cases- tax exemption

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G.R. No. L-19707 August 17, 1967

PHILIPPINE ACETYLENE CO., INC., petitione,!s.CO""I##IONER O$ INTERNAL RE%EN&E 'n( CO&RT O$ TA)APPEAL#, espon(ents.

Ponce Enrile, Siguion Reyna, Montecillo and Belo, for petitioner.Ofce o the Solicitor General or respondents.

CASTRO, J.: The petitioner is a corporation engaged in the manufacture and sale of oxygen andacetylene gases. During the period from June 2, !"# to June #$, !"%, it made&arious sales of its products to the 'ational (o)er Corporation, an agency of the(hilippine *o&ernment, and to the +oice of America an agency of the nited States*o&ernment. The sales to the '(C amounted to (-",%./$, )hile those to the +OAamounted to (,%#, on account of )hich the respondent Commission of 0nternalRe&enue assessed against, and demanded from, the petitioner the payment of (2,!$.$ as de1ciency sales tax and surcharge, pursuant to the follo)ingpro&isions of the 'ational 0nternal Re&enue Code3

Sec. %. Percentage tax on sales o other articles .4There shall 5e le&ied, assessedand collected once only on e&ery original sale, 5arter, exchange, and similartransaction either for nominal or &alua5le considerations, intended to transfero)nership of, or title to, the articles not enumerated in sections one hundred andeightyfour and one hundred and eighty1&e a tax e6ui&alent to se&en per centum of the gross selling price or gross &alue in money of the articles so sold, 5arteredexchanged, or transferred, such tax to 5e paid 5y the manufacturer orproducer3 . . . .

Sec. %#. Payment o percentage taxes.47a8 In general.40t shall 5e the duty of e&ery person conducting 5usiness on )hich a percentage tax is imposed under this

Title, to ma9e a true and complete return of the amount of his, her, or its grossmonthly sales, receipts or earnings, or gross &alue of output actually remo&ed fromthe factory or mill )arehouse and )ithin t)enty days after the end of each month,pay the tax due thereon3 Provided, That any person retiring from a 5usiness su5:ectto the percentage tax shall notify the nearest internal re&enue o;cer thereof, 1le hisreturn or declaration and pay the tax due thereon )ithin t)enty days after closinghis 5usiness.

0f the percentage tax on any 5usiness is not paid )ithin the time speci1ed a5o&e,the amount of the tax shall 5e increased 5y t)enty1&e per centum, the incrementto 5e a part of the tax.

The petitioner denied lia5ility for the payment of the tax on the ground that 5oth the'(C and the +OA are exempt from taxation. 0t as9ed for a reconsideration of theassessment and, failing to secure one, appealed to the Court of Tax Appeals.

The court ruled that the tax on the sale of articles or goods in section % of theCode is a tax on the manufacturer and not on the 5uyer )ith the result that the<petitioner (hilippine Acetylene Company, the manufacturer or producer of oxygenand acetylene gases sold to the 'ational (o)er Corporation, cannot claim exemption

from the payment of sales tax simply 5ecause its 5uyer 4 the 'ational (o)erCorporation 4 is exempt from the payment of all taxes.< =ith respect to the sales

made to the +OA, the court held that goods purchased 5y the American *o&ernmentor its agencies from manufacturers or producers are exempt from the payment of the sales tax under the agreement 5et)een the *o&ernment of the (hilippines andthat of the nited States, pro&ided the purchases are supported 5y certi1cates of exemption, and since purchases amounting to only (""%, out of a total of (,%#,)ere not co&ered 5y certi1cates of exemption, only the sales in the sum of (""%)ere su5:ect to the payment of tax. Accordingly, the assessment )as re&ised andthe petitioner>s lia5ility )as reduced from (2,!$.$, as assessed 5y therespondent commission, to (2,%2..

The petitioner appealed to this Court. 0ts position is that it is not lia5le for thepayment of tax on the sales it made to the '(C and the +OA 5ecause 5oth entitiesare exempt from taxation.

0

The '(C en:oys tax exemption 5y &irtue of an act2 of Congress )hich pro&ides asfollo)s3

Sec. 2. To facilitate the payment of its inde5tedness, the 'ational (o)er Corporationshall 5e exempt from all taxes, except real property tax, and from all duties, fees,imposts, charges, and restrictions of the Repu5lic of the (hilippines, its pro&inces,cities and municipalities.

0t is contended that the immunity thus gi&en to the '(C )ould 5e impaired 5y theimposition of a tax on sales made to it 5ecause )hile the tax is paid 5y themanufacturer or producer, the tax is ultimately shifted 5y the latter to the former.

The petitioner in&o9es in support of its position a !"- opinion of the Secretary of Justice )hich ruled that the '(C is exempt from the payment of all taxes <)hetherdirect or indirect.<

=e 5egin )ith an analysis of the nature of the percentage 7sales8 tax imposed 5ysection % of the Code. 0s it a tax on the producer or on the purchaser? Statutes of the type under consideration, )hich impose a tax on sales, ha&e 5een descri5ed as<act@s )ith schiBophrenic symptoms,<# as they apparently ha&e t)o faces 4 onethat of a &endor tax, the other, a &endee tax. ortunately for us the pro&isions of theCode thro) some light on the pro5lem. The Code states that the sales tax <shall 5epaid 5y the manufacturer or producer,<- )ho must <ma9e a true and complete returnof the amount of his, her or its gross monthly sales, receipts or earnings or gross&alue of output actually remo&ed from the factory or mill )arehouse and )ithint)enty days after the end of each month, pay the tax due thereon.<"

ut it is argued that a sales tax is ultimately passed on to the purchaser, and that,so far as the purchaser is an entity li9e the '(C )hich is exempt from the paymentof <all taxes, except real property tax,< the tax cannot 5e collected from sales.

Eany years ago, Er. Justice Oli&er =endell Folmes expressed dissatisfaction )ith theuse of the phrase <pass the tax on.< =riting the opinion of the .S. Supreme Courtin Lashs Products v. !nited States, he said3 <The phrase >passed the tax on> isinaccurate, as o5&iously the tax is laid and remains on the manufacturer and on himalone. The purchaser does not really pay the tax. Fe pays or may pay the sellermore for the goods 5ecause of the seller>s o5ligation, 5ut that is all. . . . The price isthe sum total paid for the goods. The amount added 5ecause of the tax is paid to

get the goods and for nothing else. Therefore it is part of the price . . .<.



0f a claim of exemption from sales tax 5ased on state immunity cannot commandassent, much less can a claim resting on statutory grant.

0t may indeed 5e that the economic 5urden of the tax 1nally falls on the purchaserI)hen it does the tax 5ecomes a part of the price )hich the purchaser must pay. 0tdoes not matter that an additional amount is 5illed as tax to the purchaser. Themethod of listing the price and the tax separately and de1ning taxa5le grossreceipts as the amount recei&ed less the amount of the tax added, merely a&oidspayment 5y the seller of a tax on the amount of the tax. The eHect is still the same,namely, that the purchaser does not pay the tax. Fe pays or may pay the seller

more for the goods 5ecause of the seller>s o5ligation, 5ut that is all and the amountadded 5ecause of the tax is paid to get the goods and for nothing else.-

ut the tax 5urden may not e&en 5e shifted to the purchaser at all. A decision toa5sor5 the 5urden of the tax is largely a matter of economics. " Then it can nolonger 5e contended that a sales tax is a tax on the purchaser.

=e therefore hold that the tax imposed 5y section % of the 'ational 0nternalRe&enue Code is a tax on the manufacturer or producer and not a tax on thepurchaser except pro5a5ly in a &ery remote and inconse6uential sense. Accordinglyits le&y on the sales made to taxexempt entities li9e the '(C is permissi5le.

00

This conclusion should dispose of the same issue )ith respect to sales made to the+OA, except that a claim is here made that the exemption of such sales fromtaxation rests on stronger grounds. &en the Court of Tax Appeals appears to sharethis &ie) as is e&ident from the follo)ing portion of its decision3

=ith regard to petitioner>s sales to the +oice of America, it appears that thepetitioner and the respondent are in agreement that the +oice of America is anagency of the nited States *o&ernment and as such, all goods purchased locally 5yit directly from manufacturers or producers are exempt from the payment of thesales tax under the pro&isions of the agreement 5et)een the *o&ernment of the(hilippines and the *o&ernment of the nited States, 7See Common)ealth Act 'o./##8 pro&ided such purchases are supported 5y serially num5ered Certi1cates of Taxxemption issued 5y the &endeeagency, as re6uired 5y *eneral Circular 'o. +-,dated Octo5er , !-/. . . .

The circular referred to reads3

*oods purchased locally 5y .S. ci&ilian agencies directly from manufacturers,producers or importers shall 5e exempt from the sales tax.

0t )as issued purportedly to implement the Agreement 5et)een the Repu5lic of the(hilippines and the nited States of America Concerning Eilitary ases, 5ut )e 1ndnothing in the language of the Agreement to )arrant the general exemption granted5y that circular.

The pertinent pro&isions of the Agreement read3

ART0CK +. 4 1xemption rom "ustoms and Other *uties

'o import, excise, consumption or other tax, duty or impost shall 5e charged on

material, e6uipment, supplies or goods, including food stores and clothing, forexclusi&e use in the construction, maintenance, operation or defense of the 5ases,

consigned to, or destined for, the nited States authorities and certi1ed 5y them to5e for such purposes.

ART0CK M+000.4Sales and Services 2ithin the /ases

. 0t is mutually agreed that the nited States Shall ha&e the right to esta5lish on5ases, free of all licensesI feesI sales, excise or other taxes, or impostsI *o&ernmentagencies, including concessions, such as sales commissaries and post exchanges,messes and social clu5s, for the exclusi&e use of the nited States military forcesand authoriBed ci&ilian personnel and their families. The merchandise or ser&ices

sold or dispensed 5y such agencies shall 5e free of all taxes, duties and inspection5y the (hilippine authorities. . . .

Thus only sales made <for exclusi&e use in the construction, maintenance, operationor defense of the 5ases,< in a )ord, only sales to the 6uartermaster, are exemptunder article + from taxation. Sales of goods to any other party e&en if it 5e anagency of the nited States, such as the +OA, or e&en to the 6uartermaster 5ut for adiHerent purpose, are not free from the payment of the tax.

On the other hand, article M+000 exempts from the payment of the tax sales made)ithin the 5ase ,y 7not sales to8 commissaries and the li9e in recognition of theprinciple that a sales tax is a tax on the seller and not on the purchaser.

0t is a familiar learning in the American la) of taxation that tax exemption must 5estrictly construed and that the exemption )ill not 5e held to 5e conferred unless theterms under )hich it is granted clearly and distinctly sho) that such )as theintention of the parties./ Fence, in so far as the circular of the ureau of 0nternalRe&enue )ould gi&e the tax exemptions in the Agreement an expansi&e constructionit is &oid.

=e hold, therefore, that sales to the +OA are su5:ect to the payment of percentagetaxes under section % of the Code. The petitioner is thus lia5le for (2,!$.$,computed as follo)s3

Sales to '(C (-",%./$

Sales to +OA ( ,%#.$$

Total sales su5:ect to tax (-/,"-!./$

/N sales tax due thereon ( $,#2%.-%

Add3 2"N surcharge ( 2,"%2.2

Total amount due and collecti5le



G.R. No. 1*09+7 u 1*, /00

CO""I##IONER O$ INTERNAL RE%EN&E, petitioner,&s."ICHEL . LH&ILLIER PAN#HOP, INC., respondent.

2A%I2E, R., C.J.3

Are pa)nshops included in the term lending in&estors for the purpose of imposingthe "N percentage tax under then Section of the 'ational 0nternal Re&enueCode 7'0RC8 of !//, as amended 5y xecuti&e Order 'o. 2/#?

(etitioner Commissioner of 0nternal Re&enue 7C0R8 1led the instant petition forre&ie) to set aside the decision of 2$ 'o&em5er 2$$ of the Court of Appeals in CA*.R. S( 'o. 2-#, )hich a;rmed the decision of # Decem5er 2$$$ of the Court of

Tax Appeals 7CTA8 in CTA Case 'o. "!$ cancelling the assessment issued againstrespondent Eichel J. Khuillier (a)nshop, 0nc. 7hereafter Khuillier8 in the amountof (#,#$,##". as de1ciency percentage tax for !!-, inclusi&e of interest andsurcharges.

The facts are as follo)s3

On Earch !!, C0R Jose . Ong issued Re&enue Eemorandum Order 7REO8 'o."! imposing a "N lending in&estors tax on pa)nshopsI thus3

A restudy of (.D. @'o. - sho)s that the principal acti&ity of pa)nshops is lendingmoney at interest and incidentally accepting a <pa)n< of personal propertydeli&ered 5y the pa)ner to the pa)nee as security for the loan.7Sec. #, 05id8. Clearly,this ma9es pa)nshop 5usiness a9in to lending in&estors 5usiness acti&ity )hich is5road enough to encompass the 5usiness of lending money at interest 5y anyperson )hether natural or :uridical. Such 5eing the case, pa)nshops shall 5e su5:ectto the "N lending in&estors tax 5ased on their gross income pursuant to Section of the Tax Code, as amended.

This REO )as clari1ed 5y Re&enue Eemorandum Circular 7REC8 'o. -#! on 2/Eay !!, )hich reads3

. RE@O "! dated Earch , !!.

This Circular su5:ects to the "N lending in&estors tax the gross income of pa)nshops pursuant to Section of the Tax Code, and it thus re&o9es 0R Ruling'o@. !$, and +AT Ruling 'os. 22!$ and /!$. 0n order to ha&e a uniform cutoH date, a&oid unfairness on the part of tax payers if they are re6uired to pay the taxon past transactions, and so as to gi&e meaning to the express pro&isions of Section2- of the Tax Code, pa)nshop o)ners or operators shall 5ecome lia5le to thelending in&estors tax on their gross income 5eginning January , !!. Since thedeadline for the 1ling of percentage tax return 70R orm 'o. 2"2!A$8 and thepayment of the tax on lending in&estors co&ering the 1rst calendar 6uarter of !!has already lapsed, taxpayers are gi&en up to June #$, !! )ithin )hich to pay thesaid tax )ithout penalty. 0f the tax is paid after June #$, !!, the correspondingpenalties shall 5e assessed and computed from April 2, !!.

Since pa)nshops are considered as lending in&estors eHecti&e January , !!, theyalso 5ecome su5:ect to documentary stamp taxes prescri5ed in Title +00 of the TaxCode. 0R Ruling 'o. #2"%% dated July #, !%% is here5y re&o9ed.

On Septem5er !!/, pursuant to these issuances, the ureau of 0nternal Re&enue70R8 issued Assessment 'otice 'o. %(T#!-!/!% against Khuillierdemanding payment of de1ciency percentage tax in the sum of(#,#$,##". for!!- inclusi&e of interest and surcharges.

On # Octo5er !!/, Khuillier 1led an administrati&e protest )ith the O;ce of theRe&enue Regional Director contending that 78 neither the Tax Code nor the +AT Ka)expressly imposes "N percentage tax on the gross income of pa)nshopsI 728pa)nshops are diHerent from lending in&estors, )hich are su5:ect to the "Npercentage tax under the speci1c pro&ision of the Tax CodeI 7#8 REO 'o. "! is

not implementing any pro&ision of the 0nternal Re&enue la)s 5ut is a ne) andadditional tax measure on pa)nshops, )hich only Congress could enactI 7-8 REO'o. "! impliedly amends the Tax Code and is therefore taxation 5y implication,)hich is proscri5ed 5y la)I and 7"8 REO 'o. "! is a <class legislation< 5ecause itsingles out pa)nshops among other lending and 1nancial operations.

On 2 Octo5er !!%, Deputy 0R Commissioner Romeo S. (angani5an issued=arrant of Distraint andPor Ke&y 'o. %$-#!% against Khuilliers property for theenforcement and payment of the assessed percentage tax.

0ts protest ha&ing 5een unacted upon, Khuillier, in a letter dated # Earch !!%,ele&ated the matter to the C0R. Still, the protest )as not acted upon 5y the C0R.

Thus, on 'o&em5er !!%, Khuillier 1led a <'otice and Eemorandum on Appeal<)ith the Court of Tax Appeals in&o9ing Section 22% of Repu5lic Act 'o. %-2-,

other)ise 9no)n as the Tax Reform Act of !!/, )hich pro&ides3Section 22%. (rotesting of Assessment. Q

0f the protest is denied in )hole or in part, or is not acted upon )ithin one hundredeighty 7%$8 days from su5mission of documents, the taxpayer ad&ersely aHected5y the decision or inaction may appeal to the Court of Tax Appeals )ithin thirty 7#$8days from receipt of the said decision, or from the lapse of the one hundred eighty7%$8day periodI other)ise, the decision shall 5ecome 1nal, executory anddemanda5le.

The case )as doc9eted as CTA Case 'o. "!$.

On ! 'o&em5er !!%, the C0R 1led )ith the CTA a motion to dismiss Khuillierspetition on the ground that it did not state a cause of action, as there )as no action

yet on the protest.

Khuillier opposed the motion to dismiss and mo&ed for the issuance of a )rit of preliminary in:unction praying that the 0R 5e en:oined from enforcing the )arrant of distraint and le&y.

or Khuilliers failure to appear on the scheduled date of hearing, the CTA denied themotion for the issuance of a )rit of preliminary in:unction. Fo)e&er, on Khuilliersmotion for reconsideration, said denial )as set aside and a hearing on the motion forthe issuance of a )rit of preliminary in:unction )as set.

On #$ June !!!, after due hearing, the CTA denied the C0Rs motion to dismiss andgranted Khuilliers motion for the issuance of a )rit of preliminary in:unction.

On # Decem5er 2$$$, the CTA rendered a decision declaring 78 REO 'o. "!and REC 'o. -#! null and &oid insofar as they classify pa)nshops as lending



in&estors su5:ect to "N percentage taxI and 728 Assessment 'otice 'o. %(T#!-!/!% as cancelled, )ithdra)n, and )ith no force and eHect.2

Dissatis1ed, the C0R 1led a petition for re&ie) )ith the Court of Appeals praying thatthe aforesaid decision 5e re&ersed and set aside and another one 5e renderedordering Khuillier to pay the "N lending in&estors tax for !!- )ith interests andsurcharges.

pon due consideration of the issues presented 5y the parties in their respecti&ememoranda, the Court of Appeals a;rmed the CTA decision on 2$ 'o&em5er 2$$.

The C0R is no) 5efore this Court &ia this petition for re&ie) on certiorari, allegingthat the Court of Appeals erred in holding that pa)nshops are not su5:ect to the "Nlending in&estors tax. Fe in&o9es then Section of the Tax Code, )hich imposeda "N percentage tax on lending in&estors. Fe argues that the legal de1nition of lending in&estors pro&ided in Section "/ 7u8 of the Tax Code is 5road enough toinclude pa)nshop operators. Section # of (residential Decree 'o. - states that theprincipal 5usiness acti&ity of a pa)nshop is lending moneyI thus, a pa)nshop easilyfalls under the legal de1nition of lending in&estors. REO 'o. "! and REC 'o. -#!, )hich su5:ect pa)nshops to the "N lending in&estors tax 5ased on their grossincome, are &alid. eing mere interpretations of the '0RC, they need not 5epu5lished. Kastly, the C0R in&o9es the case of Commissioner of 0nternal Re&enue &s.Agencia x6uisite of ohol, 0nc.,# )here the Court of Appeals Special ourteenthDi&ision ruled that a pa)nshop is su5:ect to the "N lending in&estors tax.-

Khuillier, on the other hand, maintains that 5efore and after the amendment of the Tax Code 5y .O. 'o. 2/#, )hich too9 eHect on January !%%, pa)nshops andlending in&estors )ere su5:ected to diHerent tax treatments. (a)nshops )erere6uired to pay an annual 1xed tax of only (,$$$, )hile lending in&estors )eresu5:ect to a "N percentage tax on their gross income in addition to their 1xedannual taxes. Accordingly, during the period from April !%2 up to Decem5er !!$,the C0R consistently ruled that a pa)nshop is not a lending in&estor and should nottherefore 5e re6uired to pay percentage tax on its gross income.

Khuillier li9e)ise asserts that REO 'o. "! and REC 'o. -#! are notimplementing rules 5ut are ne) and additional tax measures, )hich only Congress isempo)ered to enact. esides, they are in&alid 5ecause they ha&e ne&er 5eenpu5lished in the O;cial *aBette or any ne)spaper of general circulation.

Khuillier further points out that pa)nshops are strictly regulated 5y the Central an9pursuant to (.D. 'o. -, other)ise 9no)n as The (a)nshop Regulation Act. On theother hand, there is no special la) go&erning lending in&estors. Due to the )idediHerences 5et)een the t)o, pa)nshops had ne&er 5een considered as lendingin&estors for tax purposes. 0n fact, in !!-, Congress passed Fouse ill 'o.!/," )hich attempted to amend Section of the '0RC, as amended, to includeo)ners of pa)nshops as among those su5:ect to percentage tax. Fo)e&er, theSenate ill and the su5se6uent icameral Committee &ersion, )hich e&entually5ecame the +AT Ka), did not incorporate such proposed amendment.

Kastly, Khuillier argues that follo)ing the maxim in statutory construction <expressiounius est exclusio alterius,< it )as not the intention of the Kegislature to imposepercentage taxes on pa)nshops 5ecause if it )ere so, pa)nshops )ould ha&e 5eenincluded as among the 5usinesses su5:ect to the said tax. 0nasmuch as re&enue la)s

impose special 5urdens upon taxpayers, the enforcement of such la)s should not 5eextended 5y implication 5eyond the clear import of the language used.

=e are therefore called upon to resol&e the issue of )hether pa)nshops are su5:ectto the "N lending in&estors tax. Corollary to this issue are the follo)ing 6uestions378 Are REO 'o. "! and REC 'o. -#! &alid? 728 =ere they issued to implementSection of the '0RC of !//, as amended? 7#8 Are pa)nshops considered<lending in&estors< for the purpose of the imposition of the lending in&estors tax?7-8 0s pu5lication necessary for the &alidity of REO 'o. "! and REC 'o. -#!.

REO 'o. "! and REC 'o. -#! )ere issued in accordance )ith the po)er of theC0R to ma9e rulings and opinions in connection )ith the implementation of internalre&enue la)s, )hich )as 5esto)ed 5y then Section 2-" of the '0RC of !//, as

amended 5y .O. 'o. 2/#.

Such po)er of the C0R cannot 5e contro&erted. Fo)e&er,the C0R cannot, in the exercise of such po)er, issue administrati&e rulings orcirculars not consistent )ith the la) sought to 5e applied. 0ndeed, administrati&eissuances must not o&erride, supplant or modify the la), 5ut must remain consistent)ith the la) they intend to carry out. Only Congress can repeal or amend the la)./

The C0R argues that 5oth issuances are mere rules and regulations implementingthen Section of the '0RC, as amended, )hich pro&ided3

SC. . (ercentage tax on dealers in securitiesI lending in&estors. Dealers insecurities and lending in&estors shall pay a tax e6ui&alent to six 78 per centum of their gross income. Kending in&estors shall pay a tax e6ui&alent to 1&e 7"N8 percentof their gross income.

0t is clear from the afore6uoted pro&ision that pa)nshops are not speci1callyincluded. Thus, the 6uestion is )hether pa)nshops are considered lending in&estorsfor the purpose of imposing percentage tax.

=e rule in the negati&e.

0ncidentally, )e o5ser&e that 5oth parties, as )ell as the Court of Tax Appeals andthe Court of Appeals, refer to the 'ational 0nternal Re&enue Code as the Tax Code.

They did not specify )hether the pro&isions they cited )ere ta9en from the '0RC of !//, as amended, or the '0RC of !%, as amended. or clarity, it must 5e pointedout that the '0RC of !// as renum5ered and rearranged 5y .O. 'o. 2/# is a laterla) than the '0RC of !%, as amended 5y (.D. 'os. !!, !!-, 2$$ and 2$#.

The citation of the speci1c Code is important for us to determine the intent of thela).

nder Section "/7u8 of the '0RC of !%, as amended, the term lending in&estorincludes <all persons )ho ma9e a practice of lending money for themsel&es orothers at interest.< A pa)nshop, on the other hand, is de1ned under Section # of (.D.'o. - as <a person or entity engaged in the 5usiness of lending money onpersonal property deli&ered as security for loans and shall 5e synonymous, and may5e used interchangea5ly, )ith pa)n5ro9er or pa)n 5ro9erage.<

=hile it is true that pa)nshops are engaged in the 5usiness of lending money, theyare not considered <lending in&estors< for the purpose of imposing the "Npercentage taxes for the follo)ing reasons3

irst. nder Section !2, paragraph #, su5paragraphs 7dd8 and 7H8, of the '0RC of !//, prior to its amendment 5y .O. 'o. 2/#, as )ell as Section , paragraph 2,su5paragraphs 7dd8 and 7H8, of the '0RC of !%, pa)nshops and lending in&estors

)ere su5:ected to diHerent tax treatmentsI thus3



7#8 Other ixed Taxes. The follo)ing 1xed taxes shall 5e collected as follo)s, theamount stated 5eing for the )hole year, )hen not other)ise speci1ed3

Q.

7dd8 Kending in&estors

. 0n chartered cities and 1rst class municipalities, one thousand pesosI

2. 0n second and third class municipalities, 1&e hundred pesosI

#. 0n fourth and 1fth class municipalities and municipal districts, t)o hundred 1ftypesos3 (ro&ided, That lending in&estors )ho do 5usiness as such in more than onepro&ince shall pay a tax of one thousand pesos.

Q.

7H8 (a)nshops, one thousand pesos 7underscoring ours8

Second. Congress ne&er intended pa)nshops to 5e treated in the same )ay aslending in&estors. Section of the '0RC of !//, as renum5ered and rearranged5y .O. 'o. 2/#, )as 5asically lifted from Section /"% of the '0RC of !%, )hichtreated 5oth tax su5:ects diHerently. Section /" of the latter Code read as follo)s3

Sec. /". (ercentage tax on dealers in securities, lending in&estors. Dealers insecurities shall pay a tax e6ui&alent to six 7N8 percent of their gross income.Kending in&estors shall pay a tax e6ui&alent to 1&e 7"N8 percent of their grossincome. 7As amended 5y (.D. 'o. /#!, (.D. 'o. !"! and (.D. 'o. !!-8.

=e note that the de1nition of lending in&estors found in Section "/ 7u8 of the '0RCof !% is not found in the '0RC of !//, as amended 5y .O. 'o. 2/#, )here Section in&o9ed 5y the C0R is found. Fo)e&er, as emphasiBed earlier, 5oth the '0RC of !% and the '0RC of !// dealt )ith pa)nshops and lending in&estors diHerently.+erily then, it )as the intent of Congress to deal )ith 5oth su5:ects diHerently.Fence, )e must li9e)ise interpret the statute to conform )ith such legislati&e intent.

Third. Section of the '0RC of !//, as amended 5y .O. 'o. 2/#, su5:ects topercentage tax dealers in securities and lending in&estors only. There is no mentionof pa)nshops. nder 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 )hich it is to operate, e&erything else must necessarilyand 5y implication 5e excluded from its operation and eHect. ! This rule, as a guideto pro5a5le legislati&e intent, is 5ased upon the rules of logic and natural )or9ingsof the human mind.$

ourth. The 0R had ruled se&eral times prior to the issuance of REO 'o. "! andREC -#! that pa)nshops )ere not su5:ect to the "N percentage tax imposed 5ySection of the '0RC of !//, as amended 5y .O. 'o. 2/#. This )as e&enadmitted 5y the C0R in REO 'o. "! itself. Considering that Section of the'0RC of !//, as amended, )as practically lifted from Section /" of the '0RC of !%, as amended, and there 5eing no change in the la), the interpretation thereof should not ha&e 5een altered.

0t may not 5e amiss to state that, as pointed out 5y the respondent, pa)nshops )as

sought to 5e included as among those su5:ect to "N percentage tax 5y Fouse ill'o. !/ in !!-. Section # thereof reads3

Section #. Section of the 'ational 0nternal Re&enue Code, as amended, ishere5y further amended to read as follo)s3

<SC. . (ercentage tax on dealers in securitiesI lending in&estorsI O='RS O(A='SFO(SI OR0*' CRR'CL DAKRS A'DPOR EO'L CFA'*RS. Dealersin securities shall pay a tax e6ui&alent to Six 7N8 per centum of their gross income.Kending in&estors, O='RS O (A='SFO(S A'D OR0*' CRR'CL DAKRSA'DPOR EO'L CFA'*RS shall pay a tax e6ui&alent to i&e 7"N8 percent of theirgross income.<

0f pa)nshops )ere co&ered )ithin the term lending in&estor, there )ould ha&e 5eenno need to introduce such amendment to include o)ners of pa)nshops. At any rate,such proposed amendment )as not adopted. 0nstead, the appro&ed 5ill )hich5ecame R.A. 'o. // repealed Section of '0RC of !//, as amended, )hich)as the 5asis of REO 'o. "! and REC 'o. -#!I thus3

SC. 2$. Repealing Clauses. The pro&isions of any special la) relati&e to the rateof franchise taxes are here5y expressly repealed. Sections #, - and of the'ational 0nternal Re&enue Code are here5y repealed.

Section 2 of the same la) pro&ides that the la) shall ta9e eHect 1fteen 7"8 daysafter its complete pu5lication in the O;cial *aBette or in at least t)o 728 nationalne)spapers of general circulation )hiche&er comes earlier. R.A. 'o. // )aspu5lished in the O;cial *aBette on August !!- 2I in the Journal and Ealayane)spapers, on 2 Eay !!-I and in the Eanila ulletin, on " June !!-. Thus, R.A.'o. // is deemed eHecti&e on 2/ Eay !!-.

Since Section of the '0RC of !//, )hich 5reathed life on the 6uestionedadministrati&e issuances, had already 5een repealed, REO "! and REC -#!,)hich depended upon it, are deemed automatically repealed. Fence, e&en grantingthat pa)nshops are included )ithin the term lending in&estors, the assessment from2/ Eay !!- on)ard )ould ha&e no leg to stand on.

Adding to the in&alidity of the REC 'o. -#! and REO 'o. "! is the a5sence of pu5lication. =hile the rulema9ing authority of the C0R is not dou5ted, li9e any othergo&ernment agency, the C0R may not disregard legal re6uirements or applica5leprinciples in the exercise of 6uasilegislati&e po)ers.

Ket us 1rst distinguish 5et)een t)o 9inds of administrati&e issuances3 the legislati&e

rule and the interpretati&e rule. A legislati&e rule is in the nature of su5ordinatelegislation, designed to implement a primary legislation 5y pro&iding the detailsthereof. An interpretati&e rule, on the other hand, is designed to pro&ide guidelinesto the la) )hich the administrati&e agency is in charge of enforcing.#

0n Eisamis Oriental Association of Coco Traders, 0nc. &s. Department of inanceSecretary,- this Tri5unal ruled3

Q 0n the same )ay that la)s must ha&e the 5ene1t of pu5lic hearing, it is generallyre6uired that 5efore a legislati&e rule is adopted there must 5e hearing. 0n thisconnection, the Administrati&e Code of !%/ pro&ides3

(u5lic (articipation. 0f not other)ise re6uired 5y la), an agency shall, as far aspractica5le, pu5lish or circulate notices of proposed rules and aHord interested

parties the opportunity to su5mit their &ie)s prior to the adoption of any rule.



728 0n the 1xing of rates, no rule or 1nal order shall 5e &alid unless the proposedrates shall ha&e 5een pu5lished in a ne)spaper of general circulation at least t)o)ee9s 5efore the 1rst hearing thereon.

7#8 0n case of opposition, the rules on contested cases shall 5e o5ser&ed.

0n addition, such rule must 5e pu5lished.

=hen an administrati&e rule is merely interpretati&e in nature, its applica5ility needsnothing further than its 5are issuance, for it gi&es no real conse6uence more than)hat the la) itself has already prescri5ed. =hen, on the other hand, theadministrati&e rule goes 5eyond merely pro&iding for the means that can facilitateor render least cum5ersome the implementation of the la) 5ut su5stantiallyincreases the 5urden of those go&erned, it 5ehoo&es the agency to accord at least tothose directly aHected a chance to 5e heard, and thereafter to 5e duly informed,5efore that ne) issuance is gi&en the force and eHect of la)."

REO 'o. "! and REC 'o. -#! cannot 5e &ie)ed simply as implementing rulesor correcti&e measures re&o9ing in the process the pre&ious rulings of pastCommissioners. Speci1cally, they )ould ha&e 5een amendatory pro&isionsapplica5le to pa)nshops. =ithout these disputed C0R issuances, pa)nshops )ouldnot 5e lia5le to pay the "N percentage tax, considering that they )ere notspeci1cally included in Section of the '0RC of !//, as amended. 0n so doing,the C0R did not simply interpret the la). The due o5ser&ance of the re6uirements of notice, hearing, and pu5lication should not ha&e 5een ignored.

There is no need for us to discuss the ruling in CA*.R. S( 'o. "!2%2 entitledCommissioner of 0nternal Re&enue &. Agencia x6uisite of ohol 0nc., )hich upheldthe &alidity of REO 'o. "! and REC 'o. -#!. Su;ce it to say that the :udgmentin that case cannot 5e 5inding upon the Supreme Court 5ecause it is only a decisionof the Court of Appeals. The Supreme Court, 5y tradition and in our system of

:udicial administration, has the last )ord on )hat the la) isI it is the 1nal ar5iter of any :usti1a5le contro&ersy. There is only one Supreme Court from )hose decisionsall other courts should ta9e their 5earings.

0n &ie) of the foregoing, REO 'o. "! and REC 'o. -#! are here5y declared nulland &oid. Conse6uently, Khuillier is not lia5le to pay the "N lending in&estors tax.

HERE$ORE, the petition is here5y D0SE0SSD for lac9 of merit. The decision of the

Court of Appeals of 2$ 'o&em5er 2$$ in CA*.R. S( 'o. 2-# is A0RED.

SO ORDRD.

9itug5 nare0;Santiago5 "arpio5 and +0cuna5 JJ.5 concur.



G.R. No. 17/047 "'5 1*, /011

PHILIPPINE A"&#E"ENT AN2 GA"ING CORPORATION PAGCOR8, (etitioner,&s.THE &REA& O$ INTERNAL RE%EN&E IR8, epesente( eein : HON. O#E "ARIO &;AG, in is o<5i' 5'p'5it 's CO""I##IONER O$ INTERNALRE%EN&E, (u5lic Respondent, OHN 2OE 'n( ANE 2OE, =o 'e pesons '5ting >o, in :e'>, o un(ete 'utoit o> Respon(ent.(u5lic and (ri&ate Respondents.

D C 0 S 0 O 'PERALTA, J.:

or resolution of this Court is the (etition for Certiorari and (rohi5ition )ith prayerfor the issuance of a Temporary Restraining Order andPor (reliminary 0n:unction,dated April /, 2$$, of petitioner (hilippine Amusement and *aming Corporation7(A*COR8, see9ing the declaration of nullity of Section of Repu5lic Act 7R.A.8 'o.!##/ insofar as it amends Section 2/ 7c8 of the 'ational 0nternal Re&enue Code of !!/, 5y excluding petitioner from exemption from corporate income tax for 5eingrepugnant to Sections and $ of Article 000 of the Constitution. (etitioner furthersee9s to prohi5it the implementation of ureau of 0nternal Re&enue 70R8 Re&enueRegulations 'o. 2$$" for 5eing contrary to la).

The undisputed facts follo).

(A*COR )as created pursuant to (residential Decree 7(.D.8 'o. $/A 2 on January, !//. Simultaneous to its creation, (.D. 'o. $/# 7supplementing (.D. 'o. $/A8 )as issued exempting (A*COR from the payment of any type of tax, except afranchise tax of 1&e percent 7"N8 of the gross re&enue.- Thereafter, on June 2, !/%,(.D. 'o. #!! )as issued expanding the scope of (A*COR>s exemption."

To consolidate the la)s pertaining to the franchise and po)ers of (A*COR, (.D. 'o.%! )as issued. Section # thereof reads as follo)s3

Sec. #. 1xemptions. 4 x x x

78 Customs Duties, taxes and other imposts on importations. All importations of e6uipment, &ehicles, automo5iles, 5oats, ships, 5arges, aircraft and such other

gam5ling paraphernalia, including accessories or related facilities, for the sole andexclusi&e use of the casinos, the proper and e;cient management andadministration thereof and such other clu5s, recreation or amusement places to 5eesta5lished under and 5y &irtue of this ranchise shall 5e exempt from the paymentof duties, taxes and other imposts, including all 9inds of fees, le&ies, or charges of any 9ind or nature.

+essels andPor accessory ferry 5oats imported or to 5e imported 5y any corporationha&ing existing contractual arrangements )ith the Corporation, for the sole andexclusi&e use of the casino or to 5e used to ser&ice the operations and re6uirementsof the casino, shall li9e)ise 5e totally exempt from the payment of all customsduties, taxes and other imposts, including all 9inds of fees, le&ies, assessments orcharges of any 9ind or nature, )hether 'ational or Kocal.

728 0ncome and other taxes. 7a8 ranchise Folder3 'o tax of any 9ind or form,income or other)ise, as )ell as fees, charges, or le&ies of )hate&er nature, )hether'ational or Kocal, shall 5e assessed and collected under this ranchise from the

CorporationI nor shall any form of tax or charge attach in any )ay to the earnings of the Corporation, except a ranchise Tax of 1&e percent 7"N8of the gross re&enue orearnings deri&ed 5y the Corporation from its operation under this ranchise. Suchtax shall 5e due and paya5le 6uarterly to the 'ational *o&ernment and shall 5e inlieu of all 9inds of taxes, le&ies, fees or assessments of any 9ind, nature ordescription, le&ied, esta5lished, or collected 5y any municipal, pro&incial or nationalgo&ernment authority.

758 Others3 The exemption herein granted for earnings deri&ed from the operationsconducted under the franchise, speci1cally from the payment of any tax, income or

other)ise, as )ell as any form of charges, fees or le&ies, shall inure to the 5ene1t of and extend to corporation7s8, association7s8, agency7ies8, or indi&idual7s8 )ith )homthe Corporation or operator has any contractual relationship in connection )ith theoperations of the casino7s8 authoriBed to 5e conducted under this ranchise and tothose recei&ing compensation or other remuneration from the Corporation as aresult of essential facilities furnished andPor technical ser&ices rendered tothe Corporation or operator.

The fee or remuneration of foreign entertainers contracted 5y the Corporation oroperator in pursuance of this pro&ision shall 5e free of any tax.

7#8 *ividend Income. 'ot)ithstanding any pro&ision of la) to the contrary, in thee&ent the Corporation should declare a cash di&idend income corresponding to theparticipation of the pri&ate sector shall, as an incenti&e to the 5ene1ciaries, 5e

su5:ect only to a 1nal Gat income rate of ten percent 7$N8 of the regular incometax rates. The di&idend income shall not in such case 5e considered as part of the5ene1ciaries> taxa5le incomeI pro&ided, ho)e&er, that such di&idend income shall5e totally exempted from income or other form of taxes if in&ested )ithin six 78months from the date the di&idend income is recei&ed in the follo)ing3

7a8 operation of the casino7s8 or in&estments in any a;liate acti&ity that )illultimately redound to the 5ene1t of the CorporationI or any other corporation )ith)hom the Corporation has any existing arrangements in connection )ith or relatedto the operations of the casino7s8I

758 *o&ernment 5onds, securities, treasury notes, or go&ernment de5enturesI or

7c8 O0registered or exportoriented corporation7s8./

(A*COR>s tax exemption )as remo&ed in June !%- through (.D. 'o. !#, 5ut it)as later restored 5y Ketter of 0nstruction 'o. -#$, )hich )as issued in Septem5er!%-.

On January , !!%, R.A. 'o. %-2-,% other)ise 9no)n as the <ational Internal

4evenue "ode o $==>, too9 eHect. Section 2/ 7c8 of R.A. 'o. %-2- pro&ides thatgo&ernmento)ned and controlled corporations 7*OCCs8 shall pay corporate incometax, except petitioner (A*COR, the *o&ernment Ser&ice and 0nsurance Corporation,the Social Security System, the (hilippine Fealth 0nsurance Corporation, and the(hilippine Charity S)eepsta9es O;ce, thus3

7c8 Government;o&ned or "ontrolled "orporations5 +gencies or Instrumentalities . The pro&isions of existing special general la)s to the contrary not)ithstanding, allcorporations, agencies or instrumentalities o)ned and controlled 5y the

*o&ernment, except the *o&ernment Ser&ice and 0nsurance Corporation 7*S0S8, theSocial Security System 7SSS8, the (hilippine Fealth 0nsurance Corporation 7(F0C8, the

http://www.lawphil.net/judjuris/juri2011/mar2011/gr_172087_2011.html#fnt1






















(hilippine Charity S)eepsta9es O;ce 7(CSO8, and the (hilippine Amusement and*aming Corporation 7(A*COR8, shall pay such rate of tax upon their taxa5le incomeas are imposed 5y this Section upon corporations or associations engaged in similar5usiness, industry, or acti&ity.!

=ith the enactment of R.A. 'o. !##/$ on Eay 2-, 2$$", certain sections of the'ational 0nternal Re&enue Code of !!/ )ere amended. The particular amendmentthat is at issue in this case is Section of R.A. 'o. !##/, )hich amended Section 2/7c8 of the 'ational 0nternal Re&enue Code of !!/ 5y excluding (A*COR from theenumeration of *OCCs that are exempt from payment of corporate income tax,

thus3

7c8 Government;o&ned or "ontrolled "orporations5 +gencies or Instrumentalities. The pro&isions of existing special general la)s to the contrary not)ithstanding, allcorporations, agencies, or instrumentalities o)ned and controlled 5y the*o&ernment, except the *o&ernment Ser&ice and 0nsurance Corporation 7*S0S8, theSocial Security System 7SSS8, the (hilippine Fealth 0nsurance Corporation 7(F0C8,and the (hilippine Charity S)eepsta9es O;ce 7(CSO8, shall pay such rate of taxupon their taxa5le income as are imposed 5y this Section upon corporations orassociations engaged in similar 5usiness, industry, or acti&ity.

DiHerent groups came to this Court &ia petitions for certiorari andprohi5ition assailing the &alidity and constitutionality of R.A. 'o. !##/, in particular3

8 Section -, )hich imposes a $N +alue Added Tax 7+AT8 on sale of goods andpropertiesI Section ", )hich imposes a $N +AT on importation of goodsI andSection , )hich imposes a $N +AT on sale of ser&ices and use or lease of properties, all contain a uniform pro&iso authoriBing the (resident, upon therecommendation of the Secretary of inance, to raise the +AT rate to 2N. The saidpro&isions )ere alleged to 5e &iolati&e of Section 2% 728, Article +0 of theConstitution, )hich section &ests in Congress the exclusi&e authority to 1x the rateof taxes, and of Section , Article 000 of the Constitution on due process, as )ell as of Section 2 728, Article +0 of the Constitution, )hich section pro&ides for the <noamendment rule< upon the last reading of a 5illI

28 Sections % and 2 )ere alleged to 5e &iolati&e of Section , Article 000 of theConstitution, or the guarantee of e6ual protection of the la)s, and Section 2% 78,Article +0 of the ConstitutionI and

#8 other technical aspects of the passage of the la), 6uestioning the manner it )aspassed.

On Septem5er , 2$$", the Court dismissed all the petitions and upheld theconstitutionality of R.A. 'o. !##/.2

On the same date, respondent 0R issued Re&enue Regulations 7RR8 'o. 2$$",# speci1cally identifying (A*COR as one of the franchisees su5:ect to $N +ATimposed under Section $% of the 'ational 0nternal Re&enue Code of !!/, asamended 5y R.A. 'o. !##/. The said re&enue regulation, in part, reads3

Sec. -. $%#. De1nitions and Speci1c Rules on Selected Ser&ices. 4

x x x x

7h8 x x x

*ross Receipts of all other franchisees, other than those co&ered 5y Sec. ! of the Tax Code, regardless of ho) their franchisees may ha&e 5een granted, shall 5esu5:ect to the $N +AT imposed under Sec.$% of the Tax Code. This includes,among others, the (hilippine Amusement and *aming Corporation 7(A*COR8, and itslicensees or franchisees.

Fence, the present petition for certiorari.

(A*COR raises the follo)ing issues3

0

=FTFR OR 'OT RA !##/, SCT0O' 7C8 0S 'KK A'D +O0D +/ I<I?IO OR 0'*R(*'A'T TO TF AK (ROTCT0O' @CKAS EOD0D 0' SCT0O' ,ART0CK 000 O TF !%/ CO'ST0TT0O'.

00

=FTFR OR 'OT RA !##/, SCT0O' 7C8 0S 'KK A'D +O0D +/ I<I?IO OR 0'*R(*'A'T TO TF 'O'0E(A0RE'T @CKAS EOD0D 0' SCT0O' $, ART0CK000 O TF !%/ CO'ST0TT0O'.

000

=FTFR OR 'OT RR 2$$", SCT0O' -.$%#, (ARA*RA(F 7F8 0S 'KK A'D

+O0D +/ I<I?IOOR 0'* LO'D TF SCO( O TF AS0C KA=, RA %-2-,SCT0O' $%, 0'SOAR AS TF SA0D R*KAT0O' 0E(OSD +AT O' TF SR+0CSO TF (T0T0O'R AS =KK AS (T0T0O'RS K0C'SS OR RA'CF0SS =F'

TF AS0C KA=, AS 0'TR(RTD L A((K0CAK JR0S(RD'C, DOS 'OT0E(OS +AT O' (T0T0O'R OR O' (T0T0O'RS K0C'SS OR RA'CF0SS.-

The 0R, in its Comment" dated Decem5er 2!, 2$$, counters3

0

SCT0O' O R.A. 'O. !##/ A'D SCT0O' # 728 O (.D. %! AR OTF +AK0DA'D CO'ST0TT0O'AK (RO+0S0O'S O KA=S TFAT SFOKD FAREO'0OSKLCO'STRD TO*TFR SO AS TO *0+ CT TO AKK O TF0R (RO+0S0O'S=F'+R (OSS0K.

00

SCT0O' O R.A. 'O. !##/ 0S 'OT +0OKAT0+ O SCT0O' A'D SCT0O' $,ART0CK 000 O TF !%/ CO'ST0TT0O'.

000

0R R+' R*KAT0O'S AR (RSED +AK0D A'D CO'ST0TT0O'AK 'T0KSTR0CU' DO=' L KA=K ATFOR0T0S.

The O;ce of the Solicitor *eneral 7OS*8, 5y )ay of Eanifestation 0n Lieu of Comment, concurred )ith the arguments of the petitioner. 0t added that althoughthe State is free to select the su5:ects of taxation and that the ine6uity resultingfrom singling out a particular class for taxation or exemption is not an infringementof the constitutional limitation, a tax la) must operate )ith the same force and

eHect to all persons, 1rms and corporations placed in a similar situation.urthermore, according to the OS*, pu5lic respondent 0R exceeded its statutory























authority )hen it enacted RR 'o. 2$$", 5ecause the latter>s pro&isions arecontrary to the mandates of (.D. 'o. %! in relation to R.A. 'o. !##/.

The main issue is )hether or not (A*COR is still exempt from corporate income taxand +AT )ith the enactment of R.A. 'o. !##/.

After a careful study of the positions presented 5y the parties, this Court 1nds thepetition partly meritorious.

nder Section of R.A. 'o. !##/, amending Section 2/ 7c8 of the 'ational 0nternalRe&enue Code of !//, petitioner is no longer exempt from corporate income tax asit has 5een eHecti&ely omitted from the list of *OCCs that are exempt from it.(etitioner argues that such omission is unconstitutional, as it is &iolati&e of its rightto e6ual protection of the la)s under Section , Article 000 of the Constitution3

Sec. . 'o person shall 5e depri&ed of life, li5erty, or property )ithout due process of la), nor shall any person 5e denied the e6ual protection of the la)s.

0n "ity o #anila &. Laguio5 Jr.,/ this Court expounded the meaning and scope of e6ual protection, thus3

6ual protection re6uires that all persons or things similarly situated should 5etreated ali9e, 5oth as to rights conferred and responsi5ilities imposed. Similarsu5:ects, in other )ords, should not 5e treated diHerently, so as to gi&e undue fa&orto some and un:ustly discriminate against others. The guarantee means that no

person or class of persons shall 5e denied the same protection of la)s )hich isen:oyed 5y other persons or other classes in li9e circumstances. The <e6ualprotection of the la)s is a pledge of the protection of e6ual la)s.< 0t limitsgo&ernmental discrimination. The e6ual protection clause extends to arti1cialpersons 5ut only insofar as their property is concerned.

x x x x

Kegislati&e 5odies are allo)ed to classify the su5:ects of legislation. 0f theclassi1cation is reasona5le, the la) may operate only on some and not all of thepeople )ithout &iolating the e6ual protection clause. The classi1cation must, as anindispensa5le re6uisite, not 5e ar5itrary. To 5e &alid, it must conform to the follo)ingre6uirements3

8 0t must 5e 5ased on su5stantial distinctions.

28 0t must 5e germane to the purposes of the la).

#8 0t must not 5e limited to existing conditions only.

-8 0t must apply e6ually to all mem5ers of the class.%

0t is not contested that 5efore the enactment of R.A. 'o. !##/, petitioner )as one of the 1&e *OCCs exempted from payment of corporate income tax as sho)n in R.A.'o. %-2-, Section 2/ 7c8 of )hich, reads3

7c8 *o&ernmento)ned or Controlled Corporations, Agencies or 0nstrumentalities. The pro&isions of existing special or general la)s to the contrary not)ithstanding, allcorporations, agencies or instrumentalities o)ned and controlled 5y the

*o&ernment, except the *o&ernment Ser&ice and 0nsurance Corporation 7*S0S8, theSocial Security System 7SSS8, the (hilippine Fealth 0nsurance Corporation 7(F0C8, the

(hilippine Charity S)eepsta9es O;ce 7(CSO8, and the (hilippine Amusement and*aming Corporation 7(A*COR8, shall pay such rate of tax upon their taxa5le incomeas are imposed 5y this Section upon corporations or associations engaged in similar5usiness, industry, or acti&ity.!

A perusal of the legislati&e records of the icameral Conference Eeeting of theCommittee on =ays on Eeans dated Octo5er 2/, !!/ )ould sho) that theexemption of (A*COR from the payment of corporate income tax )as due to theac6uiescence of the Committee on =ays on Eeans to the re6uest of (A*COR that it5e exempt from such tax.2$ The records of the icameral Conference Eeeting re&eal3

FO'. R. D0AV. The other thing, sir, is )e 0 noticed )e imposed a tax on lotto)innings.

CFA0REA' 'R0K. =ala na, tinanggal na namin yon.

FO'. R. D0AV. Tinanggal na 5a natin yon?

CFA0REA' 'R0K. Oo.

FO'. R. D0AV. ecause 0 )as )ondering )hether )e co&ered the tax on =hetheron a uni&ersal 5asis, )e included a tax on coc91ghting )innings.

CFA0REA' 'R0K. 'o, )e remo&ed the

FO'. R. D0AV. 0 . . . 7inaudi5le8 natin yong lotto?CFA0REA' 'R0K. (ati (A*COR tinanggal upon re6uest.

CFA0REA' JA+0R. Leah, (hilippine 0nsurance Commission.

CFA0REA' 'R0K. (hilippine 0nsurance Fealth, health 5a. Lon ang re6uest ngChairman, 0 )ill accept. 7laughter8 (ag(agi5ig yon, maliliit na sa tao yon.

FO'. ROMAS. Er. Chairman, 0 )onder if in the re&enue gainers if )e factored in anamount that )ould reGect the +AT and other sales taxes

CFA0REA' 'R0K. 'o, )ere tal9ing of this measure only. =e )ill not 7discontinued8

FO'. ROMAS. 'o, no, no, no, from the arising from the exemption. Assuming that)hen )e release the money into the hands of the pu5lic, they )ill not use that to for )allpaper. They )ill spend that eh, Er. Chairman. So )hen they spend that

CFA0REA' 'R0K. Theres a +AT.

FO'. ROMAS. There )ill 5e a +AT and there )ill 5e other sales taxes no. 0s there a6uanti1cation? 0s there an approximation?

CFA0REA' JA+0R. 'ot anything.

FO'. ROMAS. So, in eHect, )e ha&e steriliBed that entire se&en 5illion. 0n eHect, it isnot circulating in the economy )hich is unrealistic.

CFA0REA' 'R0K. 0t does, it does, 5ecause this is ta9en and spent 5y go&ernment,

some5ody recei&es it in the form of )ages and supplies and other ser&ices and othergoods. They are not 5eing ta9en from the pu5lic and stored in a &ault.













CFA0REA' JA+0R. That /./ loss 5ecause of tax exemption. That )ill 5e extra incomefor the taxpayers.

FO'. ROMAS. (recisely, so they )ill 5e spending it. 2

The discussion a5o&e 5ears out that under R.A. 'o. %-2-, the exemption of (A*CORfrom paying corporate income tax )as not 5ased on a classi1cation sho)ingsu5stantial distinctions )hich ma9e for real diHerences, 5ut to reiterate, theexemption )as granted upon the re6uest of (A*COR that it 5e exempt from thepayment of corporate income tax.

=ith the su5se6uent enactment of R.A. 'o. !##/, amending R.A. 'o. %-2-, (A*CORhas 5een excluded from the enumeration of *OCCs that are exempt from payingcorporate income tax. The records of the icameral Conference Eeeting dated April%, 2$$", of the Committee on the Disagreeing (ro&isions of Senate ill 'o. !"$and Fouse ill 'o. #""", sho) that it is the legislati&e intent that (A*COR 5e su5:ectto the payment of corporate income tax, thus3

TF CFA0REA' 7S'. RCTO8. Les, OsmeWa, the proponent of the amendment.

S'. OSEXA. Leah. Er. Chairman, one of the reasons )hy )e>re e&en consideringthis +AT 5ill is )e )ant to sho) the )orld )ho our creditors, that )e are increasingo;cial re&enues that go to the national 5udget. nfortunately today, (agcor isuno;cial.

'o), in 2$$#, 0 too9 a 6uic9 loo9 this morning, (agcor had a net income of !./ 5illionafter paying some small taxes that they are su5:ected to. Of the !./ 5illion, theyclaim they remitted to national go&ernment se&en 5illion. (ag9atapos, there areother speci1c remittances li9e to the (hilippine Sports Commission, etc., asmandated 5y &arious la)s, and then a5out -$$ million to the (resident>s Socialund. ut all in all, their net pro1t today should 5e a5out 2 5illion. That>s )hy 0 am6uestioning this t)o 5illion. e5'use =ie essenti' te 5'i? t't te?one goes to go!en?ent, 'n( I =i '55ept t't @ust >o te s'e o> 'gu?ent. It (oes not p'ss toug te 'ppopi'tion po5ess. An( I tin t't 't e'st i> =e 5'n 5'ptue * pe5ent o / pe5ent toug te:u(get' po5ess, Bst, it is ee5te( in ou o<5i' in5o?e o> go!en?ent=i5 is 'ppie( to te n'tion' :u(get, 'n( se5on(, it goes toug='t is 5onstitution' ?'n('te( 's Congess 'ppopi'ting 'n( (eBning=ee te ?one is spent 'n( not toug ' :o'( o> (ie5tos t't 's

':soute no '55ount':iit.

R(. ('TKKA. =ell, )ith all due respect, Er. Chairman, follo) up lang.

There is )isdom in the comments of my good friend from Ce5u, Senator OsmeWa.

S'. OSEXA. And 'egros.

R(. ('TKKA. And 'egros at the same time ay Uasiman)a. ut 0 )ould not)ant to put my friends from the Department of inance in a di;cult position, 5utmay )e 9no) your comments on this 9no)ing that as Senator OsmeWa :ustmentioned, he said, <0 accept that that a lot of it is going to spending for 5asicser&ices,< you 9no), going to most, 0 thin9, supposedly a lot or most of it should goto go&ernment spending, social ser&ices and the li9e. =hat is your comment on this?

This is going to aHect a lot of ser&ices on the go&ernment side.

TF CFA0REA' 7R(. KA(S8. Er. Chair, Er. Chair.

S'. OSEXA. 0t goes from poc9et to the other, Eonico.

R(. ('TKKA. 0 9no) that. ut 0 )anted to as9 them, Er. Senator, 5ecause youmay ha&e your o)n pre:udgment on this and 0 don>t 5lame you. 0 don>t 5lame you.And 0 9no) you ha&e your o)n research. ut )ill this not aHect a lot, thedis5ursements on social ser&ices and other?

R(. KOCS0'. Er. Chairman. Er. Chairman, if 0 can add to that 6uestion also. =ouldn>tit 5e easier for you to explain to, say, foreign creditors, ho) do you explain to themthat if there is a 1scal gap some of our richest corporations has @5een spared @from

taxation 5y the go&ernment )hich is one rich source of re&enues. 'o), )hy do yousa&e, )hy do you spare certain go&ernment corporations on that, li9e (agcor? So,)ould it 5e easier for you to ma9e an argument if e&erything )as exposed totaxation?

R(. T+S. Er. Chair, please.

TF CFA0REA' 7R(. KA(S8. Can )e as9 the DO to respond to those 5efore )e callCongressman Te&es?

ER. (R0S0EA. Than9 you, Er. Chair.

Yes, >o? (eBnite i?po!ing te 5oe5tion, it =i ep us :e5'use it =iten ente 's 'n o<5i' e!enue 'toug =en (i!i(en(s (e5'e it 'sogoes in 's ote in5o?e. 7sic8

x x x x

R(. T+S. Er. Chairman.

x x x x

TF CFA0REA' 7R(. KA(S8. Congressman Te&es.

R(. T+S. Ye'. P'g5o is 5ontoe( un(e #e5tion /7, t't is on in5o?et'D. No=, =e 'e t'ing ee on !'ue-'((e( t'D. 2o ou ?e'n to s' =e'e going to '?en( it >o? in5o?e t'D to !'ue-'((e( t'D, 's >' 's P'g5ois 5on5ene(

TF CFA0REA' 7S'. RCTO8. No. e 'e @ust '?en(ing t't se5tion =it

eg'( to te eDe?ption >o? in5o?e t'D o> P'g5o.

x x x x

R(. 'O*RAKS. Er. Chairman, Er. Chairman. Er. Chairman.

TF CFA0REA' 7R(. KA(S8. Congressman 'ograles.

R(. 'O*RAKS. Just a point of in6uiry from the Chair. =hat exactly are the functionsof (agcor that are +ATa5le? =hat )ill )e +AT in (agcor?

TF CFA0REA' 7R(. KA(S8. This is on o)n income tax. This is (agcor income tax.

R(. 'O*RAKS. 'o, that>s )hy. Anong i&a+at natin sa 9anya. Sale of )hat?

x x x x





R(. +0KKART. Er. Chairman, my 6uestion is, )hat are )e +ATing (agcor )ith, isit the . . .

R(. 'O*RAKS. Er. Chairman, this is a secret agreement or the )ay they craft theircontract, )hich 5asis?

TF CFA0REA' 7S'. RCTO8. Congess?'n Nog'es, te #en'te !esion(oes not (is5uss ' %AT on P'g5o :ut it @ust t'es '=' tei eDe?ption>o? non-p'?ent o> in5o?e t'D.22

Taxation is the rule and exemption is the exception.2# The 5urden of proof rests uponthe party claiming exemption to pro&e that it is, in fact, co&ered 5y the exemption soclaimed.2- As a rule, tax exemptions are construed strongly against theclaimant.2" xemptions must 5e sho)n to exist clearly and categorically, andsupported 5y clear legal pro&ision.2

0n this case, (A*COR failed to pro&e that it is still exempt from the payment of corporate income tax, considering that Section of R.A. 'o. !##/ amended Section2/ 7c8 of the 'ational 0nternal Re&enue Code of !!/ 5y omitting (A*COR from theexemption. The legislati&e intent, as sho)n 5y the discussions in the icameralConference Eeeting, is to re6uire (A*COR to pay corporate income taxI hence, theomission or remo&al of (A*COR from exemption from the payment of corporateincome tax. 0t is a 5asic precept of statutory construction that the express mentionof one person, thing, act, or conse6uence excludes all others as expressed in thefamiliar maxim expressio unius est exclusio alterius.2/ Thus, the express mention of the *OCCs exempted from payment of corporate income tax excludes all others. 'ot5eing excepted, petitioner (A*COR must 5e regarded as coming )ithin the pur&ie)of the general rule that *OCCs shall pay corporate income tax, expressed in themaxim3 exceptio 1rmat regulam in casi5us non exceptis.2%

(A*COR cannot 1nd support in the e6ual protection clause of the Constitution, asthe legislati&e records of the icameral Conference Eeeting dated Octo5er 2/, !!/,of the Committee on =ays and Eeans, sho) that (A*CORs exemption frompayment of corporate income tax, as pro&ided in Section 2/ 7c8 of R.A. 'o. %-2-, orthe 'ational 0nternal Re&enue Code of !!/, )as not made pursuant to a &alidclassi1cation 5ased on su5stantial distinctions and the other re6uirements of areasona5le classi1cation 5y legislati&e 5odies, so that the la) may operate only onsome, and not all, )ithout &iolating the e6ual protection clause. The legislati&erecords sho) that the 5asis of the grant of exemption to (A*COR from corporate

income tax )as (A*CORs o)n re6uest to 5e exempted.

(etitioner further contends that Section 7c8 of R.A. 'o. !##/ is null and &oid a,

initio for &iolating the nonimpairment clause of the Constitution. (etitioner a&ersthat la)s form part of, and is read into, the contract e&en )ithout the partiesexpressly saying so. (etitioner states that the pri&ate partiesPin&estors transacting)ith it considered the tax exemptions, )hich inure to their 5ene1t, as the mainconsideration and inducement for their decision to transactPin&est )ith it. (etitionerargues that the )ithdra)al of its exemption from corporate income tax 5y R.A. 'o.!##/ has the eHect of changing the main consideration and inducement for thetransactions of pri&ate parties )ith itI thus, the amendatory pro&ision is &iolati&e of the nonimpairment clause of the Constitution.

(etitioners contention lac9s merit.

The nonimpairment clause is contained in Section $, Article 000 of the Constitution,)hich pro&ides that no la) impairing the o5ligation of contracts shall 5e passed. Thenonimpairment clause is limited in application to la)s that derogate from prior actsor contracts 5y enlarging, a5ridging or in any manner changing the intention of theparties.2! There is impairment if a su5se6uent la) changes the terms of a contract5et)een the parties, imposes ne) conditions, dispenses )ith those agreed upon or)ithdra)s remedies for the enforcement of the rights of the parties.#$

As regards franchises, Section , Article M00 of the Constitution# pro&ides that nofranchise or right shall 5e granted except under the condition that it shall 5e su5:ect

to amendment, alteration, or repeal 5y the Congress )hen the common good sore6uires.#2

0n Eanila lectric Company &. (ro&ince of Kaguna, ## the Court held that a franchiseparta9es the nature of a grant, )hich is 5eyond the pur&ie) of the nonimpairmentclause of the Constitution.#- The pertinent portion of the case states3

=hile the Court has, not too infre6uently, referred to tax exemptions contained inspecial franchises as 5eing in the nature of contracts and a part of the inducementfor carrying on the franchise, these exemptions, ne&ertheless, are far from 5eingstrictly contractual in nature. Contractual tax exemptions, in the real sense of theterm and )here the nonimpairment clause of the Constitution can rightly 5ein&o9ed, are those agreed to 5y the taxing authority in contracts, such as thosecontained in go&ernment 5onds or de5entures, la)fully entered into 5y them under

ena5ling la)s in )hich the go&ernment, acting in its pri&ate capacity, sheds its cloa9of authority and )ai&es its go&ernmental immunity. Truly, tax exemptions of this9ind may not 5e re&o9ed )ithout impairing the o5ligations of contracts. Thesecontractual tax exemptions, ho)e&er, are not to 5e confused )ith tax exemptionsgranted under franchises. A franchise parta9es the nature of a grant )hich is 5eyondthe pur&ie) of the nonimpairment clause of the Constitution. 0ndeed, Article M00,Section , of the !%/ Constitution, li9e its precursor pro&isions in the !#" and the!/# Constitutions, is explicit that no franchise for the operation of a pu5lic utilityshall 5e granted except under the condition that such pri&ilege shall 5e su5:ect toamendment, alteration or repeal 5y Congress as and )hen the common good sore6uires.#"

0n this case, (A*COR )as granted a franchise to operate and maintain gam5lingcasinos, clu5s and other recreation or amusement places, sports, gaming pools, i.e.,5as9et5all, foot5all, lotteries, etc., )hether on land or sea, )ithin the territorial

:urisdiction of the Repu5lic of the (hilippines. # nder Section , Article M00 of theConstitution, (A*CORs franchise is su5:ect to amendment, alteration or repeal 5yCongress such as the amendment under Section of R.A. 'o. !#//. Fence, thepro&ision in Section of R.A. 'o. !##/, amending Section 2/ 7c8 of R.A. 'o. %-2- 5y)ithdra)ing the exemption of (A*COR from corporate income tax, )hich may aHectany 5ene1ts to (A*CORs transactions )ith pri&ate parties, is not &iolati&e of thenonimpairment clause of the Constitution.

Anent the &alidity of RR 'o. 2$$", the Court holds that the pro&ision su5:ecting(A*COR to $N +AT is in&alid for 5eing contrary to R.A. 'o. !##/. 'o)here in R.A.'o. !##/ is it pro&ided that petitioner can 5e su5:ected to +AT. R.A. 'o. !##/ is clearonly as to the remo&al of petitioner>s exemption from the payment of corporateincome tax, )hich )as already addressed a5o&e 5y this Court.

As pointed out 5y the OS*, R.A. 'o. !##/ itself exempts petitioner from +ATpursuant to Section / 798 thereof, )hich reads3






































Sec. /. Section $! of the same Code, as amended, is here5y further amended toread as follo)s3

Section $!. 1xempt ?ransactions. 78 Su5:ect to the pro&isions of Su5section 728hereof, the follo)ing transactions shall 5e exempt from the &alueadded tax3

x x x x

798 Transactions )hich are exempt under international agreements to )hich the(hilippines is a signatory or un(e spe5i' '=s, except (residential Decree 'o."2!.#/

(etitioner is exempt from the payment of +AT, 5ecause (A*CORs charter, (.D. 'o.%!, is a special la) that grants petitioner exemption from taxes.

Eoreo&er, the exemption of (A*COR from +AT is supported 5y Section of R.A. 'o.!##/, )hich retained Section $% 78 7#8 of R.A. 'o. %-2-, thus3

@R.A. 'o. !##/, SC. . Section $% of the same Code 7R.A. 'o. %-2-8, as amended,is here5y further amended to read as follo)s3

SC. $%. +alueAdded Tax on Sale of Ser&ices and se or Kease of (roperties. 4

7A8 Rate and ase of Tax. 4 There shall 5e le&ied, assessed and collected, a &alueadded tax e6ui&alent to ten percent 7$N8 of gross receipts deri&ed from the sale orexchange of ser&ices, including the use or lease of properties3 x x x

x x x x

78 Transactions Su5:ect to Vero (ercent 7$N8 Rate. 4 The follo)ing ser&icesperformed in the (hilippines 5y +ATregistered persons shall 5e su5:ect to Beropercent 7$N8 rateI

x x x x

7#8 Ser&ices rendered to persons or entities )hose exemption under special la)s orinternational agreements to )hich the (hilippines is a signatory eHecti&ely su5:ectsthe supply of such ser&ices to Bero percent 7$N8 rateI

x x x x#%

As pointed out 5y petitioner, although R.A. 'o. !##/ introduced amendments toSection $% of R.A. 'o. %-2- 5y imposing +AT on other ser&ices not pre&iouslyco&ered, it did not amend the portion of Section $% 78 7#8 that su5:ects to Beropercent rate ser&ices performed 5y +ATregistered persons to persons or entities)hose exemption under special la)s or international agreements to )hich the(hilippines is a signatory eHecti&ely su5:ects the supply of such ser&ices to $N rate.

(etitioner>s exemption from +AT under Section $% 78 7#8 of R.A. 'o. %-2- has 5eenthoroughly and extensi&ely discussed in "ommissioner o Internal 4evenue

v. +cesite @PhilippinesA Botel "orporation.#! Acesite )as the o)ner and operator of the Foliday 0nn Eanila (a&ilion Fotel. 0t leased a portion of the hotels premises to(A*COR. 0t incurred +AT amounting to (#$,"2,%!2.$2 from its rental income andsale of food and 5e&erages to (A*COR from January !! to April !!/. Acesite triedto shift the said taxes to (A*COR 5y incorporating it in the amount assessed to(A*COR. Fo)e&er, (A*COR refused to pay the taxes 5ecause of its taxexempt

status. (A*COR paid only the amount due to Acesite minus +AT in the sumof (#$,"2,%!2.$2. Acesite paid +AT in the amount of (#$,"2,%!2.$2 to theCommissioner of 0nternal Re&enue, fearing the legal conse6uences of its nonpayment. 0n Eay !!%, Acesite sought the refund of the amount it paid as +AT onthe ground that its transaction )ith (A*COR )as su5:ect to Bero rate as it )asrendered to a taxexempt entity. The Court ruled that (A*COR and Acesite )ere 5othexempt from paying +AT, thus3

x x x x

(A*COR is exempt from payment of indirect taxes0t is undisputed that (.D. %!, the charter creating (A*COR, grants the latter anexemption from the payment of taxes. Section # of (.D. %! pertinently pro&ides3

Sec. #. 1xemptions. 4

x x x x

728 Income and other taxes. 7a8 ranchise Folder3 'o tax of any 9ind or form,income or other)ise, as )ell as fees, charges or le&ies of )hate&er nature, )hether'ational or Kocal, shall 5e assessed and collected under this ranchise from theCorporationI nor shall any form of tax or charge attach in any )ay to the earnings of the Corporation, except a ranchise Tax of 1&e 7"N8 percent of the gross re&enue orearnings deri&ed 5y the Corporation from its operation under this ranchise. Such

tax shall 5e due and paya5le 6uarterly to the 'ational *o&ernment and shall 5e inlieu of all 9inds of taxes, le&ies, fees or assessments of any 9ind, nature ordescription, le&ied, esta5lished or collected 5y any municipal, pro&incial, or nationalgo&ernment authority.

758 Others3 The exemptions herein granted for earnings deri&ed from the operationsconducted under the franchise speci1cally from the payment of any tax, income orother)ise, as )ell as any form of charges, fees or le&ies, shall inure to the 5ene1t of and extend to corporation7s8, association7s8, agency7ies8, or indi&idual7s8 )ith )homthe Corporation or operator has any contractual relationship in connection )ith theoperations of the casino7s8 authoriBed to 5e conducted under this ranchise and tothose recei&ing compensation or other remuneration from the Corporation oroperator as a result of essential facilities furnished andPor technical ser&icesrendered to the Corporation or operator.

(etitioner contends that the a5o&e tax exemption refers only to (A*COR>s direct taxlia5ility and not to indirect taxes, li9e the +AT.

=e disagree.

A close scrutiny of the a5o&e pro&isos clearly gi&es (A*COR a 5lan9et exemption totaxes )ith no distinction on )hether the taxes are direct or indirect. =e are one )iththe CA ruling that (A*COR is also exempt from indirect taxes, li9e +AT, as follo)s3

nder the a5o&e pro&ision @Section # 728 758 of (.D. %!, the term <Corporation<or operator refers to (A*COR. Although the la) does not speci1cally mention(A*COR>s exemption from indirect taxes, (A*COR is undou5tedly exempt from suchtaxes 5ecause the la) exempts from taxes persons or entities contracting )ith(A*COR in casino operations. Although, diHerently )orded, the pro&ision clearly

exempts (A*COR from indirect taxes. 0n fact, it goes one step further 5y granting taxexempt status to persons dealing )ith (A*COR in casino operations. The











unmista9a5le conclusion is that (A*COR is not lia5le for the (#$, "2,%!2.$2 +ATand neither is Acesite as the latter is eHecti&ely su5:ect to Bero percent rate underSec. $% 7#8, R.A. %-2-. 7mphasis supplied.8

0ndeed, 5y extending the exemption to entities or indi&iduals dealing )ith (A*COR,the legislature clearly granted exemption also from indirect taxes. 0t must 5e notedthat the indirect tax of +AT, as in the instant case, can 5e shifted or passed to the5uyer, transferee, or lessee of the goods, properties, or ser&ices su5:ect to +AT.

Thus, : eDten(ing te t'D eDe?ption to entities o in(i!i(u's (e'ing =itPAGCOR in 5'sino ope'tions, it is eDe?pting PAGCOR >o? :eing i':e to

in(ie5t t'Des.Te ?'nne o> 5'ging %AT (oes not ?'e PAGCOR i':e to s'i( t'D.

0t is true that +AT can either 5e incorporated in the &alue of the goods, properties, orser&ices sold or leased, in )hich case it is computed as P of such &alue, orcharged as an additional $N to the &alue. +erily, the seller or lessor has the optionto follo) either )ay in charging its clients and customer. 0n the instant case, Acesitefollo)ed the latter method, that is, charging an additional $N of the gross salesand rentals. e that as it may, the use of either method, and in particular, the 1rstmethod, does not denigrate the fact that (A*COR is exempt from an indirect tax,li9e +AT.

+AT exemption extends to Acesite

Thus, )hile it )as proper for (A*COR not to pay the $N +AT charged 5y Acesite,the latter is not lia5le for the payment of it as it is exempt in this particulartransaction 5y operation of la) to pay the indirect tax. Such exemption falls )ithinthe former Section $2 758 7#8 of the !// Tax Code, as amended 7no) Sec. $% @5@# of R.A. %-2-8, )hich pro&ides3

Section $2. 9alue;added tax on sale o services. 7a8 Rate and 5ase of tax Thereshall 5e le&ied, assessed and collected, a &alueadded tax e6ui&alent to $N of gross receipts deri&ed 5y any person engaged in the sale of ser&ices x x xI (ro&ided,that the follo)ing ser&ices performed in the (hilippines 5y +AT registered personsshall 5e su5:ect to $N.

x x x x

7#8 Ser&ices rendered to persons or entities )hose exemption under special la)s orinternational agreements to )hich the (hilippines is a signatory eHecti&ely su5:ectsthe supply of such ser&ices to Bero 7$N8 rate 7emphasis supplied8.

The rationale for the exemption from indirect taxes pro&ided for in (.D. %! and theextension of such exemption to entities or indi&iduals dealing )ith (A*COR in casinooperations are 5est elucidated from the !%/ case of "ommissioner o Internal

4evenue &. John Gotamco Y Sons5 Inc.5 )here the a5solute tax exemption of the=orld Fealth OrganiBation 7=FO8 upon an international agreement )as upheld. =eheld in said case that the exemption of contractee =FO should 5e implemented tomean that the entity or person exempt is the contractor itself )ho constructed the5uilding o)ned 5y contractee =FO, and such does not &iolate the rule that taxexemptions are personal 5ecause the manifest intention of the agreement is toexempt the contractor so that no contractor>s tax may 5e shifted to the contractee

=FO. Thus, the pro&iso in (.D. %!, extending the exemption to entities or

indi&iduals dealing )ith (A*COR in casino operations, is clearly to proscri5e anyindirect tax, li9e +AT, that may 5e shifted to (A*COR. -$

Although the 5asis of the exemption of (A*COR and Acesite from +AT in the case of The Commissioner of 0nternal Re&enue &. Acesite 7(hilippines8 Fotel Corporation )asSection $2 758 of the !// Tax Code, as amended, )hich section )as retained asSection $% 78 7#8 in R.A. 'o. %-2-,- it is still applica5le to this case, since thepro&ision relied upon has 5een retained in R.A. 'o. !##/.-2$avvphi$

0t is settled rule that in case of discrepancy 5et)een the 5asic la) and a rule or

regulation issued to implement said la), the 5asic la) pre&ails, 5ecause the saidrule or regulation cannot go 5eyond the terms and pro&isions of the 5asic la). -# RR'o. 2$$", therefore, cannot go 5eyond the pro&isions of R.A. 'o. !##/. Since(A*COR is exempt from +AT under R.A. 'o. !##/, the 0R exceeded its authority insu5:ecting (A*COR to $N +AT under RR 'o. 2$$"I hence, the said regulatorypro&ision is here5y nulli1ed.

HERE$ORE, the petition is (ARTKL *RA'TD. Section of Repu5lic Act 'o. !##/,amending Section 2/ 7c8 of the 'ational 0nternal Re&enue Code of !!/, 5yexcluding petitioner (hilippine Amusement and *aming Corporation from theenumeration of go&ernmento)ned and controlled corporations exempted fromcorporate income tax is &alid and constitutional, )hile 0R Re&enue Regulations 'o.2$$" insofar as it su5:ects (A*COR to $N +AT is null and &oid for 5eing contraryto the 'ational 0nternal Re&enue Code of !!/, as amended 5y Repu5lic Act 'o.!##/.

'o costs.

SO ORDRD.













G.R. No. L-109/ $e:u' /7, 1947

CO""I##IONER O$ INTERNAL RE%EN&E, petitioner,&s. OHN GOTA"CO F #ON#, INC. 'n( THE CO&RT O$ TA)APPEAL#, respondents.

YAP, J.:

The 6uestion in&ol&ed in this petition is )hether respondent John *otamco Y Sons,0nc. should pay the #N contractor>s tax under Section ! of the 'ational 0nternalRe&enue Code on the gross receipts it realiBed from the construction of the =orldFealth OrganiBation o;ce 5uilding in Eanila.

The =orld Fealth OrganiBation 7=FO for short8 is an international organiBation )hichhas a regional o;ce in Eanila. As an international organiBation, it en:oys pri&ilegesand immunities )hich are de1ned more speci1cally in the Fost Agreement enteredinto 5et)een the Repu5lic of the (hilippines and the said OrganiBation on July 22,!". Section of that Agreement pro&ides, inter alia5 that <the OrganiBation, itsassets, income and other properties shall 5e3 7a8 exempt from all direct and indirecttaxes. 0t is understood, ho)e&er, that the OrganiBation )ill not claim exemption fromtaxes )hich are, in fact, no more than charges for pu5lic utility ser&icesI . . .

=hen the =FO decided to construct a 5uilding to house its o)n o;ces, as )ell asthe other nited 'ations o;ces stationed in Eanila, it entered into a furtheragreement )ith the *o&ermment of the Repu5lic of the (hilippines on 'o&em5er 2,!"/. This agreement contained the follo)ing pro&ision 7Article 000, paragraph 283

The OrganiBation may import into the country materials and 1xtures re6uired for theconstruction free from all duties and taxes and agrees not to utiliBe any portion of the international reser&es of the *o&ernment.

Article +000 of the a5o&ementioned agreement referred to the Fost Agreementconcluded on July 22, !" )hich granted the OrganiBation exemption from all directand indirect taxes.

0n in&iting 5ids for the construction of the 5uilding, the =FO informed the 5iddersthat the 5uilding to 5e constructed 5elonged to an international organiBation )ithdiplomatic status and thus exempt from the payment of all fees, licenses, and taxes,and that therefore their 5ids <must ta9e this into account and should not includeitems for such taxes, licenses and other payments to *o&ernment agencies.<

The construction contract )as a)arded to respondent John *otamco Y Sons, 0nc.7*otamco for short8 on e5ruary $, !"% for the stipulated price of (#/$,$$$.$$,5ut )hen the 5uilding )as completed the price reached a total of (-"2,"--.$$.

Sometime in Eay !"%, the =FO recei&ed an opinion from the Commissioner of theureau of 0nternal Re&enue stating that <as the #N contractor>s tax is an indirect taxon the assets and income of the OrganiBation, the gross receipts deri&ed 5ycontractors from their contracts )ith the =FO for the construction of its ne)5uilding, are exempt from tax in accordance )ith . . . the Fost Agreement.<Su5se6uently, ho)e&er, on June #, !"%, the Commissioner of 0nternal Re&enue

re&ersed his opinion and stated that <as the #N contractor>s tax is not a direct nor

an indirect tax on the =FO, 5ut a tax that is primarily due from the contractor, thesame is not co&ered 5y . . . the Fost Agreement.<

On January 2, !$, the =FO issued a certi1cation state ! inter alia,3

=hen the re6uest for 5ids for the construction of the =orld Fealth OrganiBationo;ce 5uilding )as called for, contractors )ere informed that there )ould 5e notaxes or fees le&ied upon them for their )or9 in connection )ith the construction of the 5uilding as this )ill 5e considered an indirect tax to the OrganiBation caused 5ythe increase of the contractor>s 5id in order to co&er these taxes. This )as upheld 5y

the ureau of 0nternal Re&enue and it can 5e stated that the contractors su5mittedtheir 5ids in good faith )ith the exemption in mind.

The undersigned, therefore, certi1es that the 5id of John *otamco Y Sons, madeunder the condition stated a5o&e, should 5e exempted from any taxes in connection)ith the construction of the =orld Fealth OrganiBation o;ce 5uilding.

On January /, !, the Commissioner of 0nternal Re&enue sent a letter of demandto *otamco demanding payment of ( ,!/$.-$, representing the #N contractor>stax plus surcharges on the gross receipts it recei&ed from the =FO in theconstruction of the latter>s 5uilding.

Respondent *otamco appealed the Commissioner>s decision to the Court of TaxAppeals, )hich after trial rendered a decision, in fa&or of *otamco and re&ersed theCommissioner>s decision. The Court of Tax Appeal>s decision is no) 5efore us for

re&ie) on certiorari.

0n his 1rst assignment of error, petitioner 6uestions the entitlement of the =FO totax exemption, contending that the Fost Agreement is null and &oid, not ha&ing5een rati1ed 5y the (hilippine Senate as re6uired 5y the Constitution. =e 1nd nomerit in this contention. =hile treaties are re6uired to 5e rati1ed 5y the Senateunder the Constitution, less formal types of international agreements may 5eentered into 5y the Chief xecuti&e and 5ecome 5inding )ithout the concurrence of the legislati&e 5ody. 1 The Fost Agreement comes )ithin the latter categoryI it is a&alid and 5inding international agreement e&en )ithout the concurrence of the(hilippine Senate.

The pri&ileges and immunities granted to the =FO under the Fost Agreement ha&e5een recogniBed 5y this Court as legally 5inding on (hilippine authorities. /

(etitioner maintains that e&en assuming that the Fost Agreement granting taxexemption to the =FO is &alid and enforcea5le, the #N contractor>s tax assessed on*otamco is not an <indirect tax< )ithin its pur&ie). (etitioner>s position is that thecontractor>s tax <is in the nature of an excise tax )hich is a charge imposed uponthe performance of an act, the en:oyment of a pri&ilege or the engaging in anoccupation. . . 0t is a tax due primarily and directly on the contractor, not on theo)ner of the 5uilding. Since this tax has no 5earing upon the =FO, it cannot 5edeemed an indirect taxation upon it.<

=e agree )ith the Court of Tax Appeals in re:ecting this contention of the petitioner.Said the respondent court3

0n context, direct taxes are those that are demanded from the &ery person )ho, it isintended or desired, should pay themI )hile indirect taxes are those that aredemanded in the 1rst instance from one person in the expectation and intention that



he can shift the 5urden to someone else. 7(olloc9 &s. armers, K Y T Co., !"/ S-2!, " S. Ct. /#, #! Ka). d. /"!.8 The contractor>s tax is of course paya5le 5y thecontractor 5ut in the last analysis it is the o)ner of the 5uilding that shoulders the5urden of the tax 5ecause the same is shifted 5y the contractor to the o)ner as amatter of selfpreser&ation. Thus, it is an indirect tax. And it is an indirect tax on the=FO 5ecause, although it is paya5le 5y the petitioner, the latter can shift its 5urdenon the =FO. 0n the last analysis it is the =FO that )ill pay the tax indirectly throughthe contractor and it certainly cannot 5e said that >this tax has no 5earing upon the=orld Fealth OrganiBation.

(etitioner claims that under the authority of the (hilippine Acetylene Company&ersus Commissioner of 0nternal Re&enue, et al., the #N contractor>s tax fansdirectly on *otamco and cannot 5e shifted to the =FO. The Court of Tax Appeals,ho)e&er, held that the said case is not controlling in this case, since the FostAgreement speci1cally exempts the =FO from <indirect taxes.< =e agree.

The Philippine +cetylene case in&ol&ed a tax on sales of goods )hich under the la)had to 5e paid 5y the manufacturer or producerI the fact that the manufacturer orproducer might ha&e added the amount of the tax to the price of the goods did notma9e the sales tax <a tax on the purchaser.< The Court held that the sales tax must5e paid 5y the manufacturer or producer e&en if the sale is made to taxexemptentities li9e the 'ational (o)er Corporation, an agency of the (hilippine*o&ernment, and to the +oice of America, an agency of the nited States*o&ernment.

The Fost Agreement, in speci1cally exempting the =FO from <indirect taxes,<contemplates taxes )hich, although not imposed upon or paid 5y the OrganiBationdirectly, form part of the price paid or to 5e paid 5y it. This is made clear in Section2 of the Fost Agreement )hich pro&ides3

=hile the OrganiBation )ill not, as a general rule, in the case of minor purchases,claim exemption from excise duties, and from taxes on the sale of mo&a5le andimmo&a5le property )hich form part of the price to 5e paid, ne&ertheless, )hen theOrganiBation is ma9ing important purchases for o;cial use of property on )hichsuch duties and taxes ha&e 5een charged or are chargea5le the *o&ernment of theRepu5lic of the (hilippines shall ma9e appropriate administrati&e arrangements forthe remission or return o the amount o duty or tax. 7mphasis supplied8.

The a5o&e6uoted pro&ision, although referring only to purchases made 5y the =FO,elucidates the clear intention of the Agreement to exempt the =FO from <indirect<taxation.

The certi1cation issued 5y the =FO, dated January 2$, !$, sought exemption of the contractor, *otamco, from any taxes in connection )ith the construction of the=FO o;ce 5uilding. The #N contractor>s tax )ould 5e )ithin this category andshould 5e &ie)ed as a form of an <indirect tax< On the OrganiBation, as the paymentthereof or its inclusion in the 5id price )ould ha&e meant an increase in theconstruction cost of the 5uilding.

Accordingly, 1nding no re&ersi5le error committed 5y the respondent Court of TaxAppeals, the appealed decision is here5y a;rmed.

SO ORDRD.

<arvasa5 #elencio;Berrera5 "ru05 8eliciano5 Gancayco and Sarmiento5 JJ.5 concur.



G.R. No. 44/91. "' 1, 1991.

ERNE#TO ". "ACE2A, petitione, !s. HON. CATALINO "ACARAIG, R., in is5'p'5it 's EDe5uti!e #e5et', O<5e o> te Pesi(ent HON. %ICENTE R. AY"E, in is 5'p'5it 's #e5et' o> te 2ep't?ent o> $in'n5e HON.#AL%A2OR "I#ON, in is 5'p'5it 's Co??issione, ue'u o> Custo?sHON. O#E &. ONG, in is 5'p'5it 's Co??issione o> Inten' Re!enueNATIONAL POER CORPORATION te $I#CAL INCENTI%E# RE%IE OAR2C'teD Pis.8 In5. Piipin's #e Petoeu? Copo'tion PiippineN'tion' Oi Copo'tion 'n( Petopi Copo'tion, espon(ents.

+illamor Y +illamor Ka) O;ces for petitioner.

Angara, A5ello, Concepcion, Regala Y CruB for (ilipinas Shell (etroleum Corporation.

Siguion Reyna, Eontecillo Y Ongsia9o for Caltex 7(hils.8, 0nc.

SLKKAS

. RED0AK KA=I S(C0AK C0+0K ACT0O'I EA'DAESI CAS O ERAKCOSCR0T0S COR(ORAT0O' +S. SA+KKA'O, / SCRA %$- 7!%28, A((K0D. 4 0nEeralco, this Court recogniBes the situation )hen mandamus can control thediscretion of the Commissioners of 0nternal Re&enue and Customs )hen the exerciseof discretion is tainted )ith ar5itrariness and gra&e a5use as to go 5eyond statutoryauthority.

2. 0D.I 0D.I =R0T O (ROF00T0O'I 0SSA'C TFRO (RO(R 0' CAS ATAR. 4 (u5lic respondents assess that a )rit of prohi5ition is not proper as itsfunction is to pre&ent an unla)ful exercise of :urisdiction or to pre&ent theoppressi&e exercise of legal authority. (recisely, petitioner 6uestions the la)fulnessof the acts of pu5lic respondents in this case.

#. TAMAT0O'I TAM(ALRS S0TI TO (ROS(R D0RCT 0'JRL TO TF(T0T0O'R 'OT 'CSSARLI =FR 0SS 0'+OK+S 0KK*AK M('D0TR O(K0C EO'L. 4 0n the petition it is alleged that petitioner is <instituting this suit inhis capacity as a taxpayer and a dulyelected Senator of the (hilippines.< (u5licrespondent argues that petitioner must sho) he has sustained direct in:ury as aresult of the action and that it is not su;cient for him to ha&e a mere generalinterest common to all mem5ers of the pu5lic. The Court ho)e&er agrees )ith the

petitioner that as a taxpayer he may 1le the instant petition follo)ing the ruling inKoBada )hen it in&ol&es illegal expenditure of pu5lic money. The petition 6uestionsthe legality of the tax refund to '(C 5y )ay of tax credit certi1cates and the use of said assigned tax credits 5y respondent oil companies to pay for their tax and dutylia5ilities to the 0R and ureau of Customs.

-. 0D.I A((AKI CORT O TAM A((AKSI SCT0O' / O R(K0C ACT 'O.2"I 'OT A((K0CAK 0' CAS AT AR. 4 Assuming petitioner has the personality to1le the petition, pu5lic respondents also allege that the proper remedy for petitioneris an appeal to the Court of Tax Appeals under Section / of R.A. 'o. 2" instead of this petition. Fo)e&er Section of said la) pro&ides 4 <Sec. . =ho may appealIeHect of appeal 4 Any person, association or corporation ad&ersely aHected 5y adecision or ruling of the Commissioner of 0nternal Re&enue, the Collector of Customs7Commissioner of Customs8 or any pro&incial or City oard of Assessment Appeals

may 1le an appeal in the Court of Tax Appeals )ithin thirty days after receipt of suchdecision or ruling.< rom the foregoing, it is only the taxpayer ad&ersely aHected 5y

a decision or ruling of the Commissioner of 0nternal Re&enue, the Commissioner of Customs or any pro&incial or city oard of Assessment Appeal )ho may appeal tothe Court of Tax Appeals. (etitioner does not fall under this category.

". 0D.I D0ST0'CT0O' T=' D0RCT A'D 0'D0RCT TAMS. 4 A direct tax isa tax for )hich a taxpayer is directly lia5le on the transaction or 5usiness it engagesin. xamples are the custom duties and ad &alorem taxes paid 5y the oil companiesto the ureau of Customs for their importation of crude oil, and the speci1c and ad&alorem taxes they pay to the ureau of 0nternal Re&enue after con&erting the crudeoil into petroleum products. On the other hand, <indirect taxes are taxes primarily

paid 5y persons )ho can shift the 5urden upon someone else.< or example, theexcise and ad &alorem taxes that oil companies pay to the ureau of 0nternalRe&enue upon remo&al of petroleum products from its re1nery can 5e shifted to its5uyer, li9e the '(C, 5y adding them to the <cash< andPor <selling price.<

. 0D.I CAS O 'AT0O'AK (O=R COR(ORAT0O' +S. (RO+0'C O AKAL7*.R. 'O. %/-/!, J' -, !!$8 EOD00D OR S(RSDD 0' CAS AT AR. 4 0nthe case of 'ational (o)er Corporation &s. (ro&ince of Al5ay, the Court o5ser&edthat under (.D. 'o. // the po)er of the 0R )as only recommendatory andre6uires the appro&al of the (resident to 5e &alid. Thus, in said case the Court heldthat 0R Resolutions 'os. $%" and % not ha&ing 5een appro&ed 5y the(resident )ere not &alid and eHecti&e )hile the &alidity of 0R /%/ )as upheld asit )as duly appro&ed 5y the O;ce of the (resident on Octo5er ", !%/. Fo)e&er,under Section 2 of (.D. 'o. !# of June , !%-, hereina5o&e reproduced, )hich

amended (.D. 'o. //, it is clearly pro&ided for that such 0R resolution, may 5eappro&ed 5y the <(resident of the (hilippines andPor the Einister of inance.< Torepeat, as 0R Resolutions 'os. $%" and % )ere duly appro&ed 5y the Einisterof inance, hence they are &alid and eHecti&e. To this extent, this decision modi1esor supersedes the Court>s earlier decision in 'ational (o)er Corporation &s. (ro&inceof Al5ay.

/. 0D.I 'AT0O'AK (O=R COR(ORAT0O'I ME(T ROE OTF D0RCT A'D0'D0RCT TAMS. 4 nder R.A. 'o. #"% the exemption )as )orded in general terms,as to co&er <all taxes, duties, fees, imposts, charges, etc. . . .< Fo)e&er, theamendment under Repu5lic Act 'o. #!" enumerated the details co&ered 5y theexemption. Su5se6uently, (.D. 'o. #%$, made e&en more speci1c the details of theexemption of '(C to co&er, among others, 5oth direct and indirect taxes on allpetroleum products used in its operation. (residential Decree 'o. !#% amended the

tax exemption 5y simplifying the same la) in general terms. 0t succinctly exempts'(C from <all forms of taxes, duties, fees, imposts, as )ell as costs and ser&ice feesincluding 1ling fees, appeal 5onds, supersedeas 5onds, in any court oradministrati&e proceedings.< The use of the phrase <all forms< of taxes demonstratethe intention of the la) to gi&e '(C all the tax exemptions it has 5een en:oying5efore.

%. 0D.I 0D.I 0D.I RAT0O'AK. 4 The rationale for this exemption is that 5eingnonpro1t the '(C <shall de&ote all its returns from its capital in&estment as )ell asexcess re&enues from its operation, for expansion. To ena5le the Corporation to paythe inde5tedness and o5ligations and in furtherance and eHecti&e implementation of the policy enunciated in Section one of this Act, . . . .< The pream5le of (.D. 'o. !#%states 4 <=FRAS, in the application of the tax exemption pro&ision of the Re&isedCharter, the nonpro1t character of the '(C has not 5een fully utiliBed 5ecause of

restricti&e interpretations of the taxing agencies of the go&ernment on saidpro&isions . . .<



!. 0D.I 0D.I *RA'T O TAM ME(T0O'I 0'TR(RTD K0RAKKL 0' A+OR O A*O+R'E'T 0'STRE'TAK0TL. 4 The la)ma9er did not intend that the saidpro&isions of (.D. 'o. !#% shall 5e construed strictly against '(C. On the contrary,the la) mandates that it should 5e interpreted li5erally so as to enhance the taxexempt status of '(C. Fence, petitioner cannot in&o9e the rule on strictissimi :uris)ith respect to the interpretation of statutes granting tax exemptions to '(C.Eoreo&er, it is a recogniBed principle that the rule on strict interpretation does notapply in the case of exemptions in fa&or of a go&ernment political su5di&ision orinstrumentality.

$. 0D.I 0D.I 0D.I ME(T0O' ROE 0'D0RCT TAMSI 'OT R(AKD L(RS0D'T0AK DCR 'O. !#%I R(AK L 0E(K0CAT0O' 'OT A+ORD. 4 Thecontention of petitioner that the exemption of '(C from indirect taxes under Section# of R.A. 'o. #!" and (.D. 'o. #%$, is deemed repealed 5y (.D. 'o. !#% )hen thereference to it )as deleted is not )ellta9en. Repeal 5y implication is not fa&oredunless it is manifest that the legislature so intended. As la)s are presumed to 5epassed )ith deli5eration and )ith 9no)ledge of all existing ones on the su5:ect, it islogical to conclude that in passing a statute it is not intended to interfere )ith ora5rogate a former la) relating to the same su5:ect matter, unless the repugnancy5et)een the t)o is not only irreconcila5le 5ut also clear and con&incing as a resultof the language used, or unless the latter Act fully em5races the su5:ect matter of the earlier. The 1rst eHort of a court must al)ays 5e to reconcile or ad:ust thepro&isions of one statute )ith those of another so as to gi&e sensi5le eHect to 5othpro&isions. The legislati&e intent must 5e ascertained from a consideration of the

statute as a )hole, and not of an isolated part or a particular pro&ision alone. =henconstruing a statute, the reason for its enactment should 5e 9ept in mind and thestatute should 5e construed )ith reference to its intended scope and purpose andthe e&il sought to 5e remedied. The '(C is a go&ernment instrumentality )ith theenormous tas9 of underta9ing de&elopment of hydroelectric generation of po)erand production of electricity from other sources, as )ell as the transmission of electric po)er on a nation)ide 5asis, to impro&e the 6uality of life of the peoplepursuant to the State policy em5odied in Section , Article 00 of the !%/Constitution. 0t is e&ident from the pro&isions of (.D. 'o. !#% that its purpose is tomaintain the tax exemption of '(C from all forms of taxes including indirect taxes aspro&ided for under R.A. 'o. #!" and (.D. 'o. #%$ if it is to attain its goals.

. 0D.I (RS0D'T0AK DCR 'O. !#%I CO'STRCT0O' A'D 0'TR(RTAT0O'L O0C CFAR*D =0TF TF 0E(KE'TAT0O' TFRO *0+' =0*FT. 4 The

construction of (.D. 'o. !#% 5y the O;ce charged )ith its implementation should 5egi&en controlling )eight. Since the Eay %, !%" ruling of Commissioner Ancheta, tothe letter of the Secretary of inance of June 2, !%" con1rming said ruling, theletters of the 0R of August %, !%, and Decem5er 22, !%, the letter of theSecretary of inance of e5ruary !, !%/, the Eemorandum of the xecuti&eSecretary of Octo5er !, !%/, 5y authority of the (resident, con1rming andappro&ing 0R Resolution 'o. /%/, the letter of the Secretary of inance of Eay2$, !%% to the xecuti&e Secretary rendering his opinion as re6uested 5y the latter,and the latter>s reply of June ", !%%, it )as uniformly held that the grant of taxexemption to '(C under C.A. 'o. 2$, as amended, included exemption frompayment of all taxes relati&e to '(C>s petroleum purchases including indirect taxes.

The Court 1nds and so holds that the foregoing reasons adduced in the aforestatedletter of the Secretary of inance as con1rmed 5y the then xecuti&e Secretary are)ellta9en. =hen the '(C )as exempted from all forms of taxes, duties, fees,

imposts and other charges, under (.D. 'o. !#%, it means exactly )hat it says, i.e., all

forms of taxes including those that )ere imposed directly or indirectly on petroleumproducts used in its operation.

2. 0D.I CAS O (F0K0((0' ACTLK' CO. 0'C. +S. COEE0SS0O'R O0'TR'AK R+', 2$ SCRA $" 7!/8I 'OT A((K0CAK 0' CAS AT AR. 4 Thedoctrine in (hilippine Acetylene decided in !/ 5y this Court cannot apply to thepresent case. 0t in&ol&ed the sales tax of products the plaintiH sold to '(C from June2, !"# to June #$, !"% )hen '(C )as en:oying tax exemption from all taxes underCommon)ealth Act 'o. 2$, as amended 5y Repu5lic Act 'o. #"% issued on June -,!-! hereina5o&e reproduced. 0n said case, this Court held, that the sales tax is due

from the manufacturer and not the 5uyer, so plaintiH cannot claim exemptionssimply 5ecause the '(C, the 5uyer, )as exempt. Fo)e&er, on Septem5er $, !/,Repu5lic Act 'o. #!" )as passed as the re&ised charter of '(C )here5y Section #thereof )as amended 5y emphasiBing its nonpro1t character and expanding theextent of its tax exemption. As petitioner concedes, Section #7d8 aforestated of thisamendment under Repu5lic Act 'o. #-" spells out clearly the exemption of the '(Cfrom indirect taxes. And as hereina5o&e stated, in (.D. 'o. #%$, the exemption of '(C from indirect taxes )as emphasiBed )hen it )as speci1ed to include thoseimposed <directly and indirectly.< Thereafter, under (.D. 'o. !#% the tax exemptionof '(C )as integrated under Section # de1ning the same in general terms to co&er<all forms of taxes, duties, fees, imposts, etc.< )hich, as hereina5o&e discussed,logically includes exemption from indirect taxes on petroleum products used in itsoperation. This is the status of the tax exemptions the '(C )as en:oying )hen (.D.'o. !# )as passed, on the authority of )hich 0R Resolution 'os. $%" and %

)ere issued, and )hen xecuti&e Order 'o. !# )as promulgated, 5y )hich 0RResolution /%/ )as issued. Thus, the ruling in (hilippine Acetylene cannot apply tothis case due to the diHerent en&ironmental circumstances. As a matter of fact, theamendments of Section #, under R.A. 'o. #!", (.D. 'o. #%$ and (.D. 'o. %#%appear to ha&e 5een 5rought a5out 5y the earlier inconsistent rulings of the taxagencies due to the doctrine in (hilippine Acetylene, so as to lea&e no dou5t as tothe exemption of the '(C from indirect taxes on petroleum products it uses in itsoperation. Hecti&ely, said amendments superseded if not a5rogated the ruling in(hilippine Acetylene that the tax exemption of '(C should 5e limited to direct taxesonly.

#. ADE0'0STRAT0+ KA=I D(ARTE'T SCRTARLI EAL O+RRKD LMCT0+ SCRTARLI CAS AT AR. 4 Section 2 of .O. 'o. !# pro&ides3<SCT0O' 2. The iscal 0ncenti&es Re&ie) oard created under (residential Decree

'o. //, as amended, is here5y authoriBed to3 a8 restore tax and or duty exemptions)ithdra)n hereunder in )hole or in partI 58 re&ise the scope and co&erage of taxand of duty exemption that may 5e restored. c8 impose conditions for the restorationof tax and or duty exemptionI d8 prescri5e the date or period of eHecti&ity of therestoration of tax and or duty exemptionI e8 formulate and su5mit to the (residentfor appro&al, a complete system for the grant of su5sidies to deser&ing 5ene1ciaries,in lieu of or in com5ination )ith the restoration of tax and duty exemptions orpreferential treatment in taxation, indicating the source of funding therefor, eligi5le5ene1ciaries and the terms and conditions for the grant thereof ta9ing intoconsideration the international commitments of the (hilippines and the necessaryprecautions such that the grant of su5sidies does not 5ecome the 5asis forcounter&ailing action. The then Secretary of Justice in Opinion 'o. // dated August, !// )as of the &ie) that the po)ers conferred upon the 0R 5y Sections 27a8,758, 7c8, and 7d8 of xecuti&e Order 'o. !# constitute undue delegation of legislati&e

po)er and is therefore unconstitutional. Fo)e&er, he )as o&erruled 5y therespondent xecuti&e Secretary in a letter to the Secretary of inance dated Earch



#$, !%!. The xecuti&e Secretary, 5y authority of the (resident, has the po)er tomodify, alter or re&erse the construction of a statute gi&en 5y a departmentsecretary.

-. CO'ST0TT0O'AK KA=I 'O'DK*AT0O' O K*0SKAT0+ (O=RISTA'DARD TSTI 0E(K0D 'DR SCT0O' # O MCT0+ ORDR !#. 4 A readingof Section # of .O. 'o. !# )hich pro&ides3 <SCT0O' #. 0n the discharge of itsauthority hereunder, the iscal 0ncenti&es Re&ie) oard shall ta9e into account anyor all of the follo)ing considerations3 a8 the eHect on relati&e price le&elsI 58 relati&econtri5ution of the 5ene1ciary to the re&enue generation eHortI c8 nature of the

acti&ity the 5ene1ciary is engagedI d8 in general, the greater national interest to 5eser&ed.< Sho)s that it set the policy to 5e the greater national interest. Thestandards of the delegated po)er are also clearly pro&ided for. The re6uired<standard< need not 5e expressed. 0n du &s. ricta and in De la Klana &s. Al5a, thisCourt held3 <The standard may 5e either express or implied. 0f the former, the nondelegated o5:ection is easily met. The standard though does not ha&e to 5e spelledout speci1cally. 0t could 5e implied from the policy and purpose of the act consideredas a )hole.< 0n (eople &s. Rosenthal the 5road standard of <pu5lic interest< )asdeemed su;cient. 0n Calalang &s. =illiams, it )as <pu5lic )elfare< and in Cer&antes&s. Auditor *eneral, it )as the purpose of promotion of <simplicity, economy ande;ciency.< And, implied from the purpose of the la) as a )hole, <national security<)as considered su;cient standard and so )as <protection of 1shfry or 1sh eggs.<

". 0D.I 0D.I CAS O TAKAR0' +S. *T0RRV, "2 SCRA /#$ 7!%8I

''C0ATD TF RAT0O'AK 0' A+OR O DK*AT0O' O K*0SKAT0+'CT0O'S. 4 0n the case of Ta5larin &s. *utierreB, this Court enunciated therationale in fa&or of delegation of legislati&e functions 4 <One thing ho)e&er, isapparent in the de&elopment of the principle of separation of po)ers and that is thatthe maxim of delegatus non potest delegare or delegati potestas non potestdelegare, adopted this practice 7Delegi5us et Consuetudiniis, Anglia edited 5y *..=oodline, Lale ni&ersity (ress, !22, +ol. 2, p. /8 5ut )hich is also recogniBed inprinciple in the Roman Ka) 7d. /.%.#8 has 5een made to adapt itself to thecomplexities of modern go&ernment, gi&ing rise to the adoption, )ithin certainlimits, of the principle of su5ordinate legislation, not only in the nited States andngland 5ut in practically all modern go&ernments. 7(eople &s. Rosenthal andOsmeWa, % (hil. #%, !#!8. Accordingly, )ith the gro)ing complexities of modernlife, the multiplication of the su5:ects of go&ernmental regulation, and the increaseddi;culty of administering the la)s, there is a constantly gro)ing tendency to)ard

the delegation of greater po)er 5y the legislati&e, and to)ard the appro&al of thepractice 5y the Courts.<

. 0D.I 0D.I MCT0+ ORDR 'O. !#I CO'ST0TT0O'AK0TL TFRO (FKD.4 The legislati&e authority could not or is not expected to state all the detailedsituations )herein the tax exemption pri&ileges of persons or entities )ould 5erestored. The tas9 may 5e assigned to an administrati&e 5ody li9e the 0R.Eoreo&er, all presumptions are indulged in fa&or of the constitutionality and &alidityof the statute. Such presumption can 5e o&erturned if its in&alidity is pro&ed 5eyondreasona5le dou5t. Other)ise, a li5eral interpretation in fa&or of constitutionality of legislation should 5e adopted. .O. 'o. !# is complete in itself and constitutes a&alid delegation of legislati&e po)er to the 0R. And as a5o&e discussed, the taxexemption pri&ilege that )as restored to '(C 5y 0R Resolution 'o. /%/ of June!%/ includes exemption from indirect taxes and duties on petroleum products used

in its operation.

/. 0D.I 0D.I (RS0D'T0AK DCR 'O. // A'D !#I CO'ST0TT0O'AK0TL(FKD 0' TF CAS O 'AT0O'AK (O=R COR(ORAT0O' +S. (RO+0'C O AKAL7*.R. 'O. %/-/!, J' -, !!$8. 4 0n Al5ay, as a5o&e stated, this Court upheld the&alidity of (.D. 'os. // and !#. The latter decree )ithdre) tax exemptions of go&ernmento)ned or controlled corporations including their su5sidiaries 5utauthoriBed the 0R to restore the same. 'e&ertheless, in Al5ay, as a5o&ediscussed,this Court ruled that the tax exemptions under 0R Resolution 'os. $%" and %cannot 5e enforced as said resolutions )ere only recommendatory and )ere notduly appro&ed 5y the (resident of the (hilippines as re6uired 5y (.D. 'o. //. TheCourt also sustained in Al5ay the &alidity of xecuti&e Order 'o. !#, and of the tax

exemptions restored under 0R Resolution 'o. /%/ )hich )as issued pursuantthereto, as it )as duly appro&ed 5y the (resident as re6uired 5y said executi&eorder. Eoreo&er, under Section #, Article M+000 of the Transitory (ro&isions of the!%/ Constitution, it is pro&ided that3 <All existing la)s, decrees, executi&e orders,proclamation, letters of instructions, and other executi&e issuances not inconsistent)ith this constitution shall remain operati&e until amended, repealed or re&o9ed.<

Thus, (.D. 'os. // and !# are &alid and operati&e unless it is sho)n that they areinconsistent )ith the Constitution.

%. 0D.I KATST KA= A((K0CAK O' TAM ME(T0O' O 'AT0O'AK (O=RCOR(ORAT0O'. 4 &en assuming arguendo that (.D. 'os. //, !# and xecuti&eOrder 'o. !# are not &alid and are unconstitutional, the result )ould 5e the same, asthen the latest applica5le la) )ould 5e (.D. 'o. !#% )hich amended the '(C charter5y granting exemption to '(C from all forms of taxes. As a5o&e discussed, this

exemption of '(C co&ers direct and indirect taxes on petroleum products used in itsoperation. This is as it should 5e, if =e are to hold as in&alid and inoperati&e the)ithdra)al of such tax exemptions under (.D. 'o. !# as )ell as under xecuti&eOrder 'o. !# and the delegation of the po)er to restore these exemptions to the0R.

!. 0D.I *RA'T O TAM ME(T0O' TO 'AT0O'AK (O=R COR(ORAT0O' 'OT ACAS O TAM +AS0O'. 4 This tax exemption is intended not only to insure that the'(C shall continue to generate electricity for the country 5ut more importantly, toassure cheaper rates to 5e paid 5y the consumers. The allegation that this is ineHect allo)ing tax e&asion 5y oil companies is not 6uite correct. There are &ariousarrangements in the payment of crude oil purchased 5y '(C from oil companies.*enerally, the custom duties paid 5y the oil companies are added to the selling pricepaid 5y '(C. As to the speci1c and ad &alorem taxes, they are added as part of the

seller>s price, 5ut '(C pays the price net of tax, on condition that '(C )ould see9 atax refund to the oil companies. 'o tax component on fuel had 5een charged orreco&ered 5y '(C from the consumers through its po)er rates. Thus, this is not acase of tax e&asion of the oil companies 5ut of tax relief for the '(C.

D C 0 S 0 O '

*A'CALCO, J p3

This petition see9s to nullify certain decisions, orders, rulings, and resolutions of respondents xecuti&e Secretary, Secretary of inance, Commissioner of 0nternalRe&enue, Commissioner of Customs and the iscal 0ncenti&es Re&ie) oard 70R8for exempting the 'ational (o)er Corporation 7'(C8 from indirect tax and duties.cdphil

The rele&ant facts are not in dispute.



On 'o&em5er #, !%, Common)ealth Act 'o. 2$ created the '(C as a pu5liccorporation to underta9e the de&elopment of hydraulic po)er and the production of po)er from other sources.

On June -, !-!, Repu5lic Act 'o. #"% granted '(C tax and duty exemptionpri&ileges under 4

<Sec. 2. To facilitate payment of its inde5tedness, the 'ational (o)er Corporationshall 5e exempt from all taxes, duties, fees, imposts, charges and restrictions of theRepu5lic of the (hilippines, its pro&inces, cities and municipalities.<

On Septem5er $, !/, Repu5lic Act 'o. #!" re&ised the charter of the '(C)herein Congress declared as a national policy the total electri1cation of the(hilippines through the de&elopment of po)er from all sources to meet the needs of industrial de&elopment and rural electri1cation )hich should 5e pursuedcoordinately and supported 5y all instrumentalities and agencies of the go&ernment,including its 1nancial institutions. 2 The corporate existence of '(C )as extended tocarry out this policy, speci1cally to underta9e the de&elopment of hydro electricgeneration of po)er and the production of electricity from nuclear, geothermal andother sources, as )ell as the transmission of electric po)er on a nation)ide 5asis. #eing a nonpro1t corporation, Section # of the la) pro&ided in detail theexemption of the '(C from all taxes, duties, fees, imposts and other charges 5y thego&ernment and its instrumentalities. prcd

On January 22, !/-, (residential Decree 'o. #%$ amended section #, paragraphs

7a8 and 7d8 of Repu5lic Act 'o. #!" 5y specifying, among others, the exemption of '(C from such taxes, duties, fees, imposts and other charges imposed <directly orindirectly,< on all petroleum products used 5y '(C in its operation. (residentialDecree 'o. !#% dated Eay 2/, !/ further amended the aforesaid pro&ision 5yintegrating the tax exemption in general terms under one paragraph. cdll

On June , !%-, (residential Decree 'o. !# )ithdre) all tax exemptionpri&ileges granted in fa&or of go&ernmento)ned or controlled corporations includingtheir su5sidiaries. - Fo)e&er, said la) empo)ered the (resident andPor the thenEinister of inance, upon recommendation of the 0R, to restore, partially or totally,the exemption )ithdra)n, or other)ise re&ise the scope and co&erage of anyapplica5le tax and duty.

(ursuant to said la), on e5ruary /, !%", the 0R issued Resolution 'o. $%"

restoring the tax and duty exemption pri&ileges of '(C from June , !%- to June#$, !%". On January /, !%, the 0R issued resolution 'o. % inde1nitelyrestoring the '(C tax and duty exemption pri&ileges eHecti&e July , !%".

Fo)e&er, eHecti&e Earch $, !%/, xecuti&e Order 'o. !# once again )ithdre) alltax and duty incenti&es granted to go&ernment and pri&ate entities )hich had 5eenrestored under (residential Decree 'os. !# and !"" 5ut it ga&e the authority to0R to restore, re&ise the scope and prescri5e the date of eHecti&ity of such tax andor duty exemptions.

On June 2-, !%/ the 0R issued Resolution 'o. /%/ restoring '(C>s tax and dutyexemption pri&ileges eHecti&e Earch $, !%/. On Octo5er ", !%/, the (resident,through respondent xecuti&e Secretary Eacaraig, Jr., con1rmed and appro&ed 0RResolution 'o. /%/.

As alleged in the petition, the follo)ing are the 5ac9ground facts3

The follo)ing are the facts rele&ant to '(C>s 6uestioned claim for refunds of taxesand duties originally paid 5y respondents Caltex, (etrophil and Shell for speci1c andad &alorem taxes to the 0RI and for Customs duties and ad &alorem taxes paid 5y('OC, Shell and Caltex to the ureau of Customs on its crude oil importation.

Eany of the factual statements are reproduced from the Senate Committee onAccounta5ility of (u5lic O;cers and 0n&estigations 7lue Ri55on8 Report 'o. -/-dated January 2, !%! and appro&ed 5y the Senate on April 2, !%! 7copyattached here to as Annex <A<8 and are identi1ed in 6uotation mar9s3

. <Since Eay 2/, !/ )hen (.D. 'o. !#% )as issued until June , !%-)hen (.D. 'o. !# )as promulgated a5olishing the tax exemptions of allgo&ernmento)ned orcontrolled corporations, the oil 1rms ne&er paid excise orspeci1c and ad &alorem taxes for petroleum products sold and deli&ered to the '(C.

This nonpayment of taxes therefore spanned a period of eight 7%8 years.< 7par. 2#,p. /, Annex <A<8.

During this period, the ureau of 0nternal Re&enue )as not collecting speci1c taxeson the purchases of '(C of petroleum products from the oil companies on theerroneous 5elief that the 'ational (o)er Corporation 7'(C8 )as exempt from indirecttaxes as reGected in the letter of Deputy Commissioner of 0nternal Re&enue 7DC0R8Romulo +illa to the '(C dated Octo5er 2!, !%$ granting 5lan9et authority to the'(C to purchase petroleum products from the oil companies )ithout payment of speci1c tax 7copy of this letter is attached hereto as petitioner>s Annex <<8.

2. The oil companies started to pay speci1c and ad &alorem taxes on theirsales of oil products to '(C only after the promulgation of (.D. 'o. !# on June ,!%-, )ithdra)ing all exemptions granted in fa&or of go&ernmento)ned orcontrolled corporations and empo)ering the 0R to recommend to the (resident orto the Einister of inance the restoration of the exemptions )hich )ere )ithdra)n.<Speci1cally, Caltex paid the total amount of ("%,$2$,$./! in speci1c and ad&alorem taxes for deli&eries of petroleum products to '(C co&ering the period fromOcto5er #, !%- to April 2/, !%".< 7par. 2#, p. /, Annex <A<8

#. <Caltex 5illings to '(C until June $, !%- al)ays included customs duty)ithout the tax portion. eginning June , !%-, )hen (.D. !# )as promulgateda5olishing '(C>s tax exemptions, Caltex>s 5illings to '(C al)ays included 5othduties and taxes. 7Caturla, tsn, Oct. $, !%%, pp. "8< 7par. 2-, p. /, Annex <A<8

-. <or the sales of petroleum products deli&ered to '(C during the periodfrom Octo5er, !%- to April, !%", '(C )as 5illed a total of ("22,$,//.#- 7sic8including 5oth duties and taxes, the speci1c tax component 5eing &alued at("%,$2$,$./!.<7par. 2", p. %, Annex <A<8.

". <iscal 0ncenti&es Re&ie) oard 70R8 Resolution $%", dated e5ruary /,!%", certi1ed true copy of )hich is hereto attached as Annex <C<, restored the taxexemption pri&ileges of '(C eHecti&e retroacti&ely to June , !%- up to June #$,!%". The 1rst paragraph of said resolution reads as follo)s3

<. Hecti&e June , !%-, the tax and duty exemption pri&ileges en:oyed 5ythe 'ational (o)er Corporation under C.A. 'o. 2$, as amended, are restored up to

June #$, !%".<



ecause of this restoration 7Annex <*<8 the '(C applied on Septem5er , !%" )iththe 0R for a <refund of Speci1c Taxes paid on petroleum products . . . in the totalamount of ("%,$2$,$./!.< 7par. 2, pp. %!, Annex <A<8.

. 0n a letter to the president of the '(C dated Eay %, !%" 7copy attached aspetitioner>s Annex <D<8, Acting 0R Commissioner Ru5en Ancheta declared3

<0R Resolution 'o. $%" ser&es as su;cient 5asis to allo) '(C to purchasepetroleum products from the oil companies free of speci1c and ad &alorem taxes,during the period in 6uestion.

The <period in 6uestion< is June , !%- to June #$, !%".

/. <On June , !%" 4 The president of the '(C, Er. *a5riel 0tchon, )rote Er.Cesar +irata, Chairman of the 0R 7Annex <<8, re6uesting <the 0R to resol&econGicting rulings on the tax exemption pri&ileges of the 'ational (o)er Corporation7'(C8.< These rulings in&ol&e 0R Resolutions 'o. %- and $%". 7par. -$, p. 2,Annex <A<8

%. 0n a letter to the (resident of '(C 7Annex <<8, dated June 2, !%",Einister Cesar +irata con1rmed the ruling of Eay %, !%" of Acting 0RCommissioner Ru5en Ancheta, 7par. -, p. 2, Annex <A<8

!. On Octo5er 22, !%", ho)e&er, under 0R Ruling 'o. %%", addressed toFanil De&elopment Co., Ktd., a Uorean contractor of '(C for its infrastructure

pro:ects, certi1ed true copy of )hich is attached hereto as petitioner>s Annex <<,0R Acting Commissioner Ru5en Ancheta ruled3

<0n Reply please 5e informed that after a restudy of Section #, R.A. #!", asamended 5y (.D. !#%, this O;ce is of the opinion, and so holds, that the scope of the tax exemption pri&ilege en:oyed 5y '(C under said section co&ers only taxes for)hich it is directly lia5le and not on taxes )hich are only shifted to it. 7(hil.Acetylene &s. C.0.R. et al., *.R. K!/$/, Aug. /, !/8 Since contractor>s tax isdirectly paya5le 5y the contractor, not 5y '(C, your re6uest for exemption, 5ased onthe stipulation in the aforesaid contract that '(C shall assume payment of yourcontractor>s tax lia5ility, cannot 5e granted for lac9 of legal 5asis.< 7Annex <F<87emphasis supplied8.

Said 0R ruling clearly states that '(C>s exemption pri&ileges co&ers 7sic8 only taxesfor )hich it is directly lia5le and does not co&er taxes )hich are only shifted to it orfor indirect taxes. The 0R, through Ancheta, re&ersed its pre&ious position of Eay %,!%" adopted 5y Ancheta himself fa&oring '(C>s indirect tax exemption pri&ilege.

$. urthermore, <in a 0R Ruling, unnum5ered,< dated June #$, !%,<addressed to Caltex 7Annex <<8, the 0R Commissioner declared that (AK>s taxexemption is limited to taxes for )hich (AK is directly lia5le, and that the payment of speci1c and ad &alorem taxes on petroleum products is a direct lia5ility of themanufacturer or producer thereof<. 7par. ", p. ", Annex <A<8

. <On January /, !%, 0R Resolution 'o. % )as issued restoring '(C>stax exemptions retroacti&ely from July , !%" to an inde1nite period,< certi1ed truecopy of )hich is hereto attached as petitioner>s Annex <F<.

2. '(C>s total refund claim )as (-%."% million 5ut only a portion thereof i.e.

the ("%,$2$,$./! 7corresponding to Caltex8 )as appro&ed and released 5y )ay of a Tax Credit Eemo 7Annex <<8 dated July /, !%, certi1ed true copy of )hich @is

attached hereto as petitioner>s Annex <,< )hich )as assigned 5y '(C to Caltex. 0RCommissioner Tan appro&ed the Deed of Assignment on July #$, !%/, certi1ed truecopy of )hich is hereto attached as petitioner>s Annex <*<. 7pars. 2, "2, "#, pp. !and ", Annex <A<8.

The Deed of Assignment stipulated among others that '(C is assigning the taxcredit to Caltex in partial settlement of its outstanding o5ligations to the latter )hileCaltex, in turn, )ould apply the assigned tax credit against its speci1c tax paymentsfor t)o 728 months. 7per memorandum dated July 2%, !% of DC0R +illa, copyattached as petitioner Annex <*<8.

#. As a result of the fa&ora5le action ta9en 5y the 0R in the refund of the("%.$ million tax credit assigned to Caltex, the '(C reiterated its re6uest for therelease of the 5alance of its pending refunds of taxes paid 5y respondents (etrophil,Shell and Caltex co&ering the period from June , !%- to early part of !%amounting to (-$."% million. 7The claim of the 1rst t)o 728 oil companies co&ersthe period from June , !%- to early part of !%I )hile that of Caltex starts from

July , !%" to early !%8. This re6uest )as denied on August %, !%, under 0RRuling "2% 7certi1ed true copy of )hich is attached hereto as petitioner>s Annex<0<8. The 0R ruled that '(C>s tax free pri&ilege to 5uy petroleum products co&eredonly the period from June , !%- up to June #$, !%". 0t further declared that,despite 0R 'o. %, '(C had already lost its tax and duty exemptions 5ecause itonly en:oys special pri&ilege for taxes for )hich it is directly lia5le. This ruling, ineHect, denied the (-$Eillion tax refund application of '(C.< 7par. 2%, p. !, Annex

<A<8-. <'(C 1led a motion for reconsideration on Septem5er %, !%. ntil no)the 0R has not resol&ed the motion. 7enigna, 00#, Oct. /, !%%, p. 2IEemorandum for the Complainant, Oct. 2, !%%, p. "8.< 7par. 2!, p. !, Annex <A<8

". On Decem5er 22, !%, in a 2nd 0ndorsement to the Fon. ulgencio S.actoran, Jr., 0R Commissioner Tan, Jr. 7certi1ed true copy of )hich is heretoattached and made a part hereof as petitioner>s Annex <J<8, re&ersed his pre&iousposition and states this time that all deli&eries of petroleum products to '(C are taxexempt, regardless of the period of deli&ery.

. On Decem5er /, !%, (resident CoraBon C. A6uino enacted xecuti&eOrder 'o. !#, entitled <=ithdra)ing All Tax and Duty 0ncenti&es, Su5:ect to Certainxceptions, xpanding the (o)ers of the iscal 0ncenti&es Re&ie) oard and Other

(urposes.<

/. On June 2-, !%/, the 0R issued Resolution 'o. /%/, )hich restored'(C>s tax exemption pri&ilege and included in the exemption <those pertaining to itsdomestic purchases of petroleum and petroleum products, and the restorations )eremade to retroact eHecti&e Earch $, !%/, a certi1ed true copy of )hich is heretoattached and made a part hereof as Annex <U<.

%. On August , !%/, the Fon. Sedfrey A. OrdoWeB, Secretary of Justice,issued Opinion 'o. //, series of !%/, opining that <the po)er conferred upon iscal0ncenti&es Re&ie) oard 5y Section 27a8, 758, 7c8 and 7d8 of xecuti&e order 'o. !%constitute undue delegation of legislati&e po)er and, therefore, @areunconstitutional,< a copy of )hich is hereto attached and made a part hereof as(etitioner>s Annex <K.<



!. On Octo5er ", !%/, respondent xecuti&e Secretary Eacaraig, Jr. in aEemorandum to the Chairman of the 0R, a certi1ed true copy of )hich is heretoattached and made a part hereof as petitioner>s Annex <E,< con1rmed and appro&ed0R Res. 'o. /%/ dated June 2-, !%/, allegedly pursuant to Sections 7f8 and 27e8 of xecuti&e Order 'o. !#.

2$. <Secretary +icente Jayme in a reply dated Eay 2$, !%% to SecretaryCatalino Eacaraig, )ho 5y letter dated Eay 2, !%% as9ed him to rule <on )hetheror not, as the la) no) stands, the 'ational (o)er Corporation is still exempt fromtaxes, duties . . . on its local purchases of . . . petroleum products . . .< declared that

<'(C under the pro&isions of its Re&ised Charter retains its exemption from dutiesand taxes imposed on the petroleum products purchased locally and used for thegeneration of electricity,< a certi1ed true copy of )hich is attached hereto aspetitioner>s Annex <'.< 7par. #$, pp. !$, Annex <A<8

2. Respondent xecuti&e Secretary came up li9e)ise )ith a con1rmatoryletter dated June ", !%% 5ut )ithout the usual o;cial form of <y the Authority of the (resident,< a certi1ed true copy of )hich is hereto attached and made a parthereof as (etitioner>s Annex <O<.

22. The actions of respondents inance Secretary and the xecuti&e Secretaryare 5ased on the RSOKT0O' 'o. /%/ of 0R, restoring the tax and dutyexemption of the respondent '(C pertaining to its domestic purchases of petroleumproducts 7petitioner>s Annex <U<, supra8.

2#. <Su5se6uently, the ne)spapers particularly, the Daily *lo5e, in its issue of July , !%% reported that the O;ce of the (resident and the Department of inance had ordered the 0R to refund the tax payments of the '(C amounting to(."% illion )hich includes the (-$ Eillion Tax refund already re:ected 5y 0RCommissioner Tan, Jr., in his 0R Ruling 'o. "2%. And in a letter dated July 2%,!%% of ndersecretary Earcelo . ernando to 0R Commissioner Tan, Jr. the (."%illion tax refund )as ordered released to '(C.< 7par. #, p. $, Annex <A<8

2-. On August %, !%%, petitioner <)rote 5oth ndersecretary ernando andCommissioner Tan re6uesting them to hold in a5eyance the release of the (."%5illion and a)ait the outcome of the in&estigation in regard to Senate Resolution 'o.22/,< copies attached as (etitioner>s Annexes <(< and <(< 7par. #2, p. $, Annex<A<8.

Reacting to this letter of the petitioner, ndersecretary ernando )roteCommissioner Tan of the 0R dated August, !%% re6uesting him to hold in a5eyancethe release of the tax refunds to '(C until after the termination of the lue Ri55onin&estigation.

2". 0n the ureau of Customs, oil companies import crude oil and 5eforeremo&al thereof from customs custody, the corresponding customs duties and ad&alorem taxes are paid. un9er fuel oil is one of the petroleum products processedfrom the crude oilI and same is sold to '(C. After the sale, '(C applies for tax creditco&ering the duties and ad &alorem exemption under its Charter. Such applicationsare processed 5y the ureau of Customs and the corresponding tax creditcerti1cates are issued in fa&or of '(C )hich, in turn assigns it to the oil 1rm thatimported the crude oil. These certi1cates are e&entually used 5y the assigneeoil1rms in payment of their other duty and tax lia5ilities )ith the ureau of Customs.<

7par. /$, p. !, Annex <A<8.

A lesser amount totalling (/-$ million, co&ering the period from !%" to the present,is 5eing sought 5y respondent '(C for refund from the ureau of Customs for dutiespaid 5y the oil companies on the importation of crude oil from )hich the processedproducts sold locally 5y them to '(C )as deri&ed. Fo)e&er, 5ased on 1guressu5mitted to the lue Ri55on Committee of the (hilippine Senate )hich conductedan in&estigation on this matter as mandated 5y Senate Resolution 'o. 22/ of )hichthe herein petitioner )as the sponsor, a much 5igger 1gure )as actually refunded to'(C representing duties and ad &alorem taxes paid to the ureau of Customs 5y theoil companies on the importation of crude oil from !/! to !%".

2. Eeantime, petitioner, as mem5er of the (hilippine Senate introduced (.S.Res. 'o. 22/, entitled3

<Resolution Directing the Senate lue Ri55on Committee, 0n Aid of Kegislation, ToConduct a ormal and xtensi&e 0n6uiry into the Reported Eassi&e Tax Eanipulationsand &asions 5y Oil Companies, particularly Caltex 7(hils.8 0nc., (ilipinas Shell and(etrophil, =hich =ere Eade (ossi5le y Their A&ailing of the 'onxisting xemptionof 'ational (o)er Corporation 7'(C8 from 0ndirect Taxes, Resulting Recently in TheirO5taining A Tax Refund Totalling (."" illion rom the Department of inance, TheirRefusal to (ay Since !/ Customs Duties Amounting to illions of (esos on0mported Crude Oil (urportedly for the se of the 'ational (o)er Corporation, the'on(ayment of Surtax on =indfall (ro1ts from 0ncreases in the (rice of Oil (roductsin August !%/ amounting Eay5e to as Euch as (.2 illion Surtax (aid 5y Them in!%- and or Other (urposes.<

2/. Acting on the a5o&e Resolution, the lue Ri55on Committee of the Senatedid conduct a lengthy formal in6uiry on the matter, calling all parties interested tothe )itness stand including representati&es from the diHerent oil companies, and indue time su5mitted its Committee Report 'o. -/- . . . 4 The lue Ri55on Committeerecommended the follo)ing courses of action.

<. Cancel its appro&al of the tax refund of ("%,$2$,$./$ to the 'ational(o)er Corporation 7'(C8 and its appro&al of Tax Credit memo co&ering said amount7Annex <(< hereto8, dated July /, !%, and cancel its appro&al of the Deed of Assignment 7Annex << hereto8 5y '(C to Caltex, dated July 2%, !%, and collectfrom Caltex its tax lia5ilities )hich )ere erroneously treated as paid or settled )iththe use of the tax credit certi1cate that '(C assigned to said 1rm3

<. '(C did not ha&e any indirect tax exemption since Eay 2/, !/ )hen (D

!#% )as issued. Therefore, the grant of a tax refund to '(C in the amount of ("%million )as illegal, and therefore, null and &oid. Such refund )as a nullity right fromthe 5eginning. Fence, it ne&er transferred any right in fa&or of '(C.

<2. Stop the processing andPor release of (."% 5illion tax refund to '(C and oroil companies on the same ground that the '(C, since Eay 2/, !/ up to June /,!%/ )as ne&er granted any indirect tax exemption. So, the (."% 5illion representtaxes legally and properly paid 5y the oil 1rms.

<#. Start collection actions of speci1c or excise and ad &alorem taxes due onpetroleum products sold to '(C from Eay 2/, !/ 7promulgation of (D !#%8 to June/, !%/ 7issuance of O !"8.

<. or the ureau of Customs 7OC8 to do the follo)ing3



<. Start reco&ery actions on the illegal duty refunds or duty credit certi1catesfor purchases of petroleum products 5y '(C and allegedly granted under the '(Ccharter co&ering the years !/%!%% . . .<

2%. On Earch #$, !%!, acting on the re6uest of respondent inance Secretaryfor clearance to direct the ureau of 0nternal Re&enue and of Customs to proceed)ith the processing of claims for tax creditsPrefunds of the '(C, respondentxecuti&e Secretary rendered his ruling, the dispositi&e portion of )hich reads3

<0' +0= O TF OR*O0'*, the clearance is here5y *RA'TD and, accordingly,unless restrained 5y proper authorities, that department andPor its linetax 5ureausmay no) proceed )ith the processing of the claims of the 'ational (o)erCorporation for duty and tax free exemption and or tax creditsPrefunds, if there 5eany, in accordance )ith the ruling of that Department dated Eay 2$, !%%, ascon1rmed 5y this O;ce on June ", !%%.< . . . "

Fence, this petition for certiorari, prohi5ition and mandamus )ith prayer for a )rit of preliminary in:unction andPor restraining order, praying among others that3

<. pon 1ling of this petition, a temporary restraining order forth)ith 5eissued against respondent 0R, xecuti&e Secretary Eacaraig, and Secretary of inance Jayme restraining them and other persons acting for, under, and in their5ehalf from enforcing their resolution, orders and ruling, to )it3

A. 0R Resolution 'o. /%/ dated June 2-, !%/ 7petitioner>s Annex <U<8I

. EemorandumOrder of the O;ce of the (resident dated Octo5er ", !%/7petitioner>s Annex <E<8I

C. Order of the xecuti&e Secretary dated June ", !%% 7petitioner>s Annex<O<8I

D. Order of the xecuti&e Secretary dated Earch #$, !%! 7petitioner>s Annex<<8I and

. Ruling of the inance Secretary dated Eay 2$, !%% 7petitioner>s Annex<'<8.

2. Said temporary restraining order should also include respondentsCommissioners of Customs Eison and 0nternal Re&enue Ong restraining them from

processing and releasing any pending claim or application 5y respondent '(C for taxand duty refunds.

#. Thereafter, and during the pendency of this petition, to issue a )rit orpreliminary in:unction against a5o&enamed respondents and all persons acting forand in their 5ehalf

-. A decision 5e rendered in fa&or of the petit ioner and against therespondents3

A. Declaring that respondent '(C did not en:oy indirect tax exemptionpri&ilege since Eay 2/, !/ up to the presentI

. 'ullifying and setting aside the follo)ing3

. 0R Resolution 'o. /%/ dated June 2-, !%/ 7petitioner>s Annex <U<8I

2. EemorandumOrder of the O;ce of the (resident dated Octo5er ", !%/7petitioner>s Annex <E<8I

#. Order of the xecuti&e Secretary dated June ", !%% 7petitioner>s Annex<O<8I

-. Order of the xecuti&e Secretary dated Earch #$, !%! 7petitioner>s Annex<<8I

". Ruling of the inance Secretary dated Eay 2$, !%% 7petitioner>s Annex<'<8I

. Tax Credit memo dated July /, !% issued to respondent '(C representingtax refund for ("%,$2$,$./! 7petitioner>s Annex <<8I

/. Deed of Assignment of said tax credit memo to respondent Caltex dated July #$, !%/ 7petitioner>s Annex <*<8I

%. Application of the assigned tax credit of Caltex in payment of its taxlia5ilities )ith the ureau of 0nternal Re&enueI and

!. 0llegal duty and tax refunds issued 5y the ureau of Customs to respondent'(C 5y )ay of tax credit certi1cates from !/! up to the present.

C. Declaring as illegal and null and &oid the pending claims for tax and dutyrefunds 5y respondent '(C )ith the ureau of Customs and the ureau of 0nternalRe&enueI

D. (rohi5iting respondents Commissioner of Customs and Commissioner of 0nternal Re&enue from enforcing the a5o&e6uestioned resolution, orders and rulingof respondents xecuti&e Secretary, Secretary of inance, and 0R 5y processingand releasing respondent '(C>s tax and duty refundsI

. Ordering the respondent Commissioner of Customs to deny as 5eing nulland &oid the pending claims for refund of respondent '(C )ith the ureau of Customs co&ering the period from !%" to the presentI to cancel and in&alidate theillegal payment made 5y respondents Caltex, Shell and ('OC 5y using the tax creditcerti1cates assigned to them 5y '(CI and to reco&er from respondents Caltex, Shelland ('OC all the amounts appearing in said tax credit certi1cates )hich )ere usedto settle their duty and tax lia5ilities )ith the ureau of Customs.

. Ordering respondent Commissioner of 0nternal Re&enue to deny as 5eingnull and &oid the pending claims for refund of respondent '(C )ith the ureau of 0nternal Re&enue co&ering the period from June , !%- to June /, !%/.

(T0T0O'R prays for such other relief and remedy as may 5e :ust and e6uita5le inthe premises.<

The issues raised in the petition are the follo)ing3

<To determine )hether respondent '(C is legally entitled to the 6uestioned tax andduty refunds, this Fonora5le Court must resol&e the follo)ing issues3

Eain issue 4



=hether or not the respondent '(C has ceased to en:oy indirect tax and dutyexemption )ith the enactment of (.D. 'o. !#% on Eay 2/, !/ )hich amended (.D.'o. #%$, issued on January , !/-.

Corollary issues 4

. =hether or not 0R Resolution 'o. $%" dated e5ruary /, !%" )hichrestored '(C>s tax exemption pri&ilege eHecti&e June , !%- to June #$, !%" and0R Resolution 'o. % dated January /, !% restoring '(C>s tax exemptionpri&ilege eHecti&e July , !%" included the restoration of indirect tax exemption to'(CI and

2. =hether or not 0R could &alidly and legally issue Resolution 'o. /%/dated June 2-, !%/ )hich restored '(C>s tax exemption pri&ilege eHecti&e Earch$, !%/I and if said Resolution )as &alidly issued, the nature and extent of the taxexemption pri&ilege restored to '(C.< /

0n a resolution dated June , !%!, the Court, )ithout gi&ing due course to thepetition, re6uired respondents to comment thereon, )ithin ten 7$8 days fromnotice. The respondents ha&ing su5mitted their comment, on Octo5er $, !%! theCourt re6uired petitioner to 1le a consolidated reply to the same. After said reply)as 1led 5y petitioner on 'o&em5er ", !%! the Court ga&e due course to thepetition, considering the comments of respondents as their ans)er to the petition,and re6uiring the parties to 1le simultaneously their respecti&e memoranda )ithint)enty 72$8 days from notice. The parties ha&ing su5mitted their respecti&e

memoranda, the petition )as deemed su5mitted for resolution.

irst the preliminary issues.

(u5lic respondents allege that petitioner does not ha&e the standing to challengethe 6uestioned orders and resolution.

0n the petition it is alleged that petitioner is <instituting this suit in his capacity as ataxpayer and a dulyelected Senator of the (hilippines.< (u5lic respondent arguesthat petitioner must sho) he has sustained direct in:ury as a result of the action andthat it is not su;cient for him to ha&e a mere general interest common to allmem5ers of the pu5lic. %

The Court ho)e&er agrees )ith the petitioner that as a taxpayer he may 1le theinstant petition follo)ing the ruling in KoBada )hen it in&ol&es illegal expenditure of pu5lic money. The petition 6uestions the legality of the tax refund to '(C 5y )ay of tax credit certi1cates and the use of said assigned tax credits 5y respondent oilcompanies to pay for their tax and duty lia5ilities to the 0R and ureau of Customs.

Assuming petitioner has the personality to 1le the petition, pu5lic respondents alsoallege that the proper remedy for petitioner is an appeal to the Court of Tax Appealsunder Section / of R.A. 'o. 2" instead of this petition. Fo)e&er Section of saidla) pro&ides 4

<Sec. .=ho may appealI eHect of appeal 4 Any person, association or corporationad&ersely aHected 5y a decision or ruling of the Commissioner of 0nternal Re&enue,the Collector of Customs 7Commissioner of Customs8 or any pro&incial or City oardof Assessment Appeals may 1le am appeal in the Court of Tax Appeals )ithin thirtydays after receipt of such decision or ruling.<

rom the foregoing, it is only the taxpayer ad&ersely aHected 5y a decision or rulingof the Commissioner of 0nternal Re&enue, the Commissioner of Customs or anypro&incial or city oard of Assessment Appeal )ho may appeal to the Court of TaxAppeals. (etitioner does not fall under this category. Cdpr

(u5lic respondents also contend that mandamus does not lie to compel theCommissioner of 0nternal Re&enue to impose a tax assessment not found 5y him to5e proper. 0t )ould 5e tantamount to a usurpation of executi&e functions. !

&en in Eeralco, this Court recogniBes the situation )hen mandamus can control thediscretion of the Commissioners of 0nternal Re&enue and Customs )hen the exerciseof discretion is tainted )ith ar5itrariness and gra&e a5use as to go 5eyond statutoryauthority. $

(u5lic respondents then assert that a )rit of prohi5ition is not proper as its functionis to pre&ent an unla)ful exercise of :urisdiction or to pre&ent the oppressi&eexercise of legal authority. 2 (recisely, petitioner 6uestions the la)fulness of theacts of pu5lic respondents in this case.

'o) to the main issue.

0t may 5e useful to ma9e a distinction, for the purpose of this disposition, 5et)een adirect tax and an indirect tax. A direct tax is a tax for )hich a taxpayer is directlylia5le on the transaction or 5usiness it engages in. xamples are the custom dutiesand ad &alorem taxes paid 5y the oil companies to the ureau of Customs for their

importation of crude oil, and the speci1c and ad &alorem taxes they pay to theureau of 0nternal Re&enue after con&erting the crude oil into petroleum products.

On the other hand, <indirect taxes are taxes primarily paid 5y persons )ho can shiftthe 5urden upon someone else.< # or example, the excise and ad &alorem taxesthat oil companies pay to the ureau of 0nternal Re&enue upon remo&al of petroleumproducts from its re1nery can 5e shifted to its 5uyer, li9e the '(C, 5y adding them tothe <cash< andPor <selling price.<

The main thrust of the petition is that under the latest amendment to the '(Ccharter 5y (residential Decree 'o. !#%, the exemption of '(C from indirect taxation)as re&o9ed and repealed. =hile petitioner concedes that '(C en:oyed 5roadexemption pri&ileges from 5oth direct and indirect taxes on the petroleum productsit used, under Section # of Repu5lic Act 'o. #!" and more so under (residential

Decree 'o. #%$, ho)e&er, 5y the deletion of the phrases <directly or indirectly< and<on all petroleum products used 5y the Corporation in the generation, transmission,utiliBation and sale of electric po)er< he contends that the exemption from indirecttaxes )as )ithdra)n 5y (.D. 'o. !#%. KK:ur

(etitioner further states that the exemption of '(C pro&ided in Section # of (residential Decree 'o. !#% regarding the payments of <all forms of taxes, etc.<cannot 5e interpreted to include indirect tax exemption. Fe cites (hilippineAcetylene Co. 0nc. &s. Commissioner of 0nternal Re&enue. - (etitioner emphasiBesthe principle in taxation that the exception contained in the tax statutes must 5estrictly construed against the one claiming the exemption, and that the rule that atax statute granting exemption must 5e strictly construed against the one claimingthe exemption is similar to the rule that a statute granting taxing po)er is to 5econstrued strictly, )ith dou5ts resol&ed against its existence. " (etitioner cites

rulings of the 0R that the phrase exemption from <all taxes, etc.< from <all forms of



taxes< and <in lieu of all taxes< co&ers only taxes for )hich the taxpayer is directlylia5le.

On the corollary issues. irst, 0R Resolution 'os. $%" and % issued under(residential Decree 'o. !#, the rele&ant pro&ision of )hich are to )it3

<(.D. 'o. !# pro&ides as follo)s3

<SCT0O' . The pro&isions of special or general la) to the contrarynot)ithstanding, all exemptions from the payment of duties, taxes . . . heretoforegranted in fa&or of go&ernmento)ned or controlled corporations . . . are here5y

)ithdra)n. 7mphasis supplied.8

<SCT0O' 2. The (resident of the (hilippines andPor the Einister of inance,upon the recommendation of the iscal 0ncenti&es Re&ie) oard . . . is here5yempo)ered to restore, partially or totally, the exemptions )ithdra)n 5y Section a5o&e . . .< 7mphasis supplied.8

The rele&ant pro&isions of 0R resolution 'os. $%" and % are the follo)ing3

Resolution 'o. $%"

< 0T RSOK+D AS 0T 0S FRL RSOK+D, That3

<. Hecti&e June , !%-, the tax and duty exemption pri&ileges en:oyed 5ythe 'ational (o)er Corporation under C.A. 'o. 2$ as amended are restored up to

June #$, !%".

<2. (ro&ided, That this restoration does not apply to the follo)ing3

a. importations of fuel oil 7crude e6ui&alent8 and coal as per 0R Resolution'o. %-I

5. commerciallyfunded importationsI and

c. interest income deri&ed from any in&estment source.

<#. (ro&ided further, That in case of importations funded 5y international1nancing agreements, the '(C is here5y re6uired to furnish the 0R on a periodic5asis the particulars of items recei&ed or to 5e recei&ed through such arrangements,for purposes of tax and duty exemptions pri&ileges.< /

Resolution 'o. %

< 0T RSOK+D AS 0T 0S FRL RSOK+D3 That3

<. Hecti&e July , !%", the tax and duty exemption pri&ileges en:oyed 5y the'ational (o)er Corporation 7'(C8 under Common)ealth Act 'o. 2$, as amended,are restored3 (ro&ided, That importations of fuel oil 7crude oil e6ui&alent8, and coalof the herein grantee shall 5e su5:ect to the 5asic and additional import dutiesI(ro&ided, further, that the follo)ing shall remain fully taxa5le3

a. Commerciallyfunded importationsI and

5. 0nterest income deri&ed 5y said grantee from 5an9 deposits and yield or

any other monetary 5ene1ts from deposit su5stitutes, trust funds and other similararrangements.

<2. The '(C as a go&ernment corporation is exempt from the real property taxon land and impro&ements o)ned 5y it pro&ided that the 5ene1cial use of theproperty is not transferred to another pursuant to the pro&isions of Sec. $7a8 of theReal (roperty Tax Code, as amended.< %

(etitioner does not 6uestion the &alidity and enforcea5ility of 0R Resolution 'os.$%" and %. 0ndeed, they )ere issued in compliance )ith the re6uirement of Section 2, (.D. 'o. !#, )here5y the 0R should ma9e the recommendationsu5:ect to the appro&al of <the (resident of the (hilippines and or the Einister of inance.< =hile said Resolutions do not appear to ha&e 5een appro&ed 5y the

(resident, they )ere ne&ertheless appro&ed 5y the Einister of inance )ho is alsoduly authoriBed to appro&e the same. 0n fact it )as the Einister of inance )hosigned and promulgated said resolutions. !

The o5ser&ation of Er. Justice Sarmiento in the dissenting opinion that 0RResolution 'os. $%" and % )hich )ere promulgated 5y then Acting Einister of inance Alfredo de Roda, Jr. and Einister of inance Cesar .A. +irata, as Chairman of 0R, respecti&ely, should 5e separately appro&ed 5y said Einister of inance asre6uired 5y (.D. !# is, a superGuity. An examination of the said resolutions )hichare reproduced in full in the dissenting opinion sho) that the said o;cials signedsaid resolutions in the dual capacity of Chairman of 0R and Einister of inance.KKphil

Er. Justice Sarmiento also ma9es reference to the case 'ational (o)er Corporation&s. (ro&ince of Al5ay, 2$ )herein the Court o5ser&ed that under (.D. 'o. // thepo)er of the 0R )as only recommendatory and re6uires the appro&al of the(resident to 5e &alid. Thus, in said case the Court held that 0R Resolutions 'os.$%" and % not ha&ing 5een appro&ed 5y the (resident )ere not &alid andeHecti&e )hile the &alidity of 0R /%/ )as upheld as it )as duly appro&ed 5y theO;ce of the (resident on Octo5er ", !%/. cdrep

Fo)e&er, under Section 2 of (.D. 'o. !# of June , !%-, hereina5o&ereproduced, )hich amended (.D. 'o. //, it is clearly pro&ided for that such 0Rresolution, may 5e appro&ed 5y the <(resident of the (hilippines andPor the Einisterof inance.< To repeat, as 0R Resolutions 'os. $%" and % )ere duly appro&ed5y the Einister of inance, hence they are &alid and eHecti&e. To this extent, thisdecision modi1es or supersedes the Court>s earlier decision in Al5ay aforereferredto.

(etitioner, ho)e&er, argues that under 5oth 0R resolutions, only the tax and dutyexemption pri&ileges en:oyed 5y the '(C under its charter, C.A. 'o. 2$, asamended, are restored, that is, only its direct tax exemption pri&ilegeI and that itcannot 5e interpreted to co&er indirect taxes under the principle that tax exemptionsare construed strictissimi :uris against the taxpayer and li5erally in fa&or of thetaxing authority.

(etitioner argues that the release 5y the 0R of the ("%.$ million refund torespondent '(C 5y )ay of a tax credit certi1cate 2 )hich )as assigned torespondent Caltex through a deed of assignment appro&ed 5y the 0R 22 is patentlyillegal. Fe also contends that the pending claim of respondent '(C in the amount of (-$."% million )ith respondent 0R for the sale and deli&ery to it of 5un9er fuel 5yrespondents (etrophil, Shell and Caltex from July , !%" up to !%, 5eing illegal,should not 5e released. Cdpr



'o) to the second corollary issue in&ol&ing the &alidity of 0R Resolution 'o. /%/issued on June 2-, !%/. 0t )as issued under authority of xecuti&e Order 'o. !#dated Decem5er /, !% )hich grants to the 0R, among others, the po)er torecommend the restoration of the tax and duty exemptionsPincenti&es )ithdra)nthereunder. llcd

(etitioner stresses that on August , !%/ the Secretary of Justice rendered Opinion'o. // to the eHect that the po)ers conferred upon the 0R 5y Section 27a8, 758,and 7c8 and 7-8 of xecuti&e Order 'o. !# <constitute undue delegation of legislati&epo)er and is, therefore, unconstitutional.< (etitioner o5ser&es that the 0R did not

merely recommend 5ut categorically restored the tax and duty exemption of the'(C so that the memorandum of the respondent xecuti&e Secretary dated Octo5er", !%/ appro&ing the same is a surplusage.

urther assuming that 0R Resolution 'o. /%/ to ha&e 5een legally issued,follo)ing the doctrine in (hilippine Acetylene, petitioner a&ers that the restorationcannot co&er indirect taxes and it cannot create ne) indirect tax exemption notother)ise granted in the '(C charter as amended 5y (residential Decree 'o. !#%.

The petition is de&oid of merit.

The '(C is a nonpro1t pu5lic corporation created for the general good and )elfare2# )holly o)ned 5y the go&ernment of the Repu5lic of the (hilippines. 2- rom the&ery 5eginning of its corporate existence, the '(C en:oyed preferential taxtreatment, 2" <to ena5le the Corporation to pay the inde5tedness and o5ligation

and in furtherance and eHecti&e implementation of the policy enunciated in Sectionone of <Repu5lic Act 'o. #!"< 2 )hich pro&ides3

<Section . Declaration of (olicy 4 Congress here5y declares that 78 thecomprehensi&e de&elopment, utiliBation and conser&ation of (hilippine )aterresources for all 5ene1cial uses, including po)er generation, and 728 the totalelectri1cation of the (hilippines through the de&elopment of po)er from all sourcesto meet the need of rural electri1cation are primary o5:ecti&es of the nation )hichshall 5e pursued coordinately and supported 5y all instrumentalities and agencies of the go&ernment including its 1nancial institutions.<

rom the changes made in the '(C charter, the intention to strengthen itspreferential tax treatment is o5&ious. nder Repu5lic Act 'o. #"%, its exemption ispro&ided as follo)s3

<Sec. 2. To facilitate payment of its inde5tedness, the 'ational (o)er Corporationshall 5e exempt from all taxes, duties, fees, imposts, charges, and restrictions of theRepu5lic of the (hilippines, its pro&inces, cities and municipalities.<

nder Repu5lic Act 'o. #!"3

<Sec. #.'onpro1t Character of the CorporationI xemption from all Taxes, Duties,ees, 0mposts and other Charges 5y *o&ernment and *o&ernmental0nstrumentalities. 4 The Corporation shall 5e nonpro1t and shall de&ote all itsreturns from its capital in&estment, as )ell as excess re&enues from its operation,for expansion. To ena5le the Corporation to pay its inde5tedness and o5ligations andin furtherance and eHecti&e implementation of the policy enunciated in Section oneof this Act, the Corporation is here5y declared exempt3

<7a8 rom the payment of all taxes, duties, fees, imposts, charges, costs andser&ice fees in any court or administrati&e proceedings in )hich it may 5e a party,restrictions and duties to the Repu5lic of the (hilippines, its pro&inces, cities,municipalities and other go&ernment agencies and instrumentalitiesI

<758 rom all income taxes, franchise taxes and realty taxes to 5e paid to the'ational *o&ernment, its pro&inces, cities, municipalities and other go&ernmentagencies and instrumentalitiesI

<7c8 rom all import duties, compensating taxes and ad&anced sales tax, and)harfage fees on import of foreign goods re6uired for its operations and pro:ectsIand

<7d8 rom all taxes, duties, fees, imposts, and all other charges imposed 5y theRepu5lic of the (hilippines, its pro&inces, cities, municipalities and other go&ernmentagencies and instrumentalities, on all petroleum products used 5y the Corporation inthe generation, transmission, utiliBation, and sale of electric po)er.< 7mphasissupplied.8

nder (residential Decree 'o. #%$3

<Sec. #.'onpro1t Character of the Corporation3 xemption from all Taxes, Duties,ees, 0mposts and other Charges 5y the *o&ernment and *o&ernment0nstrumentalities. 4 The Corporation shall 5e nonpro1t and shall de&ote all itsreturns from its capital in&estment as )ell as excess re&enues from its operation, for

expansion. To ena5le the Corporation to pay its inde5tedness and o5ligations and infurtherance and eHecti&e implementation of the policy enunciated in Section one of this Act, the Corporation, including its su5sidiaries, is here5y declared, exempt3

7a8 rom the payment of all taxes, duties, fees, imposts, charges, costs andser&ices fees in any court or administrati&e proceedings in )hich it may 5e a party,restrictions and duties to the Repu5lic of the (hilippines, its pro&inces, cities,municipalities and other go&ernment agencies and instrumentalitiesI

758 rom all income taxes, franchise taxes and realty taxes to 5e paid to the'ational *o&ernment, its pro&inces, cities, municipalities and other go&ernmentalagencies and instrumentalitiesI

7c8 rom all import duties, compensating taxes and ad&anced sales tax, and)harfage fees on import of foreign goods re6uired for its operation and pro:ectsI and

7d8 rom all taxes, duties, fees, imposts, and all other charges imposed directlyor indirectly 5y the Repu5lic of the (hilippines, its pro&inces, cities, municipalitiesand other go&ernment agencies and instrumentalities, on all petroleum producedused 5y the Corporation in the generation, transmission, utiliBation, and sale of electric po)er.< 7mphasis supplied.8

nder (residential Decree 'o. !#%3

<Sec. #.'onpro1t Character of the Corporation3 xemption from All Taxes, Duties,ees, 0mposts and Other Charges 5y the *o&ernment and *o&ernment0nstrumentalities. 4 The Corporation shall 5e nonpro1t and shall de&ote all itsreturns from its capital in&estment as )ell as excess re&enues from its operation, forexpansion. To ena5le the Corporation to pay the inde5tedness and o5ligations and in

furtherance and eHecti&e implementation of the policy enunciated in Section One of this Act, the Corporation, including its su5sidiaries here5y declared exempt from the



payment of all forms of taxes, duties, fees, imposts as )ell as costs and ser&ice feesincluding 1ling fees, appeal 5onds, supersedeas 5onds, in any court oradministrati&e proceedings.< 7mphasis supplied.8

0t is noted that in the earlier la), R.A. 'o. #"% the exemption )as )orded in generalterms, as to co&er <all taxes, duties, fees, imposts, charges, etc. . . .< Fo)e&er, theamendment under Repu5lic Act 'o. #!" enumerated the details co&ered 5y theexemption. Su5se6uently, (.D. 'o. #%$, made e&en more speci1c the details of theexemption of '(C to co&er, among others, 5oth direct and indirect taxes on allpetroleum products used in its operation. (residential Decree 'o. !#% amended the

tax exemption 5y simplifying the same la) in general terms. 0t succinctly exempts'(C from <all forms of taxes, duties, fees, imposts, as )ell as costs and ser&ice feesincluding 1ling fees, appeal 5onds, supersedeas 5onds, in any court oradministrati&e proceedings.< KexKi5

The use of the phrase <all forms< of taxes demonstrate the intention of the la) togi&e '(C all the tax exemptions it has 5een en:oying 5efore. The rationale for thisexemption is that 5eing nonpro1t the '(C <shall de&ote all its returns from itscapital in&estment as )ell as excess re&enues from its operation, for expansion. Toena5le the Corporation to pay the inde5tedness and o5ligations and in furtheranceand eHecti&e implementation of the policy enunciated in Section one of this Act, . . .<2/

The pream5le of (.D. 'o. !#% states 4

<=FRAS, in the application of the tax exemption pro&ision of the Re&ised Charter,the nonpro1t character of the '(C has not 5een fully utiliBed 5ecause of restricti&einterpretations of the taxing agencies of the go&ernment on said pro&isions . . .<7mphasis supplied.8

0t is e&ident from the foregoing that the la)ma9er did not intend that the saidpro&isions of (.D. 'o. !#% shall 5e construed strictly against '(C. On the contrary,the la) mandates that it should 5e interpreted li5erally so as to enhance the taxexempt status of '(C.

Fence, petitioner cannot in&o9e the rule on strictissimi :uris )ith respect to theinterpretation of statutes granting tax exemptions to '(C.

Eoreo&er, it is a recogniBed principle that the rule on strict interpretation does not

apply in the case of exemptions in fa&or of a go&ernment political su5di&ision orinstrumentality. 2%

<The 5asis for applying the rule of strict construction to statutory pro&isions grantingtax exemptions or deductions, e&en more o5&ious than )ith reference to thea;rmati&e or le&ying pro&isions of tax statutes, is to minimiBe diHerential treatmentand foster impartiality, fairness, and e6uality of treatment among tax payers.

The reason for the rule does not apply in the case of exemptions running to the5ene1t of the go&ernment itself or its agencies. 0n such case the practical eHect of an exemption is merely to reduce the amount of money that has to 5e handled 5ygo&ernment in the course of its operations. or these reasons, pro&isions grantingexemptions to go&ernment agencies may 5e construed li5erally, in fa&or of non taxlia5ility of such agencies.< 2!

0n the case of property o)ned 5y the state or a city or other pu5lic corporations, theexpress exemption should not 5e construed )ith the same degree of strictness thatapplies to exemptions contrary to the policy of the state, since as to such property<exemption is the rule and taxation the exception.< #$

The contention of petitioner that the exemption of '(C from indirect taxes underSection # of R.A. 'o. #!" and (.D. 'o. #%$, is deemed repealed 5y (.D. 'o. !#%)hen the reference to it )as deleted is not )ellta9en.

Repeal 5y implication is not fa&ored unless it is manifest that the legislature sointended. As la)s are presumed to 5e passed )ith deli5eration and )ith 9no)ledgeof all existing ones on the su5:ect, it is logical to conclude that in passing a statute itis not intended to interfere )ith or a5rogate a former la) relating to the samesu5:ect matter, unless the repugnancy 5et)een the t)o is not only irreconcila5le 5utalso clear and con&incing as a result of the language used, or unless the latter Actfully em5races the su5:ect matter of the earlier. # The 1rst eHort of a court mustal)ays 5e to reconcile or ad:ust the pro&isions of one statute )ith those of anotherso as to gi&e sensi5le eHect to 5oth pro&isions. #2

The legislati&e intent must 5e ascertained from a consideration of the statute as a)hole, and not of an isolated part or a particular pro&ision alone. ## =henconstruing a statute, the reason for its enactment should 5e 9ept in mind and thestatute should 5e construed )ith reference to its intended scope and purpose #-and the e&il sought to 5e remedied. #"

The '(C is a go&ernment instrumentality )ith the enormous tas9 of underta9ingde&elopment of hydroelectric generation of po)er and production of electricity fromother sources, as )ell as the transmission of electric po)er on a nation)ide 5asis, toimpro&e the 6uality of life of the people pursuant to the State policy em5odied inSection , Article 00 of the !%/ Constitution.

0t is e&ident from the pro&isions of (.D. 'o. !#% that its purpose is to maintain thetax exemption of '(C from all forms of taxes including indirect taxes as pro&ided forunder R.A. 'o. #!" and (.D. 'o. #%$ if it is to attain its goals.

urther, the construction of (.D. 'o. !#% 5y the O;ce charged )ith itsimplementation should 5e gi&en controlling )eight. #

Since the Eay %, !%" ruling of Commissioner Ancheta, to the letter of the Secretary

of inance of June 2, !%" con1rming said ruling, the letters of the 0R of August%, !%, and Decem5er 22, !%, the letter of the Secretary of inance of e5ruary!, !%/, the Eemorandum of the xecuti&e Secretary of Octo5er !, !%/, 5yauthority of the (resident, con1rming and appro&ing 0R Resolution 'o. /%/, theletter of the Secretary of inance of Eay 2$, !%% to the xecuti&e Secretaryrendering his opinion as re6uested 5y the latter, and the latter>s reply of June ",!%%, it )as uniformly held that the grant of tax exemption to '(C under C.A. 'o.2$, as amended, included exemption from payment of all taxes relati&e to '(C>spetroleum purchases including indirect taxes. #/ Thus, then Secretary of inance+icente Jayme in his letter of Eay 2$, !%% to the xecuti&e Secretary Eacaraigaptly stated the :usti1cation for this tax exemption of '(C 4

<The issue turns on the eHect to the exemption of '(C from taxes of the deletion of the phrase >taxes imposed indirectly> on oil products and its exemption from >all

forms of taxes.> 0t is suggested that the change in language e&idenced an intentionto exempt '(C only from taxes directly imposed on or paya5le 5y itI since taxes on



fueloil purchased 5y '(C locally are le&ied on and paid 5y its oil suppliers, '(Cthere5y lost its exemption from those taxes. The principal authority relied on is the!/ case of (hilippine Acetylene Co., 0nc. &s. Commissioner of 0nternal Re&enue, 2$SCRA $".

irst of all, tracing the changes made through the years in the Re&ised Charter, thestrengthening of '(C>s preferential tax treatment )as clearly the intention. To theextent that the explanatory >)hereas clauses> may disclose the intent of the la)ma9er, the charges eHected 5y (.D. !#% can only 5e read as 5eing expansi&e ratherthan restricti&e, including its &ersion of Section #.

Our Tax Code does not recogniBe that there are taxes directly imposed and thoseimposed indirectly. The text5oo9 distinction 5et)een a direct and an indirect taxmay 5e 5ased on the possi5ility of shifting the incidence of the tax. A direct tax isone )hich is demanded from the &ery person intended to 5e the payor, although itmay ultimately 5e shifted to another. An example of a direct tax is the personalincome tax. On the other hand, indirect taxes are those )hich are demanded fromone person in the expectation and intention that he shall indemnify himself at theexpense of another. An example of this type of tax is the sales tax le&ied on sales of a commodity.

The distinction 5et)een a direct tax and one indirectly imposed 7or an indirect tax8is really of no moment. =hat is more rele&ant is that )hen an >indirect tax> is paid 5ythose upon )hom the tax ultimately falls, it is paid not as a tax 5ut as an additionalpart of the cost or of the mar9et price of the commodity.

This distinction )as made clear 5y Chief Justice Castro in the (hilippine Acetylenecase, )hen he analyBed the nature of the percentage 7sales8 tax to determine)hether it is a tax on the producer or on the purchaser of the commodity. nder out

Tax Code, the sales tax falls upon the manufacturer or producer. The phrase >passon> the tax )as criticiBed as 5eing inaccurate. Justice Castro says that the taxremains on the manufacturer alone. The purchaser does not pay the taxI he pays anamount added to the price 5ecause of the tax. Therefore, the tax is not >passed on>and does not for that reason 5ecome an >indirect tax> on the purchaser. 0t iseminently possi5le that the la) ma9er in enacting (.D. !#% in !/ may ha&e usedlessons from the analysis of Chief Justice Castro in !/ (hilippine Acetylene case.

=hen (.D. !#% )hich exempted '(C from >all forms of taxes> )as issued in Eay!/, the socalled oil crunch had already drastically pushed up crude oil prices

from a5out Z.$$ per 55l. in !/ to a5out Z$ and a pea9 7as it turned out8 of a5out Z#- per 55l. in !%. 0n !/-/%, '(C )as operating the Eeralco thermalplants under a lease agreement. The po)er generated 5y the leased plants )as soldto Eeralco for distri5ution to its customers. This lease and sale arrangement )asentered into for the 5ene1t of the consuming pu5lic, 5y reducing the tax 5urden onthe s)iftly rising )orld crude oil prices. This o5:ecti&e )as achie&ed 5y the use of '(C>s >tax um5rella> under its Re&ised Charter 4 the exemption from speci1c taxeson locally purchased fuel oil. 0n this context, 0 can not interpret (.D. !#% to ha&e)ithdra)n the exemption from tax on fuel oil to )hich '(C )as already entitled and)hich exemption *o&ernment in fact )as utiliBing to soften the 5urden of high crudeprices.

There is one other consideration )hich 0 consider pi&otal. The taxes paid 5y oilcompanies on oil products sold to '(C, )hether paid to them 5y '(C or not, ne&er

entered into the rates charged 5y '(C to its customers 4 not e&en during thoseperiods of uncertainty engendered 5y the issuance of (.D. !# and .O. !# on '(C>s

tax status. 'o tax component on the fuel ha&e 5een charged or reco&ered 5y '(Cthrough its rates.

There is an import duty on the crude oil imported 5y the local re1neries. After there1ning process, speci1c and ad &alorem taxes are le&ied on the 1nished productsincluding fuel oil or residue upon their )ithdra)al from the re1nery. These taxes arepaid 5y the oil companies as the manufacturer thereof.

0n selling the fuel oil to '(C, the oil companies include in their 5illings the duty andtax component. '(C pays the oil companies> in&oices including the duty component5ut net of the tax component. '(C then applies for dra)5ac9 of customs duties paidand for a credit in amount e6ui&alent to the tax paid 75y the oil companies8 on theproducts purchased. The tax credit is assigned to the oil companies 4 as payment,in eHect, of the tax component sho)n in the sales in&oices. 7'OT3 Theseprocedures &aried o&er time 4 There )ere instances )hen '(C paid the taxcomponent that )as shifted to it and then applied for tax credit. There )ere alsoside issues raised 5ecause of (.D. !# and .O. !# )hich )ithdre) all exemptionsof go&ernment corporations. 0n these latter instances, the resolutions of the iscal0ncenti&es Re&ie) oard 70R8 come into play. These incidents )ill not 5e touchedupon for purposes of this discussion8.

'(C rates of electricity are structured such that changes in its cost of fuel areautomatically 7)ithout need of fresh appro&als8 reGected in the su5se6uent months>5illing rates.

This uel Cost Ad:ustment clause protects '(C>s rate of return. 0f '(C should e&eraccept lia5ility to the tax and duty component on the oil products, such amount )illgo into its fuel cost and 5e passed on to its customers through correspondingincreases in rates. Since !/-, )hen '(C operated the oil1red generating stationsleased from Eeralco 7)hich plants it 5ought in !/!8, until the present time, no taxon fuel oil e&er )ent into '(C>s electric rates.

That the exemption of '(C from the tax on fuel )as not )ithdra)n 5y (.D. !#% isimpressed upon me 5y yet another circumstance. 0t is conceded that '(C, at the&ery least, is exempt from taxes to )hich it is directly lia5le. '(C therefore could&ery )ell ha&e imported its fuel oil or crude residue for 5urning at its thermal plants.

There )ould ha&e 5een no 6uestion in such a case as to its exemption from allduties and taxes, e&en under the strictest interpretation that can 5e put for)ard.Fo)e&er, at the time (.D. !#% )as issued in !/, there )ere already operating in

the (hilippines three oil re1neries. The esta5lishment of these re1neries in the(hilippines in&ol&ed hea&y in&estments, )ere economically desira5le and ena5ledthe country to import crude oil and processPre1ne the same into the &ariouspetroleum products at a sa&ings to the industry and the pu5lic. The re1ning processproduced as its largest output, in &olume, fuel oil or residue, )hose con&entionaleconomic use )as for 5urning in electric or steam generating plants. Fad there 5eenno use locally for the residue, the oil re1neries )ould ha&e 5ecome largely un&ia5le.

Again, in this circumstance, 0 cannot accept that (.D. !#% )ould ha&e in eHect forced'(C to 5ypass the local oil re1neries and import its fossil fuel re6uirements directlyin order to a&ail itself of its exemption from >direct taxes.> The oil re1neries had to9eep operating 5oth for economic de&elopment and national security reasons. 0nfact, the restoration 5y the 0R of '(C>s exemption after (.D. !# and .O. !#expressly excluded direct fuel oil importations, so as not to pre:udice the continued

operations of the local oil re1neries.



To ans)er your 6uery therefore, it is the opinion of this Department that '(C underthe pro&isions of its Re&ised Charter retains its exemption from duties and taxesimposed on the petroleum products purchased locally and used for the generation of electricity.

The Department in issuing this ruling does so pursuant to its po)er and function tosuper&ise and control the collection of go&ernment re&enues 5y the application andimplementation of re&enue la)s. 0t is prepared to ta9e the measures supplementalto this ruling necessary to carry the same into full eHect.

As presented rather extensi&ely a5o&e, the '(C electric po)er rates did not carry

the taxes and duties paid on the fuel oil it used. The point is that )hile these le&ies)ere in fact paid to the go&ernment, no part thereof )as reco&ered from the sale of electricity produced. As a conse6uence, as of our most recent information, some(." in claims represent amounts for )hich the oil suppliers and '(C are >outofpoc9et. There )ould ha&e to 5e speci1c order to the ureaus concerned for theresumption of the processing of these claims.< #%

0n the latter of June ", !%% of then xecuti&e Secretary Eacaraig to the thenSecretary of inance, the said opinionruling of the latter )as con1rmed and itsimplementation )as directed. #!

The Court 1nds and so holds that the foregoing reasons adduced in the aforestatedletter of the Secretary of inance as con1rmed 5y the then xecuti&e Secretary are)ellta9en. =hen the '(C )as exempted from all forms of taxes, duties, fees,

imposts and other charges, under (.D. 'o. !#%, it means exactly )hat it says, i.e., allforms of taxes including those that )ere imposed directly or indirectly on petroleumproducts used in its operation.

Reference is made in the dissenting opinion to contrary rulings of the 0R that theexemption of the '(C extends only to taxes for )hich it is directly lia5le and not totaxes merely shifted to it. Fo)e&er, these rulings are predicated on (hilippineAcetylene.

The doctrine in (hilippine Acetylene decided in !/ 5y this Court cannot apply tothe present case. 0t in&ol&ed the sales tax of products the plaintiH sold to '(C from

June 2, !"# to June #$, !"% )hen '(C )as en:oying tax exemption from all taxesunder Common)ealth Act 'o. 2$, as amended 5y Repu5lic Act 'o. #"% issued on

June -, !-! hereina5o&e reproduced.

0n said case, this Court held, that the sales tax is due from the manufacturer and notthe 5uyer, so plaintiH cannot claim exemptions simply 5ecause the '(C, the 5uyer,)as exempt.

Fo)e&er, on Septem5er $, !/, Repu5lic Act 'o. #!" )as passed as the re&isedcharter of '(C )here5y Section # thereof )as amended 5y emphasiBing its nonpro1t character and expanding the extent of its tax exemption.

As petitioner concedes, Section #7d8 aforestated of this amendment under Repu5licAct 'o. #-" spells out clearly the exemption of the '(C from indirect taxes. And ashereina5o&e stated, in (.D. 'o. #%$, the exemption of '(C from indirect taxes )asemphasiBed )hen it )as speci1ed to include those imposed <directly and indirectly.<

Thereafter, under (.D. 'o. !#% the tax exemption of '(C )as integrated under

Section # de1ning the same in general terms to co&er <all forms of taxes, duties,

fees, imposts, etc.< )hich, as hereina5o&e discussed, logically includes exemptionfrom indirect taxes on petroleum products used in its operation.

This is the status of the tax exemptions the '(C )as en:oying )hen (.D. 'o. !#)as passed, on the authority of )hich 0R Resolution 'os. $%" and % )ereissued, and )hen xecuti&e Order 'o. !# )as promulgated, 5y )hich 0RResolution /%/ )as issued.

Thus, the ruling in (hilippine Acetylene cannot apply to this case due to the diHerenten&ironmental circumstances. As a matter of fact, the amendments of Section #,under R.A. 'o. #!", (.D. 'o. #%$ and (.D. 'o. %#% appear to ha&e 5een 5rought

a5out 5y the earlier inconsistent rulings of the tax agencies due to the doctrine in(hilippine Acetylene, so as to lea&e no dou5t as to the exemption of the '(C fromindirect taxes on petroleum products it uses in its operation. Hecti&ely, saidamendments superseded if not a5rogated the ruling in (hilippine Acetylene that thetax exemption of '(C should 5e limited to direct taxes only. cdrep

0n the light of the foregoing discussion the 1rst corollary issue must conse6uently 5eresol&ed in the a;rmati&e, that is, 0R Resolution 'o. $%" dated e5ruary /, !%"and 0R Resolution 'o. % dated January /, !% )hich restored '(C>s taxexemption pri&ileges included the restoration of the indirect tax exemption of the'(C on petroleum products it used.

On the second corollary issue as to the &alidity of 0R resolution 'o. /%/ dated June 2-, !%/ )hich restored '(C>s tax exemption pri&ilege eHecti&e Earch $,

!%/, the Court 1nds that the same is &a lid and eHecti&e.

0t pro&ides as follo)s3

< 0T RSOK+D, AS 0T 0S FRL RSOK+D, That the tax and duty exemptionpri&ileges of the 'ational (o)er Corporation, including those pertaining to itsdomestic purchases of petroleum and petroleum products, granted under the termsand conditions of Common)ealth Act 'o. 2$ 7Creating the 'ational (o)erCorporation, de1ning its po)ers, o5:ecti&es and functions, and for other purposes8,as amended, are restored eHecti&e Earch $, !%/, su5:ect to the follo)ingconditions3

<. The restoration of the tax and duty exemption pri&ileges does not apply tothe follo)ing3

. 0mportation of fuel oil 7crude e6ui&alent8 and coalI

.2 Commerciallyfunded importations 7i.e., importations )hich include 5ut arenot limited to those 1nanced 5y the '(C>s o)n internal funds, domestic 5orro)ingsfrom any source )hatsoe&er, 5orro)ing from foreign5ased pri&ate 1nancialinstitutions, etc.8I and

.# 0nterest income deri&ed from any source.

<2. The '(C shall su5mit to the 0R a report of its expansion program,including details of disposition of relie&ed tax and duty payments for such expansionon an annual 5asis or as often as the 0R may re6uire it to do so. This report shall5e in addition to the usual 0R reporting re6uirements on incenti&e a&ailment.< -$

xecuti&e Order 'o. !# pro&ides as follo)s 4



<SCT0O' . The pro&isions of any general or special la) to the contrarynot)ithstanding, all tax and duty incenti&es granted to go&ernment and pri&ateentities are here5y )ithdra)n, except3

a8 those co&ered 5y the nonimpairment clause of the ConstitutionI

58 those conferred 5y eHecti&e international agreements to )hich the*o&ernment of the Repu5lic of the (hilippines is a signatoryI

c8 those en:oyed 5y enterprises registered )ith3

7i8 the oard of 0n&estments pursuant to (residential Decree 'o. /%!, asamendedI

7ii8 the xport (rocessing Vone Authority, pursuant to (residential Decree 'o., as amendedI

7iii8 the (hilippine +eterans 0n&estment De&elopment Corporation 0ndustrialAuthority pursuant to (residential Decree 'o. "#%, as amendedI

d8 those en:oyed 5y the copper mining industry pursuant to the pro&isions of Ketter of 0nstruction 'o. -I

e8 those conferred under the four 5asic codes namely3

7i8 the TariH and Customs Code, as amendedI

7ii8 the 'ational 0nternal Re&enue Code, as amendedI

7ii i8 the Kocal Tax Code, as amendedI

7i&8 the Real (roperty Tax Code, as amendedI.

f8 those appro&ed 5y the (resident upon the recommendation of the iscal0ncenti&es Re&ie) oard.

<SCT0O' 2. The iscal 0ncenti&es Re&ie) oard created under (residentialDecree 'o. //, as amended, is here5y authoriBed to3

a8 restore tax and or duty exemptions )ithdra)n hereunder in )hole or inpartI

58 re&ise the scope and co&erage of tax and of duty exemption that may 5erestored.

c8 impose conditions for the restoration of tax and or duty exemptionI

d8 prescri5e the date or period of eHecti&ity of the restoration of tax and orduty exemptionI

e8 formulate and su5mit to the (resident for appro&al, a complete system forthe grant of su5sidies to deser&ing 5ene1ciaries, in lieu of or in com5ination )ith therestoration of tax and duty exemptions or preferential treatment in taxation,indicating the source of funding therefor, eligi5le 5ene1ciaries and the terms andconditions for the grant thereof taxing into consideration the internationalcommitments of the (hilippines and the necessary precautions such that the grant

of su5sidies does not 5ecome the 5asis for counter&ailing action.

<SCT0O' #. 0n the discharge of its authority hereunder, the iscal 0ncenti&esRe&ie) oard shall ta9e into account any or all of the follo)ing considerations3

a8 the eHect on relati&e price le&elsI

58 relati&e contri5ution of the 5ene1ciary to the re&enue generation eHortI

c8 nature of the acti&ity the 5ene1ciary is engagedI

d8 in general, the greater national interest to 5e ser&ed.<

True it is that the then Secretary of Justice in Opinion 'o. // dated August , !//)as of the &ie) that the po)ers conferred upon the 0R 5y Sections 27a8, 758, 7c8,and 7d8 of xecuti&e Order 'o. !# constitute undue delegation of legislati&e po)erand is therefore unconstitutional. Fo)e&er, he )as o&erruled 5y the respondentxecuti&e Secretary in a letter to the Secretary of inance dated Earch #$, !%!.

The xecuti&e Secretary, 5y authority of the (resident, has the po)er to modify,alter or re&erse the construction of a statute gi&en 5y a department secretary. -

A reading of Section # of said la) sho)s that it set the policy to 5e the greaternational interest. The standards of the delegated po)er are also clearly pro&ided for.

The re6uired <standard< need not 5e expressed. 0n du &s. ricta -2 and in De laKlana &s. Al5a, -# this Court held3 <The standard may 5e either express or implied.0f the former, the nondelegated o5:ection is easily met. The standard though doesnot ha&e to 5e spelled out speci1cally. 0t could 5e implied from the policy andpurpose of the act considered as a )hole.<

0n (eople &s. Rosenthal -- the 5road standard of <pu5lic interest< )as deemedsu;cient. 0n Calalang &s. =illiams, -" it )as <pu5lic )elfare< and in Cer&antes &s.Auditor *eneral, - it )as the purpose of promotion of <simplicity, economy ande;ciency.< And, implied from the purpose of the la) as a )hole, <national security<)as considered su;cient standard -/ and so )as <protection of 1shfry or 1sheggs.< -%

The o5ser&ation of petitioner that the appro&al of the (resident )as not e&enre6uired in said xecuti&e Order of the tax exemption pri&ilege appro&ed 5y the0R, unli9e in pre&ious similar issuances, is not )ellta9en. On the contrary, underSection 7f8 of xecuti&e Order 'o. !#, aforestated, such tax and duty exemptionsextended 5y the 0R must 5e appro&ed 5y the (resident. 0n this case, 0R

Resolution 'o. /%/ )as appro&ed 5y the respondent xecuti&e Secretary, 5yauthority of the (resident, on Octo5er ", !%/. -!

Er. Justice 0sagani A. CruB commenting on the delegation of legislati&e po)er stated4

<The latest in our :urisprudence indicates that delegation of legislati&e po)er has5ecome the rule and its nondelegation the exception. The reason is the increasingcomplexity of modern life and many technical 1elds of go&ernmental functions as inmatters pertaining to tax exemptions. This is coupled 5y the gro)ing ina5ility of thelegislature to cope directly )ith the many pro5lems demanding its attention. Thegro)th of society has rami1ed its acti&ities and created peculiar and sophisticatedpro5lems that the legislature cannot 5e expected reasona5ly to comprehend.SpecialiBation e&en in legislation has 5ecome necessary. To many of the pro5lems

attendant upon present day underta9ings, the legislature may not ha&e the



competence, let alone the interest and the time, to pro&ide the re6uired direct ande;cacious, not to say speci1c solutions.< "$

Thus, in the case of Ta5larin &s. *utierreB, " this Court enunciated the rationale infa&or of delegation of legislati&e functions 4

<One thing ho)e&er, is apparent in the de&elopment of the principle of separation of po)ers and that is that the maxim of delegatus non potest delegare or delegatipotestas non potest delegare, adopted this practice 7Delegi5us et Consuetudiniis,Anglia edited 5y *.. =oodline, Lale ni&ersity (ress, !22, +ol. 2, p. /8 5ut )hichis also recogniBed in principle in the Roman Ka) 7d. /.%.#8 has 5een made to

adapt itself to the complexities of modern go&ernment, gi&ing rise to the adoption,)ithin certain limits, of the principle of su5ordinate legislation, not only in the nitedStates and ngland 5ut in practically all modern go&ernments. 7(eople &s. Rosenthaland OsmeWa, % (hil. #%, !#!8. Accordingly, )ith the gro)ing complexities of modern life, the multiplication of the su5:ects of go&ernmental regulation, and theincreased di;culty of administering the la)s, there is a constantly gro)ing tendencyto)ard the delegation of greater po)er 5y the legislati&e, and to)ard the appro&alof the practice 5y the Courts.< 7mphasis supplied.8

The legislati&e authority could not or is not expected to state all the detailedsituations )herein the tax exemption pri&ileges of persons or entities )ould 5erestored. The tas9 may 5e assigned to an administrati&e 5ody li9e the 0R.

Eoreo&er, all presumptions are indulged in fa&or of the constitutionality and &alidity

of the statute. Such presumption can 5e o&erturned if its in&alidity is pro&ed 5eyondreasona5le dou5t. Other)ise, a li5eral interpretation in fa&or of constitutionality of legislation should 5e adopted. "2

.O. 'o. !# is complete in itself and constitutes a &alid delegation of legislati&epo)er to the 0R. And as a5o&e discussed, the tax exemption pri&ilege that )asrestored to '(C 5y 0R Resolution 'o. /%/ of June !%/ includes exemption fromindirect taxes and duties on petroleum products used in its operation.

0ndeed, the &alidity of xecuti&e Order 'o. !# as )ell as of 0R Resolution 'o. /%/has 5een upheld in Al5ay. "#

0n the dissenting opinion of Er. Justice CruB, it is stated that (.D. 'os. !# and !""issued 5y (resident Earcos in !%- are in&alid as they )ere presuma5ly

promulgated under the infamous Amendment 'o. and that as they co&er taxexemption, under Section /7-8, Article +000 of the !/# Constitution, the samecannot 5e passed <)ithout the concurrence of the ma:ority of all the mem5ers of theatasan (am5ansa.< And, e&en conceding that the reser&ation of legislati&e po)erin the (resident )as &alid, it is opined that it )as not &alidly exercised as there is nosho)ing that such presidential encroachment )as :usti1ed under the conditions thenexisting. Conse6uently, it is concluded that xecuti&e Order 'o. !#, )hich )asintended to implement said decrees, is also illegal. The authority of the (resident tosu5delegate to the 0R po)ers delegated to him is also 6uestioned. KexKi5

0n Al5ay, "- as a5o&e stated, this Court upheld the &alidity of (.D. 'os. // and!#. The latter decree )ithdre) tax exemptions of go&ernmento)ned orcontrolled corporations including their su5sidiaries 5ut authoriBed the 0R to restorethe same. 'e&ertheless, in Al5ay, as a5o&ediscussed, this Court ruled that the taxexemptions under 0R Resolution 'os. $%" and % cannot 5e enforced as saidresolutions )ere only recommendatory and )ere not duly appro&ed 5y the (resident

of the (hilippines as re6uired 5y (.D. 'o. //. "" The Court also sustained in Al5aythe &alidity of xecuti&e Order 'o. !#, and of the tax exemptions restored under0R Resolution 'o. /%/ )hich )as issued pursuant thereto, as it )as dulyappro&ed 5y the (resident as re6uired 5y said executi&e order.

Eoreo&er, under Section #, Article M+000 of the Transitory (ro&isions of the !%/Constitution, it is pro&ided that3

<All existing la)s, decrees, executi&e orders, proclamation, letters of instructions,and other executi&e issuances not inconsistent )ith this constitution shall remainoperati&e until amended, repealed or re&o9ed.<

Thus, (.D. 'os. // and !# are &alid and operati&e unless it is sho)n that they areinconsistent )ith the Constitution.

&en assuming arguendo that (.D. 'os. //, !# and xecuti&e Order 'o. !# arenot &alid and are unconstitutional, the result )ould 5e the same, as then the latestapplica5le la) )ould 5e (.D. 'o. !#% )hich amended the '(C charter 5y grantingexemption to '(C from all forms of taxes. As a5o&e discussed, this exemption of '(C co&ers direct and indirect taxes on petroleum products used in its operation.

This is as it should 5e, if =e are to hold as in&alid and inoperati&e the )ithdra)al of such tax exemptions under (.D. 'o. !# as )ell as under xecuti&e Order 'o. !#and the delegation of the po)er to restore these exemptions to the 0R. Cdpr

The Court realiBes the magnitude of the conse6uences of this decision. To reiterate,

in Al5ay this Court ruled that the '(C is lia5le for real estate taxes as of June ,!%- 7the date of promulgation of (.D. 'o. !#8 )hen '(C had ceased to en:oy taxexemption pri&ileges since 0R Resolution 'os. $%" and % )ere not &alidlyissued. The real estate tax lia5ility of '(C from June , !%- to Decem5er , !!$is estimated to amount to (/.-! 5illion plus another (-./ 5illion in fuel importduties the 1rm had earlier paid to the go&ernment )hich the '(C no) proposed topass on to the consumers 5y another ##centa&o increase per 9ilo)att hour in po)errates on top of the /centa&o increase per 9ilo)att hour that too9 eHect :ust o&er a)ee9 ago. " Fence, another case has 5een 1led in this Court to stop thisproposed increase )ithout a hearing.

As a5o&ediscussed, at the time 0R Resolutions 'os. $%" and % )ere issued,(.D. 'o. // dated August 2-, !/" )as already amended 5y (.D. 'o. !#, "/)herein it is pro&ided that such 0R resolutions may 5e appro&ed not only 5y the

(resident of the (hilippines 5ut also 5y the Einister of inance. Such resolutions)ere promulgated 5y the Einister of inance in his o)n right and also in his capacityas 0R Chairman. Thus, a separate appro&al thereof 5y the Einister of inance or 5ythe (resident is unnecessary. Cdpr

As earlier stated a reexamination of the ruling in Al5ay on this aspect is thereforecalled for and conse6uently, Al5ay must 5e considered superseded to this extent 5ythis decision. This is 5ecause (.D. 'o. !#% )hich is the latest amendment to the '(Ccharter granting the '(C exemption from all forms of taxes certainly co&ers realestate taxes )hich are direct taxes.

This tax exemption is intended not only to insure that the '(C shall continue togenerate electricity for the country 5ut more importantly, to assure cheaper rates to5e paid 5y the consumers.



The allegation that this is in eHect allo)ing tax e&asion 5y oil companies is not 6uitecorrect. There are &arious arrangements in the payment of crude oil purchased 5y'(C from oil companies. *enerally, the custom duties paid 5y the oil companies areadded to the selling price paid 5y '(C. As to the speci1c and ad &alorem taxes, theyare added as part of the seller>s price, 5ut '(C pays the price net of tax, oncondition that '(C )ould see9 a tax refund to the oil companies. 'o tax componenton fuel had 5een charged or reco&ered 5y '(C from the consumers through itspo)er rates. "% Thus, this is not a case of tax e&asion of the oil companies 5ut of tax relief for the '(C. The 5illions of pesos in&ol&ed in these exemptions )illcertainly inure to the ultimate good and 5ene1t of the consumers )ho are there5y

spared the additional 5urden of increased po)er rates to co&er these taxes paid orto 5e paid 5y the '(C if it is held lia5le for the same. KKpr

The fear of the serious implication of this decision in that '(C>s suppliers, importersand contractors may claim the same pri&ilege should 5e dispelled 5y the fact that7a8 this decision particularly treats of only the exemption of the '(C from all taxes,duties, fees, imposts and all other charges imposed 5y the go&ernment on thepetroleum products it used or uses for its operationI and 758 Section #7d8 of R.A. 'o.#!" and Section #7d8 of (.D. 'o. #%$, 5oth speci1cally exempt the '(C from alltaxes, duties, fees, imposts and all other charges imposed 5y the *o&ernment on allpetroleum products used in its operation only, )hich is the &ery exemption )hichthis Court deems to 5e carried o&er 5y the passage of (.D. 'o. !#%. As a matter of fact in Section #7d8 of (.D. 'o. #%$ it is speci1ed that the aforesaid exemption fromtaxes, etc. co&ers those <directly or indirectly< imposed 5y the <Repu5lic of the

(hilippines, its pro&inces, cities, municipalities and other go&ernment agencies andinstrumentalities< on said petroleum products. The exemption therefore from directand indirect tax on petroleum products used 5y '(C cannot 5ene1t the suppliers,importers and contractors of '(C of other products or ser&ices. cdphil

The Court realiBes the lauda5le o5:ecti&e of petitioner to impro&e the re&enue of thego&ernment. The amount of re&enue recei&ed or expected to 5e recei&ed 5y this taxexemption is, ho)e&er, not going to any of the oil companies. There )ould 5e noloss to the go&ernment. The said amount shall accrue to the 5ene1t of the '(C, ago&ernment corporation, so as to ena5le it to sustain its tremendous tas9 of pro&iding electricity for the country and at the least cost to the consumers. Denyingthis tax exemption )ould mean hampering if not paralyBing the operations of the'(C. The resulting increased re&enue in the go&ernment )ill also mean increasedpo)er rates to 5e shouldered 5y the consumers if the '(C is to sur&i&e and continue

to pro&ide our po)er re6uirements. "! The greater interest of the people must 5eparamount.

=FROR, the petition is D0SE0SSD for lac9 of merit. 'o pronouncement as tocosts.

SO ORDRD.

'ar&asa, EelencioFerrera, eliciano, idin, Eedialdea and Regalado, JJ., concur.

ernan, C.J. too9 no partI formerly counsel for one of the respondents.

(adilla, J., too9 no partI counsel for respondent (ilipinas Shell (etroleum Corp.formerly mem5er of my legal staH.

(aras, J., 0 dissentI 5ut the '(C should 5e refunded not 5y the consuming pu5lic 5ut5y the oil companies for ultimately these oil companies get the 5ene1t of thealleged tax exemption.

Separate Opinions

CRV, J., dissenting3

0 :oin Er. Justice A5raham . Sarmiento in his excellent dissent and )ould stress onlythe follo)ing additional o5ser&ations.

A tax exemption represents a loss of re&enue to the State and must therefore not 5elightly granted or inferred. =hen claimed, it must 5e strictly construed against thetaxpayer, )ho must pro&e that he comes under the exemption rather than the rulethat e&ery one must contri5ute his :ust share in the maintenance of the go&ernment.

0n the case at 5ar, the ponencia )ould :ustify the tax exemption as ha&ing 5een&alidly granted under (.D. 'os. !# and !"" and Resolutions 'os. $%" and %of the iscal 0ncenti&es Re&ie) oard. 0t is also asserted that 0R Resolution 'o. /%/, )hich restored E(C>s tax exemption eHecti&e Earch $, !%/, )as la)fullyadopted pursuant to a &alid delegation of po)er made 5y xecuti&e Order 'o. !#.

=hen (.D. 'os. !# and !"" )ere issued 5y (resident Earcos in !%-, theatasang (am5ansa )as already in existence and discharging its legislati&e po)ers.(resuma5ly, these decrees )ere promulgated under the infamous Amendment 'o.

. Assuming that the reser&ation of legislati&e po)er in the (resident )as then &alid,0 su5mit that the po)er )as ne&ertheless not &alidly exercised. Ey reason is that the(resident could legislate under the said amendment only if the atasang (am5ansa<failed or )as una5le to act ade6uately on any matter that in his :udgment re6uiredimmediate action< to meet the <exigency.< There is no sho)ing that the presidentialencroachment on legislati&e prerogati&es )as :usti1ed under these conditions.Simply 5ecause the ru55erstamp legislature then mee9ly su5mitted did not ma9ethe usurpation &alid. Ki5Kex

y these decrees, (resident Earcos, exercising legislati&e po)er, delegated it tohimself as executi&e and empo)ered himself andPor the Einister of inance torestore the exemptions pre&iously )ithdra)n.

As the decrees themsel&es )ere in&alid, it should follo) that xecuti&e Order 'o. !#,)hich )as intended only to implement them, should also 5e illegal. ut e&enassuming the legality of the said decrees, 0 )ould still 6uestion the authority of the(resident to su5delegate the po)ers delegated to her thereunder.

Such su5delegation )as not permissi5le 5ecause potestas delegata non delegaripotest. &en if )e )ere to disregard the opinion of Secretary of Justice Sedfrey A.OrdoWeB that there )ere no su;cient standards in xecuti&e Order 'o. !# 7althoughhe )as re&ersed on this legal 6uestions 5y the xecuti&e Secretary8, the (resident>sdelegated authority could still not 5e extended to the 0R, )hich )as not adelegate of the legislature.

0t is remar9a5le that the respondents could seriously argue that a mereadministrati&e 5ody li9e the 0R can exercise the legislati&e po)er to grant taxexemptions. 0 am not a)are that any other such agency, including the ureau of 0nternal Re&enue and the ureau of Customs, has this authority. An administrati&e

5ody can apply tax exemptions under existing la) 5ut it cannot itself create such



exemptions. This is a prerogati&e of the Congress that cannot 5e usurped 5y or e&endelegated to a mere administrati&e 5ody. Cdpr

0n fact, the decrees clearly pro&ided that it )as the (resident andPor the Einister of inance )ho could restore the exemption, su5:ect only to the recommendation of the0R. The 0R )as not empo)ered to directly restore the exemption. And e&en if it5e accepted that the 0R merely recommended the exemption, )hich )asappro&ed 5y the inance Einister, there )ould still 5e the curious anomaly of Einister +irata upholding his &ery o)n act as chairman of the 0R. llcd

This Court called it a <tra&esty of :ustice< )hen in Vam5ales Chromite &s. Court of

Appeals, !- SCRA 2, the Secretary of Agriculture and 'atural Resources appro&eda decision earlier rendered 5y him )hen he )as the Director of Eines, and inAnBaldo &s. Cla&e, ! SCRA #"#, )here the respondent, as presidential executi&eassistant, a;rmed on appeal to EalacaWang his o)n decision as chairman of theCi&il Ser&ice Commission.

0t is important to note that )hen (.D. 'os. !# and !"" )ere issued 5y (residentEarcos, the rule under the !/# Constitution )as that <no la) granting a taxexemption shall 5e passed )ithout the concurrence of a ma:ority of all the mem5ersof the atasang (am5ansa.< 7Art. +000, Sec. /@-8. Ka)s are usually passed 5y only ama:ority of those present in the cham5er, there 5eing a 6uorum, 5ut not )here itgrants a tax exemption. This re6uires an a5solute ma:ority. Let, despite this stringentlimitation on the national legislature itself, such stricture does not inhi5it the(resident and the 0R in the exercise of their delegated po)er. 0t )ould seem that

the delegate has more po)er than the principal. Signi1cantly, this limitation ismaintained in the present Constitution under Article +0, Section 2% 7-8.

The ponencia holds that the rule of strict construction is not applica5le )here thegrantee is an agency of the go&ernment itself, li9e the (C in the case 5efore us. 0notice, ho)e&er, that the ultimate 5ene1ciaries of the expected tax credit )ill 5e theoil companies, )hich certainly are not part of the Repu5lic of the (hilippines. As thetax refunds )ill not 5e en:oyed 5y the (C itself, 0 see no reason )hy )e should 5eexceptionally lenient in applying the exception.

The tax credits in&ol&ed in this petition are tremendous 4 no less than (."% 5illion. This amount could go a long )ay in impro&ing the national economy and the )ell5eing of the ilipino people, )ho deser&e the continuing solicitude of thego&ernment, including this Court. 0 respectfully su5mit that it is to them that )e o)e

our foremost loyalty.

*utierreB, Jr., J., concurs.

SARE0'TO, J., dissenting3

0 )ould li9e to point out speci1cally t)o things in connection )ith the ma:ority>sdisposition as to3 78 inance 0ncenti&es Re&ie) oard 70R8 Resolutions 'os. $%"and %I and 728 the 'ational (o)er Corporation>s tax exemption &isa&is ourdecision in the case of (hilippine Acetylene Co., 0nc. &s. Commissioner of 0nternalRe&enue, and in the light of the pro&isions of its charter, Repu5lic Act 'o. #!",and the &arious amendments entered into it.

78

On pages 2$2# of the Decision, the ma:ority suggests that 0R Resolutions 'os.$%" and % had &alidly restored the 'ational (o)er Corporation>s tax exemptionpri&ileges, )hich (residential Decree 'o. !# had mean)hile suspended. 0 )ish tostress that in the case of 'ational (o)er Corporation &s. (ro&ince of Al5ay, 2 theCourt held that the 0R Resolutions 'os. $%" and % had the 5are force of recommendations and did not operate as a restoration, in the a5sence of anappro&al 5y the (resident 7in then (resident Earcos> exercise of legislati&e po)ers8,of tax exemptions. The Court noted that there is nothing in (residential Decree 'o.//, the 0R charter, conferring on it the authority to grant or restore exemptions,other than to ma9e recommendations on )hat exemptions to grant or restore. 0

6uote3xxx xxx xxx

0t is to 5e pointed out that under (residential Decree 'o. //, the po)er of the 0R)as merely to <recommend to the (resident of the (hilippines and for reasons of compati5ility )ith the declared economic policy, the )ithdra)al, modi1cation,re&ocation or suspension of the enforcea5ility of any of the a5o&ecited statutorysu5sidies or tax exemption grants, except those granted 5y the Constitution.< 0t hasno authority to impose taxes or re&o9e existing ones, )hich, after all, under theConstitution, only the legislature may accomplish . . . #

xxx xxx xxx

As the Court held there, it )as only on Earch $,!%/ that the restoration 5ecame

eHecti&e, not 5ecause Resolutions 'os. $%" and % decreed a restoration, 5ut5ecause of Resolution 'o. /%/ )hich, on the other hand, carried the appro&al of the O;ce of the (resident. - 70R Resolution 'o. /%/ made the 'ational (o)erCorporation>s exemption eHecti&e Earch $, !%/.8 Fence, the 'ational (o)erCorporation, so the Court held, )as lia5le for payment of real property taxes to the(ro&ince of Al5ay 5et)een June , !%-, the date (residential Decree 'o. !#7)ithdra)ing its tax exemptions8 too9 eHect, and Earch $, !%/.

As far therefore as the ma:ority in the present case rules that the 'ational (o)erCorporation is also entitled to a refund as a result of 0R Resolutions 'os. $" and%, 0 respectfully su5mit that a serious conGict has arisen.

=hile it is true that 0R Resolutions 'os. $%" and % )ere signed 5y theinance Einister Cesar +irata, " 0 su5mit nonetheless, as Al5ay in fact held, that the

signature of the Er. +irata is not enough to restore an exemption. The reason is thatEr. +irata signed them 70R Resolutions 'os. $%" and %8 in his capacity aschairman of the inance 0ncenti&es Re&ie) oard 70R8. 0 1nd this clear from the&ery Resolutions in 6uestion3

0SCAK 0'C'T0+S R+0= OARD

RSOKT0O' 'O. $%"

0T RSOK+D, AS 0T 0S FRL RSOK+D, That3

. Hecti&e June , !%-, the tax and duty exemption pri&ileges en:oyed 5ythe 'ational (o)er Corporation under C.A. 'o. 2$ as amended are restored up to

June #$, !%".

2. (ro&ided, That this restoration does not apply to the follo)ing3



a. importations of fuel oil 7crude e6ui&alent8 and coal as per 0R Resolution'o. %-I

5. commerciallyfunded importationsI and

c. interest income deri&ed from any in&estment source.

#. (ro&ided further, That in case of importations funded 5y international1nancing agreements, the '(C is here5y re6uired to furnish the 0R on a periodic5asis the particulars of items recei&ed or to 5e recei&ed through such arrangements,for purposes of tax and duty exemption pri&ileges.

7Sgd.8 AKRDO (0O D RODA, JR.

Acting Einister of inance

Acting Chairman, 0R

0SCAK 0'C'T0+S R+0= OARD

RSOKT0O' 'O. %

0T RSOK+D, AS 0T 0S FRL RSOK+D3 That3

. Hecti&e July , !%", the tax and duty exemption pri&ileges en:oyed 5y the'ational (o)er Corporation 7'(C8 under Common)ealth Act 'o. 2$, as amended,

are restoredI (ro&ided, That importations of fuel oil 7crude oil e6ui&alent8 and coal of the herein grantee shall 5e su5:ect to the 5asic and additional import dutiesI(ro&ided, further, That the follo)ing shall remain fully taxa5le3

a. Commerciallyfunded importationsI and

5. 0nterest income deri&ed 5y said grantee from 5an9 deposits and yield orany other monetary 5ene1ts from deposit su5stitutes, trust fund and other similararrangements.

2. The '(C as a go&ernment corporation is exempt from the real property taxon land and impro&ements o)ned 5y it pro&ided that the 5ene1cial use of theproperty is not transferred to another pursuant to the pro&isions of Sec. -$7a8 of the(eal (roperty Tax Code, as amended.

7Sgd.8 CSAR .A. +0RATA

Einister of inance

Chairman 4 0R

0 respectfully su5mit that to say that Er. +irata>s signature is su;cient 7please notethat Resolution 'o. $%" )as not e&en signed 5y Er. +irata, 5ut rather 5y Er.Alfredo (io de Roda, Jr.8 is in fact to confer on the oard actual <restoration< or e&enexemption po)ers, 5ecause in all cases, 0R Resolutions are signed 5y Er. +irata7or the acting chairman8 in his capacity as oard Chairman. 0 su5mit that )e can notconsider an 0R Resolution as an act of Er. +irata in his capacity as Einister of inance 7and therefore, as a grant or restoration of tax exemption8 although Er.+irata also happened to 5e concurrently, Einister of inance, 5ecause to do so )ould

5e to 5lur the distinction 5et)een the capacities in )hich he, Er. +irata, actually

acted. 0 su5mit that he, Er. +irata, need ha&e issued separate appro&als of theResolutions in 6uestion, in his capacity as inance Einister.

(arenthetically, on the issue of the constitutional &alidity of xecuti&e Order 'o. !#,insofar as it <delegates< the po)er to restore exemptions to the 0R, 0 hold that inthe 1rst place, xecuti&e Order 'o. !# ma9es no delegation at all. As the ma:oritypoints out, <@under Section 7f8 of xecuti&e Order 'o. !#, aforestated, such tax andduty exemptions extended 5y the 0R must 5e appro&ed 5y the (resident.< Fence, the 0R does not exercise any po)er 4 and as 0 had held, its po)ers aremerely recommendatory 4 and it is the (resident )ho in fact exercises it. 0t is truethat xecuti&e Order 'o. !# has set out certain standards 5y )hich the 0R, as are&ie)ing 5ody, may act, 5ut 0 do not 5elie&e that a genuine delegation 6uestion hasarisen 5ecause precisely, the acts of the oard are su5:ect to appro&al 5y the(resident, in the exercise of her legislati&e po)ers under the reedom Constitution. /

728

According to the Decision, the 'ational (o)er Corporation, under its charter, is alsoexempt from indirect taxes, and that there is nothing irregular a5out )hat isapparently standard operating procedure 5et)een the Corporation and the oil 1rmsin )hich the latter sell to the Corporation oil <net of tax< and that thereafter, theCorporation assigns to them its tax credit.

0 gather 1rst, and )ith all due respect, that there has 5een a misunderstandinga5out socalled indirect taxes and the theory of shifting taxes. 0n (hilippine

Acetylene Co., 0nc., supra, the Court intimated that there are no such things asindirect taxes for purposes of exemption, and that the 'ational (o)er Corporation>sexemption from taxes can not 5e claimed, as )ell, 5y a manufacturer 7)ho sells hisproducts to the Corporation8 on the theory that the taxes he )ill shift )ill 5e shiftedto a taxexempt entity. According to the Court, <the purchaser does not pay thetax . . . @he pays or may pay the seller more for the goods 5ecause of the seller>so5ligation, 5ut that is all and the amount added 5ecause of the tax is paid to get thegoods and for nothing else.< %

0t is true that a tax may 5e shifted, that is, to ena5le the payor to escape its eHects5y adding it to the price, there5y transferring the 5urden to the purchaser of )homthe incidence of the tax settles 7indirect tax8. 0 su5mit, ho)e&er, that it is only forpurposes of escape from taxation. As Acetylene has clari1ed, the tax )hich themanufacturer is lia5le to pay directly under a statute is still a personal tax and in

<passing the tax on< to the purchaser, he does not really ma9e the latter pay thetax, and )hat the latter pays actually is :ust the price. Thus, for purposes of exemption, and so Acetylene tells us, the manufacturer can not claim one 5ecausethe purchaser happens to 5e exempted from taxes. Eutatis mutandis, and so 0respectfully su5mit, the purchaser can not 5e allo)ed to accept the goods <net of tax< 5ecause it ne&er paid for the tax in the 1rst place, and )as ne&er lia5letherefor, in the second place. Ki5Kex

According to the ma:ority, (hilippine Acetylene has 5een <a5rogated,< and thema:ority points to the &arious amendments to the charter of the 'ational (o)erCorporation as authority for its &ie).

irst, there is nothing in those amendments that )ould remotely point to thisconclusion.



Second, Acetylene>s pronouncement is founded on the &ery science of taxation 4that indirect taxes are no taxes for purposes of exemption, and that conse6uently,one )ho did not pay taxes can not claim an exemption although the price he paid forthe goods included taxes. To ena5le him to claim an exemption, as the ma:ority)ould no) ena5le him 7Acetylene ha&ing 5een <a5rogated<8, is, 0 su5mit, to defeatthe &ery la)s of science. Ki5Kex

The theory of <indirect taxes< and that no exemption is possi5le therefrom, so 0reiterate, are )ellsettled concepts of taxation, as the la) of supply and demand isto the la) of economics. A (resident is said 7unfairly8 to ha&e attempted it, 5ut onecan not repeal the la) on supply and demand.

0 do not 1nd the 'ational (o)er Corporation>s alleged exemption from indirect taxe&ident, as the ma:ority 1nds it e&ident, from the Corporation>s charter, Repu5lic Act'o. #!", as amended 5y (residential Decrees 'os. #%$ and !#%. 0t is true that sinceCommon)ealth Act 'o. 2$ 7the Corporation>s original charter, )hich Repu5lic Act'o. #!" repealed8, the Corporation has en:oyed a <preferential tax treatment,< 0seriously dou5t, ho)e&er, )hether or not that preference em5races <indirect taxes<as )ell 4 )hich, as 0 said, are no taxes for purposes of claims for exemptions 5y the<indirect payor.< And al5eit (residential Decree 'o. !#% refers to <all forms of taxes,<0 can not ta9e that to include, as a matter of logic, <indirect taxes,< and as 0discussed a5o&e, that scenario is not possi5le.

0 6uite agree that the legislati&e intent, 5ased on a perusal of Repu5lic Act 'o. #!"and su5se6uent amendatory statutes )as to gi&e the 'ational (o)er Corporation a

5road tax preference on account of the &ital functions it performs, indeed, <to ena5lethe Corporation to pay the inde5tedness and o5ligation and in furtherance andeHecti&e implementation of the policy initiated< 5y its charter. 0 su5mit, ho)e&er,that that alone can not entitle the Corporation to claim an exemption for indirecttaxes. 0 also 5elie&e that its existing exemption from direct taxes is su;cient toser&e the legislati&e purpose. KK:ur

The fact that the 'ational (o)er Corporation has 5een tas9ed )ith an enormousunderta9ing <to impro&e,< as the ma:ority puts it, <the 6uality of life of the people<pursuant to constitutional mandates is no reason, 0 5elie&e, to include indirect taxes)ithin the co&erage of its preferential tax treatment. After all, it is exempt fromdirect taxes, and the fact that it )ill 5e made to shoulder indirect taxes 7)hich areno taxes8 )ill not defeat its exemption or frustrate the intent of 5oth legislature andConstitution.

0 do not thin9 that the ma:ority can point to the &arious executi&e constructions asauthorities for its o)n construction. irst and foremost, )ith respect to thenCommissioner Ru5en Ancheta>s ruling of Eay %, !%" cited on pages #2## of theDecision, it is nota5le that in his 0R Ruling 'o. %#%", dated Octo5er 22, !%", hein fact re&ersed himself, 0 6uote3

0n reply please 5e informed that after a restudy of Section #, R.A. #!" asamended 5y (.D. 'o. !#%, this O;ce is of the opinion, and so holds, that the scopeof the tax exemption pri&ilege en:oyed 5y '(C under said section co&ers only taxesfor )hich it is directly lia5le and not on taxes )hich are merely shifted to it. 7(hil.Acetylene Co. &s. Comm. of 0nternal Re&enue, 2$ SCRA $", !/8. Sincecontractor>s tax is directly paya5le 5y the contractor, not 5y '(C, your re6uest forexemption, 5ased on the stipulation in the aforesaid contract that '(C shall assume

payment of your contractor>s tax lia5ility, cannot 5e granted for lac9 of legal 5asis. !

0n yet another ruling, then Commissioner ien&enido Tan li9e)ise declared, inconnection )ith an apparent claim for refund 5y the (hilippine Airlines, that <(AK>stax exemption is limited to taxes for )hich (AK is directly lia5le, and that thepayment of speci1c and ad &alorem taxes on petroleum products is a direct lia5ilityof the manufacturer or producer thereof . . .< $

Again, under 0R Ruling 'o. "2%, the ureau of 0nternal Re&enue reiterated, as tothe 'ational (o)er Corporation>s claim for a refund, 0 6uote3

. . . this O;ce has maintained the stand that your tax exemption pri&ileges co&ersonly taxes for )hich you are directly lia5le.

(er 0R Ruling 'o. /$$-#, dated August 2/, !/$, the ureau li9e)ise held that theterm <all forms of taxes< co&ers only direct taxes. 2

0n his letter addressed to former 0R Commissioner Tan, Atty. Reynoso loreBa, 0RAssistant Commissioner for Kegal, opposed Caltex (hilippines> claim for a ("%millionrefund, and although the Commissioner at that time hedged, he )as later persuaded5y Special Assistant A5raham De la +iWa, and in fact, instructed Atty. De la +iWa to<prepare @the corresponding notice to '(C and Caltex< # to inform them that theirclaim has 5een denied. 7Although strangely, he changed his mind later.8

Fence, 0 do not thin9 that )e can :udiciously rely on executi&e construction 5ecauseexecuti&e construction has 5een at 5est, erratic, and at )orst, conGicting.

0 do not 1nd that ma:ority>s historical construction a relia5le yardstic9 in this case,for if the historical de&elopment of the la) )ere any indication, the legislati&e intentis, on the contrary, to exclude indirect taxes from the co&erage of the 'ational (o)erCorporation>s tax exemption. Thus, under Common)ealth Act 'o. 2$, theCorporation )as made exempt from the payment of all taxes in connection )ith theissuance of 5onds. nder Repu5lic Act 'o. #"%, it )as made exempt from thepayment of all taxes, duties, fees, imposts, and charges of the national and localgo&ernments. Ki5Kex

nder Repu5lic Act 'o. #!", the 'ational (o)er Corporation )as further declaredexempt3

7e8 rom all taxes, duties, fees, imposts, and all other charges imposed 5y theRepu5lic of the (hilippines, its pro&inces, cities, municipalities and other go&ernmentagencies and instrumentalities, on all petroleum products used 5y the Corporation . .

.

y &irtue of (residential Decree 'o. #%$, it )as made exempt3

7d8 from all taxes, duties, fees, imposts, and all other charges imposed directlyor indirectly 5y the Repu5lic of the (hilippines, its pro&inces, cities, municipalitiesand other go&ernment agencies and instrumentalities, on all petroleum productsused 5y the corporation in the generation, transmission, utiliBation and sale of electric po)er.

y &irtue ho)e&er of (residential Decree 'o. !#%, reference to <indirect taxes< )asomitted thus3



. . . To ena5le the Corporation to pay its inde5tedness and o5ligations and infurtherance and eHecti&e implementation of the policy enunciated in Section One of this Act, the Corporation, including its su5sidiaries, is here5y declared exempt fromthe payment of all forms of taxes, duties, fees, imposts as )ell as costs and ser&icefees including 1ling fees, appeal 5onds, supersedeas 5onds, in any court oradministrati&e proceedings.

The deletion of <indirect taxes< in the Decree is, so 0 hold, signi1cant, 5ecause if theintent of the la) )ere truly to exempt the 'ational (o)er Corporation from socalledindirect taxes as )ell, the la) )ould ha&e said so speci1cally, as it said sospeci1cally in (residential Decree 'o. #%$.

0 li9e)ise do not thin9 that the reference to the )hereas clauses of (residentialDecree 'o. !#% is )arranted, in particular, the follo)ing )hereas clause3

=FRAS, in the application of the tax exemption pro&isions of the Re&ised Charter,the nonpro1t character of '(C has not 5een fully utiliBed 5ecause of the restricti&einterpretations of the taxing agencies of the go&ernment on said pro&isionsI

0 am not certain )hether it can 5e 5asis for a <li5eral< construction. 0 am moreinclined to 5elie&e that the term <restricti&e interpretations< refers to 0R rulingscon1ning the exemption to the Corporation alone 75ut not its su5sidiaries8, and not,rather, to the scope of its exemption. 0ndeed, as (residential Decree 'o. !#%speci1cally declares, <the Corporation, including its su5sidiaries, is here5y declaredexempt . . .< -

The ma:ority expresses the apprehension that if the 'ational (o)er Corporation)ere to 5e made to assume <indirect taxes,< the latter )ill 5e forced to pass them onto the consuming pu5lic.

irst, and as Acetylene held, )e do not e&en 9no) if the payor )ill in fact <pass themon.< <A decision to a5sor5 the 5urden of the tax is largely a matter of economics.<" urthermore3

0n the long run a sales tax is pro5a5ly shifted to the consumer, 5ut during the period)hen supply is 5eing ad:usted to changes in demand it must 5e in part a5sor5ed. 0npractice the 5usinessman )ill treat the le&y as an added cost of operation anddistri5ute it o&er his sales as he )ould any other cost, increasing 5y more than theamount of the tax prices of goods demand or )hich )ill 5e least aHected andlea&ing other prices unchanged. -/ Far&. Kd. Re&. %$, %! 7!#-8.

0t therefore appears to me that any tal9 of the pu5lic ultimately a5sor5ing the tax ispure speculation.

Second, it has typically 5een the 5ogeyman that 5usiness, )ith due respect, hasin&o9ed to a&oid the payment of tax. And to 5e sure, the populist allure of thatargument has appealed to many, yet it has pro5a5ly also o5scured )hat is asfundamental as protecting consumers 4 preser&ing pu5lic re&enue, the &erylife5lood of the nation. 0 am afraid that this is not healthy policy, and )hat occurs tome 4 and )hat indeed lea&es me &ery uncomforta5le 4 is that 5y the stro9e of thepen, )e should ha&e in fact gi&en a)ay (#,/"$,2-,#!.$$ 7so it is said8 of legitimate go&ernment money.

According moreo&er to Committee Report 'o. -/- of the Senate, <'(C itself says

that it does not use taxes to increase prices of electricity to consumers 5ecause the

cost of electric generation and sale already ta9es into account the tax component.</

0 can not accept 1nally, )hat to me is an una5ashed eHort 5y the oil 1rms to e&adetaxes, the arrangement 7as 0 gather from the Decision8 5et)een the 'ational (o)erCorporation and the oil companies in )hich the former assigns its tax credit to thelatter. 0 also presume that this is the natural conse6uence of the <understanding,< as0 discussed a5o&e, to purchase oil <net of tax< 5et)een 'A(OCOR and the oil 1rms,5ecause logically, the latter )ill loo9 for other sources from )hich to recoup thetaxes they had failed to shift and reco&er their losses as a result. According to theDecision, no tax is left unpaid 5ecause they ha&e 5een prepaid 5efore the oil isdeli&ered to the 'ational (o)er Corporation. ut )hate&er taxes are paid are in fact)iped out 5ecause the su5se6uent credit transfer )ill ena5le the oil companies toreco&er the taxes prepaid. prKK

According to the ma:ority, <@this is not a case of tax e&asion of the oil companies5ut a tax relief for the '(C.< % The pro5lem, precisely, is that )hile it is '(C )hichis entitled to <tax relief,< the arrangement 5et)een '(C and the oil companies hasena5led instead the latter to en:oy relief 4 )hen relief is due to '(C alone. Thepoint still remains that no tax money actually reaches our coHers 5ecause as 0 said,that arrangement ena5les them to )ipe it out. 0f the '(C )ere the direct importer, 0)ould then ha&e no reason to o5:ect, after all, the '(C is exempt from directtaxation and secondly, the money it is paying to 1nance its importations 5elongs tothe go&ernment. The la), ho)e&er, ga&e the exemption to '(C, not the oilcompanies. Cdpr

According to the Decision3 <The amount of re&enue recei&ed or expected to 5erecei&ed 5y this tax exemption is, ho)e&er, not going to any of the oilcompanies . . .< ! and that <@there )ould 5e no loss to the go&ernment.< 2$

=ith due respect to the ma:ority, it is erroneous, if not misleading, to say that nomoney is going to the oil companies and that the go&ernment is not losing anything.De1nitely, the taxcredit assignment arrangement 5et)een the '(C and the oil 1rmsena5les the latter to reco&er re&enue they ha&e paid. And de1nitely, that means lossfor the go&ernment.

The ma:ority is concerned )ith the high cost of electricity. The increasing cost of electricity is ho)e&er due to myriad factors, foremost of )hich, is the de&aluation of the peso 2 and as recent e&ents ha&e suggested, <miscalculations< at the top

le&els of '(C. 0 can not ho)e&er attri5ute it, as the ma:ority in all earnest attri5utesit, to the fact, farfetched as it is, that the '(C has not 5een allo)ed to en:oyexemption from indirect taxes. prKK

Tax exemptions furthermore are a matter of personal pri&ilege of the grantee. 0t has5een held that as such, they can not 5e assigned, unless the statute granting thempermits an assignment. 22

=hile <shifting the 5urden of tax< is a permissi5le method of a&oiding a tax, e&adingit is a totally diHerent matter. And )hile 0 agree )ith the 'ational (o)er Corporationshould 5e gi&en the )idest 1nancial assistance possi5le, assistance should not 5e anexcuse for plain tax e&asion, if not tax fraud, 5y ig usiness, in particular, ig Oil.

7#8 (ostscripts



=ith all due respect, 0 do not thin9 that the ma:ority has appreciated enough theserious implications of its decision 4 to the contrary, in particular, its shrin9ingcoHers. 0 do not thin9 that )e are, after all, tal9ing here of <simple< 5illions, 5ut infact, 5illions upon 5illions in lost re&enue looming large.

0 am also afraid that the ma:ority is not 6uite a)are that it is setting a precedent notonly for the oil companies 5ut in fact, for the 'ational (o)er Corporation>s suppliers,importers, and contractors. Although 0 am not, as of this )riting, a)are of their exactnum5er or the precise amount the 'ational (o)er Corporation has spent in paymentof supplies and e6uipment, 0 can imagine that the Corporation>s assets consisting of those supplies and e6uipment, machines and machinery, are )orth no fe)er than5illions. Cdpr

=ith this precedent, there is no stopping indeed the 'A(OCOR>s suppliers, fromma9ers of storage tan9s, steel to)ers, ca5les and ca5le poles, to 5uilders of di9es, tolayers of pipelines, and pipes, from claiming the same pri&ilege.

There is no stopping the '(C>s contractors, from suppliers of cement for plant1xtures and lum5er for edi1ces, to the &ery engineers and technicians )ho designedthem, from demanding e6ual rights.

There )ill 5e no stopping the Corporation>s transporters, from container &an and rigo)ners to suppliers of ser&ice &ehicles of '(C executi&es, from demanding thepri&ilege.

=hat is to stop, indeed, caterers of food ser&ed in 5oard meetings or in 'A(OCORcafeterias from as9ing for exemption, since food 5illed includes sales taxes shifted toa taxexempt entity and, follo)ing the theory of the ma:ority, taxes that may 5erefunded?

=hat is, indeed, to stop all imagined claimants from demanding all imagined claims,since as )e are a)are, the rule of taxation 4 and conse6uently, tax exemption 4 isuniform and e6uita5le? 2#

Of course, )e ha&e discussed 'A(OCOR aloneI )e ha&e not touched other taxexempt entities, say, the Earindu6ue Eining Corporation and 'onoc EiningCorporation. (er existing records and per relia5le information, Caltex (hilippines,5et)een !/! and !%, successfully reco&ered the total sum of (-!,%#",/!.$$. 0n!%", Caltex )as said to ha&e 5een refunded the amount of (-,2/,-2#.$$ arisingfrom the same tax arrangement )ith the 'onoc Eining Corporation. cdrep

Again, )hat is stopping 4 5y &irtue of this decision 4 not only the oil 1rms 5ut alsoEarindu6ue>s and 'onoc>s suppliers, importers, and ridiculously, caterers, fromclaiming a future refund?

The Decision, to 5e sure, attempts to allay these apprehensions and <dispel@s@them 5y the fact that . . . the decision particularly treats of only the exemption of the '(C from all taxes, duties, fees, imposts and all other charges imposed 5y thego&ernment on the petroleum products it need or uses for its operation . . .< 2-irstly, under (residential Decree 'o. !#%, the supposed tax exemption of the'ational (o)er Corporation co&ers <all forms of taxes.< 2" 0f therefore <all forms of

taxes co&ers as )ell, indirect taxes 5ecause (residential Decree 'o. #%$ supposedlyextended the Corporation>s exemption to indirect taxes 7and the ma:ority <deems(residential Decree 'o. #%$ to ha&e 5een carried o&er to (residential Decree 'o.!#%<8, then the conclusion seems inescapa5le 4 follo)ing the logic of the ma:ority4 that the Corporation is exempt from all indirect taxes, on petroleum and any andall other products and ser&ices. cdrep

The fact of the matter, second of all, is that the Decision is premised on the allegedexemption of the 'ational (o)er Corporation from all forms of taxes, meaning, directand indirect taxes. 0t is a premise that is allegedly supported 5y statutory history,and the legislature>s alleged intent to grant the Corporation a)esome exemptions. 0f that )ere the case, the Corporation must logically 5e exempt from all 9inds of taxespaya5le. Kogically, the ma:ority can not limit the s)eep of its pronouncement 5yexempting the 'ational (o)er Corporation from <indirect taxes on petroleum< alone.=hat is sauce for the goose 7taxes on petroleum8 is also sauce for the gander 7allother taxes8.

0 still )ould ha&e reason for my fears.

0 can not, in all candor, accept the ma:ority>s eHorts, and going 5ac9 to theCorporation>s charters, to <carry o&er,< in particular, Section #7d8 of (residentialDecree 'o. #%$, to (residential Decree 'o. !#%. irst of all, if (residential Decree 'o.!#% meant to a5sor5 (residential Decree 'o. #%$ it )ould ha&e said so speci1cally,or at the &ery least, left it alone. O5&iously, (residential Decree 'o. !#% meantother)ise, to 5egin )ith, 5ecause it is precisely an amendatory statute. Secondly, a

<carryo&er< )ould ha&e allo)ed this Court to ma9e la), so only it can 1t in itstheories. cdphil

The country has gone to lengths fashioning an ela5orate tax system and an e;cienttax collection machinery. (lanners> eHorts ha&e seen &arious shifts in the taxingsystem, from speci1c, to ad &alorem, to &alueadded taxation, purportedly tomaximiBe collection. or this year, the ureau of 0nternal Re&enue has a collectiontarget of (#$ 5illion, and signi1cantly, it has 5een unrelenting in its tax and taxconsciousness dri&e. 0 am not prepared to cite num5ers 5ut 0 1gure that the money it)ill lose 5y &irtue of this Decision is a meaningful chun9 oH its target, and asigni1cant set5ac9 to the go&ernment>s programs. KexKi5

0 am afraid that 5y this Decision, the ma:ority has ignored the forest 7the )elfare of the entire nation8 in fa&or of a tree 7the )elfare of a go&ernment corporation8. The

issue, in my opinion, is not the &ia5ility of the 'ational (o)er Corporation 4 as if thefate of the nation depended alone on it 4 5ut the &ery sur&i&al of the repu5lic. 0 amnot of course to 5e mista9en as 5eing less concerned )ith 'A(OCOR>s 1scal chart.

The picture, as 0 see it ho)e&er, is that )e are in fact assisting the oil companies,out of that alleged concern, in e&ading taxes at the expense, needless to state, of our coHers. 0 do not thin9 that that is a 6uestion of legal hermeneutics, 5ut rather, of plain lo&e of country.

*utierreB, Jr., *riWoA6uino and Da&ide, Jr., JJ., concur.

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