDERED.



ANTONIO T. CARPIO
Associate Justice


WE CONCUR:



REYNATO S. PUNO
Chief Justice




RENATO C. CORONA
Associate Justice




CONCHITA CARPIO MORALES
Associate Justice


MINITA V. CHICO-NAZARIO
Associate Justice





PRESBITERO J. VELASCO, JR.
Associate Justice


ANTONIO EDUARDO B. NACHURA
Associate Justice




TERESITA J. LEONARDO-DE CASTRO
Associate Justice




ARTURO D. BRION
Associate Justice




DIOSDADO M. PERALTA
Associate Justice




LUCAS P. BERSAMIN
Associate Justice



MARIANO C. DEL CASTILLO
Associate Justice

ROBERTO A. ABAD
Associate Justice



MARTIN S. VILLARAMA, JR.
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Resolution had been reached in consultation before the
case was assigned to the writer of the opinion of the Court.




REYNATO S. PUNO
Chief Justice








[1]
Decision, p. 23 (Boldfacing and underscoring supplied).
[2]
G.R. No. 164858, 16 November 2006, 507 SCRA 114.
[3]
Id. at 147-152.
[4]
Id. at 152.
[5]
Dissenting Opinion of Justice Antonio T. Carpio, pp. 4-6.
[6]
Decision, p. 24.