Republic of the Philippines SUPREME COURT Manila THIRD DIVISION Gentlemen:

Attention: Mr. James Chua President

G.R. No. 107135 February 23, 1999 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE COURT OF APPEALS, CENTRAL VEGETABLE MANUFACTURING CO., INC., and THE COURT OF TAX APPEALS, respondents.

We have received your letter of September 28,1988, relative to our assessment against your company in the amount of P1,575,514.75, as deficiency miller's tax for the year 1986. Sec. 188 of the Tax Code provides that sales, miller's or excise taxes paid on raw materials or supplies used in the milling process shall not be allowed against the miller's tax due. You contend that since packaging materials are not used in the milling process then, the sales taxes paid thereon should be allowed as a credit against the miller's tax due because they do not fall within the scope of the prohibition. It is our position, however, that since the law specifically does not allow taxes paid on the raw materials or supplies used in the milling process as a credit against the miller's tax due, with more reasons should the sales taxes paid on materials not used in the milling process be allowed as a credit against the miller's tax due. There is no provision of law which allows such a credit-to-be made. In view of the above, we are reiterating the assessment referred to above. We request that you make payment immediately so that this case may be considered closed and terminated. Very truly yours, (SGD) EUFRACIO D. SANTOS Deputy Commissioner (CA Decision, pp. 31-33 Rollo) Dissatisfied with the adverse action taken by the BIR, CENVOCO filed a petition for review with the Court of Tax Appeals, which came out with a decision, dated December 3, 1990, in favor of CENVOCO, disposing, thus: WHEREFORE, in view of the foregoing, petitioner Central Vegetable Oil Manufacturing Co., Inc., is not liable for deficiency miller's tax for the year 1986 in the amount of P1,575,514.70. No pronouncement as to costs. SO ORDERED. (Rollo, p. 53) Appealed to the Court of Appeals, the said decision was affirmed in toto. (Rollo, p. 38) The Court of Appeals adopted the reasons cited and ratiocination by the Court of Tax Appeals for allowing the sales tax paid by CENVOCO on the containers and packaging materials of its milled products to be credited against the miller's tax due thereon, viz

PURISIMA, J.: Before the Court is a Petition for Review on Certiorari from the judgment of the Court of Appeals affirming in toto the decision of the Court of Tax Appeals which required the Commissioner of Internal Revenue to credit the sales taxes paid by Central Vegetable Oil Manufacturing Co., Inc. (CENVOCO) on containers and packaging materials of its milled products, against the deficiency miller's tax due thereon for the year 1986. As culled in the decision of the Court of Tax Appeals, the undisputed facts are, as follows: Petitioner (private respondent CENVOCO herein) is a manufacturer of edible and coconut/coprameal cake and such other coconut related oil subject to the miller's tax of 3%. Petitioner also manufactures lard, detergent and laundry soap subject to the sales tax of 10%. In 1986, petitioner purchased a specified number of containers and packaging materials for its edible oil from its suppliers and paid the sales tax due thereon. After an investigation conducted by respondent's Revenue Examiner, Assessment Notice No. FAS-B-86-88-001661-001664 dated April 22, 1988 was issued against petitioner for deficiency miller's tax in the total amount of P1,575,514.70 . . . . On June 29, 1988, petitioner filed with respondent a letter dated June 27, 1988 requesting for reconsideration of the above deficiency miller's tax assessments, contending that the final provision of Section 168 of the Tax Code does not a apply to sales tax paid on containers and packaging materials, hence, the amount paid therefor should have been credited against the miller's tax assessed against it. Again, thru letter dated September 28, 1988, petitioner reiterated its request for reconsideration. On November 17, 1988, respondent wrote CENVOCO, the full text of which letter reads: November 17, 1988 Central Vegetable Oil Manufacturing Co. Inc. P.O. Box 2816 Manila

The main issuein this case is whether or not respondent CENVOCO is liable for deficiency miller's tax for the year 1986 in the amount of P1,575,514.70. This in turn hinges on whether or not containers and packaging materials are raw materials used in the milling process within the contemplation of the final proviso of Section 168 of the National Internal Revenue Code, which reads: Provided, finally, that credit for any sales, miller's or excise taxes paid on raw materials or supplies used in the milling process shall not be allowed against the miller's tax due, except in the case of a proprietor or operator of a refined sugar factory as provided hereunder. xxx xxx xxx . . . We agree with respondent Court that containers and packages cannot be considered "raw materials" utilized in the milling process. In arriving at the conclusion, respondent Court quoted with approval the reasons cited by CENVOCO, as follows: FIRST; The raw materials used by Cenvoco in manufacturing edible oil are copra and/or coconut oil. In other words, the term "used" in the final proviso of Section 168 of the NIRC refers or is strictly confined to "raw materials" or supplies fed, supplied or put into the apparatus, equipment, machinery or its adjuncts that cause or execute the milling process. On the other hand, the containers, such as tin cans, and/or packages are not used or fed into the milling machinery nor were ever intended for conversion to form part of the finished product, i.e., refined coconut/edible oil. Consequently, it would be absurd to say that said containers and packages are "used in the milling process", for the process. involves "grinding, crushing, stamping, cutting, shaping or polishing". (See THE DICTIONARY, by TIME, COPYRIGHT 1974, p. 444) . . . SECOND; Petitioner's interpretation of the term raw materials is contrary to law and jurisprudence. Thus, raw materials as used in the definition of " manufacture", denotes materials from which final product is made (Black's Law Dictionary, 4th ed. citing State vs. Hennessy Co., 71 Mont. 301, 230, p. 64, 65). And consistent with said definition, Revenue Regulations Nos. 2-86 and 11-86 [effective January 1, 1986 and August 11 1986, respectively] which govern the filing of quarterly percentage tax returns and payment thereof under the provisions, inter alia, of Section 168 of the NIRC, define raw materials or material, to wit: Any article which when used in the MANUFACTURE of another article becomes a homogenous part thereof, such that it can no longer be identified in its original state nor may be removed therefrom without

destroying or rendering useless the finished article to which it has been merged, mixed or dissolved. . . . Tested in the light of the foregoing statutory definition, it is evident that containers and packages used by Cenvoco are not "raw materials" and do not fall within the purview of the final proviso of Section 168 of the NIRC. . . . As a coup de grace, it is pertinent to note the case of Caltex (Phils.) Inc. vs. Manila Port Service (17 SCRA 1075) where the Supreme Court aptly defined containers and/or packages. . . . a package or a bundle made up for transportation; a packet; a bale; a parcel; or that in which anything is packed: box, case, barrel, crate , etc. in which goods are packed; a container. (Emphasis Ours) The definition is an emphatic rejection of petitioner's construction that Cenvoco's containers and packages are raw materials used in the milling process. . . . . . . Moreover, Section 168 of the Revenue Code expressly limits the articles subject to percentage tax (miller's tax) to: "rope, sugar, coconut oil, palm oil, cassava flour or starch, desiccated coconuts, manufactured, processed or milled by them, including the by-product of the raw materials, from which said articles are produced, processed or manufactured". . . . (CR Decision, Rollo pp. 34-36) Hence, the petition under consideration, posing the issue: WHETHER OR NOT THE SALES TAX PAID BY CENVOCO WHEN IT PURCHASED CONTAINERS AND PACKAGING MATERIALS FOR ITS MILLED PRODUCTS CAN BE CREDITED AGAINST THE DEFICIENCY MILLER'S TAX DUE THEREON. Resolution of the issue posited by the petitioner hinges on. the proper application of Section 168 of the then applicable National Internal Revenue Code, particularly the last proviso of said section, which reads: Sec. 168. Percentage tax upon proprietors or operators of rope factories, sugar centrals and mills, coconut oil mills, palm oil mills, cassava mills and desiccated coconut factories. Proprietors or operators of rope factories, sugar centrals and mills, coconut oil mills, palm oil mills, cassava mills, and desiccated coconut factories, shall pay a tax equivalent to three (3) percent of the gross value of money of all the rope, sugar, coconut, oil, palm oil, cassava flour or starch, desiccated coconut, manufactured, processed or milled by them, including the by-product of the raw materials, from which said articles are produced, processed or manufactured, such tax to be based on the actual selling price or market value of these articles at the time they leave the factory or mill warehouse: Provided, however, that this tax shall not apply to rope, coconut oil, palm oil and the by-product of copra from which it is produced or manufactured, and dessiccated coconuts, if such rope, coconut oil, palm oil, copra by-products and dessiccated coconuts, shall be removed for exportation by the proprietor of operator or the factory or mill himself, and are actually exported without returning to the Philippines, whether in their original state or as an ingredient or part of any manufactured article or product: Provided further, That where the planter or the owner of the raw materials is the exporter of

the aforementioned milled or manufactured products, he shall be entitled to a tax credit of the miller's taxes withheld by the proprietor or operator of the factory or mill, corresponding to the quantity exported, which may be used against any internal revenue tax directly due from him: and Provided, finally, That credit for any sales. miller's or excise taxes paid on raw materials or supplies used in the milling process shall not be allowed against the miller's tax due, except in the case of a proprietor or operator of a refined sugar factory as provided hereunder . (emphasis supplied) Notably, the law relied upon by the BIR Commissioner as the basis for not allowing Cenvoco's tax credit is just a proviso of Section 168 of the old Tax Code. The restriction in the said proviso, however, is limited only to sales, miller's or excise taxes paid "on raw materials used in the milling process". Under the rules of statutory construction, exceptions, as a general rule, should be strictly but reasonably construed. They extend only so far as their language fairly warrants, and all doubts should be resolved in favor of the general provisions rather than the exception. Where a general rule is established by statute with exceptions, the court will not curtail the former nor add to the latter by implication. . . . (Samson vs. Court of Appeals, 145 SCRA 659 [1986]). The exception provided for in Section 168 of the old Tax Code should thus be strictly construed. Conformably, the sales, miller's and excise taxes paid on all Other materials (except on raw materials used in the milling process), such as the sales taxes paid on containers and packaging materials of the milled products under consideration, may be credited against the miller's tax due therefor. It is a basic rule of interpretation that words and phrases used in the statute, in the absence of a clear legislative intent to the contrary, should be given their plain, ordinary and common usage or meaning. (Mustang Lumber Inc. v. CA, 257 SCRA 430 [1996] citing Ruben E. Agpalo, Statutory Construction, second ed. [1990], 131). From the disquisition and rationalization aforequoted, containers and packaging materials are certainly not raw materials. Cans and tetrakpaks are not used in the manufacture of Cenvoco's finished products which are coconut, edible oil or coprameal cake. Such finished products are packed in cans and tetrapaks. Petitioner laments the pronouncement by the Court of Appeals that Deputy Commissioner Eufracio Santos' 1988 ruling may not reverse Commissioner Ruben Ancheta's favorable ruling on a similar claim of CENVOCO of October, 1984, which reads in part: . . . This refers to your letter dated September 5, 1984 requesting that the 10% sales tax paid on container cans purchased by you, be credited against the 2% (now 3%) miller's tax due on the refined coconut edible oil. It is represented that you process copra and/or coconut oil and sell the refined edible oil in cans; that said cans are purchased from can manufacturers who in turn bill to you the price of the cans and the 10% tax paid thereon which are separately shown on the invoice; and that the cost of the cans, including the 2% miller's tax is computed. In reply, I have the honor to inform you that your request is hereby granted. . . . (Pacific Oxygen & Acetylene Co. vs. Commissioner, GR No. L-17708, April 30, 1905). (Rollo p. 36) According to petitioner, to hold, as what the Court of Appeals did, that a reversal of the aforesaid ruling would be violative of the rule on non-retroactivity of rulings of tax officials

when prejudicial to the taxpayer (Section 278 of the old Tax Code) would, in effect, create a perpetual exemption in favor of CENVOCO although there may be subsequent changes in circumstances warranting a reversal. This Court is mindful of the well-entrenched principle that the government is never estopped from collecting taxes because of mistakes or errors on the part of its agents, but this rule admits of exceptions in the interest of justice and fairplay. (ABS CBN Broadcasting Corp. vs. Court of Tax Appeals, 108 SCRA 151 [1951]) More so in the present case, where we discern no error in allowing the sales taxes paid by CENVOCO on the containers and packages of its milled products, to be credited against the deficiency miller's tax due thereon, for a proper application of the law. It bears stressing that tax burdens are not to be imposed, nor presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. (The Province of Bulacan, et. al, vs. Hon. CA, et. al., GR No. 226232, November 27, 1998; Republic vs. IAC, 196 SCRA 335[1931]; CIR vs. Firemen's Fund Ins. Co., 148 SCRA 315 (1987); CIR vs. CA, 204 SCRA 182 [1991]) Then, too, it has been the long standing policy and practice of this Court to respect conclusions arrived at by quasi-judicial agencies, especially the Court of Tax Appeals which: by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems, and which has thus developed an expertise on the subject, unless an abuse or improvident exercise of its authority is shown. Finding no such abuse or improvident exercise of authority or discretion under the premises, the decision of the Court of Appeals, affirming that of the Court of Tax Appeals, should be upheld. (Commissioner of Internal Revenue vs. Court of Appeals, 204 SCRA 189 [1991]) WHEREFORE, the petition is hereby DISMISSED and the decision of the Court of Appeals AFFIRMED. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT THIRD DIVISION G.R. No. 139303 August 25, 2005 Cipriano Enriquez, Raymundo Enriquez, Concepcion Enriquez, assisted by her husband Matias Quitanes, Tomas Enriquez, Luis Diaz, Cesar Diaz, Manuel Diaz, Domingo Enriquez, Elpidio Enriquez, Filipina Enriquez, Casimira Dizon, Saturnino Dizon, Jose Ramos, Amado Mislang, Antonio Quitaneg, Villamor Quitaneg, Jimmy Clavo, Oscar Laborce, Sevilla Pizarro, Angelita Pizzaro, Isidro Rico, Pio Famisan, Pantaleon Abille, Beinvenido Corum, Martina Hisole, Erna D. Enriquez, assisted by her husband Ritchie Flauta, and Ignacio Enriquez, Jr., Petitioners, vs. MAXIMO ENRIQUEZ (now deceased), substituted by CARMEN AGANA, IGMIDIO ENRIQUEZ, CONCEPCION ENRIQUEZ, CIPRIANO ENRIQUEZ, DIONISIONENRIQUEZ, MAXIMO ENRIQUEZ, CLEOFE ENRIQUEZ, TOMAS ENRIQUEZ, RAYMUNDO ENRIQUEZ and NICOLAS ENRIQUEZ, Respondents. DECISION SANDOVAL-GUTIERREZ, J.: Assailed in the instant petition for review on certiorari are the Resolutions dated February 3, 1999 and July 7, 1999 issued by the Court of Appeals in CA-G.R. CV UDK-7011 dismissing the appeal of petitioners for their failure to pay the appellate court docket fee. On November 17, 1988, Maximo Enriquez, later substituted by his heirs (now respondents), filed with the Regional Trial Court (RTC), Branch 71 of Iba, Zambales a complaint for partition against petitioners, docketed as Civil Case No. RTC-568-1. The complaint involves a parcel of land situated at Amungan, Iba, same province, covered by TCT No. T-28593, with an area of 44,984 square meters. He alleged that he owns 10/18 undivided portion of the property, 9/18 by purchase and 1/18 by inheritance; and that petitioners have been residing in the premises without his knowledge and consent, thereby depriving him of his undivided share of the property. Petitioners, in their answer, averred that Cipriano Enriquez, one of the petitioners, owns of the property, while the others are in possession of the other areas with his knowledge and consent. On June 4, 1998, the RTC rendered a Decision ordering the petitioners to vacate the property and to surrender possession thereof to respondents. A copy of the Decision was received by counsel for petitioners on June 22, 1998. On July 3, 1998, they filed a Notice of Appeal with the RTC. It was approved on July 7, 1998. On February 3, 1999, the Court of Appeals dismissed the appeal of petitioners for their failure to pay the appellate court docket fee, thus: "For failure to pay docket fee, the appeal is deemed ABANDONED and DISMISSED, pursuant to Section 1(c), Rule 50, Revised Rules of Court."

Petitioners filed a motion for reconsideration but it was denied by the Appellate Court in a Resolution dated July 7, 1999, thus: "Per copy of the official receipt attached to appellants motion for reconsideration, the docket fee was paid on November 4, 1998 or 4 months after the notice of appeal was filed on July 3, 1998. Consequently, appellants motion for reconsideration is hereby denied." In the instant petition for review, petitioners raise the following errors allegedly committed by the Appellate Court: "I. The respondent Court of Appeals seriously erred in considering petitioners appeal as deemed abandoned and dismissed for alleged failure of petitioners to pay docket fee. II. the respondent Court of Appeals gravely erred in denying petitioners motion for reconsideration of the resolution considering petitioners appeal as deemed abandoned and dismissed on the ground that the docket fee was paid on November 4, 1998, or four (4) months after the notice of appeal was filed on July 3, 1998. III. the respondent Court of Appeals in issuing the aforesaid resolutions gave premium on technicalities rather on substance and substantial justice and disregarded the merits of petitioners case." In sum, the issue is whether the Court of Appeals correctly dismissed the petition for failure of the petitioners to pay appellate court docket fee. In dismissing petitioners appeal, the Court of Appeals cited Section 1(c), Rule 50 of the Revised Rules of Court which provides: "Section 1. Grounds for dismissal of appeal. An appeal may be dismissed by the Court of Appeals, on its own motion or on that of the appellee, on the following grounds: xxx (c) Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41." Petitioners admit that the governing Rule on their payment of appellate court docket fee is Section 4, Rule 41 of the 1997 Rules of Civil Procedure, as amended, which provides: "Section 4. Appellate court docket and other lawful fees. Within the period for taking an appeal, the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together with the original record of the record or the record on appeal." Underscoring the sentence "Proof of payment of said fees shall be transmitted to the appellate court together with the original record or the record on appeal," petitioners maintain that the trial court must first send them a notice to pay the appellate court docket fee and other lawful fees within the period for taking an appeal. Hence, they waited for the notice for them to pay the appellate court docket fee. When they did not receive any, they paid the docket fee to the trial court. Consequently, they cannot be faulted if they paid the appellate court docket fee four (4) months after their Notice of Appeal was approved on July 7, 1998.

Prior to the effectivity of the 1997 Rules of Civil Procedure, as amended, payment of appellate court docket fee is not a prerequisite for the perfection of an appeal. In 1 Santos vs. Court of Appeals, this Court held that although an appeal fee is required to be paid in case of an appeal taken from the Municipal Trial Court to the Regional 2 Trial Court, it is not a prerequisite for the perfection of an appeal under Sections 20 3 and 23 of the Interim Rules and Guidelines issued by this Court on January 11, 1983 implementing the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). Under these sections, there are only two requirements for the perfection of an appeal, to wit: (a) the filing with the trial court of a notice of appeal within the reglementary period; and (b) the expiration of the last day to appeal by any party. However, the 1997 Rules of Civil Procedure, as amended, which took effect on July 1, 1997, now require that appellate docket and other lawful fees must be paid within the same period for taking an appeal. This is clear from the opening sentence of Section 4, Rule 41 of the same Rules that, "(W)ithin the period for taking an appeal, the appellant shall pay to the clerk of the court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees." The use of the word "shall" underscores the mandatory character of the Rule. The term "shall" is a word of command, and one which has always or which must be given 4 a compulsory meaning, and it is generally imperative or mandatory. Petitioners cannot give a different interpretation to the Rule and insist that payment of docket fee shall be made only upon their receipt of a notice from the trial court to pay. For it is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be interpreted together with the other parts, and kept subservient to the general intent of the whole 5 enactment. Indeed, petitioners cannot deviate from the Rule. Also under Rule 41 of the same Rules, an appeal to the Court of Appeals from a case decided by the RTC in the exercise of the latters original jurisdiction, shall be taken within fifteen (15) days from the notice of judgment or final order appealed from. Such appeal is made by filing a notice thereof with the court that rendered the judgment or final order and by serving a copy of that notice upon the adverse party. Furthermore, within this same period, appellant shall pay to the clerk of court which rendered the judgment or final order appealed from, the full amount of the appellate court docket and other lawful fees. The payment of docket fee within this period is mandatory for the perfection of appeal. Otherwise, the appellate court would not be able to act on the subject matter of the action, and the decision sought to be appealed from 6 becomes final and executory. Time and again, this Court has consistently held that payment of docket fee within the prescribed period is mandatory for the perfection of an appeal. Without such payment, the appellate court does not acquire jurisdiction over the subject matter of the action and the decision sought to be appealed from becomes final and 7 executory. Petitioners argue that the Appellate Court, in issuing the assailed Resolutions, gave premium to technicalities rather than substance and disregarded the merits of the petition. They ask for a liberal construction of the Rules. Appeal is not a right but a statutory privilege, thus, appeal must be made strictly in accordance with the provision set by law. The requirement of the law under Section

4, Rule 41 is clear. The payment of appellate docket fee is not a mere technicality of 8 law or procedure but an essential requirement for the perfection of an appeal. The payment of the docket fee within the period is a condition sine qua non for the perfection of an appeal. Contrary to petitioners submission, the payment of the appellate court docket and other lawful fees is not a mere technicality of law or procedure. It is an essential requirement, without which the decision or final order 9 appealed from would become final and executory as if no appeal was filed at all. This Court has consistently ruled that litigation is not a game of technicalities and that every case must be prosecuted in accordance with the prescribed procedure so that issues may be properly presented and justly resolved. The rules of procedure must be faithfully followed except only when, for persuasive and weighting reasons, they may be relaxed to relieve a litigant of an injustice commensurate with his failure to comply within the prescribed procedure. Concomitant to a liberal interpretation of the rules of procedure should be an effort on the part of the party invoking 10 liberality to adequately explain his failure to abide by the rules . Anyone seeking exemption from the application of the Rule has the burden of proving that 11 exceptionally meritorious instances exist which warrant such departure. In the present case, petitioners failed to establish any sufficient and satisfactory reason to warrant a relaxation of the mandatory rule on the payment of appellate court docket fee. Actually, the payment of the required docket fee was late because of the erroneous interpretation of the Rule by petitioners counsel. Verily, to grant their petition would be putting a premium on his ignorance or lack of knowledge of existing Rules. He should be reminded that it is his duty to keep abreast of legal 12 developments and prevailing laws, rules and legal principles, otherwise his clients will be prejudiced, as in this case. In fine, the Court of Appeals did not err in dismissing petitioners app eal. WHEREFORE, the instant petition for review on certiorari is DENIED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-60403 August 3, 1983 ALLIANCE OF GOVERNMENT WORKERS (AGW); PNB-FEMA BANK EMPLOYEES ASSOCIATION (AGW); KAISAHAN AT KAPATIRAN NG MGA MANGAGAWA AT KAWANI NG MWSS (AGW); BALARA EMPLOYEES ASSOCIATION (AGW); GSIS WORKERS ASSOCIATION (AGW); SSS EMPLOYEES ASSOCIATION (AGW); PVTA EMPLOYEES ASSOCIATION (AGW); NATIONAL ALLIANCE OF TEACHERS AND OFFICE WORKERS (AGW); , petitioners, vs. THE HONORABLE MINISTER OF LABOR and EMPLOYMENT, PHILIPPINE NATIONAL BANK (PNB); METROPOLITAN WATERWORKS and SEWERAGE SYSTEM (MWSS); GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS); SOCIAL SECURITY SYSTEM (SSS); PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION (PVTA) PHILIPPINE NORMAL COLLEGE (PNC); POLYTECHNIC UNIVERSITY OF THE PHILIPPINES (PUP), respondents. The Solicitor General for MOLE, PNB, SSS, PNC and PUP. Oliver Gesmundo for petitioners. Jesus C. Gentiles for petitioner SSSEA-AGW.

WHEREAS, there has been no increase case in the legal minimum wage rates since 1970; WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year. NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the Constitution do hereby decree as follows: SECTION 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than Pl,000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year. SECTION 2. Employers already paying their employees a 13th-month pay or its equivalent are not covered by this Decree. SECTION 3. This Decree shall take effect immediately. Done in the City of Manila, this 16th day of December 1975. According to the petitioners, P.D. No. 851 requires all employers to pay the 13th-month pay to their employees with one sole exception found in Section 2 which states that "(E)mployers already paying their employees a 13th month pay or its equivalent are not covered by this Decree. " The petitioners contend that Section 3 of the Rules and Regulations Implementing Presidential Decree No. 851 included other types of employers not exempted by the decree. They state that nowhere in the decree is the secretary, now Minister of Labor and Employment, authorized to exempt other types of employers from the requirement. Section 3 of the Rules and Regulations Implementing Presidential Decree No. 851 provides: Section 3. Employers covered The Decree shall apply to all employers except to: a) Distressed employers, such as (1) those which are currently incurring substantial losses or 112) in the case of non-profit institutions and organizations, where their income, whether from donations, contributions, grants and other earnings from any source, has consistently declined by more than forty (40%) per cent of their normal income for the last two (2) )years, subject to the provision of Section 7 of this issuance. b) The Government and any of its political subdivisions, including government-owned and controlled corporations, except)t those corporation, operating essentially as private, ,subsidiaries of the government; c) Employers already paying their employees 13th-month pay or more in a calendar year or its equivalent at the of this issuance; d) Employers of household helpers and persons in the personal service of another in relation to such workers: and e) Employers of those who are paid on purely commission, boundary, or task basis and those who are paid a fixed for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid an piece- rate basis in which case the employer shall be covered by this issuance :insofar ab such workers are concerned ... The petitioners assail this rule as ultra vires and void. Citing Philippine Apparel Workers'Union v. NIRC et al., (106 SCRA 444); Teoxon v. Members of the Board of' Administators (33 SCRA 585); Santos u. Hon. Estenzo et al., (109 Phil. 419); Hilado u. Collector of Internal Revenue (100 Phil. 288), and Olsen & Co. Inc. v. Aldanese and Trinidad (43 Phil. 259), the petitioners argue that regulations adopted under legislative authority must be in harmony with the provisions of the law and for the sole purpose of carrying into effect its general provisions. They state that a

GUTIERREZ, JR., J.: Are the branches, agencies, subdivisions, and instrumentalities of the Government, including government owned or controlled corporations included among the 4 "employers"" under Presidential Decree No. 851 which are required to pay an their employees receiving a basic salary of not more than P1,000.00 a month, a thirteenth (13th) month pay not later than December 24 of every year? Petitioner Alliance of Government Workers (AGW) is a registered labor federation while the other petitioners are its affiliate unions with members from among the employees of the following offices, schools, or government owned or controlled corporations: 1. Philippine National Bank (PNB) Escolta Street, Manila 2. Metropolitan Waterworks and Sewerage System (MWSS) Katipunan Road, Balara, Quezon City 3. Government Service Insurance System (GSIS) Arroceros Street, Manila 4. Social Security System (SSS) East Avenue, Quezon City 5. Philippine Virginia Tobacco Administration (PVTA) Consolacion Building, Cubao, Quezon City 6. Philippine Normal College (PNC) Ayala Boulevard, Manila 7. Polytechnic University of the Philippines (PUP) Hippodromo Street, Sta. Mesa, Manila On February 28, 1983, the Philippine Government Employees Association (PGEA) filed a motion to come in as an additional petitioner. Presidential Decree No. 851 provides in its entirety: WHEREAS, it is necessary to further protect the level of real f wages from the ravage of world-wide inflation;

legislative act cannot be amended by a rule and an administrative officer cannot change the law. Section 3 is challenged as a substantial modification by rule of a Presidential Decree and an unlawful exercise of legislative power. Our initial reaction was to deny due course to the petition in a minute resolution, however, considering the important issues propounded and the fact, that constitutional principles are involved, we have now decided to give due course to the petition, to consider the various comments as answers and to resolve the questions raised through a full length decision in the exercise of this Court's symbolic function as an aspect of the power of judicial review. At the outset, the petitioners are faced with a procedural barrier. The petition is one for declaratory relief, an action not embraced within the original jurisdiction of the Supreme Court. (Remotigue v. Osmena,, Jr., 21 SCRA 837; Rural Bank of Olongapo v. Commission of Land Registration, 102 SCRA 794; De la Llana v. Alba, 112 SCRA 294). There is no statutory or jurisprudential basis for the petitioners' statement that the Supreme Court has original and exclusive jurisdiction over declaratory relief suits where only questions of law are involved. Jurisdiction is conferred by law. The petitioners have not pointed to any provision of the Constitution or statute which sustains their sweeping assertion. On this ground alone, the petition could have been dismissed outright. Following similar action taken in Nacionalista Party v. Angelo Bautista (85 Phil. 101) and Aquino v. Commission on Elections (62 SCRA 275) we have, however, decided to treat the petition as one for mandamus. The petition has far reaching implications and raises questions that should be resolved. Have the respondents unlawfully excluded the petitioners from the use and enjoyment of rights to which they are entitled under the law? An analysis of the "whereases" of P.D. No. 851 shows that the President had in mind only workers in private employment when he issued the decree. There was no intention to cover persons working in the government service. The decree states: xxx xxx xxx WHEREAS, there has been no increase in the legal minimum wage rates since 1970; xxx xxx xxx As pointed out by the Solicitor General in his comment for the Minister of Labor and Employment, the Social Security System the Philippine Normal College, and Polytechnic University, the contention that govermment owned and controlled corporations and state colleges and universities are covered by the term "all employers" is belied by the nature of the 13- month pay and the intent behind the decree. The Solicitor General states: "Presidential Decree No. 851 is a labor standard law which requires covered employers to pay their employees receiving not more than P1,000.00 a month an additional thirteenth-month pay. Its purpose is to increase the real wage of the worker (Marcopper Mining Corp. v. Ople, 105 SCRA 75; and National Federation of Sugar Workers v. Ovejera, G.R. No. 59743, May 31, 1982) as explained in the'whereas'clause which read: WHEREAS, it is necessary to further protect the level of real wages from the ravage of world-wide inflation; WHEREAS, there has been no increase in the legal minimum wage rates since 1970; 11 WHEREAS, the Christmas season is an opportune time for society to show its concern for the plight of the working masses so they may celebrate the Christmas and New Year. xxx xxx xxx We agree.

What the P.D. No. 851 intended to cover, as explained in the prefatory statement of the Decree, are only those in the private sector whose real wages require protection from world-wide inflation. This is emphasized by the "whereas" clause which states that 'there has been no increase in the legal minimum wage rates since 1970'. This could only refer to the private sector, and not to those in the government service because at the time of the enactment of Presidential Decree No. 851 in 1975, only the employees in the private sector had not been given any increase in their minimum wage. The employees in the government service had already been granted in 1974 a ten percent across-the-board increase on their salaries as stated in P.D. No. 525, Section 4. Moreover, where employees in the government service were to benefit from labor standard laws, their coverage is explicitly stated in the statute or presidential enactment. This is evident in (a) Presidential Decree No. 390, Sec. 1 which granted emergency cost of living allowance to employees in the national government; (b) Republic Act No. 6111, Sec. 10 on medicare benefits; (c) Presidential Decree No -442, Title II, Article 97 on the applicable minimum wage rates; (d) Presidential Decree No. 442, Title 11, Article 167 (g) on workmen's compensation; (e) Presidential Decree No. 1123 which provides for increases in emergency allowance to employees in the private sector and in salary to government employees in Section 2 thereof; and (f) Executive Order No. 752 granting government employees a year-end bonus equivalent to one week's pay. Thus, had the intention been to include government employees under the coverage of Presidential Decree No. 851, said Decree should have expressly so provided and there should have been accompanying yearly appropriation measures to implement the same. That no such express provision was provided and no accompanying appropriation measure to was passed clearly show the intent to exclude government employees from the coverage of P. D. No. 85 1.

It is an old rule of statutory construction that restrictive statutes and acts which impose burdens on the public treasury or which diminish rights and interests, no matter how broad their terms do not embrace the Sovereign, unless the Sovereign is specifically mentioned. (See Dollar Savings Bank v. United States, 19 Wall (U.S.) 227; United States v. United Mine Workers of America, 330 U.S. 265). The Republic of the Philippines, as sovereign, cannot be covered by a general term like "employer" unless the language used in the law is clear and specific to that effect. The issue raised in this petition, however, is more basic and fundamental than a mere ascertainment of intent or a construction of statutory provisions. It is concerned with a revisiting of the traditional classification of government employment into governmental functions and proprietary functions and of the many ramifications that this dichotomous treatment presents in the handling of concerted activities, collective bargaining, and strikes by government employees to wrest concessions in compensation, fringe benefits, hiring and firing, and other terms and conditions of employment. The workers in the respondent institutions have not directly petitioned the heads of their respective offices nor their representatives in the Batasang Pambansa. They have acted through a labor federation and its affiliated unions. In other words, the workers and employees of these state firms, college, and university are taking collective action through a labor federation which uses the bargaining power of organized labor to secure increased compensation for its members. Under the present state of the law and pursuant to the express language of the Constitution, this resort to concerted activity with the ever present threat of a strike can no longer be allowed. The general rule in the past and up to the present is that "the terms and conditions of employment in the Government, including any political subdivision or instrumentality thereof are governed by law" (Section 11, the Industrial Peace Act, R.A. No. 875, as amended and Article

277, the Labor Code, P.D. No. 442, as amended). Since the terms and conditions of government employment are fixed by law, government workers cannot use the same weapons employed by workers in the private sector to secure concessions from their employers. The principle behind labor unionism in private industry is that industrial peace cannot be secured through compulsion by law. Relations between private employers and their employees rest on an essentially voluntary basis. Subject to the minimum requirements of wage laws and other labor and welfare legislation, the terms and conditions of employment in the unionized private sector are settled through the process of collective bargaining. In government employment, however, it is the legislature and, where properly given delegated power, the administrative heads of government which fix the terms and conditions of employment. And this is effected through statutes or administrative circulars, rules, and regulations, not through collective bargaining agreements. At the same time, the old Industrial Peace Act excepted employees and workers in proprietary functions of government from the above compulsion of law. Thus, in the past, government employees performing proprietary functions could belong to labor organizations imposing the obligation to join in strikes or engage in other concerted action. (Section 11, R.A. 875, as amended). They could and they did engage in concerted activities and various strikes against government owned and controlled corporations and other government institutions discharging proprietary functions. Among the institutions as falling under the exception in Section 11 of the Industrial Peace Act were respondents Government Service Insurance System (GSISEA v. Alvendia, 108 Phil. 505) and Social Security System (SSSEA v. Soriano, 7 SCRA 1016). And this Court has supported labor completely in the various strikes and concerted activities in firms and agencies discharging proprietary functions because the Constitution and the laws allowed these activities. The exception, however belongs to the past. The petitioners state in their counter comment filed July 23, 1982 that the 1973 Constitution is categorical about the grant of the rights to self- organization and collective bargaining to all workers and that no amount of stretched interpretation of lesser laws like the Labor Code and the Civil Service Act can overturn the clear message of the Constitution with respect to these rights to self-organization and collective bargaining. These statements of the petitioners are error insofar as government workers are now concerned. Under the present Constitution, govemment-owned or controlled corporations are specifically mentioned as embraced by the civil service. (Section 1, Article XII-B, Constitution). The inclusion of the clause "including every government owned or controlled corporation" in the 1973 amendments to the Constitution was a deliberate amendment for an express purpose. There may be those who disagree with the intent of the framers of the amendment but because it is fundamental law, we are all bound by it. The amendment was intended to correct the situation where more favored employees of the government could enjoy the benefits of two worlds. They were protected by the laws governing government employment. They could also engage in collective bargaining and join in strikes to secure higher wages and fringe benefits which equally hardworking employees engaged in government functions could only envy but not enjoy. Presidential Decree No. 807, the Civil Service Decree of the Philippines has implemented the 1973 Constitutional amendment. It is categorical about the inclusion of personnel of governmentowned or controlled corporations in the civil service and their being subject to civil service requirements: SECTION 56. Government- owned or Controlled Corporations Personnel. All permanent personnel of government- owned or controlled corporations whose positions are now embraced in the civil service shall continue in the service until they have been given a chance to qualify in an appropriate examination, but in the meantime, those who do not possess the appropriate civil service eligibility shall not be promoted until they qualify in an appropriate civil service examination. Services of temporary personnel ma be y terminated any time.

Personnel of government-owned or controlled corporations are now part of the civil service. It would not be fair to allow them to engage in concerted activities to wring higher salaries or fringe benefits from Government even as other civil service personnel such as the hundreds of thousands of public school teachers, soldiers, policemen, health personnel, and other government workers are denied the right to engage in similar activities. To say that the words "all employers" in P.D. No. 851 includes the Government and all its agencies, instrumentalities, and government-owned or controlled corporations would also result in nightmarish budgetary problems. For instance, the Supreme Court is trying its best to alleviate the financial difficulties of courts, judges, and court personnel in the entire country but it can do so only within the limits of budgetary appropriations. Public school teachers have been resorting to what was formerly unthinkable, to mass leaves and demonstrations, to get not a 13th-month pay but promised increases in basic salaries and small allowances for school uniforms. The budget of the Ministry of Education, Culture and Sports has to be supplemented every now and then for this purpose. The point is, salaries and fringe benefits of those embraced by the civil service are fixed by law. Any increases must come from law, from appropriations or savings under the law, and not from concerted activity. The Government Corporate Counsel, Justice Manuel Lazaro, in his consolidated comment * for respondents GSIS, MWSS, and PVTA gives the background of the amendment which includes every government-owned or controlled corporation in the embrace of the civil service: Records of the 1971 Constitutional Convention show that in the deliberations held relative to what is now Section 1(1) Article XII-B, supra the issue of the inclusion of government-owned or controlled corporations figured prominently. The late delegate Roberto S. Oca, a recognized labor leader, vehemently objected to the inclusion of government-owned or controlled corporations in the Civil Service. He argued that such inclusion would put asunder the right of workers in government corporations, recognized in jurisprudence under the 1935 Constitution, to form and join labor unions for purposes of collective bargaining with their employers in the same manner as in the private section (see: records of 1971 Constitutional Convention). In contrast, other labor experts and delegates to the 1971 Constitutional Convention enlightened the members of the Committee on Labor on the divergent situation of government workers under the 1935 Constitution, and called for its rectification. Thus, in a Position Paper dated November-22, 1971, submitted to the Committee on Labor, 1971 Constitutional Convention, then Acting Commissioner of Civil Service Epi Rev Pangramuyen declared: It is the stand, therefore, of this Commission that by reason of the nature of the public employer and the peculiar character of the public service, it must necessarily regard the right to strike given to unions in private industry as not applying to public employees and civil service employees. It has been stated that the Government, in contrast to the private employer, protects the interests of all people in the public service, and that accordingly, such conflicting interests as are present in private labor relations could not exist in the relations between government and those whom they employ. Moreover, determination of employment conditions as well as supervision of the management of the public service is in the hands of legislative bodies. It is further

emphasized that government agencies in the performance of their duties have a right to demand undivided allegiance from their workers and must always maintain a pronounced esprit de corps or firm discipline among their staff members. It would be highly incompatible with these requirements of the public service, if personnel took orders from union leaders or put solidarity with members of the working class above solidarity with the Government. This would be inimical to the public interest. Moreover, it is asserted that public employees by joining labor unions may be compelled to support objectives which are political in nature and thus jeopardize the fundamental principle that the governmental machinery must be impartial and nonpolitical in the sense of party politics.' (see: Records of 1971 Constitutional Convention). Similarly, Delegate Leandro P. Garcia, expressing support for the inclusion of government-owned or controlled corporations in the Civil Service, argued: It is meretricious to contend that because Govermnent owned or controlled corporations yield profits, their employees are entitled to better wages and fringe benefits than employees of Government other than Government- owned and controlled cor orations which are not making profits. There is no gainsaying the fact that the capital they use is the people's (see Records of the 1971 Constitutional Convention). Summarizing the deliberations of the 1971 Constitutional Convention on the inclusion of Government owned or controlled corporations, Dean Joaquin G. Bernas, SJ., of the Ateneo de Manila University Professional School of Law, stated that government-owned corporations came under attack as milking cows of a privileged few enjoying salaries far higher than their counterparts in the various branches of government, while the capital of these corporations belongs to the Government and government money is pumped into them whenever on the brink of disaster, and they should therefore come under the strick surveillance of the Civil Service System. (Bernas, The 1973 Philippine Constitution, Notes and Cases, 1974 ed., p. 524). The Government Corporate Counsel cites the precedent setting decision in Agricultural- Credit and Cooperative Financing Administration (ACCFA v. Confederation of Unions in Government Corporations and Offtces CUGCO et al., 30 SCRA 649) as giving the rationale for coverage of government-owned or controlled corporations by the civil service. We stated ACCFA v. CUGCO that: ... The ACA is a government office or agency engaged in governmental, not proprietary functions. These functions may not be strictly what President Wilson described as "constituent" (as distinguished from 'ministrant'), [Bacani vs. National Coconut Corporation, G.R. No. L-9657, Nov. 29,1956, 53 O.G. p. 2800] such as those relating to the maintenance of peace and the prevention of crime, those regulating property and property rights, those relating to the administration of justice and the determination of political duties of citizens, and those relating to national defense and foreign relations. Under this traditional classification, such constituent functions are exercised by the State as attributes of sovereignty, and not merely to promote the welfare, progress and prosperity of the people these latter

functions being ministrant, the exercise of which is optional on the part of the government. The growing complexities of modern society, however, have rendered this traditional classification of the functions of government quite unrealistic, not to say obsolete. The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally, and only "because it was better equipped to administer for the public welfare than is any private individual or group of individuals," (Malcolm, The Government of the Philippines, pp. 19-20; Bacani vs. National Coconut Corporation, supra) continue to lose their well- defined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces, Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice. Chief Justice Fernando, then an Associate Justice of this Court, observed in a concurring opinion that the traditional classification into constituent and ministrant functions reflects the primacy at that time of the now discredited and repudiated laissez faire concept carried over into government. He stated: The influence exerted by American constitutional doctrines unavoidable when the Philippines was still under American rule notwithstanding, an influence that has not altogether vanished even after independence, the laissez faire principle never found fun acceptance in this jurisdiction, even during the period of its full flowering in the United States. Moreover, to erase any doubts, the Constitutional Convention saw to it that our fundamental law embodies a policy of the responsibility thrust on government to cope with social and economic problems and an earnest and sincere commitment to the promotion of the general welfare through state action. It would thus follow that the force of any legal objection to regulatory measures adversely affecting property rights or to statutes organizing public corporations that may engage in competition with private enterprise has been blunted. Unless there be a clear showing of any invasion of rights guaranteed by the Constitution, their validity is a foregone conclusion. No fear need be entertained that thereby spheres hitherto deemed outside government domain have been encroached upon. With our explicit disavowal of the 'constituent-ministrant' test, the ghost of the laissez-faire concept no longer stalks the juridical stage." Our dismissal of this petiti/n should not, by any means, be interpreted to imply that workers in government-owned and controlled corporations or in state colleges and universities may not enjoy freedom of association. The workers whom the petitioners purport to represent have the right, which may not be abridged, to form associations or societies for purposes not contrary to law. (Constitution, Article IV, Section 7). This is a right which share with all public officers and employees and, in fact, by everybody living in this country. But they may not join associations which impose the obligation to engage in concerted activities in order to get salaries, fringe benefits, and other emoluments higher than or different fr m that provided by law and regulation. The very Labor Code, P.D. No. 442 as amended,, which governs the registration and provides for the rights of legitimate labor organizations states: ART. 277. Government employees. The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations, shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the new constitution. However,

there shall be no reduction of existing wages, benefits, and other terms and conditions of employment being enjoyed by them at the time of the adoption of this code. Section 6, Article XII-B of the Constitution gives added reasons why the government employees represented by the petitioners cannot expect treatment in matters of salaries different from that extended to all others government personnel. The provision states: SEC. 6. The National Assembly shall provide for the standardization of compensation of government officials and employees, including those in government-owned or controlled corporations, taking into account the nature of the responsibilities pertaining to, and the qualifications required for the positions concerned. It is the legislature or, in proper cases, the administrative heads of government and not the collective bargaining process nor the concessions wrung by labor unions from management that determine how much the workers in government-owned or controlled corporations may receive in terms of salaries, 13th month pay, and other conditions or terms of employment. There are government institutions which can afford to pay two weeks, three weeks, or even 13th-month salaries to their personnel from their budgetary appropriations. However, these payments must be pursuant to law or regulation. Presidential Decree No. 985 as amended provides: xxx xxx xxx SEC. 2. Declaration of Policy. It is hereby declared to be the policy, of the national government to provide equal pay for substantially, equal work and to base differences in pay upon substantive differences in duties and responsibilities, and qualification requirements of the positions. In determining rates of pay, due regard shall be given to, among others, prevailing rates in private industry for comparable work. For this purpose, there is hereby established a system of compensation standardization and position classification in the national government for all departments, bureaus, agencies, and officers including government-owned or controlled corporations and financial institutions: Provided, That notwithstanding a standardized salary system established for all employees, additional financial incentives may be established by government corporations and financial institutions for their employees to be supported fully from their corporate funds and for such technical positions as may be approved by the President in critical government agencies. The Solicitor-General correctly points out that to interpret P.D. No. 851 as including government employees would upset the compensation levels of government employees in violation of those fixed according to P.D. No. 985. Here as in other countries, government salaries and wages have always been lower than salaries, wages, and bonuses in the private sector. However, civil servants have no cause for despair. Service in the government may at times be a sacrifice but it is also a welcome privilege. Apart from the emotional and psychic satisfactions, there are various material advantages. The security of tenure guaranteed to those in the civil service by the Constitution and statutes, the knowledge that one is working for the most stable of employers and not for private persons, the merit system in appointments and promotions, the scheme of vacation, sick, and maternity leave privileges, and the prestige and dignity associated with public office are only a few of the joys of government employment. Section 3 of the Rules and Regulations Implementing Presidential Decree No. 851 is, therefore, a correct interpretation of the decree. It has been implemented and enforced from December 22, 1975 to the present, The petitioners have shown no valid reason why it should be nullified because of their petition filed six and a half years after the issuance and implementation of the rule. WHEREFORE, the petition is hereby DISMISSED for lack of merit.

SO ORDERED.