[G.R. No. 101273. July 3, 1992.

CONGRESSMAN ENRIQUE T. GARCIA, (Second District of Bataan), Petitioner, v. THE EXECUTIVE

SECRETARY, THE COMMISSIONER OF CUSTOMS, THE NATIONAL ECONOMIC AND DEVELOPMENT
AUTHORITY, THE TARIFF COMMISSION, THE SECRETARY OF FINANCE, and THE ENERGY REGULATORY
BOARD, Respondents.

Abraham C. La Vina for Petitioner.

SYLLABUS

1. CONSTITUTIONAL LAW; PRESIDENT; AUTHORIZED BY CONGRESS TO FIX TARIFF RATES AND OTHER
DUTIES OR IMPOSTS. — Under Section 24, Article VI of the Constitution, the enactment of
appropriation, revenue and tariff bills, like all other bills is, of course, within the province of the
Legislative rather than the Executive Department. It does not follow, however, that therefore
Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue measures, are
prohibited to the President, that they must be enacted instead by the Congress of the Philippines.
There is explicit constitutional permission (Section 28[2] of Article VI of the Constitution) to Congress
to authorize the President "subject to such limitations and restrictions as [Congress] may impose" to
fix "within specific limits" "tariff rates . . . and other duties or imposts . . . ." The relevant
congressional statute is the Tariff and Customs Code of the Philippines, and Sections 104 and 401,
the pertinent provisions thereof. These are the provisions which the President explicitly invoked in
promulgating Executive Orders Nos. 475 and 478.

2. TAXATION; TARIFF AND CUSTOMS CODE; CUSTOMS DUTIES; NAME GIVEN TO TAXES ON THE
IMPORTATION AND EXPORTATION OF COMMODITIES. — Customs duties which are assessed at the
prescribed tariff rates are very much like taxes which are frequently imposed for both revenue-
raising and for regulatory purposes. Thus, it has been held that "customs duties" is "the name given
to taxes on the importation and exportation of commodities, the tariff or tax assessed upon
merchandise imported from, or exported to, a foreign country."cralaw virtua1aw library

3. ID.; ID.; ID.; PROTECTION AFFORDED TO LOCAL INDUSTRIES. — The levying of customs duties on
imported goods may have in some measure the effect of protecting local industries — where such
local industries actually exist and are producing comparable goods. Simultaneously, however, the
very same customs duties inevitably have the effect of producing governmental revenues. Customs
duties like internal revenue taxes are rarely, if ever, designed to achieve one policy objective only.
Most commonly, customs duties, which constitute taxes in the sense of exactions the proceeds of
which become public funds — have either or both the generation of revenue and the regulation of
economic or social activity as their moving purposes and frequently, it is very difficult to say which, in
a particular instance, is the dominant or principal objective. In the instant case, since the Philippines
in fact produces ten (10) to fifteen percent (15%) of the crude oil consumed here, the imposition of
increased tariff rates and a special duty on imported crude oil and imported oil products may be seen
to have some "protective" impact upon indigenous oil production. For the effective price of imported
crude oil and oil products is increased. At the same time, it cannot be gainsaid that substantial
revenues for the government are raised by the imposition of such increased tariff rates or special
duty.

4. ID.; ID.; GENERAL STANDARDS SET FOR THE EXERCISE OF THE AUTHORITY DELEGATED TO THE
PRESIDENT. — Section 401 of the Tariff and Customs Code establishes general standards with which
the exercise of the authority delegated by that provision to the President must be consistent: that
authority must be exercised in "the interest of national economy, general welfare and/or national
security." Petitioner, however, insists that the "protection of local industries" is the only permissible
objective that can be secured by the exercise of that delegated authority, and that therefore
"protection of local industries" is the sum total or the alpha and omega of "the national economy,
general welfare and/or national security." We find it extremely difficult to take seriously such a
confined and closed view of the legislative standards and policies summed up in Section 401. We
believe, for instance, that the protection of consumers, who after all constitute the very great bulk of
our population, is at the very least as important a dimension of "the national economy, general
welfare and national security" as the protection of local industries. And so customs duties may be
reduced or even removed precisely for the purpose of protecting consumers from the high prices
and shoddy quality and inefficient service that tariff-protected and subsidized local manufacturers
may otherwise impose upon the community.

5. ID.; ID.; TARIFF RATES AND CUSTOM DUTIES; LEVIED UPON ARTICLES NOT PRODUCED IN THE
PHILIPPINES. — Tariff rates are commonly established and the corresponding customs duties levied
and collected upon articles and goods which are not found at all and not produced in the Philippines.
In such cases, customs duties may be seen to be imposed either for revenue purposes purely or
perhaps, in certain cases, to discourage any importation of the items involved. In either case, it is
clear that customs duties are levied and imposed entirely apart from whether or not there are any
competing local industries to protect.

6. CONSTITUTIONAL LAW; PRESIDENT; EXECUTIVE ORDERS NOS. 475 AND 478, CONSTITUTIONAL. —
Executive Orders Nos. 475 and 478 which may be conceded to be substantially moved by the desire
to generate additional public revenues, are not, for that reason alone, either constitutionally flawed,
or legally infirm under Section 401 of the Tariff and Customs Code. Petitioner has not successfully
overcome the presumptions of constitutionality and legality to which those Executive Orders are
entitled.

DECISION
FELICIANO, J.:

On 27 November 1990, the President issued Executive Order No. 438 which imposed, in addition to
any other duties, taxes and charges imposed by law on all articles imported into the Philippines, an
additional duty of five percent (5%) ad valorem. This additional duty was imposed across the board
on all imported articles, including crude oil and other oil products imported into the Philippines. This
additional duty was subsequently increased from five percent (5%) ad valorem to nine percent (9%)
ad valorem by the promulgation of Executive Order No. 443, dated 3 January 1991.

On 24 July 1991, the Department of Finance requested the Tariff Commission to initiate the process
required by the Tariff and Customs Code for the imposition of a specific levy on crude oil and other
petroleum products, covered by HS Heading Nos. 27.09, 27.10 and 27.11 of Section 104 of the Tariff
and Customs Code as amended. Accordingly, the Tariff Commission, following the procedure set forth
in Section 401 of the Tariff and Customs Code, scheduled a public hearing to give interested parties
an opportunity to be heard and to present evidence in support of their respective positions.

Meantime, Executive Order No. 475 was issued by the President on 15 August 1991 reducing the rate
of additional duty on all imported articles from nine percent (9%) to five percent (5%) ad valorem,
except in the cases of crude oil and other oil products which continued to be subject to the
additional duty of nine percent (9%) ad valorem.chanroblesvirtual|awlibrary

Upon completion of the public hearings, the Tariff Commission submitted to the President a "Report
on Special Duty on Crude Oil and Oil Products" dated 16 August 1991, for consideration and
appropriate action. Seven (7) days later, the President issued Executive Order No. 478, dated 23
August 1991, which levied (in addition to the aforementioned additional duty of nine percent (9%) ad
valorem and all other existing ad valorem duties) a special duty of P0.95 per liter or P151.05 per
barrel of imported crude oil and P1.00 per liter of imported oil products.chanrobles.com.ph : virtual
law library

In the present Petition for Certiorari, Prohibition and Mandamus, petitioner assails the validity of
Executive Orders Nos. 475 and 478. He argues that Executive Orders Nos. 475 and 478 are violative
of Section 24, Article VI of the 1987 Constitution which provides as follows:jgc:chanrobles.com.ph

"Section 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills
of local application, and private bills shall originate exclusively in the House of Representatives, but
the Senate may propose or concur with amendments."cralaw virtua1aw library
He contends that since the Constitution vests the authority to enact revenue bills in Congress, the
President may not assume such power of issuing Executive Orders Nos. 475 and 478 which are in the
nature of revenue-generating measures.

Petitioner further argues that Executive Orders Nos. 475 and 478 contravene Section 401 of the Tariff
and Customs Code, which Section authorizes the President, according to petitioner, to increase,
reduce or remove tariff duties or to impose additional duties only when necessary to protect local
industries or products but not for the purpose of raising additional revenue for the government.

Thus, petitioner questions first the constitutionality and second the legality of Executive Orders Nos.
475 and 478, and asks us to restrain the implementation of those Executive Orders. We will examine
these questions in that order.

Before doing so, however, the Court notes that the recent promulgation of Executive Order No. 517
did not render the instant Petition moot and academic. Executive Order No. 517 which is dated 30
April 1992 provides as follows:jgc:chanrobles.com.ph

"Section 1. Lifting of the Additional Duty. — The additional duty in the nature of ad valorem imposed
on all imported articles prescribed by the provisions of Executive Order No. 443, as amended, is
hereby lifted; Provided, however, that the selected articles covered by HS Heading Nos. 27.09 and
27.10 of Section 104 of the Tariff and Customs Code, as amended, subject of Annex `A’ hereof, shall
continue to be subject to the additional duty of nine (9%) percent ad valorem."cralaw virtua1aw
library

Under the above quoted provision, crude oil and other oil products continue to be subject to the
additional duty of nine percent (9%) ad valorem under Executive Order No. 475 and to the special
duty of P0.95 per liter of imported crude oil and P1.00 per liter of imported oil products under
Executive Order No. 478.chanrobles.com : virtual law library

Turning first to the question of constitutionality, under Section 24, Article VI of the Constitution, the
enactment of appropriation, revenue and tariff bills, like all other bills is, of course, within the
province of the Legislative rather than the Executive Department. It does not follow, however, that
therefore Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue
measures, are prohibited to the President, that they must be enacted instead by the Congress of the
Philippines. Section 28(2) of Article VI of the Constitution provides as follows:jgc:chanrobles.com.ph

"(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to
such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonage and
wharfage dues, and other duties or imposts within the framework of the national development
program of the Government." (Emphasis supplied)

There is thus explicit constitutional permission 1 to Congress to authorize the President "subject to
such limitations and restrictions as [Congress] may impose" to fix "within specific limits" "tariff rates .
. . and other duties or imposts . . . ."cralaw virtua1aw library

The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections
104 and 401, the pertinent provisions thereof. These are the provisions which the President explicitly
invoked in promulgating Executive Orders Nos. 475 and 478. Section 104 of the Tariff and Customs
Code provides in relevant part:jgc:chanrobles.com.ph

"Sec. 104. All tariff sections, chapters, headings and subheadings and the rates of import duty under
Section 104 of Presidential Decree No. 34 and all subsequent amendments issued under Executive
Orders and Presidential Decrees are hereby adopted and form part of this Code.

There shall be levied, collected, and paid upon all imported articles the rates of duty indicated in the
Section under this section except as otherwise specifically provided for in this Code: Provided, that,
the maximum rate shall not exceed one hundred per cent ad valorem.

The rates of duty herein provided or subsequently fixed pursuant to Section Four Hundred One of
this Code shall be subject to periodic investigation by the Tariff Commission and may be revised by
the President upon recommendation of the National Economic and Development Authority.

x x x

(Emphasis supplied)

Section 401 of the same Code needs to be quoted in full:jgc:chanrobles.com.ph

"Sec. 401. Flexible Clause. —

a. In the interest of national economy, general welfare and/or national security, and subject to the
limitations herein prescribed, the President, upon recommendation of the National Economic and
Development Authority (hereinafter referred to as NEDA), is hereby empowered: (1) to increase,
reduce or remove existing protective rates of import duty (including any necessary change in
classification). The existing rates may be increased or decreased but in no case shall the reduced rate
of import duty be lower than the basic rate of ten (10) per cent ad valorem, nor shall the increased
rate of import duty be higher than a maximum of one hundred (100) per cent ad valorem; (2) to
establish import quota or to ban imports of any commodity, as may be necessary; and (3) to impose
an additional duty on all imports not exceeding ten (10) per cent ad valorem whenever necessary;
Provided, That upon periodic investigations by the Tariff Commission and recommendation of the
NEDA, the President may cause a gradual reduction of protection levels granted in Section One
hundred and four of this Code, including those subsequently granted pursuant to this
section.cralawnad

b. Before any recommendation is submitted to the President by the NEDA pursuant to the provisions
of this section, except in the imposition of an additional duty not exceeding ten (10) per cent ad
valorem, the Commission shall conduct an investigation in the course of which they shall hold public
hearings wherein interested parties shall be afforded reasonable opportunity to be present, produce
evidence and to be heard. The Commission shall also hear the views and recommendations of any
government office, agency or instrumentality concerned. The Commission shall submit their findings
and recommendations to the NEDA within thirty (30) days after the termination of the public
hearings.

c. The power of the President to increase or decrease rates of import duty within the limits fixed in
subsection `a’ shall include the authority to modify the form of duty. In modifying the form of duty,
the corresponding ad valorem or specific equivalents of the duty with respect to imports from the
principal competing foreign country for the most recent representative period shall be used as bases.

d. The Commissioner of Customs shall regularly furnish the Commission a copy of all customs import
entries as filed in the Bureau of Customs. The Commission or its duly authorized representatives shall
have access to, and the right to copy all liquidated customs import entries and other documents
appended thereto as finally filed in the Commission on Audit.

e. The NEDA shall promulgate rules and regulations necessary to carry out the provisions of this
section.

f. Any Order issued by the President pursuant to the provisions of this section shall take effect thirty
(30) days after promulgation, except in the imposition of additional duty not exceeding ten (10) per
cent ad valorem which shall take effect at the discretion of the President." (Underscoring supplied)

Petitioner, however, seeks to avoid the thrust of the delegated authorizations found in Sections 104
and 401 of the Tariff and Customs Code, by contending that the President is authorized to act under
the Tariff and Customs Code only "to protect local industries and products for the sake of the
national economy, general welfare and/or national security." 2 He goes on to claim
that:jgc:chanrobles.com.ph

"E.O. Nos. 478 and 475 having nothing to do whatsoever with the protection of local industries and
products for the sake of national economy, general welfare and/or national security. On the contrary,
they work in reverse, especially as to crude oil, an essential product which we do not have to protect,
since we produce only minimal quantities and have to import the rest of what we need.

These Executive Orders are avowedly solely to enable the government to raise government finances,
contrary to Sections 24 and 28 (2) of Article VI of the Constitution, as well as to Section 401 of the
Tariff and Customs Code." 3 (Emphasis in the original)

The Court is not persuaded. In the first place, there is nothing in the language of either Section 104
or of 401 of the Tariff and Customs Code that suggest such a sharp and absolute limitation of
authority. The entire contention of petitioner is anchored on just two (2) words, one found in Section
401 (a) (1): "existing protective rates of import duty," and the second in the proviso found at the end
of Section 401 (a):" protection levels granted in Section 104 of this Code . . . ." We believe that the
words "protective" and "protection" are simply not enough to support the very broad and
encompassing limitation which petitioner seeks to rest on those two (2) words.

In the second place, petitioner’s singular theory collides with a very practical fact of which this Court
may take judicial notice — that the Bureau of Customs which administers the Tariff and Customs
Code, is one of the two (2) principal traditional generators or producers of governmental revenue,
the other being the Bureau of Internal Revenue. (There is a third agency, non-traditional in character,
that generates lower but still comparable levels of revenue for the government — The Philippine
Amusement and Games Corporation [PAGCOR].)

In the third place, customs duties which are assessed at the prescribed tariff rates are very much like
taxes which are frequently imposed for both revenue-raising and for regulatory purposes. 4 Thus, it
has been held that "customs duties" is "the name given to taxes on the importation and exportation
of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign
country." 5 The levying of customs duties on imported goods may have in some measure the effect of
protecting local industries — where such local industries actually exist and are producing comparable
goods. Simultaneously, however, the very same customs duties inevitably have the effect of
producing governmental revenues. Customs duties like internal revenue taxes are rarely, if ever,
designed to achieve one policy objective only. Most commonly, customs duties, which constitute
taxes in the sense of exactions the proceeds of which become public funds 6 — have either or both
the generation of revenue and the regulation of economic or social activity as their moving purposes
and frequently, it is very difficult to say which, in a particular instance, is the dominant or principal
objective. In the instant case, since the Philippines in fact produces ten (10) to fifteen percent (15%)
of the crude oil consumed here, the imposition of increased tariff rates and a special duty on
imported crude oil and imported oil products may be seen to have some "protective" impact upon
indigenous oil production. For the effective price of imported crude oil and oil products is increased.
At the same time, it cannot be gainsaid that substantial revenues for the government are raised by
the imposition of such increased tariff rates or special duty.

In the fourth place, petitioner’s concept which he urges us to build into our constitutional and
customs law, is a stiflingly narrow one. Section 401 of the Tariff and Customs Code establishes
general standards with which the exercise of the authority delegated by that provision to the
President must be consistent: that authority must be exercised in "the interest of national economy,
general welfare and/or national security." Petitioner, however, insists that the "protection of local
industries" is the only permissible objective that can be secured by the exercise of that delegated
authority, and that therefore "protection of local industries" is the sum total or the alpha and the
omega of "the national economy, general welfare and/or national security." We find it extremely
difficult to take seriously such a confined and closed view of the legislative standards and policies
summed up in Section 401. We believe, for instance, that the protection of consumers, who after all
constitute the very great bulk of our population, is at the very least as important a dimension of "the
national economy, general welfare and national security" as the protection of local industries. And so
customs duties may be reduced or even removed precisely for the purpose of protecting consumers
from the high prices and shoddy quality and inefficient service that tariff-protected and subsidized
local manufacturers may otherwise impose upon the community.

It seems also important to note that tariff rates are commonly established and the corresponding
customs duties levied and collected upon articles and goods which are not found at all and not
produced in the Philippines. The Tariff and Customs Code is replete with such articles and
commodities: among the more interesting examples are ivory (Chapter 5, 5.10); castoreum or musk
taken from the beaver (Chapter 5, 5.14); olives (Chapter 7, Notes); truffles or European fungi growing
under the soil on tree roots (Chapter 7, Notes); dates (Chapter 8, 8.01); figs (Chapter 8, 8.03); caviar
(Chapter 16, 16.01); aircraft (Chapter 88, 88.01); special diagnostic instruments and apparatus for
human medicine and surgery (Chapter 90, Notes); X-ray generators; X-ray tubes; X-ray screens, etc
(Chapter 90, 90.20); etc. In such cases, customs duties may be seen to be imposed either for revenue
purposes purely or perhaps, in certain cases, to discourage any importation of the items involved. In
either case, it is clear that customs duties are levied and imposed entirely apart from whether or not
there are any competing local industries to protect.

Accordingly, we believe and so hold that Executive Orders Nos. 475 and 478 which may be conceded
to be substantially moved by the desire to generate additional public revenues, are not, for that
reason alone, either constitutionally flawed, or legally infirm under Section 401 of the Tariff and
Customs Code. Petitioner has not successfully overcome the presumptions of constitutionality and
legality to which those Executive Orders are entitled. 7

The conclusion we have reached above renders it unnecessary to deal with petitioner’s additional
contention that, should Executive Orders Nos. 475 and 478 be declared unconstitutional and illegal,
there should be a roll back of prices of petroleum products equivalent to the "resulting excess money
not be needed to adequately maintain the Oil Price Stabilization Fund (OPSF)." 8
WHEREFORE, premises considered, the Petition for Certiorari, Prohibition and Mandamus is hereby
DISMISSED for lack of merit. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Paras, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado, Davide, Jr.,
Romero, Nocon and Bellosillo, JJ., concur.

Endnotes:

1. This provision also existed in substantially identical terms in the 1973 Constitution (Article VIII,
Section 17 [2]), and the 1935 Constitution (Article VI, Section 22 [2]).

5. U.S. v. Sischo, 262 Fed. 1001 (1919); Flint v. Stone Tracey Company, 220 US 107 (1910); Keller-
Dorian Corp. v. Commissioner of Internal Revenue, 153 F 2d 1006 (1946). The close affinity of
"customs duties" and "taxes" was stressed almost a century ago in the following excerpt from Pollock
v. Farmers’ Loan and Trust Company (158 US 601; 39 Law Ed. 1108 [1895]):jgc:chanrobles.com.ph

"Cooley, on Taxation, p. 3, says that the word `duty’ ordinarily `means an indirect tax, imposed on the
importation, exportation, or consumption of goods;’ having `a broader meaning than customs, which
is a duty imposed on imports or exports;’ that `the term impost also signifies any tax, tribute or duty,
but it is seldom applied to any but the indirect taxes. An excise duty is an inland impost, levied upon
articles of manufacture or sale, and also upon licenses to pursue certain trades or to deal in certain
commodities." (Underscoring partly in the original and partly supplied)

7. National Waterworks and Sewerage Authority v. Reyes, 22 SCRA 905 (1968); See also: Victoriano v.
Elizalde Rope Workers’ Union, 59 SCRA 54 (1974); Ermita-Malate Hotel and Motel Operators
Association Inc. v. City Mayor of Manila, 20 SCRA 849 (1967).

G.R. No. L-22814 August 28, 1968

PEPSI-COLA BOTTLING CO. OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.

CITY OF BUTUAN, MEMBERS OF THE MUNICIPAL BOARD,

THE CITY MAYOR and THE CITY TREASURER, all of the CITY OF BUTUAN, defendants-appellees.

Sabido, Sabido and Associates for plaintiff-appellant.

The City Attorney of Butuan City for defendants-appellees.

CONCEPCION, C.J.:

Direct appeal to this Court, from a decision of the Court of First Instance of Agusan, dismissing
plaintiff's complaint, with costs.

Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and
principal place of business in Quezon City. The defendants are the City of Butuan, its City Mayor, the
members of its municipal board and its City Treasurer. Plaintiff — seeks to recover the sums paid by it
to the City of Butuan — hereinafter referred to as the City and collected by the latter, pursuant to its
Municipal Ordinance No. 110, as amended by Municipal Ordinance No. 122, both series of 1960,
which plaintiff assails as null and void, and to prevent the enforcement thereof. Both parties
submitted the case for decision in the lower court upon a stipulation to the effect:

1. That plaintiff's warehouse in the City of Butuan serves as a storage for its products the "Pepsi-
Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province
of Agusan. These "Pepsi-Cola Cola" soft drinks are bottled in Cebu City and shipped to the Butuan
City warehouse of plaintiff for distribution and sale in the City of Butuan and all municipalities of
Agusan. .

2. That on August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently
amended by Ordinance No. 122 and effective November 28, 1960. A copy of Ordinance No. 110,
Series of 1960 and Ordinance No. 122 are incorporated herein as Exhibits "A" and "B", respectively.

3. That Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per
case of 24 bottles of Pepsi-Cola and the plaintiff paid under protest the amount of P4,926.63 from
August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961.

4. That the plaintiff filed the foregoing complaint for the recovery of the total amount of P14,177.03
paid under protest and those that if may later on pay until the termination of this case on the ground
that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive
and that it is unconstitutional.

5. That pursuant to Ordinance No. 110 as amended, the City Treasurer of Butuan City, has prepared a
form to be accomplished by the plaintiff for the computation of the tax. A copy of the form is
enclosed herewith as Exhibit "C".
6. That the Profit and Loss Statement of the plaintiff for the period from January 1, 1961 to July 30,
1961 of its warehouse in Butuan City is incorporated herein as Exhibits "D" to "D-1" to "D-5". In this
Profit and Loss Statement, the defendants claim that the plaintiff is not entitled to a depreciation of
P3,052.63 but only P1,202.55 in which case the profit of plaintiff will be increased from P1,254.44 to
P3,104.52. The plaintiff differs only on the claim of depreciation which the company claims to be
P3,052.62. This is in accordance with the findings of the representative of the undersigned City
Attorney who verified the records of the plaintiff.

7. That beginning November 21, 1960, the price of Pepsi-Cola per case of 24 bottles was increased to
P1.92 which price is uniform throughout the Philippines. Said increase was made due to the increase
in the production cost of its manufacture.

8. That the parties reserve the right to submit arguments on the constitutionality and illegality of
Ordinance No. 110, as amended of the City of Butuan in their respective memoranda.

xxx xxx x x x1äwphï1.ñët

Section 1 of said Ordinance No. 110, as amended, states what products are "liquors", within the
purview thereof. Section 2 provides for the payment by "any agent and/or consignee" of any dealer
"engaged in selling liquors, imported or local, in the City," of taxes at specified rates. Section 3
prescribes a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages therein
named, and "all other soft drinks or carbonated drinks." Section 3-A, defines the meaning of the
term "consignee or agent" for purposes of the ordinance. Section 4 provides that said taxes "shall be
paid at the end of every calendar month." Pursuant to Section 5, the taxes "shall be based and
computed from the cargo manifest or bill of lading or any other record showing the number of cases
of soft drinks, liquors or all other soft drinks or carbonated drinks received within the month."
Sections 6, 7 and 8 specify the surcharge to be added for failure to pay the taxes within the period
prescribed and the penalties imposable for "deliberate and willful refusal to pay the tax mentioned in
Sections 2 and 3" or for failure "to furnish the office of the City Treasurer a copy of the bill of lading
or cargo manifest or record of soft drinks, liquors or carbonated drinks for sale in the City." Section 9
makes the ordinance applicable to soft drinks, liquors or carbonated drinks "received outside" but
"sold within" the City. Section 10 of the ordinance provides that the revenue derived therefrom
"shall be alloted as follows: 40% for Roads and Bridges Fund; 40% for the General Fund and 20% for
the School Fund."

Plaintiff maintains that the disputed ordinance is null and void because: (1) it partakes of the nature
of an import tax; (2) it amounts to double taxation; (3) it is excessive, oppressive and confiscatory; (4)
it is highly unjust and discriminatory; and (5) section 2 of Republic Act No. 2264, upon the authority
of which it was enacted, is an unconstitutional delegation of legislative powers.
The second and last objections are manifestly devoid of merit. Indeed — independently of whether
or not the tax in question, when considered in relation to the sales tax prescribed by Acts of
Congress, amounts to double taxation, on which we need not and do not express any opinion -
double taxation, in general, is not forbidden by our fundamental law. We have not adopted, as part
thereof, the injunction against double taxation found in the Constitution of the United States and of
some States of the Union.1 Then, again, the general principle against delegation of legislative
powers, in consequence of the theory of separation of powers2 is subject to one well-established
exception, namely: legislative powers may be delegated to local governments — to which said theory
does not apply3 — in respect of matters of local concern.

The third objection is, likewise, untenable. The tax of "P0.10 per case of 24 bottles," of soft drinks or
carbonated drinks — in the production and sale of which plaintiff is engaged — or less than P0.0042
per bottle, is manifestly too small to be excessive, oppressive, or confiscatory.

The first and the fourth objections merit, however, serious consideration. In this connection, it is
noteworthy that the tax prescribed in section 3 of Ordinance No. 110, as originally approved, was
imposed upon dealers "engaged in selling" soft drinks or carbonated drinks. Thus, it would seem that
the intent was then to levy a tax upon the sale of said merchandise. As amended by Ordinance No.
122, the tax is, however, imposed only upon "any agent and/or consignee of any person, association,
partnership, company or corporation engaged in selling ... soft drinks or carbonated drinks." And,
pursuant to section 3-A, which was inserted by said Ordinance No. 122:

... — Definition of the Term Consignee or Agent. — For purposes of this Ordinance, a consignee of
agent shall mean any person, association, partnership, company or corporation who acts in the place
of another by authority from him or one entrusted with the business of another or to whom is
consigned or shipped no less than 1,000 cases of hard liquors or soft drinks every month for resale,
either retail or wholesale.

As a consequence, merchants engaged in the sale of soft drink or carbonated drinks, are not subject
to the tax, unless they are agents and/or consignees of another dealer, who, in the very nature of
things, must be one engaged in business outside the City. Besides, the tax would not be applicable to
such agent and/or consignee, if less than 1,000 cases of soft drinks are consigned or shipped to him
every month. When we consider, also, that the tax "shall be based and computed from the cargo
manifest or bill of lading ... showing the number of cases" — not sold — but "received" by the
taxpayer, the intention to limit the application of the ordinance to soft drinks and carbonated drinks
brought into the City from outside thereof becomes apparent. Viewed from this angle, the tax
partakes of the nature of an import duty, which is beyond defendant's authority to impose by
express provision of law.4

Even however, if the burden in question were regarded as a tax on the sale of said beverages, it
would still be invalid, as discriminatory, and hence, violative of the uniformity required by the
Constitution and the law therefor, since only sales by "agents or consignees" of outside dealers
would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants,
regardless of the volume of their sales, and even if the same exceeded those made by said agents or
consignees of producers or merchants established outside the City of Butuan, would be exempt from
the disputed tax.

It is true that the uniformity essential to the valid exercise of the power of taxation does not require
identity or equality under all circumstances, or negate the authority to classify the objects of
taxation.5 The classification made in the exercise of this authority, to be valid, must, however, be
reasonable6 and this requirement is not deemed satisfied unless: (1) it is based upon substantial
distinctions which make real differences; (2) these are germane to the purpose of the legislation or
ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions
substantially identical to those of the present; and (4) the classification applies equally all those who
belong to the same class.7

These conditions are not fully met by the ordinance in question.8 Indeed, if its purpose were merely
to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales
thereof by sealers other than agents or consignees of producers or merchants established outside
the City of Butuan should be exempt from the tax.

WHEREFORE, the decision appealed from is hereby reversed, and another one shall be entered
annulling Ordinance No. 110, as amended by Ordinance No. 122, and sentencing the City of Butuan
to refund to plaintiff herein the amounts collected from and paid under protest by the latter, with
interest thereon at the legal rate from the date of the promulgation of this decision, in addition to
the costs, and defendants herein are, accordingly, restrained and prohibited permanently from
enforcing said Ordinance, as amended. It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
1äwphï1.ñët

Footnotes

1De Villata v. Stanley, 32 Phil. 541; City of Manila v. Inter-Island Gas Service, 99 Phil. 847, 854; Syjuco
v. Municipality of Parañaque, L-11265, Nov. 27, 1959; City of Bacolod v. Gruet, L-18290, Jan. 31, 1963.

2U.S. v. Bull, 15 Phil. 7, 27; Kilbourn v. Thompson, 103 U.S. 168, 26 L. ed. 377.

3State v. City of Mankato, 136 N.W. 264; People v. Provinces, 34 Cal. 520; Stoutenburgh v. Hennick
129 U.S. 141, 32 L. ed. 637.
4Section 2(i), Republic Act No. 2264; Panaligan v. City of Tacloban, L- 9319, Sept. 27, 1957, 102 Phil.
1162-1163; East Asiatic Co. v. City of Davao, L-16253, August 21, 1962. .

5Tan Tim Kee v. Court of Tax Appeals, L-18080, April 22, 1963; Nin Bay Mining Co. v. Municipality of
Roxas, L-20125, July 20, 1965. .

6Felwa v. Salas, L-26511, October 29, 1966; Aleja v. GSIS, L-18529, February 26, 1965; People v.
Solon, L-14864, November 23, 1960; People v. Cayat, 68 Phil. 12; People v. Vera, 65 Phil. 56; Laurel v.
Misa, 42 O.G. 2847.

7Commissioner of Int. Rev. v. Botelho Shipping Corp., L-21633-34, June 29, 1967; Ermita-Malate
Hotel & Motel Operators Ass'n. v. City Mayor, L-24693, October 23, 1967; Rafael v. Embroidery &
Apparel Control & Inspection Board, L-19978, September 29, 1967; Meralco v. Public Utilities
Employee Ass'n., 79 Phil. 409. .

8Viray v. City of Caloocan, L-23118, July 26, 1967; PHILCONSA v. Gimenez, L-23326, December 18,
1965; Ormoc Sugar Co. v. Treasurer of Ormoc City, L-23794, February 17, 1968.

G.R. No. 150947 July 15, 2003

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

MICHEL J. LHUILLIER PAWNSHOP, INC., respondent.

DAVIDE, JR., C.J.:

Are pawnshops included in the term lending investors for the purpose of imposing the 5%
percentage tax under then Section 116 of the National Internal Revenue Code (NIRC) of 1977, as
amended by Executive Order No. 273?

Petitioner Commissioner of Internal Revenue (CIR) filed the instant petition for review to set aside
the decision1 of 20 November 2001 of the Court of Appeals in CA G.R. SP No. 62463, which affirmed
the decision of 13 December 2000 of the Court of Tax Appeals (CTA) in CTA Case No. 5690 cancelling
the assessment issued against respondent Michel J. Lhuillier Pawnshop, Inc. (hereafter Lhuillier) in
the amount of P3,360,335.11 as deficiency percentage tax for 1994, inclusive of interest and
surcharges.

The facts are as follows:

On 11 March 1991, CIR Jose U. Ong issued Revenue Memorandum Order (RMO) No. 15-91 imposing
a 5% lending investor’s tax on pawnshops; thus:

A restudy of P.D. [No.] 114 shows that the principal activity of pawnshops is lending money at
interest and incidentally accepting a "pawn" of personal property delivered by the pawner to the
pawnee as security for the loan.(Sec. 3, Ibid). Clearly, this makes pawnshop business akin to lending
investor’s business activity which is broad enough to encompass the business of lending money at
interest by any person whether natural or juridical. Such being the case, pawnshops shall be subject
to the 5% lending investor’s tax based on their gross income pursuant to Section 116 of the Tax Code,
as amended.

This RMO was clarified by Revenue Memorandum Circular (RMC) No. 43-91 on 27 May 1991, which
reads:

1. RM[O] 15-91 dated March 11, 1991.

This Circular subjects to the 5% lending investor’s tax the gross income of pawnshops pursuant to
Section 116 of the Tax Code, and it thus revokes BIR Ruling No[]. 6-90, and VAT Ruling Nos. 22-90 and
67-90. In order to have a uniform cut-off date, avoid unfairness on the part of tax- payers if they are
required to pay the tax on past transactions, and so as to give meaning to the express provisions of
Section 246 of the Tax Code, pawnshop owners or operators shall become liable to the lending
investor’s tax on their gross income beginning January 1, 1991. Since the deadline for the filing of
percentage tax return (BIR Form No. 2529A-0) and the payment of the tax on lending investors
covering the first calendar quarter of 1991 has already lapsed, taxpayers are given up to June 30,
1991 within which to pay the said tax without penalty. If the tax is paid after June 30, 1991, the
corresponding penalties shall be assessed and computed from April 21, 1991.

Since pawnshops are considered as lending investors effective January 1, 1991, they also become
subject to documentary stamp taxes prescribed in Title VII of the Tax Code. BIR Ruling No. 325-88
dated July 13, 1988 is hereby revoked.

On 11 September 1997, pursuant to these issuances, the Bureau of Internal Revenue (BIR) issued
Assessment Notice No. 81-PT-13-94-97-9-118 against Lhuillier demanding payment of deficiency
percentage tax in the sum of P3,360,335.11 for 1994 inclusive of interest and surcharges.
On 3 October 1997, Lhuillier filed an administrative protest with the Office of the Revenue Regional
Director contending that (1) neither the Tax Code nor the VAT Law expressly imposes 5% percentage
tax on the gross income of pawnshops; (2) pawnshops are different from lending investors, which are
subject to the 5% percentage tax under the specific provision of the Tax Code; (3) RMO No. 15-91 is
not implementing any provision of the Internal Revenue laws but is a new and additional tax
measure on pawnshops, which only Congress could enact; (4) RMO No. 15-91 impliedly amends the
Tax Code and is therefore taxation by implication, which is proscribed by law; and (5) RMO No. 15-91
is a "class legislation" because it singles out pawnshops among other lending and financial
operations.

On 12 October 1998, Deputy BIR Commissioner Romeo S. Panganiban issued Warrant of Distraint
and/or Levy No. 81-043-98 against Lhuillier’s property for the enforcement and payment of the
assessed percentage tax.

Its protest having been unacted upon, Lhuillier, in a letter dated 3 March 1998, elevated the matter
to the CIR. Still, the protest was not acted upon by the CIR. Thus, on 11 November 1998, Lhuillier
filed a "Notice and Memorandum on Appeal" with the Court of Tax Appeals invoking Section 228 of
Republic Act No. 8424, otherwise known as the Tax Reform Act of 1997, which provides:

Section 228. Protesting of Assessment. …

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days
from submission of documents, the taxpayer adversely affected by the decision or inaction may
appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from
the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.

The case was docketed as CTA Case No. 5690.

On 19 November 1998, the CIR filed with the CTA a motion to dismiss Lhuillier’s petition on the
ground that it did not state a cause of action, as there was no action yet on the protest.

Lhuillier opposed the motion to dismiss and moved for the issuance of a writ of preliminary
injunction praying that the BIR be enjoined from enforcing the warrant of distraint and levy.

For Lhuillier’s failure to appear on the scheduled date of hearing, the CTA denied the motion for the
issuance of a writ of preliminary injunction. However, on Lhuillier’s motion for reconsideration, said
denial was set aside and a hearing on the motion for the issuance of a writ of preliminary injunction
was set.

On 30 June 1999, after due hearing, the CTA denied the CIR’s motion to dismiss and granted
Lhuillier’s motion for the issuance of a writ of preliminary injunction.

On 13 December 2000, the CTA rendered a decision declaring (1) RMO No. 15-91 and RMC No. 43-91
null and void insofar as they classify pawnshops as lending investors subject to 5% percentage tax;
and (2) Assessment Notice No. 81-PT-13-94-97-9-118 as cancelled, withdrawn, and with no force and
effect.2

Dissatisfied, the CIR filed a petition for review with the Court of Appeals praying that the aforesaid
decision be reversed and set aside and another one be rendered ordering Lhuillier to pay the 5%
lending investor’s tax for 1994 with interests and surcharges.

Upon due consideration of the issues presented by the parties in their respective memoranda, the
Court of Appeals affirmed the CTA decision on 20 November 2001.

The CIR is now before this Court via this petition for review on certiorari, alleging that the Court of
Appeals erred in holding that pawnshops are not subject to the 5% lending investor’s tax. He invokes
then Section 116 of the Tax Code, which imposed a 5% percentage tax on lending investors. He
argues that the legal definition of lending investors provided in Section 157 (u) of the Tax Code is
broad enough to include pawnshop operators. Section 3 of Presidential Decree No. 114 states that
the principal business activity of a pawnshop is lending money; thus, a pawnshop easily falls under
the legal definition of lending investors. RMO No. 15-91 and RMC No. 43-91, which subject
pawnshops to the 5% lending investor’s tax based on their gross income, are valid. Being mere
interpretations of the NIRC, they need not be published. Lastly, the CIR invokes the case of
Commissioner of Internal Revenue vs. Agencia Exquisite of Bohol, Inc.,3 where the Court of Appeals’
Special Fourteenth Division ruled that a pawnshop is subject to the 5% lending investor’s tax.4

Lhuillier, on the other hand, maintains that before and after the amendment of the Tax Code by E.O.
No. 273, which took effect on 1 January 1988, pawnshops and lending investors were subjected to
different tax treatments. Pawnshops were required to pay an annual fixed tax of only P1,000, while
lending investors were subject to a 5% percentage tax on their gross income in addition to their fixed
annual taxes. Accordingly, during the period from April 1982 up to December 1990, the CIR
consistently ruled that a pawnshop is not a lending investor and should not therefore be required to
pay percentage tax on its gross income.

Lhuillier likewise asserts that RMO No. 15-91 and RMC No. 43-91 are not implementing rules but are
new and additional tax measures, which only Congress is empowered to enact. Besides, they are
invalid because they have never been published in the Official Gazette or any newspaper of general
circulation.

Lhuillier further points out that pawnshops are strictly regulated by the Central Bank pursuant to P.D.
No. 114, otherwise known as The Pawnshop Regulation Act. On the other hand, there is no special
law governing lending investors. Due to the wide differences between the two, pawnshops had never
been considered as lending investors for tax purposes. In fact, in 1994, Congress passed House Bill
No. 11197,5 which attempted to amend Section 116 of the NIRC, as amended, to include owners of
pawnshops as among those subject to percentage tax. However, the Senate Bill and the subsequent
Bicameral Committee version, which eventually became the E-VAT Law, did not incorporate such
proposed amendment.

Lastly, Lhuillier argues that following the maxim in statutory construction "expressio unius est
exclusio alterius," it was not the intention of the Legislature to impose percentage taxes on
pawnshops because if it were so, pawnshops would have been included as among the businesses
subject to the said tax. Inasmuch as revenue laws impose special burdens upon taxpayers, the
enforcement of such laws should not be extended by implication beyond the clear import of the
language used.

We are therefore called upon to resolve the issue of whether pawnshops are subject to the 5%
lending investor’s tax. Corollary to this issue are the following questions: (1) Are RMO No. 15-91 and
RMC No. 43-91 valid? (2) Were they issued to implement Section 116 of the NIRC of 1977, as
amended? (3) Are pawnshops considered "lending investors" for the purpose of the imposition of
the lending investor’s tax? (4) Is publication necessary for the validity of RMO No. 15-91 and RMC
No. 43-91.

RMO No. 15-91 and RMC No. 43-91 were issued in accordance with the power of the CIR to make
rulings and opinions in connection with the implementation of internal revenue laws, which was
bestowed by then Section 245 of the NIRC of 1977, as amended by E.O. No. 273.6 Such power of the
CIR cannot be controverted. However, the CIR cannot, in the exercise of such power, issue
administrative rulings or circulars not consistent with the law sought to be applied. Indeed,
administrative issuances must not override, supplant or modify the law, but must remain consistent
with the law they intend to carry out. Only Congress can repeal or amend the law.7

The CIR argues that both issuances are mere rules and regulations implementing then Section 116 of
the NIRC, as amended, which provided:

SEC. 116. Percentage tax on dealers in securities; lending investors. - Dealers in securities and lending
investors shall pay a tax equivalent to six (6) per centum of their gross income. Lending investors
shall pay a tax equivalent to five (5%) percent of their gross income.
It is clear from the aforequoted provision that pawnshops are not specifically included. Thus, the
question is whether pawnshops are considered lending investors for the purpose of imposing
percentage tax.

We rule in the negative.

Incidentally, we observe that both parties, as well as the Court of Tax Appeals and the Court of
Appeals, refer to the National Internal Revenue Code as the Tax Code. They did not specify whether
the provisions they cited were taken from the NIRC of 1977, as amended, or the NIRC of 1986, as
amended. For clarity, it must be pointed out that the NIRC of 1977 as renumbered and rearranged by
E.O. No. 273 is a later law than the NIRC of 1986, as amended by P.D. Nos. 1991, 1994, 2006 and
2031. The citation of the specific Code is important for us to determine the intent of the law.

Under Section 157(u) of the NIRC of 1986, as amended, the term lending investor includes "all
persons who make a practice of lending money for themselves or others at interest." A pawnshop, on
the other hand, is defined under Section 3 of P.D. No. 114 as "a person or entity engaged in the
business of lending money on personal property delivered as security for loans and shall be
synonymous, and may be used interchangeably, with pawnbroker or pawn brokerage."

While it is true that pawnshops are engaged in the business of lending money, they are not
considered "lending investors" for the purpose of imposing the 5% percentage taxes for the following
reasons:

First. Under Section 192, paragraph 3, sub-paragraphs (dd) and (ff), of the NIRC of 1977, prior to its
amendment by E.O. No. 273, as well as Section 161, paragraph 2, sub-paragraphs (dd) and (ff), of the
NIRC of 1986, pawnshops and lending investors were subjected to different tax treatments; thus:

(3) Other Fixed Taxes. – The following fixed taxes shall be collected as follows, the amount stated
being for the whole year, when not otherwise specified:

….

(dd) Lending investors –

1. In chartered cities and first class municipalities, one thousand pesos;

2. In second and third class municipalities, five hundred pesos;

3. In fourth and fifth class municipalities and municipal districts, two hundred fifty pesos: Provided,
That lending investors who do business as such in more than one province shall pay a tax of one
thousand pesos.

….

(ff) Pawnshops, one thousand pesos (underscoring ours)

Second. Congress never intended pawnshops to be treated in the same way as lending investors.
Section 116 of the NIRC of 1977, as renumbered and rearranged by E.O. No. 273, was basically lifted
from Section 1758 of the NIRC of 1986, which treated both tax subjects differently. Section 175 of the
latter Code read as follows:

Sec. 175. Percentage tax on dealers in securities, lending investors. -- Dealers in securities shall pay a
tax equivalent to six (6%) percent of their gross income. Lending investors shall pay a tax equivalent
to five (5%) percent of their gross income. (As amended by P.D. No. 1739, P.D. No. 1959 and P.D. No.
1994).

We note that the definition of lending investors found in Section 157 (u) of the NIRC of 1986 is not
found in the NIRC of 1977, as amended by E.O. No. 273, where Section 116 invoked by the CIR is
found. However, as emphasized earlier, both the NIRC of 1986 and the NIRC of 1977 dealt with
pawnshops and lending investors differently. Verily then, it was the intent of Congress to deal with
both subjects differently. Hence, we must likewise interpret the statute to conform with such
legislative intent.

Third. Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects to percentage tax
dealers in securities and lending investors only. There is no mention of pawnshops. Under the maxim
expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing
not mentioned. Thus, if a statute enumerates the things upon which it is to operate, everything else
must necessarily and by implication be excluded from its operation and effect.9 This rule, as a guide
to probable legislative intent, is based upon the rules of logic and natural workings of the human
mind.10

Fourth. The BIR had ruled several times prior to the issuance of RMO No. 15-91 and RMC 43-91 that
pawnshops were not subject to the 5% percentage tax imposed by Section 116 of the NIRC of 1977,
as amended by E.O. No. 273. This was even admitted by the CIR in RMO No. 15-91 itself. Considering
that Section 116 of the NIRC of 1977, as amended, was practically lifted from Section 175 of the NIRC
of 1986, as amended, and there being no change in the law, the interpretation thereof should not
have been altered.

It may not be amiss to state that, as pointed out by the respondent, pawnshops was sought to be
included as among those subject to 5% percentage tax by House Bill No. 11197 in 1994. Section 13
thereof reads:

Section 13. Section 116 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:

"SEC. 116. Percentage tax on dealers in securities; lending investors; OWNERS OF PAWNSHOPS;
FOREIGN CURRENCY DEALERS AND/OR MONEY CHANGERS. – Dealers in securities shall pay a tax
equivalent to Six (6%) per centum of their gross income. Lending investors, OWNERS OF PAWNSHOPS
AND FOREIGN CURRENCY DEALERS AND/OR MONEY CHANGERS shall pay a tax equivalent to Five
(5%) percent of their gross income."

If pawnshops were covered within the term lending investor, there would have been no need to
introduce such amendment to include owners of pawnshops. At any rate, such proposed
amendment was not adopted. Instead, the approved bill which became R.A. No. 771611 repealed
Section 116 of NIRC of 1977, as amended, which was the basis of RMO No. 15-91 and RMC No. 43-
91; thus:

SEC. 20. Repealing Clauses. -- The provisions of any special law relative to the rate of franchise taxes
are hereby expressly repealed. Sections 113, 114 and 116 of the National Internal Revenue Code are
hereby repealed.

Section 21 of the same law provides that the law shall take effect fifteen (15) days after its complete
publication in the Official Gazette or in at least two (2) national newspapers of general circulation
whichever comes earlier. R.A. No. 7716 was published in the Official Gazette on 1 August 199412; in
the Journal and Malaya newspapers, on 12 May 1994; and in the Manila Bulletin, on 5 June 1994.
Thus, R.A. No. 7716 is deemed effective on 27 May 1994.

Since Section 116 of the NIRC of 1977, which breathed life on the questioned administrative
issuances, had already been repealed, RMO 15-91 and RMC 43-91, which depended upon it, are
deemed automatically repealed. Hence, even granting that pawnshops are included within the term
lending investors, the assessment from 27 May 1994 onward would have no leg to stand on.

Adding to the invalidity of the RMC No. 43-91 and RMO No. 15-91 is the absence of publication.
While the rule-making authority of the CIR is not doubted, like any other government agency, the CIR
may not disregard legal requirements or applicable principles in the exercise of quasi-legislative
powers.

Let us first distinguish between two kinds of administrative issuances: the legislative rule and the
interpretative rule. A legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof. An interpretative rule, on the other
hand, is designed to provide guidelines to the law which the administrative agency is in charge of
enforcing.13

In Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance Secretary,14 this
Tribunal ruled:

… In the same way that laws must have the benefit of public hearing, it is generally required that
before a legislative rule is adopted there must be hearing. In this connection, the Administrative
Code of 1987 provides:

Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish
or circulate notices of proposed rules and afford interested parties the opportunity to submit their
views prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been
published in a newspaper of general circulation at least two weeks before the first hearing thereon.

(3) In case of opposition, the rules on contested cases shall be observed.

In addition, such rule must be published.

When an administrative rule is merely interpretative in nature, its applicability needs nothing further
than its bare issuance, for it gives no real consequence more than what the law itself has already
prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the
means that can facilitate or render least cumbersome the implementation of the law but
substantially increases the burden of those governed, it behooves the agency to accord at least to
those directly affected a chance to be heard, and thereafter to be duly informed, before that new
issuance is given the force and effect of law.15

RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing rules or corrective
measures revoking in the process the previous rulings of past Commissioners. Specifically, they
would have been amendatory provisions applicable to pawnshops. Without these disputed CIR
issuances, pawnshops would not be liable to pay the 5% percentage tax, considering that they were
not specifically included in Section 116 of the NIRC of 1977, as amended. In so doing, the CIR did not
simply interpret the law. The due observance of the requirements of notice, hearing, and publication
should not have been ignored.

There is no need for us to discuss the ruling in CA-G.R. SP No. 59282 entitled Commissioner of
Internal Revenue v. Agencia Exquisite of Bohol Inc., which upheld the validity of RMO No. 15-91 and
RMC No. 43-91. Suffice it to say that the judgment in that case cannot be binding upon the Supreme
Court because it is only a decision of the Court of Appeals. The Supreme Court, by tradition and in
our system of judicial administration, has the last word on what the law is; it is the final arbiter of any
justifiable controversy. There is only one Supreme Court from whose decisions all other courts should
take their bearings.16

In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby declared null and void.
Consequently, Lhuillier is not liable to pay the 5% lending investor’s tax.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The decision of the Court of Appeals
of 20 November 2001 in CA-G.R. SP No. 62463 is AFFIRMED.

SO ORDERED.

Vitug, Ynarez-Santiago, Carpio, and Azcuna, JJ., concur.

Footnotes

1 Rollo, 18-24. Per Associate Justice Edgardo P. Cruz, with then Presiding Justice (now Supreme Court
Associate Justice) Alicia Austria-Martinez and Associate Justice Hilarion L. Aquino concurring.

2 Rollo, 25-33. Per Associate Judge Ramon O. de Veyra, with Presiding Judge Ernesto D. Acosta and
Associate Judge Amancio Q. Saga concurring.

3 CA-G.R. SP No. 59282, 23 March 2001.

4 Rollo, 35-44.
5 Entitled An Act Restructuring the Value-Added Tax (VAT) System to Widen its Tax Base and Enhance
its Administration, Amending for These Purposes Sections … 116 of Title V … of the National Internal
Revenue Code, as Amended.

6 Now Sections 244 and 245 of R.A. No. 8424, otherwise known as the Tax Reform Act of 1997.

7 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.

8 Formerly Section 209 of the NIRC of 1977, as amended by P.D. No. 1739 of 17 September 1980,
which read:

Section 209. – Percentage tax on dealers in securities, lending investors. – Dealers in securities and
lending investors shall pay a tax equivalent to five per centum on their gross income.

9 Vera v. Fernandez, L-31364, 30 March 1979; 89 SCRA 199, 203.

10 Republic v. Estenzo, L-35376, 11 September 1980; 99 SCRA 651, 656.

11 Entitled An Act Restructuring the Value-added Tax (VAT) System, Widening Its Tax Base and
Enhancing Its Administration, and for These Purposes Amending and Repealing the Relevant
Provisions of the National Internal Revenue Code, as amended, and for Other Purposes.

12 90 O.G. 31, 4489.

13 Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary, G.R. No.
108524, 10 November 1994, 238 SCRA 63, 69.

14 Supra.

15 Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1007 [1996].
16 GSIS v. Court of Appeals, 334 Phil. 163, 175 [1997], citing Ang Ping v. RTC of Manila, Br. 40, G.R.
No. L-75860, 17 September 1987, 154 SCRA 77 and Tugade v. Court of Appeals, G.R. L-47772, 31
August 1978, 85 SCRA 226.

G.R. No. 88291 May 31, 1991

ERNESTO M. MACEDA, petitioner,

vs.

HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President; HON.
VICENTE R. JAYME, in his capacity as Secretary of the Department of Finance; HON. SALVADOR
MISON, in his capacity as Commissioner, Bureau of Customs; HON. JOSE U. ONG, in his capacity as
Commissioner of Internal Revenue; NATIONAL POWER CORPORATION; the FISCAL INCENTIVES
REVIEW BOARD; Caltex (Phils.) Inc.; Pilipinas Shell Petroleum Corporation; Philippine National Oil
Corporation; and Petrophil Corporation, respondents.

Villamor & Villamor Law Offices for petitioner.

Angara, Abello, Concepcion, Regala & Cruz for Pilipinas Shell Petroleum Corporation.

Siguion Reyna, Montecillo & Ongsiako for Caltex (Phils.), Inc.

GANCAYCO, J.:

This petition seeks to nullify certain decisions, orders, rulings, and resolutions of respondents
Executive Secretary, Secretary of Finance, Commissioner of Internal Revenue, Commissioner of
Customs and the Fiscal Incentives Review Board FIRB for exempting the National Power Corporation
(NPC) from indirect tax and duties.

The relevant facts are not in dispute.

On November 3, 1986, Commonwealth Act No. 120 created the NPC as a public corporation to
undertake the development of hydraulic power and the production of power from other sources.1

On June 4, 1949, Republic Act No. 358 granted NPC tax and duty exemption privileges under—

Sec. 2. To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
from all taxes, duties, fees, imposts, charges and restrictions of the Republic of the Philippines, its
provinces, cities and municipalities.
On September 10, 1971, Republic Act No. 6395 revised the charter of the NPC wherein Congress
declared as a national policy the total electrification of the Philippines through the development of
power from all sources to meet the needs of industrial development and rural electrification which
should be pursued coordinately and supported by all instrumentalities and agencies of the
government, including its financial institutions.2 The corporate existence of NPC was extended to
carry out this policy, specifically to undertake the development of hydro electric generation of power
and the production of electricity from nuclear, geothermal and other sources, as well as the
transmission of electric power on a nationwide basis.3 Being a non-profit corporation, Section 13 of
the law provided in detail the exemption of the NPC from all taxes, duties, fees, imposts and other
charges by the government and its instrumentalities.

On January 22, 1974, Presidential Decree No. 380 amended section 13, paragraphs (a) and (d) of
Republic Act No. 6395 by specifying, among others, the exemption of NPC from such taxes, duties,
fees, imposts and other charges imposed "directly or indirectly," on all petroleum products used by
NPC in its operation. Presidential Decree No. 938 dated May 27, 1976 further amended the aforesaid
provision by integrating the tax exemption in general terms under one paragraph.

On June 11, 1984, Presidential Decree No. 1931 withdrew all tax exemption privileges granted in
favor of government-owned or controlled corporations including their subsidiaries.4 However, said
law empowered the President and/or the then Minister of Finance, upon recommendation of the
FIRB to restore, partially or totally, the exemption withdrawn, or otherwise revise the scope and
coverage of any applicable tax and duty.

Pursuant to said law, on February 7, 1985, the FIRB issued Resolution No. 10-85 restoring the tax and
duty exemption privileges of NPC from June 11, 1984 to June 30, 1985. On January 7, 1986, the FIRB
issued resolution No. 1-86 indefinitely restoring the NPC tax and duty exemption privileges effective
July 1, 1985.

However, effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and duty
incentives granted to government and private entities which had been restored under Presidential
Decree Nos. 1931 and 1955 but it gave the authority to FIRB to restore, revise the scope and
prescribe the date of effectivity of such tax and/or duty exemptions.

On June 24, 1987 the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty exemption
privileges effective March 10, 1987. On October 5, 1987, the President, through respondent
Executive Secretary Macaraig, Jr., confirmed and approved FIRB Resolution No. 17-87.

As alleged in the petition, the following are the background facts:

The following are the facts relevant to NPC's questioned claim for refunds of taxes and duties
originally paid by respondents Caltex, Petrophil and Shell for specific and ad valorem taxes to the BIR;
and for Customs duties and ad valorem taxes paid by PNOC, Shell and Caltex to the Bureau of
Customs on its crude oil importation.

Many of the factual statements are reproduced from the Senate Committee on Accountability of
Public Officers and Investigations (Blue Ribbon) Report No. 474 dated January 12, 1989 and approved
by the Senate on April 21, 1989 (copy attached hereto as Annex "A") and are identified in quotation
marks:

1. Since May 27, 1976 when P.D. No. 938 was issued until June 11, 1984 when P.D. No. 1931 was
promulgated abolishing the tax exemptions of all government-owned or-controlled corporations, the
oil firms never paid excise or specific and ad valorem taxes for petroleum products sold and delivered
to the NPC. This non-payment of taxes therefore spanned a period of eight (8) years. (par. 23, p. 7,
Annex "A")

During this period, the Bureau of Internal Revenue was not collecting specific taxes on the purchases
of NPC of petroleum products from the oil companies on the erroneous belief that the National
Power Corporation (NPC) was exempt from indirect taxes as reflected in the letter of Deputy
Commissioner of Internal Revenue (DCIR) Romulo Villa to the NPC dated October 29, 1980 granting
blanket authority to the NPC to purchase petroleum products from the oil companies without
payment of specific tax (copy of this letter is attached hereto as petitioner's Annex "B").

2. The oil companies started to pay specific and ad valorem taxes on their sales of oil products to NPC
only after the promulgation of P.D. No. 1931 on June 11, 1984, withdrawing all exemptions granted in
favor of government-owned or-controlled corporations and empowering the FIRB to recommend to
the President or to the Minister of Finance the restoration of the exemptions which were withdrawn.
"Specifically, Caltex paid the total amount of P58,020,110.79 in specific and ad valorem taxes for
deliveries of petroleum products to NPC covering the period from October 31, 1984 to April 27,
1985." (par. 23, p. 7, Annex "A")

3. Caltex billings to NPC until June 10, 1984 always included customs duty without the tax portion.
Beginning June 11, 1984, when P.D. 1931 was promulgated abolishing NPC's tax exemptions, Caltex's
billings to NPC always included both duties and taxes. (Caturla, tsn, Oct. 10, 1988, pp. 1-5) (par. 24, p,
7, Annex "A")

4. For the sales of petroleum products delivered to NPC during the period from October, 1984 to
April, 1985, NPC was billed a total of P522,016,77.34 (sic) including both duties and taxes, the
specific tax component being valued at P58,020,110.79. (par. 25, p. 8, Annex "A").
5. Fiscal Incentives Review Board (FIRB) Resolution 10-85, dated February 7, 1985, certified true copy
of which is hereto attached as Annex "C", restored the tax exemption privileges of NPC effective
retroactively to June 11, 1984 up to June 30, 1985. The first paragraph of said resolution reads as
follows:

1. Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the National Power
Corporation under C.A. No. 120, as amended, are restored up to June 30, 1985.

Because of this restoration (Annex "G") the NPC applied on September 11, 1985 with the BIR for a
"refund of Specific Taxes paid on petroleum products . . . in the total amount of P58,020,110.79. (par.
26, pp. 8-9, Annex "A")

6. In a letter to the president of the NPC dated May 8, 1985 (copy attached as petitioner's Annex
"D"), Acting BIR Commissioner Ruben Ancheta declared:

FIRB Resolution No. 10-85 serves as sufficient basis to allow NPC to purchase petroleum products
from the oil companies free of specific and ad valorem taxes, during the period in question.

The "period in question" is June 1 1, 1 984 to June 30, 1 985.

7. On June 6, 1985—The president of the NPC, Mr. Gabriel Itchon, wrote Mr. Cesar Virata, Chairman
of the FIRB (Annex "E"), requesting "the FIRB to resolve conflicting rulings on the tax exemption
privileges of the National Power Corporation (NPC)." These rulings involve FIRB Resolutions No. 1-84
and 10-85. (par. 40, p. 12, Annex "A")

8. In a letter to the President of NPC (Annex "F"), dated June 26, 1985, Minister Cesar Virata
confirmed the ruling of May 8, 1985 of Acting BIR Commissioner Ruben Ancheta, (par. 41, p. 12,
Annex "A")

9. On October 22, 1985, however, under BIR Ruling No. 186-85, addressed to Hanil Development Co.,
Ltd., a Korean contractor of NPC for its infrastructure projects, certified true copy of which is
attached hereto as petitioner's Annex "E", BIR Acting Commissioner Ruben Ancheta ruled:

In Reply please be informed that after a re-study of Section 13, R.A. 6395, as amended by P.D. 938,
this Office is of the opinion, and so holds, that the scope of the tax exemption privilege enjoyed by
NPC under said section covers only taxes for which it is directly liable and not on taxes which are only
shifted to it. (Phil. Acetylene vs. C.I.R. et al., G.R. L-19707, Aug. 17, 1967) Since contractor's tax is
directly payable by the contractor, not by NPC, your request for exemption, based on the stipulation
in the aforesaid contract that NPC shall assume payment of your contractor's tax liability, cannot be
granted for lack of legal basis." (Annex "H") (emphasis added)

Said BIR ruling clearly states that NPC's exemption privileges covers (sic) only taxes for which it is
directly liable and does not cover taxes which are only shifted to it or for indirect taxes. The BIR,
through Ancheta, reversed its previous position of May 8, 1985 adopted by Ancheta himself favoring
NPC's indirect tax exemption privilege.

10. Furthermore, "in a BIR Ruling, unnumbered, "dated June 30, 1986, "addressed to Caltex (Annex
"F"), the BIR Commissioner declared that PAL's tax exemption is limited to taxes for which PAL is
directly liable, and that the payment of specific and ad valorem taxes on petroleum products is a
direct liability of the manufacturer or producer thereof". (par. 51, p. 15, Annex "A")

11. On January 7, 1986, FIRB Resolution No. 1-86 was issued restoring NPC's tax exemptions
retroactively from July 1, 1985 to a indefinite period, certified true copy of which is hereto attached
as petitioner's Annex "H".

12. NPC's total refund claim was P468.58 million but only a portion thereof i.e. the P58,020,110.79
(corresponding to Caltex) was approved and released by way of a Tax Credit Memo (Annex "Q")
dated July 7, 1986, certified true copy of which [is) attached hereto as petitioner's Annex "F," which
was assigned by NPC to Caltex. BIR Commissioner Tan approved the Deed of Assignment on July 30,
1987, certified true copy of which is hereto attached as petitioner's Annex "G"). (pars. 26, 52, 53, pp.
9 and 15, Annex "A")

The Deed of Assignment stipulated among others that NPC is assigning the tax credit to Caltex in
partial settlement of its outstanding obligations to the latter while Caltex, in turn, would apply the
assigned tax credit against its specific tax payments for two (2) months. (per memorandum dated
July 28, 1986 of DCIR Villa, copy attached as petitioner Annex "G")

13. As a result of the favorable action taken by the BIR in the refund of the P58.0 million tax credit
assigned to Caltex, the NPC reiterated its request for the release of the balance of its pending
refunds of taxes paid by respondents Petrophil, Shell and Caltex covering the period from June 11,
1984 to early part of 1986 amounting to P410.58 million. (The claim of the first two (2) oil companies
covers the period from June 11, 1984 to early part of 1986; while that of Caltex starts from July 1,
1985 to early 1986). This request was denied on August 18, 1986, under BIR Ruling 152-86 (certified
true copy of which is attached hereto as petitioner's Annex "I"). The BIR ruled that NPC's tax free
privilege to buy petroleum products covered only the period from June 11, 1984 up to June 30, 1985.
It further declared that, despite FIRB No. 1-86, NPC had already lost its tax and duty exemptions
because it only enjoys special privilege for taxes for which it is directly liable. This ruling, in effect,
denied the P410 Million tax refund application of NPC (par. 28, p. 9, Annex "A")
14. NPC filed a motion for reconsideration on September 18, 1986. Until now the BIR has not
resolved the motion. (Benigna, II 3, Oct. 17, 1988, p. 2; Memorandum for the Complainant, Oct. 26,
1988, p. 15)." (par. 29, p. 9, Annex "A")

15. On December 22, 1986, in a 2nd Indorsement to the Hon. Fulgencio S. Factoran, Jr., BIR
Commissioner Tan, Jr. (certified true copy of which is hereto attached and made a part hereof as
petitioner's Annex "J"), reversed his previous position and states this time that all deliveries of
petroleum products to NPC are tax exempt, regardless of the period of delivery.

16. On December 17, 1986, President Corazon C. Aquino enacted Executive Order No. 93, entitled
"Withdrawing All Tax and Duty Incentives, Subject to Certain Exceptions, Expanding the Powers of
the Fiscal Incentives Review Board and Other Purposes."

17. On June 24, 1987, the FIRB issued Resolution No. 17-87, which restored NPC's tax exemption
privilege and included in the exemption "those pertaining to its domestic purchases of petroleum
and petroleum products, and the restorations were made to retroact effective March 10, 1987, a
certified true copy of which is hereto attached and made a part hereof as Annex "K".

18. On August 6, 1987, the Hon. Sedfrey A. Ordoñez, Secretary of Justice, issued Opinion No. 77,
series of 1987, opining that "the power conferred upon Fiscal Incentives Review Board by Section 2a
(b), (c) and (d) of Executive order No. 93 constitute undue delegation of legislative power and,
therefore, [are] unconstitutional," a copy of which is hereto attached and made a part hereof as
Petitioner's Annex "L."

19. On October 5, 1987, respondent Executive Secretary Macaraig, Jr. in a Memorandum to the
Chairman of the FIRB a certified true copy of which is hereto attached and made a part hereof as
petitioner's Annex "M," confirmed and approved FIRB Res. No. 17-87 dated June 24, 1987, allegedly
pursuant to Sections 1 (f) and 2 (e) of Executive Order No. 93.

20. Secretary Vicente Jayme in a reply dated May 20, 1988 to Secretary Catalino Macaraig, who by
letter dated May 2, 1988 asked him to rule "on whether or not, as the law now stands, the National
Power Corporation is still exempt from taxes, duties . . . on its local purchases of . . . petroleum
products . . ." declared that "NPC under the provisions of its Revised Charter retains its exemption
from duties and taxes imposed on the petroleum products purchased locally and used for the
generation of electricity," a certified true copy of which is attached hereto as petitioner's Annex "N."
(par. 30, pp. 9-10, Annex "A")

21. Respondent Executive Secretary came up likewise with a confirmatory letter dated June 1 5, 1988
but without the usual official form of "By the Authority of the President," a certified true copy of
which is hereto attached and made a part hereof as Petitioner's Annex "O".
22. The actions of respondents Finance Secretary and the Executive Secretary are based on the
RESOLUTION No. 17-87 of FIRB restoring the tax and duty exemption of the respondent NPC
pertaining to its domestic purchases of petroleum products (petitioner's Annex K supra).

23. Subsequently, the newspapers particularly, the Daily Globe, in its issue of July 11, 1988 reported
that the Office of the President and the Department of Finance had ordered the BIR to refund the tax
payments of the NPC amounting to Pl.58 Billion which includes the P410 Million Tax refund already
rejected by BIR Commissioner Tan, Jr., in his BIR Ruling No. 152-86. And in a letter dated July 28, 1988
of Undersecretary Marcelo B. Fernando to BIR Commissioner Tan, Jr. the Pl.58 Billion tax refund was
ordered released to NPC (par. 31, p. 1 0, Annex "A")

24. On August 8, 1988, petitioner "wrote both Undersecretary Fernando and Commissioner Tan
requesting them to hold in abeyance the release of the Pl.58 billion and await the outcome of the
investigation in regard to Senate Resolution No. 227," copies attached as Petitioner's Annexes "P"
and "P-1 " (par. 32, p. 10, Annex "A").

Reacting to this letter of the petitioner, Undersecretary Fernando wrote Commissioner Tan of the BIR
dated August, 1988 requesting him to hold in abeyance the release of the tax refunds to NPC until
after the termination of the Blue Ribbon investigation.

25. In the Bureau of Customs, oil companies import crude oil and before removal thereof from
customs custody, the corresponding customs duties and ad valorem taxes are paid. Bunker fuel oil is
one of the petroleum products processed from the crude oil; and same is sold to NPC. After the sale,
NPC applies for tax credit covering the duties and ad valorem exemption under its Charter. Such
applications are processed by the Bureau of Customs and the corresponding tax credit certificates
are issued in favor of NPC which, in turn assigns it to the oil firm that imported the crude oil. These
certificates are eventually used by the assignee-oil firms in payment of their other duty and tax
liabilities with the Bureau of Customs. (par. 70, p. 19, Annex "A")

A lesser amount totalling P740 million, covering the period from 1985 to the present, is being sought
by respondent NPC for refund from the Bureau of Customs for duties paid by the oil companies on
the importation of crude oil from which the processed products sold locally by them to NPC was
derived. However, based on figures submitted to the Blue Ribbon Committee of the Philippine Senate
which conducted an investigation on this matter as mandated by Senate Resolution No. 227 of which
the herein petitioner was the sponsor, a much bigger figure was actually refunded to NPC
representing duties and ad valorem taxes paid to the Bureau of Customs by the oil companies on the
importation of crude oil from 1979 to 1985.

26. Meantime, petitioner, as member of the Philippine Senate introduced P.S. Res. No. 227, entitled:
Resolution Directing the Senate Blue Ribbon Committee, In Aid of Legislation, To conduct a Formal
and Extensive Inquiry into the Reported Massive Tax Manipulations and Evasions by Oil Companies,
particularly Caltex (Phils.) Inc., Pilipinas Shell and Petrophil, Which Were Made Possible By Their
Availing of the Non-Existing Exemption of National Power Corporation (NPC) from Indirect Taxes,
Resulting Recently in Their Obtaining A Tax Refund Totalling P1.55 Billion From the Department of
Finance, Their Refusal to Pay Since 1976 Customs Duties Amounting to Billions of Pesos on Imported
Crude Oil Purportedly for the Use of the National Power Corporation, the Non-Payment of Surtax on
Windfall Profits from Increases in the Price of Oil Products in August 1987 amounting Maybe to as
Much as Pl.2 Billion Surtax Paid by Them in 1984 and For Other Purposes.

27. Acting on the above Resolution, the Blue Ribbon Committee of the Senate did conduct a lengthy
formal inquiry on the matter, calling all parties interested to the witness stand including
representatives from the different oil companies, and in due time submitted its Committee Report
No. 474 . . . — The Blue Ribbon Committee recommended the following courses of action.

1. Cancel its approval of the tax refund of P58,020,110.70 to the National Power Corporation (NPC)
and its approval of Tax Credit memo covering said amount (Annex "P" hereto), dated July 7, 1986,
and cancel its approval of the Deed of Assignment (Annex "Q" hereto) by NPC to Caltex, dated July
28, 1986, and collect from Caltex its tax liabilities which were erroneously treated as paid or settled
with the use of the tax credit certificate that NPC assigned to said firm.:

1.1. NPC did not have any indirect tax exemption since May 27, 1976 when PD 938 was issued.
Therefore, the grant of a tax refund to NPC in the amount of P58 million was illegal, and therefore,
null and void. Such refund was a nullity right from the beginning. Hence, it never transferred any
right in favor of NPC.

2. Stop the processing and/or release of Pl.58 billion tax refund to NPC and/or oil companies on the
same ground that the NPC, since May 27, 1976 up to June 17, 1987 was never granted any indirect
tax exemption. So, the P1.58 billion represent taxes legally and properly paid by the oil firms.

3. Start collection actions of specific or excise and ad valorem taxes due on petroleum products sold
to NPC from May 27, 1976 (promulgation of PD 938) to June 17, 1987 (issuance of EO 195).

B. For the Bureau of Customs (BOC) to do the following:

1. Start recovery actions on the illegal duty refunds or duty credit certificates for purchases of
petroleum products by NPC and allegedly granted under the NPC charter covering the years 1978-
1988 . . .
28. On March 30, 1989, acting on the request of respondent Finance Secretary for clearance to direct
the Bureau of Internal Revenue and of Customs to proceed with the processing of claims for tax
credits/refunds of the NPC, respondent Executive Secretary rendered his ruling, the dispositive
portion of which reads:

IN VIEW OF THE FOREGOING, the clearance is hereby GRANTED and, accordingly, unless restrained
by proper authorities, that department and/or its line-tax bureaus may now proceed with the
processing of the claims of the National Power Corporation for duty and tax free exemption and/or
tax credits/ refunds, if there be any, in accordance with the ruling of that Department dated May
20,1988, as confirmed by this Office on June 15, 1988 . . .5

Hence, this petition for certiorari, prohibition and mandamus with prayer for a writ of preliminary
injunction and/or restraining order, praying among others that:

1. Upon filing of this petition, a temporary restraining order forthwith be issued against respondent
FIRB Executive Secretary Macaraig, and Secretary of Finance Jayme restraining them and other
persons acting for, under, and in their behalf from enforcing their resolution, orders and ruling, to
wit:

A. FIRB Resolution No. 17-87 dated June 24, 1987 (petitioner's Annex "K");

B. Memorandum-Order of the Office of the President dated October 5, 1987 (petitioner's Annex
"M");

C. Order of the Executive Secretary dated June 15, 1988 (petitioner's Annex "O");

D. Order of the Executive Secretary dated March 30, l989 (petitioner's Annex "Q"); and

E. Ruling of the Finance Secretary dated May 20, 1988 (petitioner's Annex "N").

2. Said temporary restraining order should also include respondent Commissioners of Customs Mison
and Internal Revenue Ong restraining them from processing and releasing any pending claim or
application by respondent NPC for tax and duty refunds.
3. Thereafter, and during the pendency of this petition, to issue a writ or preliminary injunction
against above-named respondents and all persons acting for and in their behalf.

4. A decision be rendered in favor of the petitioner and against the respondents:

A. Declaring that respondent NPC did not enjoy indirect tax exemption privilege since May 27, 1976
up to the present;

B. Nullifying the setting aside the following:

1. FIRB Resolution No. 17-87 dated June 24, 1987 (petitioner's Annex "K");

2. Memorandum-Order of the Office of the President dated October 5, 1987 (petitioner's Annex
"M");

3. Order of the Executive Secretary dated June 15, 1988 (petitioner's Annex "O");

4. Order of the Executive Secretary dated March 30, 1989 (petitioner's Annex "Q");

5. Ruling of the Finance Secretary dated May 20, 1988 (petitioner's Annex "N"

6. Tax Credit memo dated July 7, 1986 issued to respondent NPC representing tax refund for
P58,020,110.79 (petitioner's Annex "F");

7. Deed of Assignment of said tax credit memo to respondent Caltex dated July 30, 1987 (petitioner's
Annex "G");

8. Application of the assigned tax credit of Caltex in payment of its tax liabilities with the Bureau of
Internal Revenue and

9. Illegal duty and tax refunds issued by the Bureau of Customs to respondent NPC by way of tax
credit certificates from 1979 up to the present.
C. Declaring as illegal and null and void the pending claims for tax and duty refunds by respondent
NPC with the Bureau of Customs and the Bureau of Internal Revenue;

D. Prohibiting respondents Commissioner of Customs and Commissioner of Internal Revenue from

enforcing the abovequestioned resolution, orders and ruling of respondents Executive Secretary,
Secretary of Finance, and FIRB by processing and releasing respondent NPC's tax and duty refunds;

E. Ordering the respondent Commissioner of Customs to deny as being null and void the pending
claims for refund of respondent NPC with the Bureau of Customs covering the period from 1985 to
the present; to cancel and invalidate the illegal payment made by respondents Caltex, Shell and
PNOC by using the tax credit certificates assigned to them by NPC and to recover from respondents
Caltex, Shell and PNOC all the amounts appearing in said tax credit certificates which were used to
settle their duty and tax liabilities with the Bureau of Customs.

F. Ordering respondent Commissioner of Internal Revenue to deny as being null and void the pending
claims for refund of respondent NPC with the Bureau of Internal Revenue covering the period from
June 11, 1984 to June 17, 1987.

PETITIONER prays for such other relief and remedy as may be just and equitable in the premises.6

The issues raised in the petition are the following:

To determine whether respondent NPC is legally entitled to the questioned tax and duty refunds, this
Honorable Court must resolve the following issues:

Main issue—

Whether or not the respondent NPC has ceased to enjoy indirect tax and duty exemption with the
enactment of P.D. No. 938 on May 27, 1976 which amended P.D. No. 380, issued on January 11,
1974.

Corollary issues—

1. Whether or not FIRB Resolution No. 10-85 dated February 7, 1985 which restored NPC's tax
exemption privilege effective June 11, 1984 to June 30, 1985 and FIRB Resolution No. 1-86 dated
January 7, 1986 restoring NPC's tax exemption privilege effective July 1, 1985 included the
restoration of indirect tax exemption to NPC and
2. Whether or not FIRB could validly and legally issue Resolution No. 17-87 dated June 24, 1987
which restored NPC's tax exemption privilege effective March 10, 1987; and if said Resolution was
validly issued, the nature and extent of the tax exemption privilege restored to NPC.7

In a resolution dated June 6, 1989, the Court, without giving due course to the petition, required
respondents to comment thereon, within ten (10) days from notice. The respondents having
submitted their comment, on October 10, 1989 the Court required petitioner to file a consolidated
reply to the same. After said reply was filed by petitioner on November 15, 1989 the Court gave due
course to the petition, considering the comments of respondents as their answer to the petition, and
requiring the parties to file simultaneously their respective memoranda within twenty (20) days from
notice. The parties having submitted their respective memoranda, the petition was deemed
submitted for resolution.

First the preliminary issues.

Public respondents allege that petitioner does not have the standing to challenge the questioned
orders and resolution.

In the petition it is alleged that petitioner is "instituting this suit in his capacity as a taxpayer and a
duly-elected Senator of the Philippines." Public respondent argues that petitioner must show he has
sustained direct injury as a result of the action and that it is not sufficient for him to have a mere
general interest common to all members of the public.8

The Court however agrees with the petitioner that as a taxpayer he may file the instant petition
following the ruling in Lozada when it involves illegal expenditure of public money. The petition
questions the legality of the tax refund to NPC by way of tax credit certificates and the use of said
assigned tax credits by respondent oil companies to pay for their tax and duty liabilities to the BIR
and Bureau of Customs.

Assuming petitioner has the personality to file the petition, public respondents also allege that the
proper remedy for petitioner is an appeal to the Court of Tax Appeals under Section 7 of R.A. No. 125
instead of this petition. However Section 11 of said law provides—

Sec. 11. Who may appeal; effect of appeal—Any person, association or corporation adversely
affected by a decision or ruling of the Commissioner of Internal Revenue, the Collector of Customs
(Commissioner of Customs) or any provincial or City Board of Assessment Appeals may file an appeal
in the Court of Tax Appeals within thirty days after receipt of such decision or ruling.
From the foregoing, it is only the taxpayer adversely affected by a decision or ruling of the
Commissioner of Internal Revenue, the Commissioner of Customs or any provincial or city Board of
Assessment Appeal who may appeal to the Court of Tax Appeals. Petitioner does not fall under this
category.

Public respondents also contend that mandamus does not lie to compel the Commissioner of
Internal Revenue to impose a tax assessment not found by him to be proper. It would be tantamount
to a usurpation of executive functions.9

Even in Meralco, this Court recognizes the situation when mandamus can control the discretion of
the Commissioners of Internal Revenue and Customs when the exercise of discretion is tainted with
arbitrariness and grave abuse as to go beyond statutory authority.10

Public respondents then assert that a writ of prohibition is not proper as its function is to prevent an
unlawful exercise of jurisdiction11 or to prevent the oppressive exercise of legal authority.12
Precisely, petitioner questions the lawfulness of the acts of public respondents in this case.

Now to the main issue.

It may be useful to make a distinction, for the purpose of this disposition, between a direct tax and
an indirect tax. A direct tax is a tax for which a taxpayer is directly liable on the transaction or
business it engages in. Examples are the custom duties and ad valorem taxes paid by the oil
companies to the Bureau of Customs for their importation of crude oil, and the specific and ad
valorem taxes they pay to the Bureau of Internal Revenue after converting the crude oil into
petroleum products.

On the other hand, "indirect taxes are taxes primarily paid by persons who can shift the burden upon
someone else ."13 For example, the excise and ad valorem taxes that oil companies pay to the
Bureau of Internal Revenue upon removal of petroleum products from its refinery can be shifted to
its buyer, like the NPC, by adding them to the "cash" and/or "selling price."

The main thrust of the petition is that under the latest amendment to the NPC charter by
Presidential Decree No. 938, the exemption of NPC from indirect taxation was revoked and repealed.
While petitioner concedes that NPC enjoyed broad exemption privileges from both direct and
indirect taxes on the petroleum products it used, under Section 13 of Republic Act No, 6395 and
more so under Presidential Decree No. 380, however, by the deletion of the phrases "directly or
indirectly" and "on all petroleum products used by the Corporation in the generation, transmission,
utilization and sale of electric power" he contends that the exemption from indirect taxes was
withdrawn by P.D. No. 938.
Petitioner further states that the exemption of NPC provided in Section 13 of Presidential Decree No.
938 regarding the payments of "all forms of taxes, etc." cannot be interpreted to include indirect tax
exemption. He cites Philippine Aceytelene Co. Inc. vs. Commissioner of Internal Revenue.14
Petitioner emphasizes the principle in taxation that the exception contained in the tax statutes must
be strictly construed against the one claiming the exemption, and that the rule that a tax statute
granting exemption must be strictly construed against the one claiming the exemption is similar to
the rule that a statute granting taxing power is to be construed strictly, with doubts resolved against
its existence.15 Petitioner cites rulings of the BIR that the phrase exemption from "all taxes, etc."
from "all forms of taxes" and "in lieu of all taxes" covers only taxes for which the taxpayer is directly
liable.16

On the corollary issues. First, FIRB Resolution Nos. 10-85 and 10-86 issued under Presidential Decree
No. 1931, the relevant provision of which are to wit:

P.D. No. 1931 provides as follows:

Sec. 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from
the payment of duties, taxes . . . heretofore granted in favor of government-owned or controlled
corporations are hereby withdrawn. (Emphasis supplied.)

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of
the Fiscal Incentives Review Board . . . is hereby empowered to restore, partially or totally, the
exemptions withdrawn by Section 1 above . . . (Emphasis supplied.)

The relevant provisions of FIRB resolution Nos. 10-85 and 1-86 are the following:

Resolution. No. 10-85

BE IT RESOLVED AS IT IS HEREBY RESOLVED, That:

1. Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the National Power
Corporation under C.A. No. 120 as amended are restored up to June 30, 1985.

2. Provided, That to restoration does not apply to the following:

a. importations of fuel oil (crude equivalent) and coal as per FIRB Resolution No. 1-84;

b. commercially-funded importations; and

c. interest income derived from any investment source.

3. Provided further, That in case of importations funded by international financing agreements, the
NPC is hereby required to furnish the FIRB on a periodic basis the particulars of items received or to
be received through such arrangements, for purposes of tax and duty exemptions privileges.17

Resolution No. 1-86

BE IT RESOLVED AS IT IS HEREBY RESOLVED: That:

1. Effective July 1, 1985, the tax and duty exemption privileges enjoyed by the National Power
Corporation (NPC) under Commonwealth Act No. 120, as amended, are restored: Provided, That
importations of fuel oil (crude oil equivalent), and coal of the herein grantee shall be subject to the
basic and additional import duties; Provided, further, that the following shall remain fully taxable:

a. Commercially-funded importations; and

b. Interest income derived by said grantee from bank deposits and yield or any other monetary
benefits from deposit substitutes, trust funds and other similar arrangements.

2. The NPC as a government corporation is exempt from the real property tax on land and
improvements owned by it provided that the beneficial use of the property is not transferred to
another pursuant to the provisions of Sec. 10(a) of the Real Property Tax Code, as amended.18

Petitioner does not question the validity and enforceability of FIRB Resolution Nos. 10-85 and 1-86.
Indeed, they were issued in compliance with the requirement of Section 2, P.D. No. 1931, whereby
the FIRB should make the recommendation subject to the approval of "the President of the
Philippines and/or the Minister of Finance." While said Resolutions do not appear to have been
approved by the President, they were nevertheless approved by the Minister of Finance who is also
duly authorized to approve the same. In fact it was the Minister of Finance who signed and
promulgated said resolutions.19
The observation of Mr. Justice Sarmiento in the dissenting opinion that FIRB Resolution Nos. 10-85
and 1-86 which were promulgated by then Acting Minister of Finance Alfredo de Roda, Jr. and
Minister of Finance Cesar E.A Virata, as Chairman of FIRB respectively, should be separately approved
by said Minister of Finance as required by P.D. 1931 is, a superfluity. An examination of the said
resolutions which are reproduced in full in the dissenting opinion show that the said officials signed
said resolutions in the dual capacity of Chairman of FIRB and Minister of Finance.

Mr. Justice Sarmiento also makes reference to the case National Power Corporation vs. Province of
Albay,20 wherein the Court observed that under P.D. No. 776 the power of the FIRB was only
recommendatory and requires the approval of the President to be valid. Thus, in said case the Court
held that FIRB Resolutions Nos. 10-85 and 1-86 not having been approved by the President were not
valid and effective while the validity of FIRB 17-87 was upheld as it was duly approved by the Office
of the President on October 5, 1987.

However, under Section 2 of P.D. No. 1931 of June 11, 1984, hereinabove reproduced, which
amended P.D. No. 776, it is clearly provided for that such FIRB resolution, may be approved by the
"President of the Philippines and/or the Minister of Finance." To repeat, as FIRB Resolutions Nos. 10-
85 and 1-86 were duly approved by the Minister of Finance, hence they are valid and effective. To
this extent, this decision modifies or supersedes the Court's earlier decision in Albay afore-referred
to.

Petitioner, however, argues that under both FIRB resolutions, only the tax and duty exemption
privileges enjoyed by the NPC under its charter, C.A. No. 120, as amended, are restored, that is, only
its direct tax exemption privilege; and that it cannot be interpreted to cover indirect taxes under the
principle that tax exemptions are construed stricissimi juris against the taxpayer and liberally in favor
of the taxing authority.

Petitioner argues that the release by the BIR of the P58.0 million refund to respondent NPC by way of
a tax credit certificate21 which was assigned to respondent Caltex through a deed of assignment
approved by the BIR22 is patently illegal. He also contends that the pending claim of respondent NPC
in the amount of P410.58 million with respondent BIR for the sale and delivery to it of bunker fuel by
respondents Petrophil, Shell and Caltex from July 1, 1985 up to 1986, being illegal, should not be
released.

Now to the second corollary issue involving the validity of FIRB Resolution No. 17-87 issued on June
24, 1987. It was issued under authority of Executive Order No. 93 dated December 17, 1986 which
grants to the FIRB among others, the power to recommend the restoration of the tax and duty
exemptions/incentives withdrawn thereunder.

Petitioner stresses that on August 6, 1987 the Secretary of Justice rendered Opinion No. 77 to the
effect that the powers conferred upon the FIRB by Section 2(a), (b), and (c) and (4) of Executive Order
No. 93 "constitute undue delegation of legislative power and is, therefore, unconstitutional."
Petitioner observes that the FIRB did not merely recommend but categorically restored the tax and
duty exemption of the NPC so that the memorandum of the respondent Executive Secretary dated
October 5, 1987 approving the same is a surplusage.

Further assuming that FIRB Resolution No. 17-87 to have been legally issued, following the doctrine
in Philippine Aceytelene, petitioner avers that the restoration cannot cover indirect taxes and it
cannot create new indirect tax exemption not otherwise granted in the NPC charter as amended by
Presidential Decree No. 938.

The petition is devoid of merit.

The NPC is a non-profit public corporation created for the general good and welfare23 wholly owned
by the government of the Republic of the Philippines.24 From the very beginning of its corporate
existence, the NPC enjoyed preferential tax treatment25 to enable the Corporation to pay the
indebtedness and obligation and in furtherance and effective implementation of the policy
enunciated in Section one of "Republic Act No. 6395"26 which provides:

Sec. 1. Declaration of Policy—Congress hereby declares that (1) the comprehensive development,
utilization and conservation of Philippine water resources for all beneficial uses, including power
generation, and (2) the total electrification of the Philippines through the development of power
from all sources to meet the need of rural electrification are primary objectives of the nation which
shall be pursued coordinately and supported by all instrumentalities and agencies of the government
including its financial institutions.

From the changes made in the NPC charter, the intention to strengthen its preferential tax treatment
is obvious.

Under Republic Act No. 358, its exemption is provided as follows:

Sec. 2. To facilitate payment of its indebtedness, the National Power Corporation shall be exempt
from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its
provinces, cities and municipalities."

Under Republic Act No. 6395:

Sec. 13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and
other Charges by Government and Governmental Instrumentalities.— The Corporation shall be non-
profit and shall devote all its returns from its capital investment, as well as excess revenues from its
operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, the
Corporation is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court
or administrative proceedings in which it may be a party, restrictions and duties to the Republic of
the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its
provinces, cities, municipalities and other government agencies and instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import
of foreign goods required for its operations and projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities,
on all petroleum products used by the Corporation in the generation, transmission, utilization, and
sale of electric power. (Emphasis supplied.)

Under Presidential Decree No. 380:

Sec. 13. Non-profit Character of the Corporation: Exemption from all Taxes, Duties, Fees, Imposts and
other Charges by the Government and Government Instrumentalities.— The Corporation shall be
non-profit and shall devote all its returns from its capital investment as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, the
Corporation, including its subsidiaries, is hereby declared, exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and services fees in any court
or administrative proceedings in which it may be a party, restrictions and duties to the Republic of
the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its
provinces, cities, municipalities and other governmental agencies and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import
of foreign goods required for its operation and projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the
Republic of the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities, on all petroleum produced used by the Corporation in the generation,
transmission, utilization, and sale of electric power. (Emphasis supplied.)

Under Presidential Decree No. 938:

Sec. 13. Non-profit Character of the Corporation: Exemption from All Taxes, Duties, Fees, Imposts and
Other Charges by the Government and Government Instrumentalities.—The Corporation shall be
non-profit and shall devote all its returns from its capital investment as well as excess revenues from
its operation, for expansion. To enable the Corporation to pay the indebtedness and obligations and
in furtherance and effective implementation of the policy enunciated in Section One of this Act, the
Corporation, including its subsidiaries hereby declared exempt from the payment of all forms of
taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds,
supersedeas bonds, in any court or administrative proceedings. (Emphasis supplied.)

It is noted that in the earlier law, R.A. No. 358 the exemption was worded in general terms, as to
cover "all taxes, duties, fees, imposts, charges, etc. . . ." However, the amendment under Republic Act
No. 6395 enumerated the details covered by the exemption. Subsequently, P.D. No. 380, made even
more specific the details of the exemption of NPC to cover, among others, both direct and indirect
taxes on all petroleum products used in its operation. Presidential Decree No. 938 amended the tax
exemption by simplifying the same law in general terms. It succinctly exempts NPC from "all forms of
taxes, duties, fees, imposts, as well as costs and service fees including filing fees, appeal bonds,
supersedeas bonds, in any court or administrative proceedings."

The use of the phrase "all forms" of taxes demonstrate the intention of the law to give NPC all the tax
exemptions it has been enjoying before. The rationale for this exemption is that being non-profit the
NPC "shall devote all its returns from its capital investment as well as excess revenues from its
operation, for expansion. To enable the Corporation to pay the indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, . . ."27

The preamble of P.D. No. 938 states—

WHEREAS, in the application of the tax exemption provision of the Revised Charter, the non-profit
character of the NPC has not been fully utilized because of restrictive interpretations of the taxing
agencies of the government on said provisions. . . . (Emphasis supplied.)
It is evident from the foregoing that the lawmaker did not intend that the said provisions of P.D. No.
938 shall be construed strictly against NPC. On the contrary, the law mandates that it should be
interpreted liberally so as to enhance the tax exempt status of NPC.

Hence, petitioner cannot invoke the rule on strictissimi juris with respect to the interpretation of
statutes granting tax exemptions to NPC.

Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case
of exemptions in favor of a government political subdivision or instrumentality.28

The basis for applying the rule of strict construction to statutory provisions granting tax exemptions
or deductions, even more obvious than with reference to the affirmative or levying provisions of tax
statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of
treatment among tax payers.

The reason for the rule does not apply in the case of exemptions running to the benefit of the
government itself or its agencies. In such case the practical effect of an exemption is merely to
reduce the amount of money that has to be handled by government in the course of its operations.
For these reasons, provisions granting exemptions to government agencies may be construed
liberally, in favor of non tax liability of such agencies.29

In the case of property owned by the state or a city or other public corporations, the express
exemption should not be construed with the same degree of strictness that applies to exemptions
contrary to the policy of the state, since as to such property "exemption is the rule and taxation the
exception."30

The contention of petitioner that the exemption of NPC from indirect taxes under Section 13 of R.A.
No. 6395 and P.D. No. 380, is deemed repealed by P.D. No. 938 when the reference to it was deleted
is not well-taken.

Repeal by implication is not favored unless it is manifest that the legislature so intended. As laws are
presumed to be passed with deliberation and with knowledge of all existing ones on the subject, it is
logical to conclude that in passing a statute it is not intended to interfere with or abrogate a former
law relating to the same subject matter, unless the repugnancy between the two is not only
irreconcilable but also clear and convincing as a result of the language used, or unless the latter Act
fully embraces the subject matter of the earlier.31 The first effort of a court must always be to
reconcile or adjust the provisions of one statute with those of another so as to give sensible effect to
both provisions.32
The legislative intent must be ascertained from a consideration of the statute as a whole, and not of
an isolated part or a particular provision alone.33 When construing a statute, the reason for its
enactment should be kept in mind and the statute should be construed with reference to its
intended scope and purpose34 and the evil sought to be remedied.35

The NPC is a government instrumentality with the enormous task of undertaking development of
hydroelectric generation of power and production of electricity from other sources, as well as the
transmission of electric power on a nationwide basis, to improve the quality of life of the people
pursuant to the State policy embodied in Section E, Article II of the 1987 Constitution.

It is evident from the provision of P.D. No. 938 that its purpose is to maintain the tax exemption of
NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6895 and P.D. No.
380 if it is to attain its goals.

Further, the construction of P.D. No. 938 by the Office charged with its implementation should be
given controlling weight.36

Since the May 8, 1985 ruling of Commissioner Ancheta, to the letter of the Secretary of Finance of
June 26, 1985 confirming said ruling, the letters of the BIR of August 18, 1986, and December 22,
1986, the letter of the Secretary of Finance of February 19, 1987, the Memorandum of the Executive
Secretary of October 9, 1987, by authority of the President, confirming and approving FIRB
Resolution No. 17-87, the letter of the Secretary of Finance of May 20, 1988 to the Executive
Secretary rendering his opinion as requested by the latter, and the latter's reply of June 15, 1988, it
was uniformly held that the grant of tax exemption to NPC under C.A. No. 120, as amended, included
exemption from payment of all taxes relative to NPC's petroleum purchases including indirect
taxes.37 Thus, then Secretary of Finance Vicente Jayme in his letter of May 20, 1988 to the Executive
Secretary Macaraig aptly stated the justification for this tax exemption of NPC —

The issue turns on the effect to the exemption of NPC from taxes of the deletion of the phrase 'taxes
imposed indirectly on oil products and its exemption from 'all forms of taxes.' It is suggested that the
change in language evidenced an intention to exempt NPC only from taxes directly imposed on or
payable by it; since taxes on fuel-oil purchased by it; since taxes on fuel-oil purchased by NPC locally
are levied on and paid by its oil suppliers, NPC thereby lost its exemption from those taxes. The
principal authority relied on is the 1967 case of Philippine Acetylene Co., Inc. vs. Commissioner of
Internal Revenue, 20 SCRA 1056.

First of all, tracing the changes made through the years in the Revised Charter, the strengthening of
NPC's preferential tax treatment was clearly the intention. To the extent that the explanatory
"whereas clauses" may disclose the intent of the law-maker, the changes effected by P.D. 938 can
only be read as being expansive rather than restrictive, including its version of Section 13.
Our Tax Code does not recognize that there are taxes directly imposed and those imposed indirectly.
The textbook distinction between a direct and an indirect tax may be based on the possibility of
shifting the incidence of the tax. A direct tax is one which is demanded from the very person
intended to be the payor, although it may ultimately be shifted to another. An example of a direct tax
is the personal income tax. On the other hand, indirect taxes are those which are demanded from
one person in the expectation and intention that he shall indemnify himself at the expense of
another. An example of this type of tax is the sales tax levied on sales of a commodity.

The distinction between a direct tax and one indirectly imposed (or an indirect tax) is really of no
moment. What is more relevant is that when an "indirect tax" is paid by those upon whom the tax
ultimately falls, it is paid not as a tax but as an additional part of the cost or of the market price of
the commodity.

This distinction was made clear by Chief Justice Castro in the Philippine Acetylene case, when he
analyzed the nature of the percentage (sales) tax to determine whether it is a tax on the producer or
on the purchaser of the commodity. Under out Tax Code, the sales tax falls upon the manufacturer or
producer. The phrase "pass on" the tax was criticized as being inaccurate. Justice Castro says that the
tax remains on the manufacturer alone. The purchaser does not pay the tax; he pays an amount
added to the price because of the tax. Therefore, the tax is not "passed on" and does not for that
reason become an "indirect tax" on the purchaser. It is eminently possible that the law maker in
enacting P.D. 938 in 1976 may have used lessons from the analysis of Chief Justice Castro in 1967
Philippine Acetylene case.

When P.D. 938 which exempted NPC from "all forms of taxes" was issued in May 1976, the so-called
oil crunch had already drastically pushed up crude oil Prices from about $1.00 per bbl in 1971 to
about $10 and a peak (as it turned out) of about $34 per bbl in 1981. In 1974-78, NPC was operating
the Meralco thermal plants under a lease agreement. The power generated by the leased plants was
sold to Meralco for distribution to its customers. This lease and sale arrangement was entered into
for the benefit of the consuming public, by reducing the burden on the swiftly rising world crude oil
prices. This objective was achieved by the use of NPC's "tax umbrella under its Revised Charter—the
exemption from specific taxes on locally purchased fuel oil. In this context, I can not interpret P.D.
938 to have withdrawn the exemption from tax on fuel oil to which NPC was already entitled and
which exemption Government in fact was utilizing to soften the burden of high crude prices.

There is one other consideration which I consider pivotal. The taxes paid by oil companies on oil
products sold to NPC, whether paid to them by NPC or no never entered into the rates charged by
NPC to its customers not even during those periods of uncertainty engendered by the issuance of
P.D. 1931 and E. 0. 93 on NP/Cs tax status. No tax component on the fuel have been charged or
recovered by NPC through its rates.
There is an import duty on the crude oil imported by the local refineries. After the refining process,
specific and ad valorem taxes are levied on the finished products including fuel oil or residue upon
their withdrawal from the refinery. These taxes are paid by the oil companies as the manufacturer
thereof.

In selling the fuel oil to NPC, the oil companies include in their billings the duty and tax component.
NPC pays the oil companies' invoices including the duty component but net of the tax component.
NPC then applies for drawback of customs duties paid and for a credit in amount equivalent to the
tax paid (by the oil companies) on the products purchased. The tax credit is assigned to the oil
companies—as payment, in effect, of the tax component shown in the sales invoices. (NOTE: These
procedures varied over time—There were instances when NPC paid the tax component that was
shifted to it and then applied for tax credit. There were also side issues raised because of P.D. 1931
and E.O. 93 which withdrew all exemptions of government corporations. In these latter instances, the
resolutions of the Fiscal Incentives Review Board (FIRB) come into play. These incidents will not be
touched upon for purposes of this discussion).

NPC rates of electricity are structured such that changes in its cost of fuel are automatically (without
need of fresh approvals) reflected in the subsequent months billing rates.

This Fuel Cost Adjustment clause protects NPC's rate of return. If NPC should ever accept liability to
the tax and duty component on the oil products, such amount will go into its fuel cost and be passed
on to its customers through corresponding increases in rates. Since 1974, when NPC operated the
oil-fired generating stations leased from Meralco (which plants it bought in 1979), until the present
time, no tax on fuel oil ever went into NPC's electric rates.

That the exemption of NPC from the tax on fuel was not withdrawn by P.D. 938 is impressed upon me
by yet another circumstance. It is conceded that NPC at the very least, is exempt from taxes to which
it is directly liable. NPC therefore could very well have imported its fuel oil or crude residue for
burning at its thermal plants. There would have been no question in such a case as to its exemption
from all duties and taxes, even under the strictest interpretation that can be put forward. However,
at the time P.D. 938 was issued in 1976, there were already operating in the Philippines three oil
refineries. The establishment of these refineries in the Philippines involved heavy investments, were
economically desirable and enabled the country to import crude oil and process / refine the same
into the various petroleum products at a savings to the industry and the public. The refining process
produced as its largest output, in volume, fuel oil or residue, whose conventional economic use was
for burning in electric or steam generating plants. Had there been no use locally for the residue, the
oil refineries would have become largely unviable.

Again, in this circumstances, I cannot accept that P.D. 938 would have in effect forced NPC to by-pass
the local oil refineries and import its fossil fuel requirements directly in order to avail itself of its
exemption from "direct taxes." The oil refineries had to keep operating both for economic
development and national security reasons. In fact, the restoration by the FIRB of NPC's exemption
after P.D. 1931 and E.O. 93 expressly excluded direct fuel oil importations, so as not to prejudice the
continued operations of the local oil refineries.

To answer your query therefore, it is the opinion of this Department that NPC under the provisions of
its Revised Charter retains its exemption from duties and taxes imposed on the petroleum products
purchased locally and used for the generation of electricity.

The Department in issuing this ruling does so pursuant to its power and function to supervise and
control the collection of government revenues by the application and implementation of revenue
laws. It is prepared to take the measures supplemental to this ruling necessary to carry the same into
full effect.

As presented rather extensively above, the NPC electric power rates did not carry the taxes and
duties paid on the fuel oil it used. The point is that while these levies were in fact paid to the
government, no part thereof was recovered from the sale of electricity produced. As a consequence,
as of our most recent information, some P1.55 B in claims represent amounts for which the oil
suppliers and NPC are "out-of-pocket. There would have to be specific order to the Bureaus
concerned for the resumption of the processing of these claims."38

In the latter of June 15, 1988 of then Executive Secretary Macaraig to the then Secretary of Finance,
the said opinion ruling of the latter was confirmed and its implementation was directed.39

The Court finds and so holds that the foregoing reasons adduced in the aforestated letter of the
Secretary of Finance as confirmed by the then Executive Secretary are well-taken. When the NPC was
exempted from all forms of taxes, duties, fees, imposts and other charges, under P.D. No. 938, it
means exactly what it says, i.e., all forms of taxes including those that were imposed directly or
indirectly on petroleum products used in its operation.

Reference is made in the dissenting opinion to contrary rulings of the BIR that the exemption of the
NPC extends only to taxes for which it is directly liable and not to taxes merely shifted to it. However,
these rulings are predicated on Philippine Acytelene.

The doctrine in Philippine Acytelene decided in 1967 by this Court cannot apply to the present case.
It involved the sales tax of products the plaintiff sold to NPC from June 2, 1953 to June 30,1958 when
NPC was enjoying tax exemption from all taxes under Commonwealth Act No. 120, as amended by
Republic Act No. 358 issued on June 4, 1949 hereinabove reproduced.

In said case, this Court held, that the sales tax is due from the manufacturer and not the buyer, so
plaintiff cannot claim exemptions simply because the NPC, the buyer, was exempt.
However, on September 10, 1971, Republic Act No. 6395 was passed as the revised charter of NPC
whereby Section 13 thereof was amended by emphasizing its non-profit character and expanding the
extent of its tax exemption.

As petitioner concedes, Section 13(d) aforestated of this amendment under Republic Act No. 6345
spells out clearly the exemption of the NPC from indirect taxes. And as hereinabove stated, in P.D.
No. 380, the exemption of NPC from indirect taxes was emphasized when it was specified to include
those imposed "directly and indirectly."

Thereafter, under P.D. No. 938 the tax exemption of NPC was integrated under Section 13 defining
the same in general terms to cover "all forms of taxes, duties, fees, imposts, etc." which, as
hereinabove discussed, logically includes exemption from indirect taxes on petroleum products used
in its operation.

This is the status of the tax exemptions the NPC was enjoying when P.D. No. 1931 was passed, on the
authority of which FIRB Resolution Nos. 10-85 and 1-86 were issued, and when Executive Order No.
93 was promulgated, by which FIRB Resolution 17-87 was issued.

Thus, the ruling in Philippine Acetylene cannot apply to this case due to the different environmental
circumstances. As a matter of fact, the amendments of Section 13, under R.A. No. 6395, P.D. No, 380
and P.D. No. 838 appear to have been brought about by the earlier inconsistent rulings of the tax
agencies due to the doctrine in Philippine Acetylene, so as to leave no doubt as to the exemption of
the NPC from indirect taxes on petroleum products it uses in its operation. Effectively, said
amendments superseded if not abrogated the ruling in Philippine Acetylene that the tax exemption
of NPC should be limited to direct taxes only.

In the light of the foregoing discussion the first corollary issue must consequently be resolved in the
affirmative, that is, FIRB Resolution No. 10-85 dated February 7, 1985 and FIRB Resolution No. 1-86
dated January 7, 1986 which restored NPC's tax exemption privileges included the restoration of the
indirect tax exemption of the NPC on petroleum products it used.

On the second corollary issue as to the validity of FIRB resolution No. 17-87 dated June 24, 1987
which restored NPC's tax exemption privilege effective March 10, 1987, the Court finds that the same
is valid and effective.

It provides as follows:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That the tax and duty exemption privileges of the
National Power Corporation, including those pertaining to its domestic purchases of petroleum and
petroleum products, granted under the terms and conditions of Commonwealth Act No. 120
(Creating the National Power Corporation, defining its powers, objectives and functions, and for
other purposes), as amended, are restored effective March 10, 1987, subject to the following
conditions:

1. The restoration of the tax and duty exemption privileges does not apply to the following:

1.1. Importation of fuel oil (crude equivalent) and coal;

1.2. Commercially-funded importations (i.e., importations which include but are not limited to those
financed by the NPC's own internal funds, domestic borrowings from any source whatsoever,
borrowing from foreign-based private financial institutions, etc.); and

1.3. Interest income derived from any source.

2. The NPC shall submit to the FIRB a report of its expansion program, including details of disposition
of relieved tax and duty payments for such expansion on an annual basis or as often as the FIRB may
require it to do so. This report shall be in addition to the usual FIRB reporting requirements on
incentive availment.40

Executive Order No. 93 provides as follows—

Sec. 1. The provisions of any general or special law to the contrary notwithstanding, all tax and duty
incentives granted " to government and private entities are hereby withdrawn, except:

a) those covered by the non-impairment clause of the Constitution;

b) those conferred by effective international agreements to which the Government of the Republic of
the Philippines is a signatory;

c) those enjoyed-by enterprises registered with:

(i) the Board of Investments pursuant to Presidential Decree No. 1789, as amended;
(ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66, as amended;

(iii) the Philippine Veterans Investment Development Corporation Industrial Authority pursuant to
Presidential Decree No. 538, as amended;

d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instruction
No. 1416;

e) those conferred under the four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

(iv) the Real Property Tax Code, as amended;

f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board.

Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is
hereby authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

b) revise the scope and coverage of tax and/of duty exemption that may be restored.

c) impose conditions for the restoration of tax and/or duty exemption;

d) prescribe the date or period of effectivity of the restoration of tax and/or duty exemption;
e) formulate and submit to the President for approval, a complete system for the grant of subsidies
to deserving beneficiaries, in lieu of or in combination with the restoration of tax and duty
exemptions or preferential treatment in taxation, indicating the source of funding therefor, eligible
beneficiaries and the terms and conditions for the grant thereof taking into consideration the
international commitments of the Philippines and the necessary precautions such that the grant of
subsidies does not become the basis for countervailing action.

Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall take into
account any or all of the following considerations:

a) the effect on relative price levels;

b) relative contribution of the beneficiary to the revenue generation effort;

c) nature of the activity the beneficiary is engaged;

d) in general, the greater national interest to be served.

True it is that the then Secretary of Justice in Opinion No. 77 dated August 6, 1977 was of the view
that the powers conferred upon the FIRB by Sections 2(a), (b), (c), and (d) of Executive Order No. 93
constitute undue delegation of legislative power and is therefore unconstitutional. However, he was
overruled by the respondent Executive Secretary in a letter to the Secretary of Finance dated March
30, 1989. The Executive Secretary, by authority of the President, has the power to modify, alter or
reverse the construction of a statute given by a department secretary.41

A reading of Section 3 of said law shows that it set the policy to be the greater national interest. The
standards of the delegated power are also clearly provided for.

The required "standard" need not be expressed. In Edu vs. Ericta42 and in De la Llana vs. Alba43 this
Court held: "The standard may be either express or implied. If the former, the non-delegated
objection is easily met. The standard though does not have to be spelled out specifically. It could be
implied from the policy and purpose of the act considered as a whole."

In People vs. Rosenthal44 the broad standard of "public interest" was deemed sufficient. In Calalang
vs. Williams,45, it was "public welfare" and in Cervantes vs. Auditor General,46 it was the purpose of
promotion of "simplicity, economy and efficiency." And, implied from the purpose of the law as a
whole, "national security" was considered sufficient standard47 and so was "protection of fish fry or
fish eggs.48
The observation of petitioner that the approval of the President was not even required in said
Executive Order of the tax exemption privilege approved by the FIRB unlike in previous similar
issuances, is not well-taken. On the contrary, under Section l(f) of Executive Order No. 93,
aforestated, such tax and duty exemptions extended by the FIRB must be approved by the President.
In this case, FIRB Resolution No. 17-87 was approved by the respondent Executive Secretary, by
authority of the President, on October 15, 1987.49

Mr. Justice Isagani A. Cruz commenting on the delegation of legislative power stated —

The latest in our jurisprudence indicates that delegation of legislative power has become the rule
and its non-delegation the exception. The reason is the increasing complexity of modern life and
many technical fields of governmental functions as in matters pertaining to tax exemptions. This is
coupled by the growing inability of the legislature to cope directly with the many problems
demanding its attention. The growth of society has ramified its activities and created peculiar and
sophisticated problems that the legislature cannot be expected reasonably to comprehend.
Specialization even in legislation has become necessary. To many of the problems attendant upon
present day undertakings, the legislature may not have the competence, let alone the interest and
the time, to provide the required direct and efficacious, not to say specific solutions.50

Thus, in the case of Tablarin vs. Gutierrez,51 this Court enunciated the rationale in favor of
delegation of legislative functions—

One thing however, is apparent in the development of the principle of separation of powers and that
is that the maxim of delegatus non potest delegare or delegati potestas non potest delegare,
adopted this practice (Delegibus et Consuetudiniis Anglia edited by G.E. Woodline, Yale University
Press, 1922, Vol. 2, p. 167) but which is also recognized in principle in the Roman Law d. 17.18.3) has
been made to adapt itself to the complexities of modern government, giving rise to the adoption,
within certain limits, of the principle of subordinate legislation, not only in the United States and
England but in practically all modern governments. (People vs. Rosenthal and Osmeña, 68 Phil. 318,
1939). Accordingly, with the growing complexities of modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of administering the laws, there is a constantly
growing tendency toward the delegation of greater power by the legislative, and toward the approval
of the practice by the Courts. (Emphasis supplied.)

The legislative authority could not or is not expected to state all the detailed situations wherein the
tax exemption privileges of persons or entities would be restored. The task may be assigned to an
administrative body like the FIRB.
Moreover, all presumptions are indulged in favor of the constitutionality and validity of the statute.
Such presumption can be overturned if its invalidity is proved beyond reasonable doubt. Otherwise,
a liberal interpretation in favor of constitutionality of legislation should be adopted.52

E.O. No. 93 is complete in itself and constitutes a valid delegation of legislative power to the FIRB
And as above discussed, the tax exemption privilege that was restored to NPC by FIRB Resolution No.
17-87 of June 1987 includes exemption from indirect taxes and duties on petroleum products used in
its operation.

Indeed, the validity of Executive Order No. 93 as well as of FIRB Resolution No. 17-87 has been
upheld in Albay.53

In the dissenting opinion of Mr. Justice Cruz, it is stated that P.D. Nos. 1931 and 1955 issued by
President Marcos in 1984 are invalid as they were presumably promulgated under the infamous
Amendment No. 6 and that as they cover tax exemption, under Section 17(4), Article VIII of the 1973
Constitution, the same cannot be passed "without the concurrence of the majority of all the
members of the Batasan Pambansa." And, even conceding that the reservation of legislative power
in the President was valid, it is opined that it was not validly exercised as there is no showing that
such presidential encroachment was justified under the conditions then existing. Consequently, it is
concluded that Executive Order No. 93, which was intended to implement said decrees, is also illegal.
The authority of the President to sub-delegate to the FIRB powers delegated to him is also
questioned.

In Albay,54 as above stated, this Court upheld the validity of P.D. Nos. 776 and 1931. The latter
decree withdrew tax exemptions of government-owned or controlled corporations including their
subsidiaries but authorized the FIRB to restore the same. Nevertheless, in Albay, as above-discussed,
this Court ruled that the tax exemptions under FIRB Resolution Nos. 10-85 and 1-86 cannot be
enforced as said resolutions were only recommendatory and were not duly approved by the
President of the Philippines as required by P.D. No. 776.55 The Court also sustained in Albay the
validity of Executive Order No. 93, and of the tax exemptions restored under FIRB Resolution No. 17-
87 which was issued pursuant thereto, as it was duly approved by the President as required by said
executive order.

Moreover, under Section 3, Article XVIII of the Transitory Provisions of the 1987 Constitution, it is
provided that:

All existing laws, decrees, executive orders, proclamation, letters of instructions, and other executive
issuances not inconsistent with this constitution shall remain operative until amended, repealed or
revoked.
Thus, P.D. Nos. 776 and 1931 are valid and operative unless it is shown that they are inconsistent
with the Constitution.1âwphi1

Even assuming arguendo that P.D. Nos. 776, 1931 and Executive Order No. 93 are not valid and are
unconstitutional, the result would be the same, as then the latest applicable law would be P.D. No.
938 which amended the NPC charter by granting exemption to NPC from all forms of taxes. As above
discussed, this exemption of NPC covers direct and indirect taxes on petroleum products used in its
operation. This is as it should be, if We are to hold as invalid and inoperative the withdrawal of such
tax exemptions under P.D. No. 1931 as well as under Executive Order No. 93 and the delegation of
the power to restore these exemptions to the FIRB.

The Court realizes the magnitude of the consequences of this decision. To reiterate, in Albay this
Court ruled that the NPC is liable for real estate taxes as of June 11, 1984 (the date of promulgation
of P.D. No. 1931) when NPC had ceased to enjoy tax exemption privileges since FIRB Resolution Nos.
1085 and 1-86 were not validly issued. The real estate tax liability of NPC from June 11, 1984 to
December 1, 1990 is estimated to amount to P7.49 billion plus another P4.76 billion in fuel import
duties the firm had earlier paid to the government which the NPC now proposed to pass on to the
consumers by another 33-centavo increase per kilowatt hour in power rates on top of the 17-centavo
increase per kilowatt hour that took effect just over a week ago.,56 Hence, another case has been
filed in this Court to stop this proposed increase without a hearing.

As above-discussed, at the time FIRB Resolutions Nos. 10-85 and 1-86 were issued, P.D. No. 776
dated August 24, 1975 was already amended by P.D. No. 1931 ,57 wherein it is provided that such
FIRB resolutions may be approved not only by the President of the Philippines but also by the
Minister of Finance. Such resolutions were promulgated by the Minister of Finance in his own right
and also in his capacity as FIRB Chairman. Thus, a separate approval thereof by the Minister of
Finance or by the President is unnecessary.

As earlier stated a reexamination of the ruling in Albay on this aspect is therefore called for and
consequently, Albay must be considered superseded to this extent by this decision. This is because
P.D. No. 938 which is the latest amendment to the NPC charter granting the NPC exemption from all
forms of taxes certainly covers real estate taxes which are direct taxes.

This tax exemption is intended not only to insure that the NPC shall continue to generate electricity
for the country but more importantly, to assure cheaper rates to be paid by the consumers.

The allegation that this is in effect allowing tax evasion by oil companies is not quite
correct.1a\^/phi1 There are various arrangements in the payment of crude oil purchased by NPC
from oil companies. Generally, the custom duties paid by the oil companies are added to the selling
price paid by NPC. As to the specific and ad valorem taxes, they are added a part of the seller's price,
but NPC pays the price net of tax, on condition that NPC would seek a tax refund to the oil
companies. No tax component on fuel had been charged or recovered by NPC from the consumers
through its power rates.58 Thus, this is not a case of tax evasion of the oil companies but of tax relief
for the NPC. The billions of pesos involved in these exemptions will certainly inure to the ultimate
good and benefit of the consumers who are thereby spared the additional burden of increased
power rates to cover these taxes paid or to be paid by the NPC if it is held liable for the same.

The fear of the serious implication of this decision in that NPC's suppliers, importers and contractors
may claim the same privilege should be dispelled by the fact that (a) this decision particularly treats
of only the exemption of the NPC from all taxes, duties, fees, imposts and all other charges imposed
by the government on the petroleum products it used or uses for its operation; and (b) Section 13(d)
of R.A. No. 6395 and Section 13(d) of P.D. No. 380, both specifically exempt the NPC from all taxes,
duties, fees, imposts and all other charges imposed by the government on all petroleum products
used in its operation only, which is the very exemption which this Court deems to be carried over by
the passage of P.D. No. 938. As a matter of fact in Section 13(d) of P.D. No. 380 it is specified that the
aforesaid exemption from taxes, etc. covers those "directly or indirectly" imposed by the "Republic of
the Philippines, its provincies, cities, municipalities and other government agencies and
instrumentalities" on said petroleum products. The exemption therefore from direct and indirect tax
on petroleum products used by NPC cannot benefit the suppliers, importers and contractors of NPC
of other products or services.

The Court realizes the laudable objective of petitioner to improve the revenue of the government.
The amount of revenue received or expected to be received by this tax exemption is, however, not
going to any of the oil companies. There would be no loss to the government. The said amount shall
accrue to the benefit of the NPC, a government corporation, so as to enable it to sustain its
tremendous task of providing electricity for the country and at the least cost to the consumers.
Denying this tax exemption would mean hampering if not paralyzing the operations of the NPC. The
resulting increased revenue in the government will also mean increased power rates to be
shouldered by the consumers if the NPC is to survive and continue to provide our power
requirements.59 The greater interest of the people must be paramount.

WHEREFORE, the petition is DISMISSED for lack of merit. No pronouncement as to costs.

SO ORDERED.

Narvasa, Melencio-Herrera, Feliciano, Bidin, Medialdea and Regalado, JJ., concur.

Fernan C.J., No part.

Paras, J., I dissent, but the NPC should be refunded not by the consuming public but by the oil
companies for ultimately these oil companies get the benefit of the alleged tax exemption.

Padilla, J., took no part.

Separate Opinions

CRUZ, J., Dissenting:

I join Mr. Justice Abraham F. Sarmiento in his excellent dissent and would stress only the following
additional observations.

A tax exemption represents a loss of revenue to the State and must therefore not be lightly granted
or inferred. When claimed, it must be strictly construed against the taxpayer, who must prove that he
comes under the exemption rather than the rule that every one must contribute his just share in the
maintenance of the government.

In the case at bar, the ponencia would justify the tax exemption as having been validly granted under
P.D. Nos. 1931 and 1955 and Resolutions Nos. 10-85 and 1-86 of the Fiscal Incentives Review Board.
It is also asserted that FIRB Resolution No. 17-87, which restored MPC's tax exemption effective
March 10 1987, was lawfully adopted pursuant to a valid delegation of power made by Executive
Order No. 93.

When P.D. Nos. 1931 and 1955 were issued by President Marcos in 1984, the Batasang Pambansa
was already in existence and discharging its legislative powers. Presumably, these decrees were
promulgated under the infamous Amendment No. 6. Assuming that the reservation of legislative
power in the President was then valid, I submit that the power was nevertheless not validly
exercised. My reason is that the President could legislate under the said amendment only if the
Batasang Pambansa "failed or was unable to act adequately on any matter that in his judgment
required immediate action" to meet the "exigency." There is no showing that the presidential
encroachment on legislative prerogatives was justified under these conditions. Simply because the
rubber-stamp legislature then meekly submitted did not make the usurpation valid.

By these decrees, President Marcos, exercising legislative power, delegated it to himself as executive
and empowered himself and/or the Minister of Finance to restore the exemptions previously
withdrawn.

As the decrees themselves were invalid it should follow that Executive Order No. 93, which was
intended only to implement them, should also be illegal. But even assuming the legality of the said
decrees, I would still question the authority of the President to sub-delegate the powers delegated to
her thereunder.
Such sub-delegation was not permissible because potestas delegata non delegari potest Even if we
were to disregard the opinion of Secretary of Justice Sedfrey A. Ordoñez that there were no sufficient
standards in Executive Order No. 93 (although he was reversed on this legal questions by the
Executive Secretary), the President's delegated authority could still not be extended to the FIRB
which was not a delegate of the legislature.

It is remarkable that the respondents could seriously argue that a mere administrative body like the
FIRB can exercise the legislative power to grant tax exemptions. I am not aware that any other such
agency, including the Bureau of Internal Revenue and the Bureau of Customs, has this authority. An
administrative body can apply tax exemptions under existing law but it cannot itself create such
exemptions. This is a prerogative of the Congress that cannot be usurped by or even delegated to a
mere administrative body.

In fact, the decrees clearly provided that it was the President and/or the Minister of Finance who
could restore the exemption, subject only to the recommendation of the FIRB. The FIRB was not
empowered to directly restore the exemption. And even if it be accepted that the FIRB merely
recommended the exemption, which was approved by the Finance Minister, there would still be the
curious anomaly of Minister Virata upholding his very own act as chairman of the FIRB.

This Court called it a "travesty of justice" when in Zambales Chromite vs. Court of Appeals, 94 SCRA
261, the Secretary of Agriculture and Natural Resources approved a decision earlier rendered by him
when he was the Director of Mines, and in Anzaldo vs. Clave, 119 SCRA 353, where the respondent,
as presidential executive assistant, affirmed on appeal to Malacañang his own decision as chairman
of the Civil Service Commission.

It is important to note that when P.D. Nos. 1931 and 1955 were issued by President Marcos, the rule
under the 1973 Constitution was that "no law granting a tax exemption shall be passed without the
concurrence of a majority of all the members of the Batasang Pambansa." (Art. VIII, Sec. 17[4]). Laws
are usually passed by only a majority of those present in the chamber, there being a quorum, but not
where it grants a tax exemption. This requires an absolute majority. Yet, despite this stringent
limitation on the national legislature itself, such stricture does not inhibit the President and the FIRB
in the exercise of their delegated power. It would seem that the delegate has more power than the
principal. Significantly, this limitation is maintained in the present Constitution under Article VI,
Section 28(4).

The ponencia holds that the rule of strict construction is not applicable where the grantee is an
agency of the government itself, like the MPC in the case before us. I notice, however, that the
ultimate beneficiaries of the expected tax credit will be the oil companies, which certainly are not
part of the Republic of the Philippines. As the tax refunds will not be enjoyed by the MPC itself, I see
no reason why we should be exceptionally lenient in applying the exception.
The tax credits involved in this petition are tremendous—no less than Pl.58 billion. This amount
could go a long way in improving the national economy and the well-being of the Filipino people,
who deserve the continuing solicitude of the government, including this Court. I respectfully submit
that it is to them that we owe our foremost loyalty.

Gutierrez, Jr., J., concurs

SARMIENTO, J., dissenting:

I would like to point out specifically two things in connection with the majority's disposition as to: (1)
Finance Incentives Review Board FIRB Resolutions Nos. 10-85 and 186; and (2) the National Power
Corporation's tax exemption vis-a-vis our decision in the case of Philippine Acetylene Co., Inc. vs.
Commission of Internal Revenue,1 and in the light of the provisions of its charter, Republic Act No.
6395, and the various amendments entered into it.

(1)

On pages 20-23 of the Decision, the majority suggests that FIRB Resolutions Nos. 10-85 and 1-86 had
validly restored the National Power Corporation's tax exemption privileges, which Presidential
Decree No. 1931 had meanwhile suspended. I wish to stress that in the case of National Power
Corporation vs. Province of Albay,2 the Court held that the FIRB Resolutions Nos. 10-85 and 1-86 had
the bare force of recommendations and did not operate as a restoration, in the absence of an
approval by the President (in then President Marcos' exercise of legislative powers), of tax
exemptions. The Court noted that there is nothing in Presidential Decree No. 776, the FIRB charter,
conferring on it the authority to grant or restore exemptions, other than to make recommendations
on what exemptions to grant or restore. I quote:

xxx xxx xxx

It is to be pointed out that under Presidential Decree No. 776, the power of the FIRB was merely to
"recommend to the President of the Philippines and for reasons of compatibility with the declared
economic policy, the withdrawal, modification, revocation or suspension of the enforceability of any
of the abovecited statutory subsidies or tax exemption grants, except those granted by the
Constitution." It has no authority to impose taxes or revoke existing ones, which, after all, under the
Constitution, only the legislature may accomplish. . . .3

xxx xxx xxx

As the Court held there, it was only on March 10, 1987 that the restoration became effective, not
because Resolutions Nos. 10-85 and 1-86 decreed a restoration, but because of Resolution No. 17-87
which, on the other hand, carried the approval of the Office of the President .4 (FIRB Resolution No.
17-87 made the National Power Corporation's exemption effective March 10, 1987.) Hence, the
National Power Corporation, so the Court held, was liable for payment of real property taxes to the
Province of Albay between. June 11, 1984, the date Presidential Decree No. 1931 (withdrawing its
tax exemptions) took effect, and March 10, 1987,

As far therefore as the majority in the present case rules that the National Power Corporation is also
entitled to a refund as a result of FIRB Resolutions Nos. 10-15 and 1-86, I respectfully submit that a
serious conflict has arisen.

While it is true that FIRB Resolutions Nos. 10-85 and 1-86 were signed by the Finance Minister Cesar
Virata,5 I submit nonetheless, as Albay in fact held, that the signature of the Mr. Virata is not enough
to restore an exemption. The reason is that Mr. Virata signed them (FIRB Resolutions Nos. 10-85 and
1-86) in his capacity as chairman of the Finance Incentives Review Board FIRB. I find this clear from
the very Resolutions in question:

FISCAL INCENTIVES REVIEW BOARD

RESOLUTION NO. 10-85

BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That:

1. Effective June 11, 1984, the tax and duty exemption privileges enjoyed by the National Power
Corporation under C.A. No. 120 as amended are restored up to June 30, 1985.

2. Provided, That this restoration does not apply to the following:

a. importations of fuel oil (crude equivalent) and coal as per FIRB Resolution No. 1-84;

b. commercially-funded importations; and

c. interest income derived from any investment source.

3. Provided further, That in case of importations funded by international financing agreements, the
NPC is hereby required to furnish the FIRB on a periodic basis the particulars of items received or to
be received through such arrangements, for purposes of tax and duty exemption privileges.

(Sgd.) ALFREDO PIO DE RODA, JR.

Acting Minister of Finance

Acting Chairman, FIRB

FISCAL INCENTIVES REVIEW BOARD

RESOLUTION NO. 1-86

BE IT RESOLVED, AS IT IS HEREBY RESOLVED: That:

1. Effective July 1, 1985, the tax and duty exemption privileges enjoyed by the National Power
Corporation (NPC) under Commonwealth Act No. 120, as amended, are restored; Provided, That
importations of fuel oil (crude oil equivalent) and coal of the herein grantee shall be subject to the
basic and additional import duties; Provided, further, That the following shall remain fully taxable:

a. Commercially-funded importations; and

b. Interest income derived by said grantee from bank deposits and yield or any other monetary
benefits from deposit substitutes, trust fund and other similar arrangements.

2. The NPC as a government corporation is exempt from the real property tax on land and
improvements owned by it provided that the beneficial use of the property is not transferred to
another pursuant to the provisions of Sec. 40(a) of the Real Property Tax Code, as amended.

(Sgd.) CESAR E.A. VIRATA

Minister of Finance

Chairman-FIRB

I respectfully submit that to say that Mr. Virata's signature is sufficient (please note that Resolution
No. 10-85 was not even signed by Mr. Virata, but rather by Mr. Alfredo Pio de Roda, Jr.) is in fact to
confer on the Board actual "restoration" or even exemption powers, because in all cases, FIRB
Resolutions are signed by Mr. Virata (or the acting chairman) in his capacity as Board Chairman. I
submit that we can not consider an FIRB Resolution as an act of Mr. Virata in his capacity as Minister
of Finance (and therefore, as a grant or restoration of tax exemption) although Mr. Virata also
happened to be concurrently, Minister of Finance, because to do so would be to blur the distinction
between the capacities in which he, Mr. Virata, actually acted. I submit that he, Mr. Virata, need have
issued separate approvals of the Resolutions in question, in his capacity as Finance Minister.

Parenthetically, on the issue of the constitutional validity of Executive Order No. 93, insofar as it
"delegates" the power to restore exemptions to the FIRB, I hold that in the first place, Executive
Order No. 93 makes no delegation at all. As the majority points out, "[u]nder Section 1 (f) of
Executive Order No. 93, aforestated, such tax and duty exemptions extended by the FIRB must be
approved by the President."6 Hence, the FIRB does not exercise any power—and as I had held, its
powers does not merely recommendatory—and it is the President who in fact exercises it. It is true
that Executive Order No. 93 has set out certain standards by which the FIRB as a reviewing body, may
act, but I do not believe that a genuine delegation question has arisen because precisely, the acts of
the Board are subject to approval by the President, in the exercise of her legislative powers under the
Freedom Constitution.7

(2)

According to the Decision, the National Power Corporation, under its charter, is also exempt from
indirect taxes, and that there is nothing irregular about what is apparently standard operating
procedure between the Corporation and the oil firms in which the latter sell to the Corporation of
"net of tax" and that thereafter, the Corporation assigns to them its tax credit.

I gather first, and with all due respect, that there has been a misunderstanding about so-called
indirect taxes and the theory of shifting taxes. In Philippine Acetylene Co., Inc., supra, the Court
intimated that there are no such things as indirect taxes for purposes of exemption, and that the
National Power Corporation's exemption from taxes can not be claimed, as well, by a manufacturer
(who sells his products to the Corporation) on the theory that the taxes he will shift will be shifted to
a tax-exempt entity. According to the Court, "the purchaser does not pay the tax . . . [h]e pays or may
pay the seller more for the goods because of the seller's obligation, but that is all and the amount
added because of the tax is paid to get the goods and for nothing else."8

It is true that a tax may be shifted, that is, to enable the payor to escape its effects by adding it to the
price, thereby transferring the burden to the purchaser of whom the incidence of the tax settles
(indirect tax). I submit, however, that it is only for purposes of escape from taxation. As Acetylene
has clarified, the tax which the manufacturer is liable to pay directly under a statute is still a personal
tax and in "passing and tax on" to the purchaser, he does not really make the latter pay the tax, and
what the latter pays actually is just the price. Thus, for purposes of exemption, and so Acetylene tells
us, the manufacturer can not claim one because the purchaser happens to be exempted from taxes.
Mutatis mutandis and so I respectfully submit, the purchaser can not be allowed to accept the goods
"net of tax" because it never paid for the tax in the first place, and was never liable therefor in the
second place.

According to the majority, Philippine Acetylene has been "abrogated," and the majority points to the
various amendments to the charter of the National Power Corporation as authority for its view.

First, there is nothing in those amendments that would remotely point to this conclusion.

Second, Acetylene's pronouncement is founded on the very science of taxation—that indirect taxes
are no taxes for purposes of exemption, and that consequently, one who did not pay taxes can not
claim an exemption although the price he paid for the goods included taxes. To enable him to claim
an exemption, as the majority would now enable him (Acetylene having been "abrogated"), is, I
submit, to defeat the very laws of science.

The theory of "indirect taxes" and that no exemption is possible therefrom, so I reiterate, are well-
settled concepts of taxation, as the law of supply and demand is to the law of economics. A President
is said (unfairly) to have attempted it, but one can not repeal the law on supply and demand.

I do not find the National Power Corporation's alleged exemption from indirect tax evident, as the
majority finds it evident, from the Corporation's charter, Republic Act No. 6395, as amended by
Presidential Decrees Nos. 380 and 938. It is true that since Commonwealth Act No. 120 (the
Corporation's original charter, which Republic Act No. 6395 repealed), the Corporation has enjoyed a
"preferential tax treatment," I seriously doubt, however, whether or not that preference embraces
"indirect taxes" as well—which, as I said, are no taxes for purposes of claims for exemptions by the
"indirect payor." And albeit Presidential Decree No. 938 refers to "all forms of taxes," I can not take
that to include, as a matter of logic, "indirect taxes," and as discussed above, that scenario is not
possible.

I quite agree that the legislative intent, based on a perusal of Republic Act No. 6395 and subsequent
amendatory statutes was to give the National Power Corporation a broad tax preference on account
of the vital functions it performs, indeed, "to enable the Corporation to pay the indebtedness and
obligation and in furtherance and effective implementation of the policy initiated" by its charter. I
submit, however, that that alone can not entitle the Corporation to claim an exemption for indirect
taxes. I also believe that its existing exemption from direct taxes is sufficient to serve the legislative
purpose.

The fact that the National Power Corporation has been tasked with an enormous undertaking "to
improve," as the majority puts it, "the quality of life of the people" pursuant to constitutional
mandates is no reason, I believe, to include indirect taxes within the coverage of its preferential tax
treatment. After all, it is exempt from direct taxes, and the fact that it will be made to shoulder
indirect taxes (which are no taxes) will not defeat its exemption or frustrate the intent of both
legislature and Constitution.

I do not think that the majority can point to the various executive constructions as authorities for its
own construction. First and foremost, with respect to then Commissioner Ruben Ancheta's ruling of
May 8, 1985 cited on pages 32-33 of the Decision, it is notable that in his BIR Ruling No. 183-85,
dated October 22, 1985, he in fact reversed himself, I quote:

In reply please be informed that after a re-study of Section 13, R.A. 6395 as amended by P.D. No.
938, this Office is of the opinion, and so holds, that the scope of the tax exemption privilege enjoyed
by NPC under said section covers only taxes for which it is directly liable and not on taxes which are
merely shifted to it. (Phil. Acetylene Co. vs. Comm. of Internal Revenue, 20 SCRA 1056,1967). Since
contractor's tax is directly payable by the contractor, not by NPC, your request for exemption, based
on the stipulation in the aforesaid contract that NPC shall assume payment of your contractor's tax
liability, cannot be granted for lack of legal basis. (emphasis added)9

In yet another ruling, then Commissioner Bienvenido Tan likewise declared, in connection with an
apparent claim for refund by the Philippine Airlines, that "PAL's tax exemption is limited to taxes for
which PAL is directly liable, and that the payment of specific and ad valorem taxes on petroleum
products is a direct liability of the manufacturer or producer thereof . . ."10

Again, under BIR Ruling No. 152-86, the Bureau of Internal Revenue reiterated, as to the National
Power Corporation's claim for a refund I quote:

. . . this Office has maintained the stand that your tax exemption privileges covers only taxes for
which you are directly liable.11

Per BIR Ruling No. 70-043, dated August 27, 1970, the Bureau likewise held that the term "all forms
of taxes" covers only direct taxes,12

In his letter addressed to former BIR Commissioner Tan, Atty. Reynoso Floreza, BIR Assistant
Commissioner for Legal, opposed Caltex Philippines' claim for a P58-million refund, and although the
Commissioner at that time hedged he was later persuaded by Special Assistant Abraham De la Viña
and in fact, instructed Atty. De la Viña to "prepare [the] corresponding notice to NPC and Caltex"13
to inform them that their claim has been denied. (Although strangely, he changed his mind later.)

Hence, I do not think that we can judiciously rely on executive construction because executive
construction has been at best, erratic, and at worst, conflicting.
I do not find that majority's historical construction a reliable yardstick in this case, for if the historical
development of the law were any indication, the legislative intent is, on the contrary, to exclude
indirect taxes from the coverage of the National Power Corporation's tax exemption. Thus, under
Commonwealth Act No. 120, the Corporation was made exempt from the payment of all taxes in
connection with the issuance of bonds. Under Republic Act No. 358, it was made exempt from the
payment of all taxes, duties, fees, imposts, and charges of the national and local governments.

Under Republic Act No. 6395, the National Power Corporation was further declared exempt:

(e) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities,
on all petroleum products used by the Corporation . . .

By virtue of Presidential Decree No. 380, it was made exempt:

(d) from all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the
Republic of the Philippines, its provinces, cities, municipalities and other government agencies and
instrumentalities, on all petroleum products used by the corporation in the generation, transmission,
utilization and sale of electric power.

By virtue however of Presidential Decree No. 938, reference to "indirect taxes" was omitted thus:

. . .To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective
implementation of the policy enunciated in Section One of this Act, the Corporation, including its
subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts
as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court
or administrative proceedings.

The deletion of "indirect taxes" in the Decree is, so I hold, significant, because if the intent of the law
were truly to exempt the National Power Corporation from so-called indirect taxes as well, the law
would have said so specifically, as it said so specifically in Presidential Decree No. 380.

I likewise do not think that the reference to the whereas clauses of Presidential Decree No. 938 is
warranted, in particular, the following whereas clause:
WHEREAS, in the application of the tax exemption provisions of the Revised Charter, the non-profit
character of NPC has not been fully utilized because of the restrictive interpretations of the taxing
agencies of the government on said provisions;

I am not certain whether it can be basis for a "liberal" construction. I am more inclined to believe
that the term "restrictive interpretations" refers to BIR rulings confining the exemption to the
Corporation alone (but not its subsidiaries), and not, rather, to the scope of its exemption. Indeed, as
Presidential Decree No. 938 specifically declares, "the Corporation, including its subsidiaries, is
hereby declared exempt . . . "14

The majority expresses the apprehension that if the National Power Corporation were to be made to
assume "indirect taxes," the latter will be forced to pass them on to the consuming public.

First, and as Acetylene held, we do not even know if the payor will in fact "pass them on." "A
decision to absorb the burden of the tax is largely a matter of economics."15 Furthermore:

In the long run a sales tax is probably shifted to the consumer, but during the period when supply is
being adjusted to changes in demand it must be in part absorbed. In practice the businessman will
treat the levy as an added cost of operation and distribute it over his sales as he would any other
cost, increasing by more than the amount of the tax prices of goods demand for which will be least
affected and leaving other prices unchanged. 47 Harv. Ld. Rev. 860, 869 (1934).16

It therefore appears to me that any talk of the public ultimately absorbing the tax is pure speculation.

Second, it has typically been the bogeyman that business, with due respect, has invoked to avoid the
payment of tax. And to be sure, the populist allure of that argument has appealed to many, yet it has
probably also obscured what is as fundamental as protecting consumers—preserving public revenue,
the very lifeblood of the nation. I am afraid that this is not healthy policy, and what occurs to me—
and what indeed leaves me very uncomfortable—is that by the stroke of the pen, we should have in
fact given away P13,750,214,639.00 (so it is said) of legitimate government money.

According moreover to Committee Report No. 474 of the Senate, "NPC itself says that it does not use
taxes to increase prices of electricity to consumers because the cost of electric generation and sale
already takes into account the tax component. "17

I can not accept finally, what to me is an unabashed effort by the oil firms to evade taxes, the
arrangement (as I gather from the Decision) between the National Power Corporation and the oil
companies in which the former assigns its tax credit to the latter. I also presume that this is the
natural consequence of the "understanding," as I discussed above, to purchase oil "net of tax"
between NAPOCOR and the oil firms, because logically, the latter will look for other sources from
which to recoup the taxes they had failed to shift and recover their losses as a result. According to
the Decision, no tax is left unpaid because they have been pre-paid before the oil is delivered to the
National Power Corporation. But whatever taxes are paid are in fact wiped out because the
subsequent credit transfer will enable the oil companies to recover the taxes pre- paid.

According to the majority, "[t]his is not a case of tax evasion of the oil companies but a tax relief for
the NPC."18 The problem, precisely, is that while it is NPC which is entitled to "tax relief," the
arrangement between NPC and the oil companies has enabled instead the latter to enjoy relief —
when relief is due to NPC alone. The point still remains that no tax money actually reaches our
coffers because as I said, that arrangement enables them to wipe it out. If the NPC were the direct
importer, I would then have no reason to object, after all, the NPC is exempt from direct taxation and
secondly, the money it is paying to finance its importations belongs to the government. The law,
however, gave the exemption to NPC, not the oil companies.

According to the Decision: "The amount of revenue received or expected to be received by this tax
exemption is, however, not going to any of the oil companies. . . "19 and that "[t]here would be no
loss to the government."20

With due respect to the majority, it is erroneous, if not misleading, to say that no money is going to
the oil companies and that the government is not losing anything. Definitely, the tax credit
assignment arrangement between the NPC and the oil firms enables the latter to recover revenue
they have paid. And definitely, that means loss for the government.

The majority is concerned with the high cost of electricity. The increasing cost of electricity is
however due to myriad factors, foremost of which, is the devaluation of the peso21 and as recent
events have suggested, "miscalculations" at the top levels of NPC. I can not however attribute it, as
the majority in all earnest attributes it, to the fact, far-fetched as it is, that the NPC has not been
allowed to enjoy exemption from indirect taxes.

Tax exemptions furthermore are a matter of personal privilege of the grantee. It has been held that
as such, they can not be assigned, unless the statute granting them permits an assignment.22

While "shifting the burden of tax" is a permissible method of avoiding a tax, evading it is a totally
different matter. And while I agree with the National Power Corporation should be given the widest
financial assistance possible, assistance should not be an excuse for plain tax evasion, if not tax fraud,
by Big Business, in particular, Big Oil.

(3) Postscripts
With all due respect, I do not think that the majority has appreciated enough the serious implications
of its decision—to the contrary, in particular, its shrinking coffers. I do not think that we are, after all,
talking here of "simple" billions, but in fact, billions upon billions in lost revenue looming large.

I am also afraid that the majority is not quite aware that it is setting a precedent not only for the oil
companies but in fact, for the National Power Corporation's suppliers, importers, and contractors.
Although I am not, as of this writing, aware of their exact number or the precise amount the National
Power Corporation has spent in payment of supplies and equipment, I can imagine that the
Corporation's assets consisting of those supplies and equipment, machines and machinery, are worth
no fewer than billions.

With this precedent, there is no stopping indeed the NAPOCOR's suppliers, from makers of storage
tanks, steel towers, cables and cable poles, to builders of dikes, to layers of pipelines, and pipes, from
claiming the same privilege.

There is no stopping the NPC's contractors, from suppliers of cement for plant fixtures and lumber
for edifices, to the very engineers and technicians who designed them, from demanding equal rights.

There will be no stopping the Corporation's transporters, from container van and rig owners to
suppliers of service vehicles of NPC executives, from demanding the privilege.

What is to stop, indeed, caterers of food served in board meetings or in NAPOCOR cafeterias from
asking for exemption, since food billed includes sales taxes shifted to a tax-exempt entity and,
following the theory of the majority, taxes that may be refunded?

What is, indeed, to stop all imagined claimants from demanding all imagined claims, since as we are
aware, the rule of taxation—and consequently, tax exemption—is uniform and equitable?23

Of course, we have discussed NAPOCOR alone; we have not touched other tax-exempt entities, say,
the Marinduque Mining Corporation and Nonoc Mining Corporation. Per existing records and per
reliable information, Caltex Philippines, between 1979 and 1986, successfully recovered the total
sum of P49,835,791.00. In 1985, Caltex was said to have been refunded the amount of P4,217,423.00
arising from the same tax arrangement with the Nonoc Mining Corporation.

Again, what is stopping—by virtue of this decision not—only the oil firms but also Marinduque's and
Nonoc's suppliers, importers, and ridiculously, caterers, from claiming a future refund?
The Decision, to be sure, attempts to allay these apprehensions and "dispel[s] [them] by the fact that
. . . the decision particularly treats of only the exemption of the NPC from all taxes, duties, fees,
imposts and all other charges imposed by the government on the petroleum products it need or uses
for its operation . . . "24 Firstly, under Presidential Decree No. 938, the supposed tax exemption of
the National Power Corporation covers "all forms of taxes.25 If therefore "all forms of taxes covers as
well indirect taxes because Presidential Decree No. 380 supposedly extended the Corporation's
exemption to indirect taxes (and the majority "deems Presidential Decree No. 380 to have been
carried over to Presidential Decree No. 938"), then the conclusion seems in escapable—following the
logic of the majority—that the Corporation is exempt from all indirect taxes, on petroleum and any
and all other products and services.

The fact of the matter, second of all, is that the Decision is premised on the alleged exemption of the
National Power Corporation from all forms of taxes, meaning, direct and indirect taxes. It is a premise
that is allegedly supported by statutory history, and the legislature's alleged intent to grant the
Corporation awesome exemptions. If that were the case, the Corporation must logically be exempt
from all kinds of taxes payable. Logically, the majority can not limit the sweep of its pronouncement
by exempting the National Power Corporation from "indirect taxes on petroleum" alone. What is
sauce for the goose (taxes on petroleum) is also sauce for the gander (all other taxes).

I still would have reason for my fears.

I can not, in all candor, accept the majority's efforts, and going back to the Corporation's charters, to
"carry over," in particular, Section 13(d) of Presidential Decree No. 380, to Presidential Decree No.
938. First of all, if Presidential Decree No. 938 meant to absorb Presidential Decree No. 380 it would
have said so specifically, or at the very least, left it alone. Obviously, Presidential Decree No. 938
meant otherwise, to begin with, because it is precisely an amendatory statute. Secondly, a "carry-
over" would have allowed this Court to make law, so only it can fit in its theories.

The country has gone to lengths fashioning an elaborate tax system and an efficient tax collection
machinery. Planners' efforts have seen various shifts in the taxing system, from specific, to ad
valorem, to value-added taxation, purportedly to minimize collection. For this year, the Bureau of
Internal Revenue has a collection target of P130 billion, and significantly, it has been unrelenting in
its tax and tax-consciousness drive. I am not prepared to cite numbers but I figure that the money it
will lose by virtue of this Decision is a meaningful chunk off its target, and a significant setback to the
government's programs.

I am afraid that by this Decision, the majority has ignored the forest (the welfare of the entire nation)
in favor of a tree (the welfare of a government corporation). The issue, in my opinion, is not the
viability of the National Power Corporation—as if the fate of the nation depended alone on it—but
the very survival of the Republic. I am not of course to be mistaken as being less concerned with
NAPOCOR's fiscal chart. The picture, as I see it however, is that we are in fact assisting the oil
companies, out of that alleged concern, in evading taxes at the expense, needless to state, of our
coffers. I do not think that that is a question of legal hermeneutics, but rather, of plain love of
country.

Griño-Aquino, Davide, Jr. and Gutierrez, Jr., JJ., concur

Footnotes

55 P.D. No. 1955 was issued effective October 15, 1984 providing for the withdrawal of tax
exemptions of private business enterprises and/or persons engaged in any economic activity. It is not
relevant to this case which involves a government corporation.

57 Please see Sec. 5 of P.D. No. 1931 which provide that all other laws, decrees, etc. inconsistent with
the same decree are "thereby repealed, amended or modified accordingly."

7 Please note that under the 1987 Constitution, tax exemptions may be granted alone by Congress
(CONST., art. VI, sec. 28, par. 4.) Unless and until Congress, however, repeals Executive Order No. 93,
the President may continue to grant exemptions.