Commissioner of Customs v. CTA & Campos Rueda Co.

, 152 SCRA 641

Facts:

Campos Rueda imported 46 cartons or 27,000 pieces of Tungsol flashers. Before the goods arrived at the port of Manila, Campos
Rueda filed with the Collector of Customs of Manila a request for value information for the declaration of the imported flashers under
Tariff Heading No. 85.09 of the Tariff and Customs Code at 30% ad valorem duty, for classification purpose. The Customs appraiser
however, re-classified the goods under Tariff Heading No. 85.19 of the Tariff and Customs Code at 50% ad valorem.

When the goods arrived at the port of Manila, Campos Rueda immediately filed a Customs Import Entry and Internal Revenue
Declaration under Tariff Heading No. 85.19 of the Tariff and Customs Code at 50% ad valorem but, under protest and paid duties
and taxes on the goods, also under protest. It then filed a timely protest against the re-classification resulting in the payment of
additional customs duty and advance sales tax and prayed for the refund of the said.

The Collector of Customs dismissed the protest. Campos Rueda appealed to the Commissioner but was denied, and then appealed
to CTA which modified the Commissioner’s decision by ordering the refund to Campos Rueda of the sum of the additional customs
duty but not the advance sales tax. The Commissioner now appeals via petition for review the said decision.

Issue: W/N Campos Rueda should pay 30% or 50% ad valorem duty

Held:

30%. TH No 85.09 of the Tariff and Customs Code provides:

85.09. Electrical lighting and signalling equipment and electrical windscreen wipers, defrosters and demisters, for cycles or motor
vehicles ad val. 30%.

On the other hand, the same Code provides under TH No. 85.19:

85.19. Electrical apparatus for making and breaking electrical circuits, for the protection of electrical circuits, or for making
connections to or in electric circuits (for example, switches, relays, fuses, lighting arresters, surge suppressors, plugs, lamp-holders
and junction boxes); resistors, fixed or variable (including potentiometers), other than heating resistors, printed circuits, switch
boards (other than telephone switchboards) and control panels:

In finding for Campos Rueda, CTA found that it has adduced sufficient evidence to establish the general purpose or predominating
use to which flashers are applied, and for which petitioner imported them, is precisely as electrical equipment for signalling purposes
for motor vehicles; that is, to signal or indicate a right or left hand turn by means of electrical flashes in front and at the rear of
motor vehicles and not merely as electrical apparatus as the Commissioner claims.

It is the predominating use to which articles are generally applied or used that determines their character for the purpose of fixing
the duty, and not the specific or special use which any particular importer may make of the articles imported.

Parts of machines, apparatus of appliances which are suitable for use solely or principally with a particular kind of machine or with a
number of machines falling within a specific heading, as a rule, are to be classified with the machines in the same heading. Also, the
law does not provide that an article imported for electrical lighting and signalling equipment for motor vehicles falling under Tariff
Heading No. 85.09, if imported alone, shall be classified under Tariff Heading No. 85.19 as ‘electrical apparatus for making and
breaking electrical circuits that provision should not be read into the law per the circular of the former Acting Customs Collector.
Petition denied. CTA decision affirmed.

In the case at bar, it is worthy to state that the respondent's re-appraisal of the subject shipments or articles imported were based
on the alleged piece of document known as "Alert Notice" which was not even presented by respondent to the Court. At any rate,
assuming that there really is such a document and the same was received by the Commissioner of Customs, the fact is that the
records do not show from what data the alleged alerted value was taken, and how the Commissioner of Customs ascertained and
established the home consumption value of the imported articles and/or merchandise and when and where such alerted value was
published as required by law. Under these circumstances, the re-appraisal made by respondent is clearly not in accordance with the
provisions of Section 201 of the Tariff and Customs Code.

a. Equal protection of the laws Sec. I, Art. III, 1987 Constitution

Tan v. Del Rosario, G.R. No. 109289 and G.R. No. 109446, October 3, 1994- Delute
BRITISH AMERICAN TOBACCO, petitioner, vs. JOSE ISIDRO N. CAMACHO, in his capacity as Secretary of the Department of
Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue, respondents.

Philip Morris Philippines Manufacturing, Inc., fortune tobacco, corp., MIGHTY CORPORATION, and JT InTERNATIONAL, S.A., respondents-
in-intervention.

FACTS:

· This petition for review assails the validity of: (1) Section 145 of the (NIRC), as recodified by (RA) 8424; (2) RA 9334, which further amended Section
145 of the NIRC; (3) Revenue Regulations Nos. 1-97, 9-2003, and 22-2003; and (4) Revenue Memorandum Order No. 6-2003. Petitioner argues that the
said provisions are violative of the equal protection and uniformity clauses of the Constitution.

· RA 8240, entitled took effect on January 1, 1997. In the same year, Congress passed RA 8424 or The Tax Reform Act of 1997, re-codifying the NIRC.
Section 142 was renumbered as Section 145 of the NIRC.

· Paragraph (c) of Section 145 provides for four tiers of tax rates based on the net retail price per pack of cigarettes. To determine the applicable tax
rates of existing cigarette brands, a survey of the net retail prices per pack of cigarettes was conducted as of October 1, 1996, the results of which were
embodied in Annex "D" of the NIRC as the duly registered, existing or active brands of cigarettes.

· As such, new brands of cigarettes shall be taxed according to their current net retail price while existing or "old" brands shall be taxed based on
their net retail price as of October 1, 1996.

· To implement RA 8240, the (BIR) issued Revenue Regulations No. 1-97,2 which classified the existing brands of cigarettes as those duly
registered or active brands prior to January 1, 1997. New brands, or those registered after January 1, 1997, shall be initially assessed at their
suggested retail price until such time that the appropriate survey to determine their current net retail price is conducted.

· June 2001, petitioner British American Tobacco introduced and sold Lucky Strike, Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes
w/ SRP P 9.90/pack - Initial assessed excise tax: P 8.96/pack (Sec. 145 [c]).

· February 17, 2003: RR 9-2003: Periodic review every 2 years or earlier of the current net retail price of new brands and variants thereof for the
purpose of the establishing and updating their tax classification

· March 11, 2003: RMO 6-2003: Guidelines and procedures in establishing current net retail prices of new brands of cigarettes and alcohol products

· August 8, 2003: RR 22-2003: Implement the revised tax classification of certain new brands introduced in the market after January 1, 1997 based
on the survey of their current net retail prices. This increased the excise tax to P13.44 since the average net retail price is above P 10/pack. This
cause petitioner to file before the RTC of Makati a petition for injunction with prayer for issuance of a Temporary Restraining Order and/or Writ of
Preliminary Injunction sought to enjoin the implementation of Sec. 145 of the NIRC, RR No. 1-97, 9-2003, 22-2003 and 6-2003 on the ground that they
discriminate against new brands of cigarettes in violation of the equal protection and uniformity provisions of the Constitution

· RTC: Dismissed

· While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997 NIRC among other took effect on January 1, 2005 which in effect
increased petitioners excise tax to P25/pack

· Petitioner filed a Motion to Admit attached supplement and a supplement to the petition for review assailing the constitutionality of RA 9334 and
praying a downward classification of Lucky Strike products at the bracket taxable at P 8.96/pack since existing brands are still taxed based on their
price as of October 1996 eventhough they are equal or higher than petitioner's product price.

· Philip Morris Philippines Manufacturing Incorporated, Fortune Tobacco Corp., Mighty Corp. and JT International Intervened.

· Fortune Tobacco claimed that the CTA should have the exclusive appellate jurisdiction over the decision of the BIR in tax disputes.

ALLEGATIONS OF THE PETITIONER:

· Petitioner argues that the classification freeze provision violates the equal protection and uniformity of taxation clauses because Annex "D"
brands are taxed based on their 1996 net retail prices while new brands are taxed based on their present day net retail prices.

· Congress doubted the constitutionality of such... delegation of power, and likewise, considered the ethical implications thereof. In particular, the...
questioned provision addressed Congress's administrative concerns regarding delegating too much authority to the DOF and BIR as this will open
the tax system to potential areas for abuse and corruption.

· Petitioner asserts that the Court erroneously applied the rational basis test allegedly because this test does not apply in a constitutional challenge
based on a violation of Section 19, Article XII of the Constitution on unfair competition. It argues that the classification freeze provision gives the
brands... a decisive edge because it constitutes a substantial barrier to the entry of prospective players... the classification freeze provision will
encourage predatory pricing in contravention of the constitutional prohibition on unfair competition
· Petitioner argues that the classification freeze provision is a form of regressive and inequitable tax system which is proscribed under Article VI,
Section 28(1)[18] of the Constitution.

· Petitioner further posits that the classification freeze provision is regressive in character.

· Petitioner alleges that assuming the assailed law is constitutional, its Lucky Strike brand should be reclassified from the premium-priced to the
high-priced tax bracket. Further, the upward reclassification of Lucky Strike amounts to deprivation of property right without due process of law.

ISSUE:
1. W/N the RTC rather than the CTA has jurisdiction.
2. W/N RA 9334 of the classification freeze provision is unconstitutional for violating the equal protection and uniformity provisions of the
Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its amendment by RA 9334 can authorize the BIR to conduct resurvey and
reclassification.

HELD:

1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on the CTA jurisdiction to resolve tax disputes in general. BUT does NOT
include cases where the constitutionality of a law or rule is challenged which is a judicial power belonging to regular courts.

2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the
liabilities imposed. If the law be looked upon in tems of burden on charges, those that fall within a class should be treated in the same fashion,
whatever restrictions cast on some in the group equally binding on the rest. xxx" Thus, classification if rational in character is allowable. In Lutz v.
Araneta: "it is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which
result from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation" SC previously held: "Equality and
uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the
authority to make reasonable and natural classifications for purposes of taxation"

Under the the rational basis test, a legislative classification, to survive an equal protection challenge, must be shown to rationally further a legitimate
state interest. The classifications must be reasonable and rest upon some ground of difference having a fair and substantial relation to the object of the
legislation

A legislative classification that is reasonable does not offend the constitutional guaranty of the equal protection of the laws. The classification is
considered valid and reasonable provided that: (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it applies, all things
being equal, to both present and future conditions; and (4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such impact as the price is not the only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify cigarette brands remains a prerogative of the legislature which cannot be usurped
by the former. These are however modified by RA 9334.

Ferrer v. Bautista, G.R. No. 210551, June 30, 2015- Hibaler

Uniformity and equity in taxation Sec. 28(I), Art. VI, 1987 Constitution

CITY OF BAGUIO, plaintiff-appellee, vs. FORTUNATO DE LEON, defendant-appellant.

Facts: In this appeal, a lower court decision upholding the validity of an ordinance of the City of Baguio imposing a license fee on any person, firm,
entity or corporation doing business in the City of Baguio is assailed by defendant-appellant Fortunato de Leon. He was held liable as a real estate
dealer with a property therein worth more than P10,000, but not in excess of P50,000, and therefore obligated to pay under such ordinance the P50
annual fee. That is the principal question. In addition, there has been a firm and unyielding insistence by defendant-appellant of the lack of jurisdiction
of the City Court of Baguio, where the suit originated, a complaint having been filed against him by the City Attorney of Baguio for his failure to pay the
amount of P300 as license fee covering the period from the first quarter of 1958 to the fourth quarter of 1962, allegedly, inspite of repeated demands.

The lower court declared the above ordinance as amended, valid and subsisting, and held defendant-appellant liable for the fees therein prescribed as
a real estate dealer.

The source of authority for the challenged ordinance is supplied by Republic Act No. 329, amending the city charter of Baguio empowering it to fix the
license fee and regulate "businesses, trades and occupations as may be established or practiced in the City."

De LEon questioned its validity on constitutional grounds because of the allegation that it imposed double taxation, which is repugnant to the due
process clause, and that it violated the requirement of uniformity.

Issue: Whether or not the ordinance is violative of the constitutional requirement of uniformity.

Held: No. According to the challenged ordinance, a real estate dealer who leases property worth P50,000 or above must pay an annual fee of P100. If
the property is worth P10,000 but not over P50,000, then he pays P50 and P24 if the value is less than P10,000. On its face, therefore, the above
ordinance cannot be assailed as violative of the constitutional requirement of uniformity. In Philippine Trust Company v. Yatco, Justice Laurel, speaking
for the Court, stated: "A tax is considered uniform when it operates with the same force and effect in every place where the subject may be found."

There was no occasion in that case to consider the possible effect on such a constitutional requirement where there is a classification. The opportunity
came in Eastern Theatrical Co. v. Alfonso. Thus: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; ..."
About two years later, Justice Tuason, speaking for this Court in Manila Race Horses Trainers Assn. v. De la Fuente incorporated the above excerpt in
his opinion and continued: "Taking everything into account, the differentiation against which the plaintiffs complain conforms to the practical dictates of
justice and equity and is not discriminatory within the meaning of the Constitution."

To satisfy this requirement then, all that is needed as held in another case decided two years later, is that the statute or ordinance in question "applies
equally to all persons, firms and corporations placed in similar situation." This Court is on record as accepting the view in a leading American case that
"inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation."

It is thus apparent from the above that in much the same way that the plea of double taxation is unavailing, the allegation that there was a violation of
the principle of uniformity is inherently lacking in persuasiveness. There is no need to pass upon the other allegations to assail the validity of the above
ordinance, it being maintained that the license fees therein imposed "is excessive, unreasonable and oppressive" and that there is a failure to observe
the mandate of equal protection. A reading of the ordinance will readily disclose their inherent lack of plausibility.
Eastern Theatrical Co. v. Alfonso, 83 Phil 852- Miranda

EASTERN THEATRICAL CO., INC., ET AL., plaintiffs-appellants, vs. VICTOR, ALFONSO as City Treasurer of Manila, THE MUNICIPAL BOARD
OF THE CITY OF MANILA, and JUAN NOLASCO, as Mayor of the City of Manila, defendants-appellees.

Twelve corporations engaged in motion picture business have initiated these proceeding through a complaint dated May 5, 1946, to impugn the validity
of Ordinance No. 2958 of the City of Manila which was enacted by the municipal Board and took effect on May 1, 1946 said ordinance reading as
follows: “AN ORDINANCE IMPOSING A FEE ON THE PRICE OF EVERY ADMISSION TICKET SOLD BY CINEMATOGRAPHS, THEATERS
VAUDEVILLE COMPANIES THEATRICAL SHOWS AND BOXING EXHIBITION AND PROVIDING FOR OTHER PURPOSES.”

The Ordinance imposes a fee on the price of every admission ticket sold by theaters and other similar amusement establishments. The fees are
graduated according to the price of the ticker sold

Plaintiffs, operator of theaters in Manila And distributor of local or imported films, allege that they are interested in the provision of section 1,2 and 4 of
said ordinance which they impugn as null and void upon the following grounds, including, among others: (a) For violation the Constitution more
particular the provision regarding the uniformity and equality of taxation and thee equal protection of the laws, because it does not tax "many more
kinds of amusements" than those therein specified, such as "race tracks, cockpits, cabarets, concert halls, circuses, and other places of amusement.";
and (b) because it is unfair, unjust, arbitrary capricious unreasonable oppressive

Defendants allege as affirmative defenses the following (among others): (b) that the graduated tax required by said ordinance being applied to all
cinematographs, theaters, vaudeville companies theatrical show and boxing exhibitions similarly situated and as a class without distinction or exception
the same does not violate the prohibition against uniformity and equality of taxation; (c) that the graduated tax on admission tickets to theaters and
other places of amusement imposed by the National Internal Revenue Code is collected by and for the purposes of the National Government, whereas,
Ordinance No.2958 imposes and requires the collection of a similar tax by and for the purposes of the Government of the City of Manila, and there is no
case of double taxation; (e) that consideration the nature of the business of the plaintiffs and the enormous volume of business they handle the
graduated tax fixed by the ordinance is not unreasonable.

Defendants allege also that since May 1, 1946, when the ordinance in question took effect plaintiffs have been charging the theater-going public
increased prices for admission to the cinematographs owned and operated to the graduated tax imposed by said ordinance and as a result while
refusing to pay said tax but at the same time collecting an amount equal to said tax plaintiffs have taken undue advantage of said ordinance to realized
more profits.

On September 5, 1946, Judge Emilio Pena of the court of first Instance of Manila rendered a decision upholding the validity of Ordinance No. 2958.

ISSUE: WON Ordinance No. 25 is unconstitutional for violating the principle of equality and uniformity of taxation (Sec. 22, sub-sec. 1, Art. VI,
Constitution of the Philippines)

RULING: No. Appellants point out to the fact that the ordinance in question does not tax "many more kinds of amusements" than those therein
specified, such as "race tracks, cockpits, cabarets, concert halls, circuses, and other places of amusement." the argument has absolutely no merit. The
fact that some places of amusement are not taxed while others, such as cinematographs, theaters, vaudeville companies, theatrical shows, and boxing
exhibitions and other kinds of amusements or places of amusement are taxed, is no argument at all against the equality and uniformity of the tax
imposition. Equality and uniformity of the tax imposition. Equality and uniformity in taxation means that all taxable articles or kinds of property of the
same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation;
and the appellants cannot point out what places of amusement taxed by the ordinance do not constitute a class by themselves and which can be
confused with those not included in the ordinance.
COC v. Hypermix, G.R. No. 179579, February 1, 2012- Muana

COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC vs. HYPERMIX FEEDS CORPORATION,

THE FACTS

According to Customs Memorandum Order (CMO) No. 27-2003, for tariff purposes, wheat was classified according to the following: (1) importer or
consignee; (2) country of origin; and (3) port of discharge. 5 The regulation provided an exclusive list of corporations, ports of discharge, commodity
descriptions and countries of origin. Depending on these factors, wheat would be classified either as food grade or feed grade. The corresponding tariff
for food grade wheat was 3%, for feed grade, 7%.

CMO further provided for the proper procedure for protest or Valuation and Classification Review Committee (VCRC) cases. Under this procedure, the
release of the articles that were the subject of protest required the importer to post a cash bond to cover the tariff differential.

A month after the issuance of CMO, respondent filed a Petition for Declaratory Relief 7 . It anticipated the implementation of the regulation on its
imported and perishable Chinese milling wheat in transit from China. 8 Respondent contended that CMO was issued without following the mandate of the
Revised Administrative Code on public participation, prior notice, and publication or registration with the University of the Philippines Law Center.

CONTENTION OF THE RESPONDENT

Respondent alleged that the regulation summarily adjudged it to be a feed grade supplier without the benefit of prior assessment and examination;
thus, despite having imported food grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing them to pay 133% more
than was proper.

Furthermore, respondent claimed that the equal protection clause of the Constitution was violated when the regulation treated non-flour millers
differently from flour millers for no reason at all.

Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in nature.

PETITIONER’S CONTENTION

Petitioner filed a Motion to Dismiss . alleging:

(3) CMO 27-2003 was an internal administrative rule and not legislative in nature; and

They likewise opposed the application for a writ of preliminary injunction on the ground that they had not inflicted any injury through the issuance of the
regulation; and that the action would be contrary to the rule that administrative issuances are assumed valid until declared otherwise.

RTC’S DECISION

Customs Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT. Respondents Commissioner of Customs, the District
Collector of Subic or anyone acting in their behalf are to immediately cease and desist from enforcing the said Customs Memorandum Order 27-2003.

CA dismissed the appeal.

ISSUE: whether or not the equal protection clause of the Constitution was violated when the regulation treated non-flour millers differently from flour
millers for no reason at all.

RULING: YES.

CMO 27-3003 is unconstitutional for being violative of the equal protection clause of the Constitution.

The equal protection clause means that no person or class of persons shall be deprived of the same protection of laws enjoyed by other persons or
other classes in the same place in like circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a reasonable
classification. For a classification to be reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is germane to the purpose of the
law; (3) it is not limited to existing conditions only; and (4) it applies equally to all members of the same class. 22

Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat is affected by who imports it, where it is
discharged, or which country it came from.

Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade wheat, the product would still be declared as feed
grade wheat, a classification subjecting them to 7% tariff. On the other hand, even if the importers listed under CMO 27-2003 have imported feed grade
wheat, they would only be made to pay 3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not become
disadvantageous to respondent only, but even to the state.

It is also not clear how the regulation intends to "monitor more closely wheat importations and thus prevent their misclassification." A careful study of
CMO 27-2003 shows that it not only fails to achieve this end, but results in the opposite. The application of the regulation forecloses the possibility that
other corporations that are excluded from the list import food grade wheat; at the same time, it creates an assumption that those who meet the criteria
do not import feed grade wheat. In the first case, importers are unnecessarily burdened to prove the classification of their wheat imports; while in the
second, the state carries that burden.
 d. Prohibition against imprisonment for nonpayment of poll tax Sec. 20, Art. III ,1987 Constitution

Secs. 156-164, Local Government Code

e. Non-impairment of obligations of contracts

Sec. 10, Art. III, 1987 Constitution

Sec. 11, Art. XII, 1987 Constitution

Casanovas v. Hord, 8 Phil. 125 - Nuneza

Phil Rural Electric Cooperatives Association Inc., et al. v. DILG & DOF, G.R. No. 143076, June 10, 2003 - Obinay

PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION, INC., et al.

vs.

THE SECRETARY OF DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT

GR. No. 143076 (June 10, 2003)

NOTE:

The instant action was filed directly to the Supreme Court, in disregard of the rule on hierarchy of courts. However, the Court opt to take primary
jurisdiction over the present petition and decide the same on its merits in view of the significant constitutional issues raised by the parties dealing with
the tax treatment of cooperatives under existing laws and in the interest of speedy justice and prompt disposition of the matter.

This is a petition for Prohibition under Rule 65 of the Rules of Court with prayer for the issuance of a temporary restraining order seeking to annul as
unconstitutional sections 193 and 234 of R.A. No. 7160 otherwise known as the Local Government Code.

FACTS:

On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing under PD
269 which are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives
of Agusan del Norte (ANECO), Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric cooperatives organized and existing under
PD 269, as amended, and registered with the National Electrification Administration (NEA).

Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all National Government, local government, and municipal taxes
and fee, including franchise, fling recordation, license or permit fees or taxes and any fees, charges, or costs involved in any court or administrative
proceedings in which it may be party.

From 1971to 1978, in order to finance the electrification projects envisioned by PD 269, the Philippine Government (through National Economic Council
now NEDA) entered into six loan agreements with the government of the United States of America, through the United States Agency for International
Development (USAID) with electric cooperatives as beneficiaries. The loan agreements contain similarly worded provisions on the tax application of the
loan and any property or commodity acquired through the proceeds of the loan.

ALLEGATIONS OF PETITIONER:

Pursuant to the provisions of P.D. No. 269 and provision in the loan agreements, they are exempt from payment of local taxes, including payment of
real property tax. With the passage of the Local Government Code, their tax exemptions have been validly withdrawn. Particularly, petitioners assail the
validity of Sec. 193 and 234 of the said code. Sec. 193 provides for the withdrawal of tax exemption privileges granted to all persons, whether natural or
juridical, except cooperatives duly registered under RA 6938, while Sec. 234 exempts the same cooperatives from payment of real property tax.

On July 25, 2000 the Court issued a Temporary Restraining Order.

ISSUE:
1. Whether or not the Local Government Code (under Sec. 193 and 234) violates the equal protection clause since the provisions unduly discriminate
against petitioners who are duly registered cooperatives under PD 269, as amended, and no under RA 6938 or the Cooperatives Code of the
Philippines?

2. Whether or not there is an impairment of the obligations of contract under the loan entered into between the Philippine and the US Governments?

RULING:

First Issue: No.

The guaranty of the equal protection clause is not violated by a law based on a reasonable classification. Classification, to be reasonable must (a) rest
on substantial classifications; (b) germane to the purpose of the law; (c) not limited to the existing conditions only; and (d) apply equally to all members
of the same class. We hold that there is reasonable classification under the Local Government Code to justify the different tax treatment between
electric cooperatives covered by PD 269 and electric cooperatives under RA 6938.

First, substantial distinctions exist between cooperatives under PD 269 and those under RA 6938. In the former, the government is the one that funds
those so-called electric cooperatives, while in the latter, the members make equitable contribution as source of funds.

a. Capital Contributions by Members – Nowhere in PD 269 does it require cooperatives to make equitable contributions to capital. Petitioners
themselves admit that to qualify as a member of an electric cooperative under PD 269, only the payment of a P5.00 membership fee is required which
is even refundable the moment the member is no longer interested in getting electric service from the cooperative or will transfer to another place
outside the area covered by the cooperative. However, under the Cooperative Code, the articles of cooperation of a cooperative applying for
registration must be accompanied with the bonds of the accountable officers and a sworn statement of the treasurer elected by the subscribers showing
that at least 25% of the authorized share capital has been subscribed and at least 25% of the total subscription has been paid and in no case shall the
paid-up share capital be less than P2,000.00.

b. Extent of Government Control over Cooperatives – The extent of government control over electric cooperatives covered by PD 269 is largely a
function of the role of the NEA as a primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred loans from various
sources to finance the development and operations of these electric cooperatives. Consequently, amendments were primarily geared to expand the
powers of NEA over the electric cooperatives o ensure that loans granted to them would be repaid to the government. In contrast, cooperatives under
RA 6938 are envisioned to be self-sufficient and independent organizations with minimal government intervention or regulation.

Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law. The Constitutional mandate that
“every local government unit shall enjoy local autonomy,” does not mean that the exercise of the power by the local governments is beyond the
regulation of Congress. Sec. 193 of the LGC is indicative of the legislative intent to vet broad taxing powers upon the local government units and to limit
exemptions from local taxation to entities specifically provided therein.

Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions are not limited to existing conditions and apply equally to all
members of the same class.

Second Issue: No.

It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the obligations of contracts does not prohibit every change in
existing laws. To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be
substantial. Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference to each other and not with
respect to non-parties.

The quoted provision under the loan agreement does not purport to grant any tax exemption in favor of any party to the contract, including the
beneficiaries thereof. The provisions simply shift the tax burden, if any, on the transactions under the loan agreements to the borrower and/or
beneficiary of the loan. Thus, the withdrawal by the Local Government Code under Sec. 193 and 234 of the tax exemptions previously enjoyed by
petitioners does not impair the obligation of the borrower, the lender or the beneficiary under the loan agreements as, in fact, no tax exemption is
granted therein.

f. Prohibition against infringement of religious freedom Sec. 5, Art. III, 1987 Constitution

American Bible Society v. City of Manila, 101 Phil. 386 - Padilla

Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business in the
Philippines

plaintiff's Philippine agency has been distributing and selling bibles and/or gospel portions thereof (except during the Japanese
occupation) throughout the Philippines and translating the same into several Philippine dialects.
 City Treasurer of the City of Manila informed plaintiff that it was conducting the business of general merchandise since November,
1945, without providing itself with the necessary Mayor's permit and municipal license

For this reason, it was required to secure, within three days, the corresponding permit and license fees, together with compromise
in the sum of P5,821.45. ABS paid the amount under protest to the City Treasurer of Manila.

Plaintiff's argument: IT NEVER MADE PROFIT

Plaintiff further tried to establish that it never made any profit from the sale of its bibles, which are disposed of for as low as one
third of the cost, and that in order to maintain its operating cost it obtains substantial remittances from its New York office and
voluntary contributions and gifts from certain churches, both in the United States and in the Philippines, which are interested in its
missionary work.

Defendant's Argument
bibles bear the price of 70cents from plaintiff-appellant's office in New York

RTC: As may be seen from the repealed section (m-2) of tile Revised Administrative Code and the repealing portions (o) of section
18 of Republic Act Ho. 409, although, they seemingly differ in the way the legislative intent is expressed, yet their meaning is
practically the same for the purpose of taxing the merchandise mentioned in said leg;al provisions, and that the taxes to be levied
by said ordinances is in the nature of percentage graduated taxes (Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2,
of Ordinance No. 2529, as amended by Ordinance No. 3364).

ISSUES
(1) whether or not the ordinances of the City of Manila, Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional and
valid; and

(2) whether the provisions of said ordinances are applicable or not to the case at bar.

Free exercise and enjoyment of religious profession and worship:

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:
"(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and
enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. No religion test
shall be required for the exercise of civil or political rights."

The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to
disseminate religious information. Any restraint of such right can only be justified like other restraints of freedom of expression on
the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent".

In the case at bar the license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious
literature.

It is a license tax a flat tax imposed on the exercise of a privilege granted by the Bill of Rights

The power to impose a license tax on the exercise of these freedoms is indeed1 as potent as the power of censorship which this
Court has repeatedly struck down. * * * He is not a nominal fee imposed as a regulatory measure to defray the expenses of policing
the activities in question. It is in no way apportioned. It ia flat license tax levied and collected as a condition to the pursuit of
activities whose enjoyment is guaranted by the constitutional liberties of press and religion and inevitably tends to suppress their
exercise. That is almost uniformly recognized as the inherent vice and evil of the flat license tax.

The right to enjoy freedom of the press and religion occupies a preferred position as against the constitutional right of property
owners.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a little bit
higher than the actual cost of the same but this cannot mean that ABS was engaged in the business or occupation of selling said
"merchandise" for profit.
For this reason, the provisions of City of Manila Ordinance No. 2529 (license fees), as amended, cannot be applied to ABS, for in
doing so it would impair its free exercise and enjoyment of its religious profession and worship as well as its rights of
dissemination of religious beliefs.
With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any person can engage in
any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge upon the enjoyment of
a right granted by the Constitution, nor tax the exercise of religious practices.

g. Prohibition re:appropriation of proceeds of taxation

Sec. 29, Art. VI, 1987 Constitution

Gaston v. Republic Planters Bank, ibid

GASTON vs. REPUBLIC PLANTERS BANK 158 SCRA 622

Facts:
Petitioners are sugar producers and planters and millers filed a MANDAMUS to implement the privatization of Republic Planters Bank, and for the
transfer of the shares in the government bank to sugar producers and planters. (because they are allegedly the true beneficial owners of the bank since
they pay P1.00 per picul of sugar from the proceeds of sugar producers as STABILIZATION FEES)

The shares are currently held by Philsucom / Sugar Regulatory Admin. The Solgen countered that the stabilization fees are considered government
funds and that the transfer of shares to from Philsucom to the sugar producers would be irregular.

Issue:
1. What is the nature of the P1.00 stabilization fees collected from sugar producers?
2. Are they funds held in trust for them, or are they public funds?

3. Are the shares in the bank (paid using these fees) owned by the government Philsucom or privately by the different sugar

planters from whom such fees were collected?

Ruling:
PUBLIC FUNDS. While it is true that the collected fees were used to buy shares in RPB, it did not collect said fees for the account of sugar producers.
The stabilization fees were charged on sugar produced and milled which ACCRUED TO PHILSUCOM, under PD 338.

The fees collected ARE IN THE NATURE OF A TAX which is within the power of the state to impose FOR THE PROMOTION OF THE SUGAR
INDUSTRY. They constitute sugar liens. The collections accrue to a SPECIAL FUND. It is levied not purely for taxation, but for regulation, to provide
means TO STABILIZE THE SUGAR INDUSTRY. The levy is primarily an exercise of police powers.

The fact that the State has taken money pursuant to law is sufficient to constitute them as STATE FUNDS, even though held for a special purpose.
Having been levied for a special purpose, the revenues are treated as a special fund, administered in trust for the purpose intended. Once the purpose
has been fulfilled or abandoned, the balance will be transferred to the general funds of gov’t.

It is a special fund since the funds are deposited in PNB, not in the National Treasury.

The sugar planters are NOT BENEFICIAL OWNERS. The money is collected from them only because it is also they who are to be benefited from the
expenditure of funds derived from it. The investing of the funds in RPB is not alien to the purpose since the Bank is a commodity bank for sugar,
conceived for the sugar industry’ growth and development.

Revenues derived from taxes cannot be used purely for private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be
utilized for the benefit of the ENTIRE SUGAR INDUSTRY, and all its components, stabilization of domestic and foreign markets, since the sugar
industry is of vital importance to the country’s economy and national interest.

h. Tax exemption of religious, charitable entities and educational entities

Sec. 28(3), Art. VI, 1987 Constitution

Abra Valley College v. Aquino, G.R. No. L-39086, June 15, 1988 - Rapisura

Lung Center of the Philippines v. Quezon City, G.R. No. 144104, June 29, 2004 - Raya

CIR v. CA, CTA & Ateneo de Manila University, G.R. No. 115349, April 18, 1997 - Said

i. Tax exemption of non-stock, non-profit institutions Sec. 4(3) and (4), Art. XIV, 1987 Constitution

Sec. 28(3), Art. VI, 1987 Constitution

Sec. 24(b), Tax Code

Secs. 27(B) and 30(H), Tax Code

Commissioner of Internal Revenue v. CA, G.R. No. 124043, October 14, 1998 - Serrano

COMMISSIONER OF INTERNAL REVENUE v. COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN
ASSOCIATION OF THE PHILIPPINES, INC., RESPONDENTS.
G.R. No. 124043, FIRST DIVISION, October 14, 1998
PANGANIBAN, J.

FACTS:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public,
especially the young people, pursuant to its religious, educational and charitable objectives. Private Respondent earned, among others, an income of
P676, 829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44, 259.00 from parking
fees collected from non-members. On July 2, 1984, the CIR issued an assessment to private respondent, in the total amount of P415,615.01 including
surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding
tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In
reply, the CIR denied the claims of YMCA.

Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March 14, 1989. In due course, the CTA
issued this ruling in favor of the YMCA stating that the leasing of private respondent's facilities to small shop owners, to restaurant and canteen
operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the
private respondents.

Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals (CA). In its Decision of February 16, 1994, the CA initially decided in
favor of the CIR.

Aggrieved, the YMCA asked for reconsideration. Finding merit in the Motion for Reconsideration filed by the YMCA, the CA reversed itself.

The internal revenue commissioner's own Motion for Reconsideration was denied by Respondent Court in its second assailed Resolution of February
29, 1996. Hence, this petition for review under Rule 45 of the Rules of Court.

ISSUE:

Whether or not the income derived from rentals of real property owned by the Young Men's Christian Association of the Philippines, Inc.
(YMCA) subject to income tax under the National Internal Revenue Code (NIRC) and the Constitution?

RULING:

YES. We now come to the crucial issue: Is the rental income of the YMCA from its real estate subject to tax? At the outset, we set forth the
relevant provision of the NIRC:

Sec. 27. Exemptions from tax on corporations. — The following organizations shall not be taxed under this Title in respect to
income received by them as such —
xxx xxx xxx

(g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;

(h) Club organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net
income of which inures to the benefit of any private stockholder or member;

xxx xxx xxx

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing
organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the
disposition made of such income, shall be subject to the tax imposed under this Code.

Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted
from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived ". . . from any of their
properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income . . . ."

Petitioner adds that "rental income derived by a tax-exempt organization from the lease of its properties, real or personal, is not, therefore, exempt from
income taxation, even if such income is exclusively used for the accomplishment of its objectives." We agree with the commissioner.

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions.
Furthermore, a claim of statutory exemption from taxation should be manifest and unmistakable from the language of the law on which it is based.
Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken."

In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the
NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax
imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real
property, the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.
It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be applied. Parenthetically, a consideration of the
question of construction must not even begin, particularly when such question is on whether to apply a strict construction or a liberal one on statutes
that grant tax exemptions to "religious, charitable and educational properties or
institutions."

The last paragraph of Section 27, the YMCA argues, should be "subject to the qualification that the income from the properties must arise from activities
'conducted for profit' before it may be considered taxable." This argument is erroneous. As previously stated, a reading of said paragraph ineludibly
shows that the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable. The phrase
"any of their activities conducted for profit" does not qualify the word "properties." This makes from the property of the organization taxable, regardless
of how that income is used — whether for profit or for lofty non-profit purposes.

Private respondent also invokes Article XIV, Section 4, par. 3 of the Character, claiming that the YMCA "is a non-stock, non-profit educational institution
whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and
income." We reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare
allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax.

As previously discussed, laws allowing tax exemption are construed strictissimi juris. Hence, for the YMCA to be granted the exemption it claims under
the aforecited provision, it must prove with substantial evidence that (1) it falls under the classification non-stock, non-profit educational institution; and
(2) the income it seeks to be exempted from taxation is used actually, directly, and exclusively for educational purposes. However, the Court notes that
not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.

Is the YMCA an educational institution within the purview of Article XIV, Section 4, par. 3 of the Constitution? We rule that it is not. The term
"educational institution" or "institution of learning" has acquired a well-known technical meaning, of which the members of the Constitutional
Commission are deemed cognizant. 38 Under the Education Act of 1982, such term refers to schools. The school system is synonymous with formal
education, 40 which "refers to the hierarchically structured and chronologically graded learnings organized and provided by the formal school system
and for which certification is required in order for the learner to progress through the grades or move to the higher levels." 41 The Court has examined
the "Amended Articles of Incorporation" and "By-Laws" 43 of the YMCA, but found nothing in them that even hints that it is a school or an educational
institution. 44

Furthermore, under the Education Act of 1982, even non-formal education is understood to be school-based and "private auspices such as foundations
and civic-spirited organizations" are ruled out. 45 It is settled that the term "educational institution," when used in laws granting tax exemptions, refers to
a ". . . school seminary, college or educational establishment . . . ." 46 Therefore, the private respondent cannot be deemed one of the educational
institutions covered by the constitutional provision under consideration.

Moreover, without conceding that Private Respondent YMCA is an educational institution, the Court also notes that the former did not submit proof of
the proportionate amount of the subject income that was actually, directly and exclusively used for educational purposes. Article XIII, Section 5 of the
YMCA by-laws, which formed part of the evidence submitted, is patently insufficient, since the same merely signified that "[t]he net income derived from
the rentals of the commercial buildings shall be apportioned to the Federation and Member Associations as the National Board may decide." In sum,
we find no basis for granting the YMCA exemption from income tax under the constitutional provision invoked.

j. Others

i. Grant of tax exemption

Sec. 28(4), Art. VI, 1987 Constitution

John Hay Peoples Alternative Coalition, et. al. v. Lim, et. al., G.R. No. 119775, October 24, 2003 - Yu

ii. Veto of appropriation, revenue, tariff bills by the President

Gonzales v. Macaraig, G.R. No. 87636, November 19, 1990 - Zambrano

Gonzales v. Macaraig, Jr.

GR 87636, November 19, 1990

Facts:

December 16, 1988 Congress passed House Bill No. 19186 (GAB of Fiscal Year 1989) which eliminated or decreased certain items included in the
proposed budget submitted by the president.

December 29, 1988 à President signed bill into law (RA 6688) but vetoed 7 special provisions and Sec 55, a general provision.
 February 2, 1989 Senate passed Res. No. 381 à Senate as an institution decided to contest the constitutionality of the veto of the president of SEC 55
only.

April 11, 1989 this petition was filed.

January 19, 1990 filed motion for leave to file and to admit supplemental petition à same issues but included SEC 16 of House Bill 26934 (Gab for FY
1990 or RA 6831).

SEC. 55 disallows the president and heads of several department to augment any item in the GAB thereby violation CONSTI ART VI SEC 25 (5) (page
459).

SEC 16 of the GAB of 1990 provides for the same and the reason for veto remains the same with the additional legal basis of violation of PD 1177
SEC 44 and 45 as amended by RA 6670 that authorizes the president and the heads of depts. To use saving to augment any item of appropriations in
the exec branch of government.

ISSUE:

Whether or not the veto by the President of SEC 55 of GAB for FY 1989 and SEC 16 of GAB for FY 1990 is unconstitutional.

HELD:

The veto is CONSTITUTIONAL. Although the petitioners contend that the veto exceeded the mandate of the line-veto power of the president because
SEC 55 and SEC 16 are provisions the court held that inappropriate provisions can be treated as items (Henry v. Edwards) and therefore can be
vetoed validly by the president. Furthermore inappropriate provisions must be struck down because they contravene the constitution because it limits
the power of the executive to augment appropriations (ART VI SEC 25 PAR 5.)

The ‘provisions’ are inappropriate because

o They do not relate to particular or distinctive appropriations

o Disapproved or reduces items are nowhere to be found on the face of the bill

o It is more of an expression of policy than an appropriation

·Court also said that to make the GAB veto-proof would be logrolling on the part of the legislative à the subject matter of the provisions should be dealt
with in separate and complete legislation but because they are aware that it would be NOT passed in that manner they attempt hide it in the GAB

If the legislature really believes that the exercise of veto is really invalid then congress SHOULD resort to their constitutionally vested power to override
the veto. (ART VI SEC 21 PAR 1)

DECISION: Veto UPHELD. Petition DISMISSED.

Non-impairment of the jurisdiction of the Supreme Court

Secs. 2 and 5(b), Art. III, 1987 Constitution

San Miguel Corp. v. Avelino, G.R. No. L-39699, March 14, 1979-Banggat

iv. Revenue bills shall originate from the House of Representatives

Sec. 24, Art. VI, 1987 Constitution

Tolentino v. Secretary of Finance, G.R. No. 115455, October 30, 1995-Delute

v. Infringement of press freedom

Sec. 24, Art. VI, 1987 Constitution
Tolentino v. Secretary of Finance, ibid

vi. Grant of franchise

Sec. 11, Art. VI, 1987 Constitution Tolentino v. Secretary of Finance, ibid