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G.R. No. 106611 July 21, 1994
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF
APPEALS, CITYTRUST BANKING CORPORATION and COURT OF TAX APPEALS,
respondents.
The Solicitor General for petitioner.
Palaez, Adriano & Gregorio for private respondent.
REGALADO, J.:
The judicial proceedings over the present controversy commenced
with CTA Case No. 4099, wherein the Court of Tax Appeals ordered
herein petitioner Commissioner of Internal Revenue to grant a
refund to herein private respondent Citytrust Banking Corporation
(Citytrust) in the amount of P13,314,506.14, representing its
overpaid income taxes for 1984 and 1985, but denied its claim for
the alleged refundable amount reflected in its 1983 income tax
return on the ground of prescription. 1 That judgment of the tax
court was affirmed by respondent Court of Appeals in its judgment
in CA-G.R. SP No. 26839. 2 The case was then elevated to us in the
present petition for review on certiorari wherein the latter
judgment is impugned and sought to be nullified and/or set
aside.
It appears that in a letter dated August 26, 1986, herein
private respondent corporation filed a claim for refund with the
Bureau of Internal Revenue (BIR) in the amount of P19,971,745.00
representing the alleged aggregate of the excess of its
carried-over total quarterly payments over the actual income tax
due, plus carried-over withholding tax payments on government
securities and rental income, as computed in its final income tax
return for the calendar year ending December 31, 1985. 3
Two days later, or on August 28, 1986, in order to interrupt the
running of the prescriptive period, Citytrust filed a petition with
the Court of Tax Appeals, docketed therein as CTA Case No. 4099,
claiming the refund of its income tax overpayments for the years
1983, 1984 and 1985 in the total amount of P19,971,745.00. 4
In the answer filed by the Office of the Solicitor General, for
and in behalf of therein respondent commissioner, it was asserted
that the mere averment that Citytrust incurred a net loss in 1985
does not ipso facto merit a refund; that the amounts of
P6,611,223.00, P1,959,514.00 and P28,238.00 claimed by Citytrust as
1983 income tax overpayment, taxes withheld on proceeds of
government securities investments, as well as on rental income,
respectively, are not properly documented; that assuming arguendo
that petitioner is entitled to refund, the right to claim the same
has prescribed with respect to income tax payments prior to August
28, 1984, pursuant to Sections 292 and 295 of the National Internal
Revenue Code of 1977, as amended, since the petition was filed only
on August 28, 1986. 5
On February 20, 1991, the case was submitted for decision based
solely on the pleadings and evidence submitted by herein private
respondent Citytrust. Herein petitioner could not present any
evidence by reason of the repeated failure of the Tax Credit/Refund
Division of
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the BIR to transmit the records of the case, as well as the
investigation report thereon, to the Solicitor General. 6
However, on June 24, 1991, herein petitioner filed with the tax
court a manifestation and motion praying for the suspension of the
proceedings in the said case on the ground that the claim of
Citytrust for tax refund in the amount of P19,971,745.00 was
already being processed by the Tax Credit/Refund Division of the
BIR, and that said bureau was only awaiting the submission by
Citytrust of the required confirmation receipts which would show
whether or not the aforestated amount was actually paid and
remitted to the BIR. 7
Citytrust filed an opposition thereto, contending that since the
Court of Tax Appeals already acquired jurisdiction over the case,
it could no longer be divested of the same; and, further, that the
proceedings therein could not be suspended by the mere fact that
the claim for refund was being administratively processed,
especially where the case had already been submitted for decision.
It also argued that the BIR had already conducted an audit, citing
therefor Exhibits Y, Y-1, Y-2 and Y-3 adduced in the case, which
clearly showed that there was an overpayment of income taxes and
for which a tax credit or refund was due to Citytrust. The
Foregoing exhibits are allegedly conclusive proof of and an
admission by herein petitioner that there had been an overpayment
of income taxes. 8
The tax court denied the motion to suspend proceedings on the
ground that the case had already been submitted for decision since
February 20, 1991. 9
Thereafter, said court rendered its decision in the case, the
decretal portion of which declares:
WHEREFORE, in view of the foregoing, petitioner is entitled to a
refund but only for the overpaid taxes incurred in 1984 and 1985.
The refundable amount as shown in its 1983 income tax return is
hereby denied on the ground of prescription. Respondent is hereby
ordered to grant a refund to petitioner Citytrust Banking Corp. in
the amount of P13,314,506.14 representing the overpaid income taxes
for 1984 and 1985, recomputed as follows:
1984 Income tax due P 4,715,533.00 Less: 1984 Quarterly payments
P 16,214,599.00* 1984 Tax Credits W/T on int. on gov't. sec.
1,921,245.37* W/T on rental inc. 26,604.30* 18,162,448.67 Tax
Overpayment (13,446,915.67) Less: FCDU payable 150,252.00 Amount
refundable for 1984 P (13,296,663.67) 1985 Income tax due (loss) P
0 Less: W/T on rentals 36,716.47* Tax Overpayment (36,716.47)*
Less: FCDU payable 18,874.00 Amount Refundable for 1985 P
(17,842.47)
* Note:
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These credits are smaller than the claimed amount because only
the above figures are well supported by the various exhibits
presented during the hearing.
No pronouncement as to costs.
SO ORDERED. 10
The order for refund was based on the following findings of the
Court of Tax Appeals: (1) the fact of withholding has been
established by the statements and certificates of withholding taxes
accomplished by herein private respondent's withholding agents, the
authenticity of which were neither disputed nor controverted by
herein petitioner; (2) no evidence was presented which could
effectively dispute the correctness of the income tax return filed
by herein respondent corporation and other material facts stated
therein; (3) no deficiency assessment was issued by herein
petitioner; and (4) there was an audit report submitted by the BIR
Assessment Branch, recommending the refund of overpaid taxes for
the years concerned (Exhibits Y to Y-3), which enjoys the
presumption of regularity in the performance of official duty.
11
A motion for the reconsideration of said decision was initially
filed by the Solicitor General on the sole ground that the
statements and certificates of taxes allegedly withheld are not
conclusive evidence of actual payment and remittance of the taxes
withheld to the BIR. 12 A supplemental motion for reconsideration
was thereafter filed, wherein it was contended for the first time
that herein private respondent had outstanding unpaid deficiency
income taxes. Petitioner alleged that through an inter-office
memorandum of the Tax Credit/Refund Division, dated August 8, 1991,
he came to know only lately that Citytrust had outstanding tax
liabilities for 1984 in the amount of P56,588,740.91 representing
deficiency income and business taxes covered by Demand/Assessment
Notice No. FAS-1-84-003291-003296. 13
Oppositions to both the basic and supplemental motions for
reconsideration were filed by private respondent Citytrust. 14
Thereafter, the Court of Tax Appeals issued a resolution denying
both motions for the reason that Section 52 (b) of the Tax Code, as
implemented by Revenue Regulation 6-85, only requires that the
claim for tax credit or refund must show that the income received
was declared as part of the gross income, and that the fact of
withholding was duly established. Moreover, with regard to the
argument raised in the supplemental motion for reconsideration
anent the deficiency tax assessment against herein petitioner, the
tax court ruled that since that matter was not raised in the
pleadings, the same cannot be considered, invoking therefor the
salutary purpose of the omnibus motion rule which is to obviate
multiplicity of motions and to discourage dilatory pleadings.
15
As indicated at the outset, a petition for review was filed by
herein petitioner with respondent Court of Appeals which in due
course promulgated its decision affirming the judgment of the Court
of Tax Appeals. Petitioner eventually elevated the case to this
Court, maintaining that said respondent court erred in affirming
the grant of the claim for refund of Citytrust, considering that,
firstly, said private respondent failed to prove and substantiate
its claim for such refund; and, secondly, the bureau's findings of
deficiency income and business tax liabilities against private
respondent for the year 1984 bars such payment. 16
After a careful review of the records, we find that under the
peculiar circumstances of this case, the ends of substantial
justice and public interest would be better subserved by the remand
of this case to the Court of Tax Appeals for further
proceedings.
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It is the sense of this Court that the BIR, represented herein
by petitioner Commissioner of Internal Revenue, was denied its day
in court by reason of the mistakes and/or negligence of its
officials and employees. It can readily be gleaned from the records
that when it was herein petitioner's turn to present evidence,
several postponements were sought by its counsel, the Solicitor
General, due to the unavailability of the necessary records which
were not transmitted by the Refund Audit Division of the BIR to
said counsel, as well as the investigation report made by the
Banks/Financing and Insurance Division of the said bureau/ despite
repeated requests. 17 It was under such a predicament and in
deference to the tax court that ultimately, said records being
still unavailable, herein petitioner's counsel was constrained to
submit the case for decision on February 20, 1991 without
presenting any evidence.
For that matter, the BIR officials and/or employees concerned
also failed to heed the order of the Court of Tax Appeals to remand
the records to it pursuant to Section 2, Rule 7 of the Rules of the
Court of Tax Appeals which provides that the Commissioner of
Internal Revenue and the Commissioner of Customs shall certify and
forward to the Court of Tax Appeals, within ten days after filing
his answer, all the records of the case in his possession, with the
pages duly numbered, and if the records are in separate folders,
then the folders shall also be numbered.
The aforestated impass came about due to the fact that, despite
the filing of the aforementioned initiatory petition in CTA Case
No. 4099 with the Court of Tax Appeals, the Tax Refund Division of
the BIR still continued to act administratively on the claim for
refund previously filed therein, instead of forwarding the records
of the case to the Court of Tax Appeals as ordered. 18
It is a long and firmly settled rule of law that the Government
is not bound by the errors committed by its agents. 19In the
performance of its governmental functions, the State cannot be
estopped by the neglect of its agent and officers. Although the
Government may generally be estopped through the affirmative acts
of public officers acting within their authority, their neglect or
omission of public duties as exemplified in this case will not and
should not produce that effect.
Nowhere is the aforestated rule more true than in the field of
taxation. 20 It is axiomatic that the Government cannot and must
not be estopped particularly in matters involving taxes. Taxes are
the lifeblood of the nation through which the government agencies
continue to operate and with which the State effects its functions
for the welfare of its constituents. 21The errors of certain
administrative officers should never be allowed to jeopardize the
Government's financial position, 22especially in the case at bar
where the amount involves millions of pesos the collection whereof,
if justified, stands to be prejudiced just because of bureaucratic
lethargy.
Further, it is also worth nothing that the Court of Tax Appeals
erred in denying petitioner's supplemental motion for
reconsideration alleging bringing to said court's attention the
existence of the deficiency income and business tax assessment
against Citytrust. The fact of such deficiency assessment is
intimately related to and inextricably intertwined with the right
of respondent bank to claim for a tax refund for the same year. To
award such refund despite the existence of that deficiency
assessment is an absurdity and a polarity in conceptual effects.
Herein private respondent cannot be entitled to refund and at the
same time be liable for a tax deficiency assessment for the same
year.
The grant of a refund is founded on the assumption that the tax
return is valid, that is, the facts stated therein are true and
correct. The deficiency assessment, although not yet final, created
a doubt as to and constitutes a challenge against the truth and
accuracy of the facts stated in said return which, by itself and
without unquestionable evidence, cannot be the basis for the grant
of the refund.
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Section 82, Chapter IX of the National Internal Revenue Code of
1977, which was the applicable law when the claim of Citytrust was
filed, provides that "(w)hen an assessment is made in case of any
list, statement, or return, which in the opinion of the
Commissioner of Internal Revenue was false or fraudulent or
contained any understatement or undervaluation, no tax collected
under such assessment shall be recovered by any suits unless it is
proved that the said list, statement, or return was not false nor
fraudulent and did not contain any understatement or
undervaluation; but this provision shall not apply to statements or
returns made or to be made in good faith regarding annual
depreciation of oil or gas wells and mines."
Moreover, to grant the refund without determination of the
proper assessment and the tax due would inevitably result in
multiplicity of proceedings or suits. If the deficiency assessment
should subsequently be upheld, the Government will be forced to
institute anew a proceeding for the recovery of erroneously
refunded taxes which recourse must be filed within the prescriptive
period of ten years after discovery of the falsity, fraud or
omission in the false or fraudulent return involved. 23 This would
necessarily require and entail additional efforts and expenses on
the part of the Government, impose a burden on and a drain of
government funds, and impede or delay the collection of much-needed
revenue for governmental operations.
Thus, to avoid multiplicity of suits and unnecessary
difficulties or expenses, it is both logically necessary and
legally appropriate that the issue of the deficiency tax assessment
against Citytrust be resolved jointly with its claim for tax
refund, to determine once and for all in a single proceeding the
true and correct amount of tax due or refundable.
In fact, as the Court of Tax Appeals itself has heretofore
conceded, 24 it would be only just and fair that the taxpayer and
the Government alike be given equal opportunities to avail of
remedies under the law to defeat each other's claim and to
determine all matters of dispute between them in one single case.
It is important to note that in determining whether or not
petitioner is entitled to the refund of the amount paid, it would
necessary to determine how much the Government is entitled to
collect as taxes. This would necessarily include the determination
of the correct liability of the taxpayer and, certainly, a
determination of this case would constitute res judicata on both
parties as to all the matters subject thereof or necessarily
involved therein.
The Court cannot end this adjudication without observing that
what caused the Government to lose its case in the tax court may
hopefully be ascribed merely to the ennui or ineptitude of
officialdom, and not to syndicated intent or corruption. The
evidential cul-de-sac in which the Solicitor General found himself
once again gives substance to the public perception and suspicion
that it is another proverbial tip in the iceberg of venality in a
government bureau which is pejoratively rated over the years. What
is so distressing, aside from the financial losses to the
Government, is the erosion of trust in a vital institution wherein
the reputations of so many honest and dedicated workers are
besmirched by the acts or omissions of a few. Hence, the liberal
view we have here taken pro hac vice, which may give some degree of
assurance that this Court will unhesitatingly react to any bane in
the government service, with a replication of such response being
likewise expected by the people from the executive authorities.
WHEREFORE, the judgment of respondent Court of Appeals in
CA-G.R. SP No. 26839 is hereby SET ASIDE and the case at bar is
REMANDED to the Court of Tax Appeals for further proceedings and
appropriate action, more particularly, the reception of evidence
for petitioner and the corresponding disposition of CTA Case No.
4099 not otherwise inconsistent with our adjudgment herein.
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SO ORDERED.
Narvasa, C.J., Padilla, Puno and Mendoza, JJ., concur.
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs. COMMISSIONER OF INTERNAL REVENUE, COURT OF TAX APPEALS and
COURT OF APPEALS, respondents.
D E C I S I O N QUISUMBING, J.:
This petition for review assails the Resolution[1] of the Court
of Appeals dated September 22, 1993, affirming the Decision[2] and
Resolution[3] of the Court of Tax Appeals which denied the claims
of the petitioner for tax refund and tax credits, and disposing as
follows:
IN VIEW OF ALL THE FOREGOING, the instant petition for review is
DENIED due course. The Decision of the Court of Tax Appeals dated
May 20, 1993 and its resolution dated July 20, 1993, are hereby
AFFIRMED in toto.
SO ORDERED.[4] The Court of Tax Appeals earlier ruled as
follows:
WHEREFORE, petitioners claim for refund/tax credit of overpaid
income tax for 1985 in the amount of P5,299,749.95 is hereby denied
for having been filed beyond the reglementary period. The 1986
claim for refund amounting to P234,077.69 is likewise denied since
petitioner has opted and in all likelihood automatically credited
the same to the succeeding year.The petition for review is
dismissed for lack of merit.
SO ORDERED.[5] The facts on record show the antecedent
circumstances pertinent to this case.
Petitioner, Philippine Bank of Communications (PBCom), a
commercial banking corporation duly organized under Philippine
laws, filed its quarterly income tax returns for the first and
second quarters of 1985, reported profits, and paid the total
income tax of P5,016,954.00. The taxes due were settled by applying
PBComs tax credit memos and accordingly, the Bureau of Internal
Revenue (BIR) issued Tax Debit Memo Nos. 0746-85 and 0747-85 for
P3,401,701.00 and P1, 615,253.00, respectively.
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Subsequently, however, PBCom suffered losses so that when it
filed its Annual Income Tax Returns for the year-ended December 31,
1985, it declared a net loss ofP25,317,228.00, thereby showing no
income tax liability. For the succeeding year, ending December 31,
1986, the petitioner likewise reported a net loss of
P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from
leased properties. The lessees withheld and remitted to the BIR
withholding creditable taxes of P282,795.50 in 1985 and P234,077.69
in 1986.
On August 7, 1987, petitioner requested the Commissioner of
Internal Revenue, among others, for a tax credit of P5,016,954.00
representing the overpayment of taxes in the first and second
quarters of 1985.
Thereafter, on July 25, 1988, petitioner filed a claim for
refund of creditable taxes withheld by their lessees from property
rentals in 1985 for P282,795.50 and in 1986 forP234,077.69.
Pending the investigation of the respondent Commissioner of
Internal Revenue, petitioner instituted a Petition for Review on
November 18, 1988 before the Court of Tax Appeals (CTA). The
petition was docketed as CTA Case No. 4309 entitled: Philippine
Bank of Communications vs. Commissioner of Internal Revenue.
The losses petitioner incurred as per the summary of petitioners
claims for refund and tax credit for 1985 and 1986, filed before
the Court of Tax Appeals, are as follows:
1985 1986 Net Income (Loss) (P25,317,228.00) (P14,129,602.00)
Tax Due NIL NIL Quarterly tax Payments Made 5,016,954.00 --- Tax
Withheld at Source 282,795.50 234,077.69
Excess Tax Payments P5,299,749.50*==============
P234,077.69==============
*CTAs decision reflects PBComs 1985 tax claim as P5,299,749.95.
A forty-five centavo difference was noted.
On May 20, 1993, the CTA rendered a decision which, as stated on
the outset, denied the request of petitioner for a tax refund or
credit in the sum amount of P5,299,749.95, on the ground that it
was filed beyond the two-year reglementary period provided for by
law. The petitioners claim for refund in 1986 amounting to
P234,077.69 was likewise denied on the assumption that it was
automatically credited by PBCom against its tax payment in the
succeeding year.
On June 22, 1993, petitioner filed a Motion for Reconsideration
of the CTAs decision but the same was denied due course for lack of
merit.[6]
Thereafter, PBCom filed a petition for review of said decision
and resolution of the CTA with the Court of Appeals. However on
September 22, 1993, the Court of Appeals
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affirmed in toto the CTAs resolution dated July 20, 1993. Hence
this petition now before us.
The issues raised by the petitioner are:
I. Whether taxpayer PBCom -- which relied in good faith on the
formal assurances of BIR in RMC No. 7-85 and did not immediately
file with the CTA a petition for review asking for the refund/tax
credit of its 1985-86 excess quarterly income tax payments -- can
be prejudiced by the subsequent BIR rejection, applied
retroactively, of its assurances in RMC No. 7-85 that the
prescriptive period for the refund/tax credit of excess quarterly
income tax payments is not two years but ten (10).[7]
II. Whether the Court of Appeals seriously erred in affirming
the CTA decision which denied PBComs claim for the refund of
P234,077.69 income tax overpaid in 1986 on the mere speculation,
without proof, that there were taxes due in 1987 and that PBCom
availed of tax-crediting that year.[8]
Simply stated, the main question is: Whether or not the Court of
Appeals erred in denying the plea for tax refund or tax credits on
the ground of prescription, despite petitioners reliance on RMC No.
7-85, changing the prescriptive period of two years to ten
years?
Petitioner argues that its claims for refund and tax credits are
not yet barred by prescription relying on the applicability of
Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The
circular states that overpaid income taxes are not covered by the
two-year prescriptive period under the tax Code and that taxpayers
may claim refund or tax credits for the excess quarterly income tax
with the BIR within ten (10) years under Article 1144 of the Civil
Code. The pertinent portions of the circular reads:
REVENUE MEMORANDUM CIRCULAR NO. 7-85
SUBJECT: PROCESSING OF REFUND OR TAX CREDIT OF EXCESS CORPORATE
INCOME TAX RESULTING FROM THE FILING OF THE FINAL ADJUSTMENT
RETURN
TO: All Internal Revenue Officers and Others Concerned
Sections 85 and 86 of the National Internal Revenue Code
provide: x x x x x x x x x
The foregoing provisions are implemented by Section 7 of Revenue
Regulations Nos. 10-77 which provide: x x x x x x x x x
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It has been observed, however, that because of the excess tax
payments, corporations file claims for recovery of overpaid income
tax with the Court of Tax Appeals within the two-year period from
the date of payment, in accordance with Sections 292 and 295 of the
National Internal Revenue Code. It is obvious that the filing of
the case in court is to preserve the judicial right of the
corporation to claim the refund or tax credit.
It should be noted, however, that this is not a case of
erroneously or illegally paid tax under the provisions of Sections
292 and 295 of the Tax Code.
In the above provision of the Regulations the corporation may
request for the refund of the overpaid income tax or claim for
automatic tax credit. To insure prompt action on corporate annual
income tax returns showing refundable amounts arising from overpaid
quarterly income taxes, this Office has promulgated Revenue
Memorandum Order No. 32-76 dated June 11, 1976, containing the
procedure in processing said returns. Under these procedures, the
returns are merely pre-audited which consist mainly of checking
mathematical accuracy of the figures of the return. After which,
the refund or tax credit is granted, and, this procedure was
adopted to facilitate immediate action on cases like this.
In this regard, therefore, there is no need to file petitions
for review in the Court of Tax Appeals in order to preserve the
right to claim refund or tax credit within the two-year period. As
already stated, actions hereon by the Bureau are immediate after
only a cursory pre-audit of the income tax returns. Moreover, a
taxpayer may recover from the Bureau of Internal Revenue excess
income tax paid under the provisions of Section 86 of the Tax Code
within 10 years from the date of payment considering that it is an
obligation created by law (Article 1144 of the Civil Code).[9]
(Emphasis supplied.)
Petitioner argues that the government is barred from asserting a
position contrary to its declared circular if it would result to
injustice to taxpayers. Citing ABS-CBN Broadcasting Corporation vs.
Court of Tax Appeals[10] petitioner claims that rulings or
circulars promulgated by the Commissioner of Internal Revenue have
no retroactive effect if it would be prejudicial to taxpayers. In
ABS-CBN case, the Court held that the government is precluded from
adopting a position inconsistent with one previously taken where
injustice would result therefrom or where there has been a
misrepresentation to the taxpayer.
Petitioner contends that Sec. 246 of the National Internal
Revenue Code explicitly provides for this rule as follows:
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Sec. 246. Non-retroactivity of rulings-- Any revocation,
modification or reversal of any of the rules and regulations
promulgated in accordance with the preceding section or any of the
rulings or circulars promulgated by the Commissioner shall not be
given retroactive application if the revocation, modification, or
reversal will be prejudicial to the taxpayers except in the
following cases:
a) where the taxpayer deliberately misstates or omits material
facts from his return or in any document required of him by the
Bureau of Internal Revenue;
b) where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which
the ruling is based;
c) where the taxpayer acted in bad faith. Respondent
Commissioner of Internal Revenue, through the Solicitor
General,
argues that the two-year prescriptive period for filing tax
cases in court concerning income tax payments of Corporations is
reckoned from the date of filing the Final Adjusted Income Tax
Return, which is generally done on April 15 following the close of
the calendar year. As precedents, respondent Commissioner cited
cases which adhered to this principle, to wit: ACCRA Investments
Corp. vs. Court of Appeals, et al.,[11] and Commissioner of
Internal Revenue vs. TMX Sales, Inc., et al..[12] Respondent
Commissioner also states that since the Final Adjusted Income Tax
Return of the petitioner for the taxable year 1985 was supposed to
be filed on April 15, 1986, the latter had only until April 15,
1988 to seek relief from the court. Further, respondent
Commissioner stresses that when the petitioner filed the case
before the CTA on November 18, 1988, the same was filed beyond the
time fixed by law, and such failure is fatal to petitioners cause
of action.
After a careful study of the records and applicable
jurisprudence on the matter, we find that, contrary to the
petitioners contention, the relaxation of revenue regulations by
RMC 7-85 is not warranted as it disregards the two-year
prescriptive period set by law.
Basic is the principle that taxes are the lifeblood of the
nation. The primary purpose is to generate funds for the State to
finance the needs of the citizenry and to advance the common
weal.[13] Due process of law under the Constitution does not
require judicial proceedings in tax cases. This must necessarily be
so because it is upon taxation that the government chiefly relies
to obtain the means to carry on its operations and it is of utmost
importance that the modes adopted to enforce the collection of
taxes levied should be summary and interfered with as little as
possible.[14]
From the same perspective, claims for refund or tax credit
should be exercised within the time fixed by law because the BIR
being an administrative body enforced to collect taxes, its
functions should not be unduly delayed or hampered by incidental
matters.
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Section 230 of the National Internal Revenue Code (NIRC) of 1977
(now Sec. 229, NIRC of 1997) provides for the prescriptive period
for filing a court proceeding for the recovery of tax erroneously
or illegally collected, viz.:
Sec. 230. Recovery of tax erroneously or illegally collected. --
No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any
sum alleged to have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed
with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be begun after the
expiration of two years from the date of payment of the tax or
penalty regardless of any supervening cause that may arise after
payment; Provided however, That the Commissioner may, even without
a written claim therefor, refund or credit any tax, where on the
face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid. (Italics
supplied)
The rule states that the taxpayer may file a claim for refund or
credit with the Commissioner of Internal Revenue, within two (2)
years after payment of tax, before any suit in CTA is commenced.
The two-year prescriptive period provided, should be computed from
the time of filing the Adjustment Return and final payment of the
tax for the year.
In Commissioner of Internal Revenue vs. Philippine American Life
Insurance Co.,[15] this Court explained the application of Sec. 230
of 1977 NIRC, as follows:
Clearly, the prescriptive period of two years should commence to
run only from the time that the refund is ascertained, which can
only be determined after a final adjustment return is accomplished.
In the present case, this date is April 16, 1984, and two years
from this date would be April 16, 1986. x x x As we have earlier
said in the TMX Sales case, Sections 68,[16] 69,[17] and 70[18] on
Quarterly Corporate Income Tax Payment and Section 321 should be
considered in conjunction with it.[19]
When the Acting Commissioner of Internal Revenue issued RMC
7-85, changing the prescriptive period of two years to ten years on
claims of excess quarterly income tax payments, such circular
created a clear inconsistency with the provision of Sec. 230 of
1977 NIRC. In so doing, the BIR did not simply interpret the law;
rather it legislated guidelines contrary to the statute passed by
Congress.
It bears repeating that Revenue memorandum-circulars are
considered administrative rulings (in the sense of more specific
and less general interpretations of tax laws) which are issued from
time to time by the Commissioner of Internal Revenue. It is widely
accepted that the interpretation placed upon a statute by the
executive officers, whose
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duty is to enforce it, is entitled to great respect by the
courts. Nevertheless, such interpretation is not conclusive and
will be ignored if judicially found to be erroneous.[20] Thus,
courts will not countenance administrative issuances that override,
instead of remaining consistent and in harmony with, the law they
seek to apply and implement.[21]
In the case of People vs. Lim,[22] it was held that rules and
regulations issued by administrative officials to implement a law
cannot go beyond the terms and provisions of the latter.
Appellant contends that Section 2 of FAO No. 37-1 is void
because it is not only inconsistent with but is contrary to the
provisions and spirit of Act. No. 4003 as amended, because whereas
the prohibition prescribed in said Fisheries Act was for any single
period of time not exceeding five years duration, FAO No. 37-1
fixed no period, that is to say, it establishes an absolute ban for
all time. This discrepancy between Act No. 4003 and FAO No. 37-1
was probably due to an oversight on the part of Secretary of
Agriculture and Natural Resources.Of course, in case of
discrepancy, the basic Act prevails, for the reason that the
regulation or rule issued to implement a law cannot go beyond the
terms and provisions of the latter. x x x In this connection, the
attention of the technical men in the offices of Department Heads
who draft rules and regulation is called to the importance and
necessity of closely following the terms and provisions of the law
which they intended to implement, this to avoid any possible
misunderstanding or confusion as in the present case.[23]
Further, fundamental is the rule that the State cannot be put in
estoppel by the mistakes or errors of its officials or agents.[24]
As pointed out by the respondent courts, the nullification of RMC
No. 7-85 issued by the Acting Commissioner of Internal Revenue is
an administrative interpretation which is not in harmony with Sec.
230 of 1977 NIRC, for being contrary to the express provision of a
statute. Hence, his interpretation could not be given weight for to
do so would, in effect, amend the statute.
As aptly stated by respondent Court of Appeals:
It is likewise argued that the Commissioner of Internal Revenue,
after promulgating RMC No. 7-85, is estopped by the principle of
non-retroactivity of BIR rulings. Again We do not agree. The
Memorandum Circular, stating that a taxpayer may recover the excess
income tax paid within 10 years from date of payment because this
is an obligation created by law, was issued by the Acting
Commissioner of Internal Revenue. On the other hand, the decision,
stating that the taxpayer should still file a claim for a refund or
tax credit and the corresponding petition for review within the
two-year prescription period, and that the lengthening of the
period of limitation on refund from two to ten years
-
would be adverse to public policy and run counter to the
positive mandate of Sec. 230, NIRC, - was the ruling and judicial
interpretation of the Court of Tax Appeals. Estoppel has no
application in the case at bar because it was not the Commissioner
of Internal Revenue who denied petitioners claim of refund or tax
credit. Rather, it was the Court of Tax Appeals who denied (albeit
correctly) the claim and in effect, ruled that the RMC No. 7-85
issued by the Commissioner of Internal Revenue is an administrative
interpretation which is out of harmony with or contrary to the
express provision of a statute (specifically Sec. 230, NIRC),
hence, cannot be given weight for to do so would in effect amend
the statute.[25]
Article 8 of the Civil Code[26] recognizes judicial decisions,
applying or interpreting statutes as part of the legal system of
the country. But administrative decisions do not enjoy that level
of recognition. A memorandum-circular of a bureau head could not
operate to vest a taxpayer with a shield against judicial action.
For there are no vested rights to speak of respecting a wrong
construction of the law by the administrative officials and such
wrong interpretation could not place the Government in estoppel to
correct or overrule the same.[27]Moreover, the non-retroactivity of
rulings by the Commissioner of Internal Revenue is not applicable
in this case because the nullity of RMC No. 7-85 was declared by
respondent courts and not by the Commissioner of Internal Revenue.
Lastly, it must be noted that, as repeatedly held by this Court, a
claim for refund is in the nature of a claim for exemption and
should be construed in strictissimi juris against the
taxpayer.[28]
On the second issue, the petitioner alleges that the Court of
Appeals seriously erred in affirming CTAs decision denying its
claim for refund of P 234,077.69 (tax overpaid in 1986), based on
mere speculation, without proof, that PBCom availed of the
automatic tax credit in 1987.
Sec. 69 of the 1977 NIRC[29] (now Sec. 76 of the 1997 NIRC)
provides that any excess of the total quarterly payments over the
actual income tax computed in the adjustment or final corporate
income tax return, shall either (a) be refunded to the corporation,
or (b) may be credited against the estimated quarterly income tax
liabilities for the quarters of the succeeding taxable year.
The corporation must signify in its annual corporate adjustment
return (by marking the option box provided in the BIR form) its
intention, whether to request for a refund or claim for an
automatic tax credit for the succeeding taxable year. To ease the
administration of tax collection, these remedies are in the
alternative, and the choice of one precludes the other.
As stated by respondent Court of Appeals:
Finally, as to the claimed refund of income tax over-paid in
1986 - the Court of Tax Appeals, after examining the adjusted final
corporate annual income tax return for taxable year 1986, found out
that petitioner opted to apply for automatic tax credit. This was
the basis used (vis-avis the fact that the 1987
-
annual corporate tax return was not offered by the petitioner as
evidence) by the CTA in concluding that petitioner had indeed
availed of and applied the automatic tax credit to the succeeding
year, hence it can no longer ask for refund, as to [sic] the two
remedies of refund and tax credit are alternative.[30]
That the petitioner opted for an automatic tax credit in
accordance with Sec. 69 of the 1977 NIRC, as specified in its 1986
Final Adjusted Income Tax Return, is a finding of fact which we
must respect. Moreover, the 1987 annual corporate tax return of the
petitioner was not offered as evidence to controvert said fact.
Thus, we are bound by the findings of fact by respondent courts,
there being no showing of gross error or abuse on their part to
disturb our reliance thereon.[31]
WHEREFORE, the petition is hereby DENIED. The decision of the
Court of Appeals appealed from is AFFIRMED, with COSTS against the
petitioner.
SO ORDERED.
G.R. No. L-23645 October 29, 1968
BENJAMIN P. GOMEZ, petitioner-appellee, vs. ENRICO PALOMAR, in
his capacity as Postmaster General, HON. BRIGIDO R. VALENCIA, in
his capacity as Secretary of Public Works and Communications, and
DOMINGO GOPEZ, in his capacity as Acting Postmaster of San
Fernando, Pampanga, respondent-appellants.
Lorenzo P. Navarro and Narvaro Belar S. Navarro for
petitioner-appellee. Office of the Solicitor General Arturo A.
Alafriz, Assistant Solicitor General Frine C. Zaballero and
Solicitor Dominador L. Quiroz for respondents-appellants.
CASTRO, J.:
This appeal puts in issue the constitutionality of Republic Act
1635,1 as amended by Republic Act 2631,2 which provides as
follows:
To help raise funds for the Philippine Tuberculosis Society, the
Director of Posts shall order for the period from August nineteen
to September thirty every year the printing and issue of
semi-postal stamps of different denominations with face value
showing the regular postage charge plus the additional amount of
five centavos for the said purpose, and during the said period, no
mail matter shall be accepted in the mails unless it bears such
semi-postal stamps: Provided, That no such additional charge of
five centavos shall be imposed on newspapers. The additional
proceeds realized from the sale of the semi-postal stamps shall
constitute a special fund and be deposited with the National
Treasury to be expended by the Philippine Tuberculosis Society in
carrying out its noble work to prevent and eradicate
tuberculosis.
The respondent Postmaster General, in implementation of the law,
thereafter issued four (4) administrative orders numbered 3 (June
20, 1958), 7 (August 9, 1958), 9 (August 28, 1958),
-
and 10 (July 15, 1960). All these administrative orders were
issued with the approval of the respondent Secretary of Public
Works and Communications.
The pertinent portions of Adm. Order 3 read as follows:
Such semi-postal stamps could not be made available during the
period from August 19 to September 30, 1957, for lack of time.
However, two denominations of such stamps, one at "5 + 5" centavos
and another at "10 + 5" centavos, will soon be released for use by
the public on their mails to be posted during the same period
starting with the year 1958.
xxx xxx xxx
During the period from August 19 to September 30 each year
starting in 1958, no mail matter of whatever class, and whether
domestic or foreign, posted at any Philippine Post Office and
addressed for delivery in this country or abroad, shall be accepted
for mailing unless it bears at least one such semi-postal stamp
showing the additional value of five centavos intended for the
Philippine Tuberculosis Society.
In the case of second-class mails and mails prepaid by means of
mail permits or impressions of postage meters, each piece of such
mail shall bear at least one such semi-postal stamp if posted
during the period above stated starting with the year 1958, in
addition to being charged the usual postage prescribed by existing
regulations. In the case of business reply envelopes and cards
mailed during said period, such stamp should be collected from the
addressees at the time of delivery. Mails entitled to franking
privilege like those from the office of the President, members of
Congress, and other offices to which such privilege has been
granted, shall each also bear one such semi-postal stamp if posted
during the said period.
Mails posted during the said period starting in 1958, which are
found in street or post-office mail boxes without the required
semi-postal stamp, shall be returned to the sender, if known, with
a notation calling for the affixing of such stamp. If the sender is
unknown, the mail matter shall be treated as nonmailable and
forwarded to the Dead Letter Office for proper disposition.
Adm. Order 7, amending the fifth paragraph of Adm. Order 3,
reads as follows:
In the case of the following categories of mail matter and mails
entitled to franking privilege which are not exempted from the
payment of the five centavos intended for the Philippine
Tuberculosis Society, such extra charge may be collected in cash,
for which official receipt (General Form No. 13, A) shall be
issued, instead of affixing the semi-postal stamp in the manner
hereinafter indicated:
1. Second-class mail. Aside from the postage at the second-class
rate, the extra charge of five centavos for the Philippine
Tuberculosis Society shall be collected on each
separately-addressed piece of second-class mail matter, and the
total sum thus collected shall be entered in the same official
receipt to be issued for the postage at the second-class rate. In
making such entry, the total number of pieces of second-class mail
posted shall be stated, thus: "Total charge for TB Fund on 100
pieces . .. P5.00." The extra charge shall be entered separate from
the postage in both of the official receipt and the Record of
Collections.
-
2. First-class and third-class mail permits. Mails to be posted
without postage affixed under permits issued by this Bureau shall
each be charged the usual postage, in addition to the five-centavo
extra charge intended for said society. The total extra charge thus
received shall be entered in the same official receipt to be issued
for the postage collected, as in subparagraph 1.
3. Metered mail. For each piece of mail matter impressed by
postage meter under metered mail permit issued by this Bureau, the
extra charge of five centavos for said society shall be collected
in cash and an official receipt issued for the total sum thus
received, in the manner indicated in subparagraph 1.
4. Business reply cards and envelopes. Upon delivery of business
reply cards and envelopes to holders of business reply permits, the
five-centavo charge intended for said society shall be collected in
cash on each reply card or envelope delivered, in addition to the
required postage which may also be paid in cash. An official
receipt shall be issued for the total postage and total extra
charge received, in the manner shown in subparagraph 1.
5. Mails entitled to franking privilege. Government agencies,
officials, and other persons entitled to the franking privilege
under existing laws may pay in cash such extra charge intended for
said society, instead of affixing the semi-postal stamps to their
mails, provided that such mails are presented at the post-office
window, where the five-centavo extra charge for said society shall
be collected on each piece of such mail matter. In such case, an
official receipt shall be issued for the total sum thus collected,
in the manner stated in subparagraph 1.
Mail under permits, metered mails and franked mails not
presented at the post-office window shall be affixed with the
necessary semi-postal stamps. If found in mail boxes without such
stamps, they shall be treated in the same way as herein provided
for other mails.
Adm. Order 9, amending Adm. Order 3, as amended, exempts
"Government and its Agencies and Instrumentalities Performing
Governmental Functions." Adm. Order 10, amending Adm. Order 3, as
amended, exempts "copies of periodical publications received for
mailing under any class of mail matter, including newspapers and
magazines admitted as second-class mail."
The FACTS. On September l5, 1963 the petitioner Benjamin P.
Gomez mailed a letter at the post office in San Fernando, Pampanga.
Because this letter, addressed to a certain Agustin Aquino of 1014
Dagohoy Street, Singalong, Manila did not bear the special anti-TB
stamp required by the statute, it was returned to the
petitioner.
In view of this development, the petitioner brough suit for
declaratory relief in the Court of First Instance of Pampanga, to
test the constitutionality of the statute, as well as the
implementing administrative orders issued, contending that it
violates the equal protection clause of the Constitution as well as
the rule of uniformity and equality of taxation. The lower court
declared the statute and the orders unconstitutional; hence this
appeal by the respondent postal authorities.
For the reasons set out in this opinion, the judgment appealed
from must be reversed.
I.
-
Before reaching the merits, we deem it necessary to dispose of
the respondents' contention that declaratory relief is unavailing
because this suit was filed after the petitioner had committed a
breach of the statute. While conceding that the mailing by the
petitioner of a letter without the additional anti-TB stamp was a
violation of Republic Act 1635, as amended, the trial court
nevertheless refused to dismiss the action on the ground that under
section 6 of Rule 64 of the Rules of Court, "If before the final
termination of the case a breach or violation of ... a statute ...
should take place, the action may thereupon be converted into an
ordinary action."
The prime specification of an action for declaratory relief is
that it must be brought "before breach or violation" of the statute
has been committed. Rule 64, section 1 so provides. Section 6 of
the same rule, which allows the court to treat an action for
declaratory relief as an ordinary action, applies only if the
breach or violation occurs after the filing of the action but
before the termination thereof.3
Hence, if, as the trial court itself admitted, there had been a
breach of the statute before the firing of this action, then indeed
the remedy of declaratory relief cannot be availed of, much less
can the suit be converted into an ordinary action.
Nor is there merit in the petitioner's argument that the mailing
of the letter in question did not constitute a breach of the
statute because the statute appears to be addressed only to postal
authorities. The statute, it is true, in terms provides that "no
mail matter shall be accepted in the mails unless it bears such
semi-postal stamps." It does not follow, however, that only postal
authorities can be guilty of violating it by accepting mails
without the payment of the anti-TB stamp. It is obvious that they
can be guilty of violating the statute only if there are people who
use the mails without paying for the additional anti-TB stamp. Just
as in bribery the mere offer constitutes a breach of the law, so in
the matter of the anti-TB stamp the mere attempt to use the mails
without the stamp constitutes a violation of the statute. It is not
required that the mail be accepted by postal authorities. That
requirement is relevant only for the purpose of fixing the
liability of postal officials.
Nevertheless, we are of the view that the petitioner's choice of
remedy is correct because this suit was filed not only with respect
to the letter which he mailed on September 15, 1963, but also with
regard to any other mail that he might send in the future. Thus, in
his complaint, the petitioner prayed that due course be given to
"other mails without the semi-postal stamps which he may deliver
for mailing ... if any, during the period covered by Republic Act
1635, as amended, as well as other mails hereafter to be sent by or
to other mailers which bear the required postage, without
collection of additional charge of five centavos prescribed by the
same Republic Act." As one whose mail was returned, the petitioner
is certainly interested in a ruling on the validity of the statute
requiring the use of additional stamps.
II.
We now consider the constitutional objections raised against the
statute and the implementing orders.
1. It is said that the statute is violative of the equal
protection clause of the Constitution. More specifically the claim
is made that it constitutes mail users into a class for the purpose
of the tax while leaving untaxed the rest of the population and
that even among postal patrons the statute discriminatorily grants
exemption to newspapers while Administrative Order 9 of the
respondent Postmaster General grants a similar exemption to offices
performing governmental functions. .
-
The five centavo charge levied by Republic Act 1635, as amended,
is in the nature of an excise tax, laid upon the exercise of a
privilege, namely, the privilege of using the mails. As such the
objections levelled against it must be viewed in the light of
applicable principles of taxation.
To begin with, it is settled that the legislature has the
inherent power to select the subjects of taxation and to grant
exemptions.4 This power has aptly been described as "of wide range
and flexibility."5 Indeed, it is said that in the field of
taxation, more than in other areas, the legislature possesses the
greatest freedom in classification.6 The reason for this is that
traditionally, classification has been a device for fitting tax
programs to local needs and usages in order to achieve an equitable
distribution of the tax burden.7
That legislative classifications must be reasonable is of course
undenied. But what the petitioner asserts is that statutory
classification of mail users must bear some reasonable relationship
to the end sought to be attained, and that absent such relationship
the selection of mail users is constitutionally impermissible. This
is altogether a different proposition. As explained in Commonwealth
v. Life Assurance Co.:8
While the principle that there must be a reasonable relationship
between classification made by the legislation and its purpose is
undoubtedly true in some contexts, it has no application to a
measure whose sole purpose is to raise revenue ... So long as the
classification imposed is based upon some standard capable of
reasonable comprehension, be that standard based upon ability to
produce revenue or some other legitimate distinction, equal
protection of the law has been afforded. See Allied Stores of Ohio,
Inc. v. Bowers, supra, 358 U.S. at 527, 79 S. Ct. at 441; Brown
Forman Co. v. Commonwealth of Kentucky, 2d U.S. 56, 573, 80 S. Ct.
578, 580 (1910).
We are not wont to invalidate legislation on equal protection
grounds except by the clearest demonstration that it sanctions
invidious discrimination, which is all that the Constitution
forbids. The remedy for unwise legislation must be sought in the
legislature. Now, the classification of mail users is not without
any reason. It is based on ability to pay, let alone the enjoyment
of a privilege, and on administrative convinience. In the
allocation of the tax burden, Congress must have concluded that the
contribution to the anti-TB fund can be assured by those whose who
can afford the use of the mails.
The classification is likewise based on considerations of
administrative convenience. For it is now a settled principle of
law that "consideration of practical administrative convenience and
cost in the administration of tax laws afford adequate ground for
imposing a tax on a well recognized and defined class."9 In the
case of the anti-TB stamps, undoubtedly, the single most important
and influential consideration that led the legislature to select
mail users as subjects of the tax is the relative ease and
convenienceof collecting the tax through the post offices. The
small amount of five centavos does not justify the great expense
and inconvenience of collecting through the regular means of
collection. On the other hand, by placing the duty of collection on
postal authorities the tax was made almost self-enforcing, with as
little cost and as little inconvenience as possible.
And then of course it is not accurate to say that the statute
constituted mail users into a class. Mail users were already a
class by themselves even before the enactment of the statue and all
that the legislature did was merely to select their class.
Legislation is essentially empiric and Republic Act 1635, as
amended, no more than reflects a distinction that exists in fact.
As Mr. Justice Frankfurter said, "to recognize differences that
exist in fact
-
is living law; to disregard [them] and concentrate on some
abstract identities is lifeless logic."10
Granted the power to select the subject of taxation, the State's
power to grant exemption must likewise be conceded as a necessary
corollary. Tax exemptions are too common in the law; they have
never been thought of as raising issues under the equal protection
clause.
It is thus erroneous for the trial court to hold that because
certain mail users are exempted from the levy the law and
administrative officials have sanctioned an invidious
discrimination offensive to the Constitution. The application of
the lower courts theory would require all mail users to be taxed, a
conclusion that is hardly tenable in the light of differences in
status of mail users. The Constitution does not require this kind
of equality.
As the United States Supreme Court has said, the legislature may
withhold the burden of the tax in order to foster what it conceives
to be a beneficent enterprise.11 This is the case of newspapers
which, under the amendment introduced by Republic Act 2631, are
exempt from the payment of the additional stamp.
As for the Government and its instrumentalities, their exemption
rests on the State's sovereign immunity from taxation. The State
cannot be taxed without its consent and such consent, being in
derogation of its sovereignty, is to be strictly construed.12
Administrative Order 9 of the respondent Postmaster General, which
lists the various offices and instrumentalities of the Government
exempt from the payment of the anti-TB stamp, is but a restatement
of this well-known principle of constitutional law.
The trial court likewise held the law invalid on the ground that
it singles out tuberculosis to the exclusion of other diseases
which, it is said, are equally a menace to public health. But it is
never a requirement of equal protection that all evils of the same
genus be eradicated or none at all.13 As this Court has had
occasion to say, "if the law presumably hits the evil where it is
most felt, it is not to be overthrown because there are other
instances to which it might have been applied."14
2. The petitioner further argues that the tax in question is
invalid, first, because it is not levied for a public purpose as no
special benefits accrue to mail users as taxpayers, and second,
because it violates the rule of uniformity in taxation.
The eradication of a dreaded disease is a public purpose, but if
by public purpose the petitioner means benefit to a taxpayer as a
return for what he pays, then it is sufficient answer to say that
the only benefit to which the taxpayer is constitutionally entitled
is that derived from his enjoyment of the privileges of living in
an organized society, established and safeguarded by the devotion
of taxes to public purposes. Any other view would preclude the
levying of taxes except as they are used to compensate for the
burden on those who pay them and would involve the abandonment of
the most fundamental principle of government that it exists
primarily to provide for the common good.15
Nor is the rule of uniformity and equality of taxation infringed
by the imposition of a flat rate rather than a graduated tax. A tax
need not be measured by the weight of the mail or the extent of the
service rendered. We have said that considerations of
administrative convenience and cost afford an adequate ground for
classification. The same considerations may induce the legislature
to impose a flat tax which in effect is a charge for the
transaction, operating equally on all persons within the class
regardless of the amount involved.16 As Mr.
-
Justice Holmes said in sustaining the validity of a stamp act
which imposed a flat rate of two cents on every $100 face value of
stock transferred:
One of the stocks was worth $30.75 a share of the face value of
$100, the other $172. The inequality of the tax, so far as actual
values are concerned, is manifest. But, here again equality in this
sense has to yield to practical considerations and usage. There
must be a fixed and indisputable mode of ascertaining a stamp tax.
In another sense, moreover, there is equality. When the taxes on
two sales are equal, the same number of shares is sold in each
case; that is to say, the same privilege is used to the same
extent. Valuation is not the only thing to be considered. As was
pointed out by the court of appeals, the familiar stamp tax of 2
cents on checks, irrespective of income or earning capacity, and
many others, illustrate the necessity and practice of sometimes
substituting count for weight ...17
According to the trial court, the money raised from the sales of
the anti-TB stamps is spent for the benefit of the Philippine
Tuberculosis Society, a private organization, without appropriation
by law. But as the Solicitor General points out, the Society is not
really the beneficiary but only the agency through which the State
acts in carrying out what is essentially a public function. The
money is treated as a special fund and as such need not be
appropriated by law.18
3. Finally, the claim is made that the statute is so broadly
drawn that to execute it the respondents had to issue
administrative orders far beyond their powers. Indeed, this is one
of the grounds on which the lower court invalidated Republic Act
1631, as amended, namely, that it constitutes an undue delegation
of legislative power.
Administrative Order 3, as amended by Administrative Orders 7
and 10, provides that for certain classes of mail matters (such as
mail permits, metered mails, business reply cards, etc.), the
five-centavo charge may be paid in cash instead of the purchase of
the anti-TB stamp. It further states that mails deposited during
the period August 19 to September 30 of each year in mail boxes
without the stamp should be returned to the sender, if known,
otherwise they should be treated as nonmailable.
It is true that the law does not expressly authorize the
collection of five centavos except through the sale of anti-TB
stamps, but such authority may be implied in so far as it may be
necessary to prevent a failure of the undertaking. The authority
given to the Postmaster General to raise funds through the mails
must be liberally construed, consistent with the principle that
where the end is required the appropriate means are given.19
The anti-TB stamp is a distinctive stamp which shows on its face
not only the amount of the additional charge but also that of the
regular postage. In the case of business reply cards, for instance,
it is obvious that to require mailers to affix the anti-TB stamp on
their cards would be to make them pay much more because the cards
likewise bear the amount of the regular postage.
It is likewise true that the statute does not provide for the
disposition of mails which do not bear the anti-TB stamp, but a
declaration therein that "no mail matter shall be accepted in the
mails unless it bears such semi-postal stamp" is a declaration that
such mail matter is nonmailable within the meaning of section 1952
of the Administrative Code. Administrative Order 7 of the
Postmaster General is but a restatement of the law for the guidance
of postal officials and employees. As for Administrative Order 9,
we have already said that in listing the offices and entities of
the Government exempt from the payment of the stamp, the
-
respondent Postmaster General merely observed an established
principle, namely, that the Government is exempt from taxation.
ACCORDINGLY, the judgment a quo is reversed, and the complaint
is dismissed, without pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Sanchez,
Angeles and Capistrano, JJ., concur. Zaldivar, J., is on leave.
Separate Opinions
FERNANDO, J., concurring:
I join fully the rest of my colleagues in the decision upholding
Republic Act No. 1635 as amended by Republic Act No. 2631 and the
majority opinion expounded with Justice Castro's usual vigor and
lucidity subject to one qualification. With all due recognition of
its inherently persuasive character, it would seem to me that the
same result could be achieved if reliance be had on police power
rather than the attribute of taxation, as the constitutional basis
for the challenged legislation.
1. For me, the state in question is an exercise of the
regulatory power connected with the performance of the public
service. I refer of course to the government postal function, one
of respectable and ancient lineage. The United States Constitution
of 1787 vests in the federal government acting through Congress the
power to establish post offices.1 The first act providing for the
organization of government departments in the Philippines, approved
Sept. 6, 1901, provided for the Bureau of Post Offices in the
Department of Commerce and Police.2 Its creation is thus a
manifestation of one of the many services in which the government
may engage for public convenience and public interest. Such being
the case, it seems that any legislation that in effect would
require increase cost of postage is well within the discretionary
authority of the government.
It may not be acting in a proprietary capacity but in fixing the
fees that it collects for the use of the mails, the broad
discretion that it enjoys is undeniable. In that sense, the
principle announced in Esteban v. Cabanatuan City,3 in an opinion
by our Chief Justice, while not precisely controlling furnishes for
me more than ample support for the validity of the challenged
legislation. Thus: "Certain exactions, imposable under an authority
other than police power, are not subject, however, to qualification
as to the amount chargeable, unless the Constitution or the
pertinent laws provide otherwise. For instance, the rates of taxes,
whether national or municipal, need not be reasonable, in the
absence of such constitutional or statutory limitation. Similarly,
when a municipal corporation fixes the fees for the use of its
properties, such as public markets, it does not wield the police
power, or even the power of taxation. Neither does it assert
governmental authority. It exercises merely a proprietary function.
And, like any private owner, it is in the absence of the
aforementioned limitation, which does not exist in the Charter of
Cabanatuan City (Republic Act No. 526) free to charge such sums as
it may deem best, regardless of the reasonableness of the amount
fixed, for the prospective lessees are free to enter into the
corresponding contract of lease, if they are agreeable to the terms
thereof or, otherwise, not enter into such contract."
-
2. It would appear likewise that an expression of one's personal
view both as to the attitude and awareness that must be displayed
by inferior tribunals when the "delicate and awesome" power of
passing on the validity of a statute would not be inappropriate.
"The Constitution is the supreme law, and statutes are written and
enforced in submission to its commands."4 It is likewise common
place in constitutional law that a party adversely affected could,
again to quote from Cardozo, "invoke, when constitutional
immunities are threatened, the judgment of the courts."5
Since the power of judicial review flows logically from the
judicial function of ascertaining the facts and applying the law
and since obviously the Constitution is the highest law before
which statutes must bend, then inferior tribunals can, in the
discharge of their judicial functions, nullify legislative acts. As
a matter of fact, in clear cases, such is not only their power but
their duty. In the language of the present Chief Justice: "In fact,
whenever the conflicting claims of the parties to a litigation
cannot properly be settled without inquiring into the validity of
an act of Congress or of either House thereof, the courts have, not
only jurisdiction to pass upon said issue but, also, the duty to do
so, which cannot be evaded without violating the fundamental law
and paving the way to its eventual destruction."6
Nonetheless, the admonition of Cooley, specially addressed to
inferior tribunals, must ever be kept in mind. Thus: "It must be
evident to any one that the power to declare a legislative
enactment void is one which the judge, conscious of the fallibility
of the human judgment, will shrink from exercising in any case
where he can conscientiously and with due regard to duty and
official oath decline the responsibility."7
There must be a caveat however to the above Cooley
pronouncement. Such should not be the case, to paraphrase Freund,
when the challenged legislation imperils freedom of the mind and of
the person, for given such an undesirable situation, "it is freedom
that commands a momentum of respect." Here then, fidelity to the
great ideal of liberty enshrined in the Constitution may require
the judiciary to take an uncompromising and militant stand. As
phrased by us in a recent decision, "if the liberty involved were
freedom of the mind or the person, the standard of its validity of
governmental acts is much more rigorous and exacting."8
So much for the appropriate judicial attitude. Now on the
question of awareness of the controlling constitutional
doctrines.
There is nothing I can add to the enlightening discussion of the
equal protection aspect as found in the majority opinion. It may
not be amiss to recall to mind, however, the language of Justice
Laurel in the leading case of People v. Vera,9 to the effect that
the basic individual right of equal protection "is a restraint on
all the three grand departments of our government and on the
subordinate instrumentalities and subdivisions thereof, and on many
constitutional powers, like the police power, taxation and eminent
domain."10 Nonetheless, no jurist was more careful in avoiding the
dire consequences to what the legislative body might have deemed
necessary to promote the ends of public welfare if the equal
protection guaranty were made to constitute an insurmountable
obstacle.
A similar sense of realism was invariably displayed by Justice
Frankfurter, as is quite evident from the various citations from
his pen found in the majority opinion. For him, it would be a
misreading of the equal protection clause to ignore actual
conditions and settled practices. Not for him the at times academic
and sterile approach to constitutional problems of this sort. Thus:
"It would be a narrow conception of jurisprudence to confine the
notion of 'laws' to
-
what is found written on the statute books, and to disregard the
gloss which life has written upon it. Settled state practice cannot
supplant constitutional guaranties, but it can establish what is
state law. The Equal Protection Clause did not write an empty
formalism into the Constitution. Deeply embedded traditional ways
of carrying out state policy, such as those of which petitioner
complains, are often tougher and truer law than the dead words of
the written text."11 This too, from the same distinguished jurist:
"The Constitution does not require things which are different in
fact or opinion to be treated in law as though they were the
same."12
Now, as to non-delegation. It is to be admitted that the problem
of non-delegation of legislative power at times occasions
difficulties. Its strict view has been announced by Justice Laurel
in the aforecited case of People v. Verain this language. Thus: "In
testing whether a statute constitutes an undue delegation of
legislative power or not, it is usual to inquire whether the
statute was complete in all its terms and provisions when it left
the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature.
.... In United States v. Ang Tang Ho ..., this court adhered to the
foregoing rule; it held an act of the legislature void in so far as
it undertook to authorize the Governor-General, in his discretion,
to issue a proclamation fixing the price of rice and to make the
sale of it in violation of the proclamation a crime."13
Only recently, the present Chief Justice reaffirmed the above
view in Pelaez v. Auditor General,14 specially where the delegation
deals not with an administrative function but one essentially and
eminently legislative in character. What could properly be
stigmatized though to quote Justice Cardozo, is delegation of
authority that is "unconfined and vagrant, one not canalized within
banks which keep it from overflowing."15
This is not the situation as it presents itself to us. What was
delegated was power not legislative in character. Justice Laurel
himself, in a later case, People v. Rosenthal,16 admitted that
within certain limits, there being a need for coping with the more
intricate problems of society, the principle of "subordinate
legislation" has been accepted, not only in the United States and
England, but in practically all modern governments. This view was
reiterated by him in a 1940 decision, Pangasinan Transportation
Co., Inc. v. Public Service Commission.17 Thus: "Accordingly, with
the growing complexity 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 powers by the legislature, and
toward the approval of the practice by the courts."
In the light of the above views of eminent jurists,
authoritative in character, of both the equal protection clause and
the non-delegation principle, it is apparent how far the lower
court departed from the path of constitutional orthodoxy in
nullifying Republic Act No. 1635 as amended. Fortunately, the
matter has been set right with the reversal of its decision, the
opinion of the Court, manifesting its fealty to constitutional law
precepts, which have been reiterated time and time again and for
the soundest of reasons.
G.R. No. L-41631 December 17, 1976
HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN
G. GARGANTIEL, as Secretary to the Mayor; THE MARKET ADMINISTRATOR;
and THE MUNICIPAL BOARD OF MANILA, petitioners, vs. HON. PEDRO A.
RAMIREZ, in his capacity as Presiding Judge of the Court of
First
-
Instance of Manila, Branch XXX and the FEDERATION OF MANILA
MARKET VENDORS, INC., respondents.
Santiago F. Alidio and Restituto R. Villanueva for
petitioners.
Antonio H. Abad, Jr. for private respondent.
Federico A. Blay for petitioner for intervention.
MARTIN, J.:
The chief question to be decided in this case is what law shall
govern the publication of a tax ordinance enacted by the Municipal
Board of Manila, the Revised City Charter (R.A. 409, as amended),
which requires publication of the ordinance before its enactment
and after its approval, or the Local Tax Code (P.D. No. 231), which
only demands publication after approval.
On June 12, 1974, the Municipal Board of Manila enacted
Ordinance No. 7522, "AN ORDINANCE REGULATING THE OPERATION OF
PUBLIC MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF STALLS AND
PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER PURPOSES."
The petitioner City Mayor, Ramon D. Bagatsing, approved the
ordinance on June 15, 1974.
On February 17, 1975, respondent Federation of Manila Market
Vendors, Inc. commenced Civil Case 96787 before the Court of First
Instance of Manila presided over by respondent Judge, seeking the
declaration of nullity of Ordinance No. 7522 for the reason that
(a) the publication requirement under the Revised Charter of the
City of Manila has not been complied with; (b) the Market Committee
was not given any participation in the enactment of the ordinance,
as envisioned by Republic Act 6039; (c) Section 3 (e) of the
Anti-Graft and Corrupt Practices Act has been violated; and (d) the
ordinance would violate Presidential Decree No. 7 of September 30,
1972 prescribing the collection of fees and charges on livestock
and animal products.
Resolving the accompanying prayer for the issuance of a writ of
preliminary injunction, respondent Judge issued an order on March
11, 1975, denying the plea for failure of the respondent Federation
of Manila Market Vendors, Inc. to exhaust the administrative
remedies outlined in the Local Tax Code.
After due hearing on the merits, respondent Judge rendered its
decision on August 29, 1975, declaring the nullity of Ordinance No.
7522 of the City of Manila on the primary ground of non-compliance
with the requirement of publication under the Revised City Charter.
Respondent Judge ruled:
There is, therefore, no question that the ordinance in question
was not published at all in two daily newspapers of general
circulation in the City of Manila before its enactment. Neither was
it published in the same manner after approval, although it was
posted in the legislative hall and in all city public markets and
city public libraries. There being no compliance with the
-
mandatory requirement of publication before and after approval,
the ordinance in question is invalid and, therefore, null and
void.
Petitioners moved for reconsideration of the adverse decision,
stressing that (a) only a post-publication is required by the Local
Tax Code; and (b) private respondent failed to exhaust all
administrative remedies before instituting an action in court.
On September 26, 1975, respondent Judge denied the motion.
Forthwith, petitioners brought the matter to Us through the
present petition for review on certiorari.
We find the petition impressed with merits.
1. The nexus of the present controversy is the apparent conflict
between the Revised Charter of the City of Manila and the Local Tax
Code on the manner of publishing a tax ordinance enacted by the
Municipal Board of Manila. For, while Section 17 of the Revised
Charter provides:
Each proposed ordinance shall be published in two daily
newspapers of general circulation in the city, and shall not be
discussed or enacted by the Board until after the third day
following such publication. * * * Each approved ordinance * * *
shall be published in two daily newspapers of general circulation
in the city, within ten days after its approval; and shall take
effect and be in force on and after the twentieth day following its
publication, if no date is fixed in the ordinance.
Section 43 of the Local Tax Code directs:
Within ten days after their approval, certified true copies of
all provincial, city, municipal and barrioordinances levying or
imposing taxes, fees or other charges shall be published for three
consecutive days in a newspaper or publication widely circulated
within the jurisdiction of the local government, or posted in the
local legislative hall or premises and in two other conspicuous
places within the territorial jurisdiction of the local government.
In either case, copies of all provincial, city, municipal and
barrio ordinances shall be furnished the treasurers of the
respective component and mother units of a local government for
dissemination.
In other words, while the Revised Charter of the City of Manila
requires publication before the enactment of the ordinance and
after the approval thereof in two daily newspapers of general
circulation in the city, the Local Tax Code only prescribes for
publication after the approval of "ordinances levying or imposing
taxes, fees or other charges" either in a newspaper or publication
widely circulated within the jurisdiction of the local government
or by posting the ordinance in the local legislative hall or
premises and in two other conspicuous places within the territorial
jurisdiction of the local government. Petitioners' compliance with
the Local Tax Code rather than with the Revised Charter of the City
spawned this litigation.
There is no question that the Revised Charter of the City of
Manila is a special act since it relates only to the City of
Manila, whereas the Local Tax Code is a general law because it
applies universally to all local governments. Blackstone defines
general law as a universal
-
rule affecting the entire community and special law as one
relating to particular persons or things of a class. 1 And the rule
commonly said is that a prior special law is not ordinarily
repealed by a subsequent general law. The fact that one is special
and the other general creates a presumption that the special is to
be considered as remaining an exception of the general, one as a
general law of the land, the other as the law of a particular case.
2 However, the rule readily yields to a situation where the special
statute refers to a subject in general, which the general statute
treats in particular. The exactly is the circumstance obtaining in
the case at bar. Section 17 of the Revised Charter of the City of
Manila speaks of "ordinance" in general, i.e., irrespective of the
nature and scope thereof, whereas, Section 43 of the Local Tax Code
relates to "ordinances levying or imposing taxes, fees or other
charges" in particular. In regard, therefore, to ordinances in
general, the Revised Charter of the City of Manila is doubtless
dominant, but, that dominant force loses its continuity when it
approaches the realm of "ordinances levying or imposing taxes, fees
or other charges" in particular. There, the Local Tax Code
controls. Here, as always, a general provision must give way to a
particular provision. 3 Special provision governs. 4 This is
especially true where the law containing the particular provision
was enacted later than the one containing the general provision.
The City Charter of Manila was promulgated on June 18, 1949 as
against the Local Tax Code which was decreed on June 1, 1973. The
law-making power cannot be said to have intended the establishment
of conflicting and hostile systems upon the same subject, or to
leave in force provisions of a prior law by which the new will of
the legislating power may be thwarted and overthrown. Such a result
would render legislation a useless and Idle ceremony, and subject
the law to the reproach of uncertainty and unintelligibility. 5
The case of City of Manila v. Teotico 6 is opposite. In that
case, Teotico sued the City of Manila for damages arising from the
injuries he suffered when he fell inside an uncovered and unlighted
catchbasin or manhole on P. Burgos Avenue. The City of Manila
denied liability on the basis of the City Charter (R.A. 409)
exempting the City of Manila from any liability for damages or
injury to persons or property arising from the failure of the city
officers to enforce the provisions of the charter or any other law
or ordinance, or from negligence of the City Mayor, Municipal
Board, or other officers while enforcing or attempting to enforce
the provisions of the charter or of any other law or ordinance.
Upon the other hand, Article 2189 of the Civil Code makes cities
liable for damages for the death of, or injury suffered by any
persons by reason of the defective condition of roads, streets,
bridges, public buildings, and other public works under their
control or supervision. On review, the Court held the Civil Code
controlling. It is true that, insofar as its territorial
application is concerned, the Revised City Charter is a special law
and the subject matter of the two laws, the Revised City Charter
establishes a general rule of liability arising from negligence in
general, regardless of the object thereof, whereas the Civil Code
constitutes a particular prescription for liability due to
defective streets in particular. In the same manner, the Revised
Charter of the City prescribes a rule for the publication of
"ordinance" in general, while the Local Tax Code establishes a rule
for the publication of "ordinance levying or imposing taxes fees or
other charges in particular.
In fact, there is no rule which prohibits the repeal even by
implication of a special or specific act by a general or broad one.
7 A charter provision may be impliedly modified or superseded by a
later statute, and where a statute is controlling, it must be read
into the charter notwithstanding any particular charter provision.
8 A subsequent general law similarly applicable to all cities
prevails over any conflicting charter provision, for the reason
that a charter must not be inconsistent with the general laws and
public policy of the state. 9 A chartered city is not an
independent sovereignty. The state remains supreme in all matters
not purely local. Otherwise stated, a charter must yield to the
constitution and general laws of the state, it is to have read into
it that general law which governs the municipal corporation and
which the corporation cannot set aside but to which it must yield.
When a city adopts a charter, it in effect adopts as part of its
charter general law of such character. 10
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2. The principle of exhaustion of administrative remedies is
strongly asserted by petitioners as having been violated by private
respondent in bringing a direct suit in court. This is because
Section 47 of the Local Tax Code provides that any question or
issue raised against the legality of any tax ordinance, or portion
thereof, shall be referred for opinion to the city fiscal in the
case of tax ordinance of a city. The opinion of the city fiscal is
appealable to the Secretary of Justice, whose decision shall be
final and executory unless contested before a competent court
within thirty (30) days. But, the petition below plainly shows that
the controversy between the parties is deeply rooted in a pure
question of law: whether it is the Revised Charter of the City of
Manila or the Local Tax Code that should govern the publication of
the tax ordinance. In other words, the dispute is sharply focused
on the applicability of the Revised City Charter or the Local Tax
Code on the point at issue, and not on the legality of the
imposition of the tax. Exhaustion of administrative remedies before
resort to judicial bodies is not an absolute rule. It admits of
exceptions. Where the question litigated upon is purely a legal
one, the rule does not apply. 11 The principle may also be
disregarded when it does not provide a plain, speedy and adequate
remedy. It may and should be relaxed when its application may cause
great and irreparable damage. 12
3. It is maintained by private respondent that the subject
ordinance is not a "tax ordinance," because the imposition of
rentals, permit fees, tolls and other fees is not strictly a taxing
power but a revenue-raising function, so that the procedure for
publication under the Local Tax Code finds no application. The
pretense bears its own marks of fallacy. Precisely, the raising of
revenues is the principal object of taxation. Under Section 5,
Article XI of the New Constitution, "Each local government unit
shall have the power to create its own sources of revenue and to
levy taxes, subject to such provisions as may be provided by law."
13 And one of those sources of revenue is what the Local Tax Code
points to in particular: "Local governments may collect fees or
rentals for the occupancy or use of public markets and premises * *
*." 14 They can provide for and regulate market stands, stalls and
privileges, and, also, the sale, lease or occupancy thereof. They
can license, or permit the use of, lease, sell or otherwise dispose
of stands, stalls or marketing privileges. 15
It is a feeble attempt to argue that the ordinance violates
Presidential Decree No. 7, dated September 30, 1972, insofar as it
affects livestock and animal products, because the said decree
prescribes the collection of other fees and charges thereon "with
the exception of ante-mortem and post-mortem inspection fees, as
well as the delivery, stockyard and slaughter fees as may be
authorized by the Secretary of Agriculture and Natural Resources."
16Clearly, even the exception clause of the decree itself permits
the collection of the proper fees for livestock. And the Local Tax
Code (P.D. 231, July 1, 1973) authorizes in its Section 31: "Local
governments may collect fees for the slaughter of animals and the
use of corrals * * * "
4. The non-participation of the Market Committee in the
enactment of Ordinance No. 7522 supposedly in accordance with
Republic Act No. 6039, an amendment to the City Charter of Manila,
providing that "the market committee shall formulate, recommend and
adopt, subject to the ratification of the municipal board, and
approval of the mayor, policies and rules or regulation repealing
or maneding existing provisions of the market code" does not infect
the ordinance with any germ of invalidity. 17 The function of the
committee is purely recommendatory as the underscored phrase
suggests, its recommendation is without binding effect on the
Municipal Board and the City Mayor. Its prior acquiescence of an
intended or proposed city ordinance is not a condition sine qua non
before the Municipal Board could enact such ordinance. The native
power of the Municipal Board to legislate remains undisturbed even
in the slightest degree. It can move in its own initiative and the
Market Committee cannot demur. At most, the Market Committee may
serve as a legislative aide of the Municipal Board in the enactment
of city ordinances affecting the city markets or, in plain words,
in the gathering of the necessary