12. PETRON CORPORATION V. TIANGCO | GR NO.

158881 | APRIL 16, 2008

FACTS:
Petron maintains a depot or bulk plant in Navotas. Through that depot, it has engaged in the
selling of diesel fuels. Navotas Mayor Tiangco assessed taxes to Petron. However, the latter
protested arguing that it was exempt from local business taxes. The protest was denied by the
Municipal Treasurer which was followed by a “Final Demand to Pay” from the mayor with a
threat of closure of Petron’s operation within Navotas should there be no payment.
Petron subsequently filed with the Malabon RTC a complaint for Cancellation of Assessment
for Deficiency Taxes with prayer for the issuance of a TRO and/or WPI. However, the petition is
dismissed. Its motion for reconsideration is likewise denied.

ISSUE:
Whether a local government unit is empowered under the LGC to impose business taxes on
persons or entities engaged in the sale of petroleum products.

RULING:
The controversy hinges on the correct interpretation of Section 133(h) of the LGC which
provides that: “xxx the taxing power of xxx cities xxx shall not extend to the levy of the
following: xxx (h) Excise taxes on articles enumerated under the NIRC, as amended, and taxes,
fees, or charges on petroleum products”. The paragraph mentions two kinds of taxes which
cannot be imposed by LGUs, namely: “excise taxes on articles enumerated under the NIRC” and
“taxes, fees or charges on petroleum products”
With the given provision the court determines whether the tax on sale of the diesel fuels an
excise tax or whether the tax is prohibited under the proviso “taxes, fees or charges on petroleum
product”
the clause "taxes, fees or charges on petroleum products" in Section 133(h) precludes local
government units from imposing business taxes based on the sale of petroleum products. The
clause makes the distinction of business tax from excise tax immaterial insofar as the clause does
not qualify the kind of taxes, fees or charges on petroleum product. The absence of the
qualification leads to the conclusion that all sorts of taxes on petroleum products, including
business taxes, are prohibited on petroleum products. The language of Section 133(h) makes
plain that the prohibition with respect to petroleum products extends not only to excise taxes
thereon, but all "taxes, fees and charges."