763 PHIL. 312
WHEREFORE, in view of the foregoing premises, this Court hereby renders judgment as follows:Unsatisfied, respondent filed a "Motion for Partial Reconsideration."ACCORDINGLY, THE PETITIONER, PILIPINAS SHELL PETROLEUM CORPORATION (PSPC), IS HEREBY ORDERED TO PAY THE AMOUNT OF PHP405,030,003.54 AS TAX ON ITS BUSINESS OF ENGAGING IN THE MANUFACTURE AND DISTRIBUTION OF PETROLEUM PRODUCTS, WHILE THE ASSESSMENT OF PHP4,299,851.00 AS MAYOR'S PERMIT FEE IS HEREBY ORDERED REVOKED WITHOUT PREJUDICE TO ITS MODIFICATION BY THE RESPONDENTS, BATANGAS CITY, ET AL.
- The taxes on the privilege of engaging in the business of manufacturing, distribution or dealing in petroleum products in the amount of P92,373,750.50 and P312,656,253.04, respectively, imposed by Batangas City on Pilipinas Shell, is VALID.
- Declaring the Mayor's Permit Fee in the amount of P4,299,851.00 based on gross receipts/sales as grossly excessive and unreasonable considering the aforesaid business taxes.
WHEREFORE, premises considered, the judgment/order of the RTC Branch II of Batangas City is hereby MODIFIED. As to the business taxes on the manufacture and distribution of petroleum products, We find the [respondent] not liable for the same. As to the Mayor's permit, We find that it is excessive. Accordingly, the [petitioner] is hereby (a) declared legally proscribed from imposing business taxes on the manufacture and distribution of petroleum products and (b) to refund in the form of tax credit the excessive mayor's permit in the amount of THREE MILLION FIVE HUDNRED TWENTY-FIVE THOUSAND TEN PESOS and FIFTY CENTAVOS (P3,525,010.50)On July 13, 2007, respondent filed a "Motion for Clarification" on the exact amount to be refunded by petitioners as regards the Mayor's Permit Fees. After a perusal of the "Motion for Clarification," the CTA Second Division found the motion partly meritorious. Thus:
Indeed, there is a discrepancy in the amount to be refunded and to clarify, the amount should be P3,870,860.00 as written in the body of the decisions as follows:Petitioners filed a motion for reconsideration against said decision but the same was denied by the CTA Second Division in a Resolution dated November 21, 2007.Since [petitioners] failed to modify the computation of the mayor's permit fee and based on justice and equity, [respondent] should be refunded with the mayor's permit fees ordered revoked by the court a quo.To conform to this aforequoted pronouncement, the dispositive portion of the assailed decision should be amended so that the exact amount of the Mayor's Permit Fees to be refunded be changed from P3,525,010.50 to P3,870.860.00.
The details of the additional amount of P4,299,851.00 mayor's permit fees are as follows:The amount to be refunded is not the full amount of P4,299,851.00 but the excessive mayor's permit for manufacturing and distributing in the amount of P704,305.00 and P3,166,555.00, respectively, or in the total amount of P3,870,860.00.
Manufacturer Distributor Mayor's Permit Fee P704,305.00 P3,166,555.00 License Fee 70,535.50 Prof. Fee Res/Bus 25,000.00 Fire Insp. Fee 1,000.00 Occ./Prof.Tax San Permit & San Insp. Fee 12,000.00 Fire Code Fee 320,455.00 Total Amount P774,840.50 P3,525,010.50
Section 2, Rule 36 of the Rules of Court reads as follows:SEC. 2. Entry of Judgments and final orders.- If no appeal or motion for new trial or reconsideration is filed within the time provided in these Rules, the judgment or final order shall forthwith be entered by the clerk in the book of entries of judgments. The date of finality of the judgment or final order shall be deemed to be the date of its entry.In this case, PSPC received the Decision on June 28, 2007 and it filed its motion for clarification (treated as a motion for reconsideration) on July 13, 2007 which is within the period allowed by law. In effect, our Decision has not yet become final and executory. Hence, our Decision may be amended.
Moreover, pursuant to Section 5(g), Rule 135 of the Revised Rules of Court that every court shall have the power to amend or control its process and orders so as to make them conformable to law and justice, the Second Division of this Court resolves to amend its Decision dated June 21, 2007 by making the necessary corrections.
WHEREFORE, in view of the foregoing, [respondent] 's Motion for Clarification is partly GRANTED. Accordingly, the dispositive portion of this Court's Decision dated June 21, 2007 is hereby AMENDED as follows:WHEREFORE, premises considered, the judgment/order of the RTC Branch II of Batangas City is hereby MODIFIED. As to the business taxes on the manufacture and distribution of petroleum products, We find the [respondent] not liable for the same. As to the mayor's permit, We find that it is excessive. Accordingly, the [petitioner] is hereby (a) declared legally proscribed from imposing business taxes on the manufacture and distribution of petroleum products and (b) to refund in the form of tax credit the excessive mayor's permit in the amount of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND EIGHT HUDNRED SIXTY PESOS (P3,870,860.00)SO ORDERED.
WHEREFORE, the instant Petition for Review is hereby DENIED DUE COURSE and DISMISSED for lack of merit. Accordingly, the July 31, 2007 Amended Decision and November 21, 2007 Resolution of the CTA Second Division in CTA AC Case No. 10 entitled, "PILIPINAS SFIELL PETROLEUM CORPORATION, petitioner vs. BATANGAS CITY, BENJAMIN E. PARGAS in his capacity as CITY TREASURER and TEODULFO A. DEGUITO in his capacity as CITY LEGAL OFFICER OF BATANGAS CITY, [petitioners]," are hereby AFFIRMED in toto.Unfazed, petitioners filed a motion for reconsideration.
In essence, the issue is whether a LGU is empowered under the LGC to impose business taxes on persons or entities engaged in the business of manufacturing and distribution of petroleum products.
- THE COURT OF TAX APPEALS EN BANC ERRED IN NOT RULING THAT THE POWER OF LOCAL GOVERNMENT UNITS TO TAX BUSINESS IS SOLELY GOVERNED BY SEC. 143 AND 143(h) OF THE LOCAL GOVENRMENT CODE OF 1991.
- THE COURT OF TAX APPEALS EN BANC ERRED IN NOT RULING THAT THE WORD "TAXES" IN SEC. 133(h) DOES NOT INCLUDE BUSINESS TAXES.
- THE COURT OF TAX APPEALS EN BANC ERRED IN DISREGARDING THE DISTINCTION BETWEEN TAXES ON ARTICLES AND TAXES ON BUSINESS.
- THE COURT OF TAX APPEALS EN BANC INCORRECTLY CONSTRUED A CLEAR PROVISION OF LAW, SPECIFICALLY SECTION 133(h) OF THE LOCAL GOVERNMENT CODE OF 1991, AS AN EXPRESS LIMITATION ON THE POWER OF LOCAL GOVENRMENT UNITS TO IMPOSE TAXES ON THE BUSINESS OF MANUFACTURE AND DISTRIBUTION OF PETROLEUM PRODUCTS."
SECTION 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.In the consolidated cases of City of Manila, et al. v. Hon. Colet and Malaysian Airline system; Maersk-Filipinas, Inc., et al. v. City of Manila, et al,; Eastern Shipping Lines, Inc. v. City Council of Manila, et al; William Lines, Inc., et al. v. Regional Trial Court of Manila, et al.; PNOC Shipping and Transport Corporation v. Hon. Nabong, et al.; Maersk-Filipinas, Inc., et al. v. City of Manila, et al, and with Intervenors William Lines, Inc., et al; Cosco Container Lines and HEUNG-A Shipping Co., Ltd., et al. v. City of Manila; Sulpicio Lines, Inc. v. Regional Trial Court of Manila, et al; Association of International Shipping Lines, Inc. v. City of Manila, et al; Dongnama Shipping Co., Ltd., et al. v. Court of Appeals, et al., this Court expounded that the LGUs' power to tax is subject to the limitations set forth under Section 133 of the LGC. Thus:
It is already well-settled that although the power to tax is inherent in the State, the same is not true for the LGUs to whom the power must be delegated by Congress and must be exercised within the guidelines and limitations that Congress may provide. The Court expounded in Pelizloy Realty Corporation v. The Province of Benguet that:Among the common limitations on the taxing powers of LGUs under Section 133 of the LGC is paragraph (h) which states:The power to tax "is an attribute of sovereignty," and as such, inheres in the State. Such, however, is not true for provinces, cities, municipalities and barangays as they are not the sovereign; rather, there are mere "territorial and political subdivisions of the Republic of the Philippines."The rule governing the taxing power of provinces, cities, municipalities and barangays is summarized in Icard v. City Council of Baguio:It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer that power or the municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be resolved against the municipality. Inferences, implication, deductions - all these- have no place in the interpretation of the taxing power of a municipal corporation.Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either by the Constitution or by statute. Section 5, Article X of the 1987 Constitution is clear on this point:
x x x x
Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges." Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may provide."
In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise known as the local Government Code of 1991. Book II of the LGC governs local taxation and fiscal matters.
Relevant provisions of Book II of the LGC establish the parameters of the taxing powers of LGUs found below.
First, Section 130 provides for the following fundamental principles governing the taxing powers of LGUs:
Second, Section 133 provides for the common limitations on the taxing powers of LGUs.
- Taxation shall be uniform in each LGU.
- Taxes, fees, charges and other impositions shall:
- be equitable and based as far as practicable on the taxpayer's ability to pay;
- be levied and collected only for public purposes;
- not be unjust, excessive, oppressive orconfiscatory;
- not be contrary to law, public policy, national economic policy, or in the restraint of trade.
- The collection of local taxes, fees, charges and other impositions shall in no case be left to any private person.
- The revenue collected pursuant to the provisions of the LGC shall inure solely to the benefit of, and be subject to the disposition by, the LGU levying the tax, fee, charge or other imposition unless otherwise specifically provided by the LGC.
- Each LGU shall, as far as practicable, evolve a progressive system of taxation.
SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed by LGUs: (1) excise taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or charges on petroleum products.X X X X
(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products.;
ARTICLE 232. Tax on Business. - The Municipality may impose taxes on the following businesses:Article 232 defines with more particularity the capacity of a municipality to impose taxes on businesses. However, it admits of certain exceptions, specifically, that businesses engaged in the production, manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products, shall not be subject to any local tax imposed by Article 232.
x x x x
(h) On any business not otherwise specified in the preceding paragraphs which the sanggunian concerned may deem proper to tax provided that that on any business subject to the excise tax. VAT or percentage tax under the NIRC, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year and provided further, that in line with existing national policy, any business engaged in the production, manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products shall not be subject to any local tax imposed in this Article.
|(a)||On manufactures, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, x x x.|
On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature xxx. (c) On exporters, and on manufactures, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding 'A of the rates prescribed under subsections (a), (b) and
of this Section:
x x x x
On retailers, with gross sales or receipts rate of tax for the preceding calendar year of x x x.
x x x x
On contractors and other independent contractors xxx.
x x x x
On banks and other financial institutions, at a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the preceding calendar year derived from interest, commissions and discounts from lending activities, income from financial leasing, dividends, rentals on property and profit from exchange or sale of property, insurance premium.
x x x x
On peddlers engaged in the sale of any merchandise or article of commerce, at a rate not exceeding Fifty pesos (P50.00) per peddler annually.
On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may deem proper to tax: provided that on any business subject to excise, value-added or percentage tax under the National Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year.