G.R. No.

151135 July 2, 2004

CONTEX CORPORATION, petitioner,
vs.
HON. COMMISSIONER OF INTERNAL REVENE, respondent.
As an S!MA"#$%&'($#$) firm, Co*($+ is $+$,-( .#o, /ll lo0/l /*) */(&o*/l &*($#*/l #$1$*u$
(/+$' except for the preferential tax provided for in Section 12 (c)
5
of Rep. Act No. 7227.
C-*($+ /l'o #$%&'($#$) 2&(3 the Brea of !nternal Revene (!IR4 /' / *o*"VAT (/+-/y$#
nder a "ertificate of Re#istration
Co*($+ -u#03/'$) 1/#&ou' 'u--l&$' and materials necessar$ in the condct of its manfactrin#
%siness. T3$ 'u--l&$#' of these #oods '3&.($) u*(o Co*($+ the 105 VAT o* (3$ -u#03/'$)
&($,' , &hich led the Co*($+ (o -/y &*-u( (/+$' in the amonts of ' 5(),*11.++ and ' 5,*,,57.*)
for 1))7 and 1))+, respectivel$
Actin# on the 6$l&$. (3/( &( 2/' $+$,-( from all national and local taxes, incldin# -A., Co*($+
.&l$) t&o applications &ith R/0 .o# (/+ #$.u*) o# (/+ 0#$)&( of the -A. it paid. Revene
/istrict 0fficer /1N!1/. Re#ional /irector 2 N0 R1S'0NS1.
".A 2 'AR.!A3 4RAN.. ".A rled that "ontex misread S$0(&o*' 1078A48248/4 /*) 1128A4 of
the .ax "ode. .hese provisions /--ly o*ly (o (3o'$ $*(&(&$' #$%&'($#$) /' VAT (/+-/y$#'
23o'$ '/l$' /#$ 9$#o"#/($). Co*($+ )o$' *o( ./ll nder this cate#or$, '&*0$ &( &' / *o*"VAT
(/+-/y$# as evidenced %$ the "ertificate of Re#istration.
No*$(3$l$'', (3$ CTA 3$l) (3/( (3$ Co*($+ &' $+$,-( from the imposition of inpt -A. on its
prchases of spplies and materials. !t pointed ot (3/( u*)$# !/'$' Co*1$#'&o* /*)
:$1$lo-,$*( A0( of 1))2 (RA 7227), /ll (3/( Co*($+ &' #$;u&#$) (o -/y as a SB567re#istered
enterprise &' / 55 -#$.$#$*(&/l (/+.
.he ".A also disallo&ed all refnds of inpt -A. paid prior to 8ne 2), 1))7 for %ein# %arred %$
the t&o7$ear prescriptive period nder Section 22) of the .ax "ode. .he tax cort also limited
the refnd onl$ to the inpt -A. paid on the spplies and materials directl$ sed in manfactre
of its #oods. !t strc9 do&n all claims for inpt -A. paid on maintenance, office spplies, frei#ht
char#es, and all materials and spplies shipped or delivered to the "ontex:s ;a9ati and 'asa$
"it$ offices.
"A 2 R1-1RS1/. "!R maintained that the exemption of "ontex nder Rep. Act No. 7227 &as
limited onl$ to direct taxes and not to indirect taxes sch as the inpt component of the -A.. .he
"ommissioner pointed ot that from its ver$ natre, the vale7added tax is a %rden passed on %$
a -A. re#istered person to the end sers< hence, the direct lia%ilit$ for the tax lies &ith the
sppliers and not "ontex.
"ort of A--$/l' 3$l) (3/( (3$ $+$,-(&o* from dties and taxes on the importation of ra&
materials, capital, and e=ipment of SB567re#istered enterprises nder Rep. Act No. 7227 and its
implementin# rles 0o1$#' o*ly <(3$ VAT &,-o'/6l$ u*)$# S$0(&o* 10= of the >.ax "ode?,
&hich is / )&#$0( l&/6&l&(y o. (3$ &,-o#($#, and in *o 2/y &*0lu)$' (3$ 1/lu$"/))$) (/+ o. (3$
'$ll$#"$+-o#($# the %rden of &hich &as passed on to the importer as an additional costs of the
#oods.@
S" 7 /1N!1/
-A. is an indirect tax. As sch, the amont of tax paid on the #oods, properties or services
%o#ht, transferred, or leased ma$ %e shifted or passed on %$ the seller, transferor, or lessor to the
%$er, transferee or lessee. Anli9e a direct tax, sch as the income tax, &hich primaril$ taxes an
individal:s a%ilit$ to pa$ %ased on his income or net &ealth, an indirect tax, sch as the -A., is
a tax on consmption of #oods, services, or certain transactions involvin# the same. .he -A.,
ths, forms a s%stantial portion of consmer expenditres.
5rther, in indirect taxation, there is a need to distin#ish %et&een the lia%ilit$ for the tax and the
%rden of the tax. As earlier pointed ot, the amont of tax paid ma$ %e shifted or passed on %$
the seller to the %$er. Bhat is transferred in sch instances is not the lia%ilit$ for the tax, %t the
tax %rden. !n addin# or incldin# the -A. de to the sellin# price, the seller remains the person
primaril$ and le#all$ lia%le for the pa$ment of the tax. Bhat is shifted onl$ to the intermediate
%$er and ltimatel$ to the final prchaser is the %rden of the tax. Stated differentl$, a seller
&ho is directl$ and le#all$ lia%le for pa$ment of an indirect tax, sch as the -A. on #oods or
services is not necessaril$ the person &ho ltimatel$ %ears the %rden of the same tax. !t is the
final prchaser or consmer of sch #oods or services &ho, altho#h not directl$ and le#all$
lia%le for the pa$ment thereof, ltimatel$ %ears the %rden of the tax
E+$,-(&o*' .#o, VAT /#$ %#/*($) 6y $+-#$'' -#o1&'&o* o. (3$ T/+ Co)$ o# '-$0&/l l/2'.
Ander -A., the transaction can have preferential treatment in the follo&in# &a$sC
(a) VAT E+$,-(&o*. An exemption means that (3$ '/l$ of #oods or properties andDor
services /*) (3$ u'$ o# l$/'$ of properties &' *o( 'u6>$0( (o VAT 8ou(-u( (/+4 and the
'$ll$# &' *o( /llo2$) /*y (/+ 0#$)&( o* VAT 8&*-u( (/+4 -#$1&ou'ly -/&).
2,
.his is a case
&herein (3$ VAT &' #$,o1$) /( (3$ $+$,-( '(/%$ (i.e., at the point of the sale, %arter or
exchan#e of the #oods or properties).
.he -$#'o* ,/?&*% (3$ $+$,-( '/l$ of #oods, properties or services '3/ll *o( 6&ll /*y
ou(-u( (/+ (o 3&' 0u'(o,$#' %ecase the said transaction is not s%Eect to -A.. 0n the
other hand, a VAT"#$%&'($#$) -u#03/'$# o. VAT"$+$,-( %oo)'Dproperties or services
&hich are exempt from -A. &' *o( $*(&(l$) (o /*y &*-u( (/+ on sch prchase )$'-&($
(3$ &''u/*0$ o. / VAT &*1o&0$ o# #$0$&-(.
21
(%) @$#o"#/($) S/l$'. .hese are '/l$' 6y VAT"#$%&'($#$) -$#'o*' &hich are 'u6>$0( (o
05 #/($, meanin# the (/+ 6u#)$* &' *o( -/''$) on to the prchaser. A 9$#o"#/($) '/l$
%$ a -A.7re#istered person, &hich is a taxa%le transaction for -A. prposes, '3/ll *o(
#$'ul( &* /*y ou(-u( (/+. Fo&ever, (3$ &*-u( (/+ o* 3&' -u#03/'$' of #oods, properties
or services #$l/($) (o 'u03 9$#o"#/($) '/l$ '3/ll 6$ /1/&l/6l$ /' (/+ 0#$)&( o# #$.u*) in
accordance &ith these re#lations.
22
*)$# @$#o"#/(&*%, /ll VAT &' #$,o1$) .#o, (3$ 9$#o"#/($) %oo)', activit$ or firm. !n
contrast, $+$,-(&o* o*ly #$,o1$' (3$ VAT /( (3$ $+$,-( '(/%$, /*) &( 2&ll /0(u/lly &*0#$/'$,
rather than redce the (o(/l (/+$' -/&) 6y (3$ $+$,-( .&#,A' 6u'&*$'' o# *o*"#$(/&l 0u'(o,$#'.
!t is for this reason that a sharp distinction mst %e made %et&een Gero7ratin# and exemption in
desi#natin# a vale7added tax.
2(
Apropos, the Co*($+A' 0l/&, (o VAT $+$,-(&o* in the instant case .o# &(' -u#03/'$' of spplies
and ra& materials &' .ou*)$) ,/&*ly o* Section 12 (%) and (c) of R$-. A0( No. =22=, 23&03
6/'&0/lly $+$,-(' (3$, .#o, /ll */(&o*/l /*) lo0/l &*($#*/l #$1$*u$ (/+$', &*0lu)&*% VAT
and Section * (A)(a) of B!R Revene Re#lations No. 17)5.
2*
0n this point, Co*($+ #&%3(ly 0l/&,' (3/( &( &' &*)$$) VAT"E+$,-( and this fact is not
controverted %$ the respondent. !n fact, Co*($+ &' #$%&'($#$) /' / NON"VAT (/+-/y$# per
"ertificate of Re#istration
25
issed %$ the B!R. A' 'u03, &( &' $+$,-( .#o, VAT o* /ll &(' '/l$'
/*) &,-o#(/(&o*' of #oods and services.
B3&l$ &( &' (#u$ (3/( (3$ Co*($+ '3oul) *o( 3/1$ 6$$* l&/6l$ .o# (3$ VAT &*/)1$#($*(ly
-/''$) on to it 6y &(' 'u--l&$# '&*0$ 'u03 &' / 9$#o"#/($) '/l$ o* (3$ -/#( o. (3$ 'u--l&$#, the
Co*($+ &' *o( (3$ -#o-$# -/#(y (o 0l/&, 'u03 VAT #$.u*).
Since the transaction is deemed a Gero7rated sale, Co*($+A' 'u--l&$# ,/y 0l/&, /* I*-u( VAT
0#$)&( 2&(3 *o 0o##$'-o*)&*% Ou(-u( VAT l&/6&l&(y. "on#rentl$, no 0tpt -A. ma$ %e
passed on to the petitioner.
Co*($+ &' #$%&'($#$) /' / NON"VAT (/+-/y$# and ths, is exempt from -A.. As an exempt
-A. taxpa$er, &( &' *o( /llo2$) /*y (/+ 0#$)&( o* VAT 8&*-u( (/+4 -#$1&ou'ly -/&). !n fine,
even if &e are to assme that exemption from the %rden of -A. on petitioner:s prchases did
exist, petitioner is still not entitled to an$ tax credit or refnd on the inpt tax previosl$ paid as
petitioner is an exempt -A. taxpa$er.
Rather, &( &' (3$ Co*($+A' 'u--l&$#' 23o /#$ (3$ -#o-$# -/#(&$' (o 0l/&, (3$ (/+ 0#$)&( /*)
/00o#)&*%ly #$.u*) (3$ Co*($+ o. (3$ VAT $##o*$ou'ly -/''$) on to the latter.
Accordin#l$, &e find that the "ort of Appeals did not commit an$ reversi%le error of la& in
holdin# that petitioner:s -A. exemption nder Rep. Act No. 7227 is limited to the -A. on &hich
it is directl$ lia%le as a seller and hence, it cannot claim an$ refnd or exemption for an$ inpt
-A. it paid, if an$, on its prchases of ra& materials and spplies.
A6/?/)/ Gu#o P/#(y L&'(, $( /l 1' E+$0. S$0. E#,&(/
F/0('C 0n ;a$ 2*, 2,,5, the 'resident si#ned into la& Rep%lic Act )((7 or the -A. Reform
Act. Before the la& too9 effect on 8l$ 1, 2,,5, the "ort issed a .R0 enEoinin# #overnment
from implementin# the la& in response to a sle& of petitions for certiorari and prohi%ition
=estionin# the constittionalit$ of the ne& la&.
.he challen#ed section of R.A. No. )((7 is the common proviso in Sections *, 5 and HC I.hat the
'resident, pon the recommendation of the Secretar$ of 5inance, shall, effective 8anar$ 1, 2,,H,
raise the rate of vale7added tax to 12J, after an$ of the follo&in# conditions has %een satisfiedC
(i) -ale7added tax collection as a percenta#e of 4ross /omestic 'rodct (4/') of the previos
$ear exceeds t&o and for7fifth percent (2 *D5J)<
or (ii) National #overnment deficit as a percenta#e of 4/' of the previos $ear exceeds one and
one7half percent (1KJ)L
'etitioners alle#e that the #rant of stand7%$ athorit$ to the 'resident to increase the -A. rate is
an a%dication %$ "on#ress of its exclsive po&er to tax %ecase sch dele#ation is not covered
%$ Section 2+ (2), Article -! "onsti. .he$ ar#e that -A. is a tax levied on the sale or exchan#e
of #oods and services &hich can:t %e inclded &ithin the prvie& of tariffs nder the exemption
dele#ation since this refers to cstoms dties, tolls or tri%te pa$a%le pon merchandise to the
#overnment and sall$ imposed on importedDexported #oods. .he$ also said that the 'resident
has po&ers to case, inflence or create the conditions provided %$ la& to %rin# a%ot the
conditions precedent. ;oreover, the$ alle#e that no #idin# standards are made %$ la& as to ho&
the Secretar$ of 5inance &ill ma9e the recommendation.
I''u$C Bhether or not the RA )((7Ms stand7%$ athorit$ to the 1xective to increase the -A.
rate, especiall$ on accont of the recommendator$ po&er #ranted to the Secretar$ of 5inance,
constittes nde dele#ation of le#islative po&erN N0
H$l)C .he po&ers &hich "on#ress is prohi%ited from dele#atin# are those &hich are strictl$, or
inherentl$ and exclsivel$, le#islative. 'rel$ le#islative po&er &hich can never %e dele#ated is
the athorit$ to ma9e a complete la&7 complete as to the time &hen it shall ta9e effect and as to
&hom it shall %e applica%le, and to determine the expedienc$ of its enactment. !t is the natre of
the po&er and not the lia%ilit$ of its se or the manner of its exercise &hich determines the
validit$ of its dele#ation.
.he exceptions areC
(a) dele#ation of tariff po&ers to 'resident nder "onstittion
(%) dele#ation of emer#enc$ po&ers to 'resident nder "onstittion
(c) dele#ation to the people at lar#e
(d) dele#ation to local #overnments
(e) dele#ation to administrative %odies
5or the dele#ation to %e valid, it mst %e complete and it mst fix a standard. A sfficient
standard is one &hich defines le#islative polic$, mar9s its limits, maps ot its %ondaries and
specifies the p%lic a#enc$ to appl$ it.
!n this case, it is not a dele#ation of le#islative po&er BA. a dele#ation of ascertainment of facts
pon &hich enforcement and administration of the increased rate nder the la& is contin#ent.
.he le#islatre has made the operation of the 12J rate effective 8anar$ 1, 2,,H, contin#ent
pon a specified fact or condition. !t leaves the entire operation or non7operation of the 12J rate
pon factal matters otside of the control of the exective. No discretion &old %e exercised %$
the 'resident. Fi#hli#htin# the a%sence of discretion is the fact that the &ord SFA33 is sed in
the common proviso. .he se of the &ord SFA33 connotes a mandator$ order. !ts se in a
statte denotes an imperative o%li#ation and is inconsistent &ith the idea of discretion.
.hs, it is the ministerial dt$ of the 'resident to immediatel$ impose the 12J rate pon the
existence of an$ of the conditions specified %$ "on#ress. .his is a dt$, &hich cannot %e evaded
%$ the 'resident. !t is a clear directive to impose the 12J -A. rate &hen the specified conditions
are present.
"on#ress Est #ranted the Secretar$ of 5inance the athorit$ to ascertain the existence of a fact777
&hether %$ /ecem%er (1, 2,,5, the -A. collection as a percenta#e of 4/' of the previos $ear
exceeds 2 *D5 J or the national #overnment deficit as a percenta#e of 4/' of the previos $ear
exceeds one and 1KJ. !f either of these t&o instances has occrred, the Secretar$ of 5inance, %$
le#islative mandate, mst s%mit sch information to the 'resident.
!n ma9in# his recommendation to the 'resident on the existence of either of the t&o conditions,
the Secretar$ of 5inance is not actin# as the alter e#o of the 'resident or even her s%ordinate.
Fe is actin# as the a#ent of the le#islative department, to determine and declare the event pon
&hich its expressed &ill is to ta9e effect. .he Secretar$ of 5inance %ecomes the means or tool %$
&hich le#islative polic$ is determined and implemented, considerin# that he possesses all the
facilities to #ather data and information and has a mch %roader perspective to properl$ evalate
them. Fis fnction is to #ather and collate statistical data and other pertinent information and
verif$ if an$ of the t&o conditions laid ot %$ "on#ress is present.
"on#ress does not a%dicate its fnctions or ndl$ dele#ate po&er &hen it descri%es &hat Eo%
mst %e done, &ho mst do it, and &hat is the scope of his athorit$< in or complex econom$
that is fre=entl$ the onl$ &a$ in &hich the le#islative process can #o for&ard.
.here is no nde dele#ation of le#islative po&er %t onl$ of the discretion as to the exection of
a la&. .his is constittionall$ permissi%le. "on#ress did not dele#ate the po&er to tax %t the
mere implementation of the la&.
A!ADA:A Gu#o P/#(y L&'( 1'. E#,&(/
G.R. No. 17E057 S$-($,6$# 1, 2005
FACTSC
Before R.A. No. )((7 too9 effect, petitioners ABAOA/A 4AR0 'art$ 3ist, et al., filed a
petition for prohi%ition on ;a$ 27, 2,,5 =estionin# the constittionalit$ of Sections *, 5 and H
of R.A. No. )((7, amendin# Sections 1,H, 1,7 and 1,+, respectivel$, of the National !nternal
Revene "ode (N!R"). Section * imposes a 1,J -A. on sale of #oods and properties, Section 5
imposes a 1,J -A. on importation of #oods, and Section H imposes a 1,J -A. on sale of
services and se or lease of properties. .hese =estioned provisions contain a niformp ro v is o
athoriGin# the 'resident, pon recommendation of the Secretar$ of 5inance, to raise the -A.
rate to 12J, effective 8anar$ 1, 2,,H, after specified conditions have %een satisfied. 'etitioners
ar#e that the la& is nconstittional.
ISSESC
1. Bhether or not there is a violation of Article -!, Section 2* of the "onstittion.
2. Bhether or not there is nde dele#ation of le#islative po&er in violation of Article -! Sec
2+(2) of the "onstittion.
(. Bhether or not there is a violation of the de process and e=al protection nder Article !!!
Sec. 1 of the "onstittion.
RLINGC
1. Since there is no =estion that the revene %ill exclsivel$ ori#inated in the Fose of
Representatives, the Senate &as actin# &ithin its constittional po&er to introdce amendments
to the Fose %ill &hen it inclded provisions in Senate Bill No. 1)5, amendin# corporate
income taxes, percenta#e, and excise and franchise taxes.
2. .here is no nde dele#ation of le#islative po&er %t onl$ of the discretion as to the exection
of a la&. .his is constittionall$ permissi%le. "on#ress does not a%dicate its fnctions or ndl$
dele#ate po&er &hen it descri%es &hat Eo% mst %e done, &ho mst do it, and &hat is the scope
of his athorit$< in or complex econom$ that is fre=entl$ the onl$ &a$ in &hich the le#islative
process can #o for&ard.
(. .he po&er of the State to ma9e reasona%le and natral classifications for the prposes of
taxation has lon# %een esta%lished. Bhether it relates to the s%Eect of taxation, the 9ind of
propert$, the rates to %e levied, or the amonts to %e raised, the methods of assessment, valation
and collection, the State:s po&er is entitled to presmption of validit$. As a rle, the Ediciar$
&ill not interfere &ith sch po&er a%sent a clear sho&in# of nreasona%leness, discrimination, or
ar%itrariness.
Co,,&''&o*$# o. I*($#*/l R$1$*u$ 1' S$/%/($ T$03*olo%y P3&l&--&*$'
(11 5e%rar$ 2,,5)
Po*$*($C 'an#ani%an, J. (.FANO A33 .FA. !S F03P AN/ ;!4F.P that this #$ is the
ponente of the fri##in: case. Faaaaaa$.)
N/(u#$C 'etition for revie& on certiorari of a decision of the "ort of Appeals
:OCTRINEC 0N -A3!/!.P 05 R1-1NA1 RA31S AN/ R14A3A.!0NS
T3$ 0o*($,-o#/*$ou' 0o*'(#u0(&o* o. ou# (/+ l/2' 6y !IR /u(3o#&(&$' 23o /#$ 0/ll$) u-o*
(o $+$0u($ o# /),&*&'($# 'u03 l/2'2&ll 3/1$ (o 6$ /)o-($).
T3$ !IR #$%ul/(&o*' /))&(&o*/lly #$;u&#&*% /* /--#o1$) -#&o# /--l&0/(&o* .o# $..$0(&1$
9$#o #/(&*%0/**o( -#$1/&l o1$# (3$ 0l$/# VAT */(u#$ o. #$'-o*)$*(A' (#/*'/0(&o*'. .he
scope of sch re#lations is not I&ithin the stattor$ athorit$ x x x #ranted %$ the le#islatre.
1. A,$#$ /),&*&'(#/(&1$ &''u/*0$, l&?$ / !IR #$%ul/(&o*, 0/**o( /,$*) (3$ l/2F (3$
.o#,$# 0/**o( -u#-o#( (o )o /*y ,o#$ (3/* &*($#-#$( (3$ l/(($#. .he corts &ill not
contenance one that overrides the statte it see9s to appl$ and implement.
O(3$# (3/* (3$ %$*$#/l #$%&'(#/(&o* o. / (/+-/y$# (3$ VAT '(/(u' o. 23&03 &' /-(ly
)$($#,&*$), *o -#o1&'&o* u*)$# ou# VAT l/2 #$;u&#$' /* /))&(&o*/l /--l&0/(&o* (o
6$ ,/)$ .o# 'u03 (/+-/y$#A' (#/*'/0(&o*' (o 6$ 0o*'&)$#$) $..$0(&1$ly 9$#o"#/($).
An effectivel$ Gero7rated transaction does not and cannot %ecome exempt simpl$
%ecase an application therefor &as not made or, if made, &as denied. .o allo& the
additional re=irement is to #ive nfettered discretion to those officials or a#ents &ho,
&ithot flid consideration, are %ent on den$in# a valid application. ;oreover, the State
can never %e estopped %$ the omissions, mista9es or errors of its officials or a#ents.
2. Grantia argumenti that sch an application is re=ired %$ la&, (3$#$ &' '(&ll (3$
-#$'u,-(&o* o. #$%ul/#&(y &* (3$ -$#.o#,/*0$ o. o..&0&/l )u(y. Respondent:s
re#istration carries &ith it the presmption that, in the a%sence of contradictor$ evidence,
an application for effective Gero ratin# &as also filed and approval thereof #iven.
Besides, &( &' /l'o -#$'u,$) (3/( (3$ l/2 3/' 6$$* o6$y$) 6y 6o(3 (3$ /),&*&'(#/(&1$
o..&0&/l' /*) (3$ /--l&0/*(.
3. 1ven tho#h sch an application &as not made, /ll (3$ '-$0&/l laws 2$ 3/1$ (/0?l$)
$+$,-( #$'-o*)$*( *o( o*ly .#o, &*($#*/l #$1$*u$ l/2' 6u( /l'o .#o,
(3$ regulations &''u$) -u#'u/*( (3$#$(o. 3enienc$ in the implementation of the -A. in
ecoGones is an imperative, precisel$ to spr economic #ro&th in the contr$ and attain
#lo%al competitiveness as envisioned in those la&s.
FACTSC
Sea#ate .echnolo#$ 'hilippines is a resident forei#n corporation dl$ re#istered &ith
S1" to do %siness in the 'hilippines. 'rincipal office addressC "e% .o&nship 0ne,
S-$0&/l E0o*o,&0 @o*$, Br#$ "antao7an, Na#a, "e%.
Sea#ate is #$%&'($#$) o* 7 Ju*$ 1GG= &ith the 'hil 1xport 6one Athorit$ (PE@A) to
en#a#e in manfactre of recordin# components sed in compters for export
Sea#ate is a VAT"#$%&'($#$) entit$< it filed its -A. retrns for the period of 1 Apr 1))+ to
(, 8ne 1)))
04 O0(o6$# 1GGG Sea#ate filed /* /),&*&'(#/(&1$ 0l/&, .o# #$.u*) o. VAT inpt taxes
%t it received no final action from the "!R re#ardin# the claim for refnd
"!R:s defencesC
o Sea#ate:s claim is s%Eect to administrative rotinar$ investi#ation<
o Sea#ate has %rden of proof that the taxes so#ht to %e refnded &ere
erroneosl$Dille#all$ collected<
o !t is incm%ent pon Sea#ate to prove that it is indeed entitled to the refndDcredit
so#ht. 5ailre on the part of the >respondent? to prove the same is fatal to its
claim for tax credit. Fe &ho claims exemption mst %e a%le to Estif$ his claim
%$ the clearest #rant of or#anic or stattor$ la&. An exemption from the common
%rden cannot %e permitted to exist pon va#e implications<
o 4rantin#, &ithot admittin#, that Sea#ate is a P3&l&--&*$ E0o*o,&0 @o*$
Au(3o#&(y 8PE@A4 #$%&'($#$) E0o9o*$ E*($#-#&'$, then its 6u'&*$'' &' *o(
'u6>$0( (o VAT prsant to Section 2* of Rep%lic Act No. (>RA?) 7)1H in
relation to Section 1,( of the .ax "ode, as amended. As Sea#ate:s %siness is *o(
'u6>$0( (o VAT, (3$ 0/-&(/l %oo)' /*) '$#1&0$' &( /ll$%$) (o 3/1$ -u#03/'$)
/#$ 0o*'&)$#$) *o( u'$) &* VAT (/+/6l$ 6u'&*$''. Sea#ate is *o( $*(&(l$) (o
#$.u*) of inpt taxes on sch capital #oods prsant to Section *.1,H.1 of
Revene Re#lations No. (>RR?)77)5, and of inpt taxes on services prsant to
Section *.1,( of said re#lations.
o Sea#ate mst also sho& that the$ complied &ith provisions on filin# a &ritten
claim for refnd &ithin t&o $ears from the pa$ment of the tax,
CA #ul$) to #rant the claim for refndDissance of tax credit certificate (.""). Sch
amont represented the ntiliGed %t s%stantiated inpt -A. paid on capital #oods
prchased for the specified period.
7Reasonin# of the "AC Sea#ate availed itself of ONLH (3$ &*0$*(&1$' u*)$# EO 227,
and not of '/ HH and RA 7)1H."ompan$ is, therefore, 0o*'&)$#$) $+$,-( o*ly .#o, (3$
-/y,$*( o. &*0o,$ (/+ 23$* &( o-($) .o# (3$ &*0o,$ (/+ 3ol&)/y &* l&$u o. (3$ 5
-$#0$*( -#$.$#$*(&/l (/+ o* %#o'' &*0o,$ $/#*$). As a -A.7re#istered entit$, tho#h, it
&as '(&ll 'u6>$0( (o (3$ -/y,$*( of other national internal revene taxes, li9e the VAT.
Sea#ate also correctl$ filed its administrative claim for refndD."".
ISSEISC
(As s%mitted %$ the petitioner) BoN Sea#ate is entitled to the refnd or issance of .ax "redit
"ertificate for the alle#ed ntiliGed inpt -A. paid on capital #oods prchased for the period
April 1, 1))+ to 8ne (,, 1))).
HEL:C
HES, SEAGATE &' $*(&(l$) (o (3$ #$.u*)I&''u/*0$ o. T/+ C#$)&( C$#(&.&0/($.
As a PE@A"#$%&'($#$) $*($#-#&'$ &ithin a special economic Gone (a9a 1"060N1, a selected
area &ith hi#hl$7developed or &hich has the potential to %e developed into, a#ro7indstrial,
indstrial, torist7recreational, commercial, %an9in#, investment and financial centers. RA 7)1H,
.he Special 1conomic 6one Act of 1))5.), respondent is entitled to the fiscal incentives and
%enefits provided for %$ 1!.F1R P: 77 (la& creatin# the 1xport 'rocessin# 6one Athorit$7
1'6A) or EO 227 (0mni%s !nvestments "ode).
!t shall also $*>oy /ll the privile#es, %enefits, advanta#es, or exemptions nder RA 7227 (Bases
"onversion and /evelopment Act of 1))2) and RA 7+** (1xport /evelopment Act of 1))*).
RATIOC
Preferential Tax Treatment Under Special Laws
!f Sea#ate avails itself ofC
P: 77 2 Sea#ate shall not %e s%Eect to &*($#*/l #$1$*u$ l/2' and re#lations for ra& materials,
spplies, articles, e=ipment, machineries, spare parts and &ares, except those prohi%ited %$ la&,
%ro#ht into the Gone to %e stored, %ro9en p, repac9ed, assem%led, installed, sorted, cleaned,
#raded or other&ise processed, maniplated, manfactred, mixed or sed directl$ or indirectl$
in sch activities.
!t shall enEo$ a net7operatin# loss carr$ over< accelerated depreciation< forei#n exchan#e and
financial assistance< and $+$,-(&o* .#o, $+-o#( (/+$', lo0/l (/+$', /*) l&0$*'$'.
EO 2272Sea#ate shall %e exempt from same internal revene la&s and re#lations. Ander this
la&, Sea#ate shall frther %e entitled to an income tax holida$< additional dedction for la%or
expense< simplification of cstoms procedre< nrestricted se of consi#ned e=ipment< access to
a %onded manfactrin# &arehose s$stem< privile#es for forei#n nationals emplo$ed< tax
credits on domestic capital e=ipment, as &ell as for taxes and dties on ra& materials< and
exemption from contractors: taxes, &harfa#e des, taxes and dties on imported capital
e=ipment and spare parts, export taxes, dties, imposts and fees,local taxes and licenses, and
real propert$ taxes.
!t can %e seen from the follo&in# la&s that Sea#ate (respondent) enEo$s preferential tax
treatment. !t is not s%Eect to internal revene la&s and re#lations, and is even entitled to tax
credits.
:&/9 1. T&,6ol
1G, 2011
;a$ toll fees collected %$ toll&a$ operators %e s%Eected to vale7 added taxN
FACTSC
Renato -. /iaG and Arora ;a. 5. .im%ol filed a petition for declarator$ relief1 assailin# the
validit$ of the impendin# imposition of -A. %$ B!R on the collections of toll&a$ operators.
'etitioners claim that, since the -A. &old reslt in increased toll fees, the$ have an interest
as re#lar sers of toll&a$s in stoppin# the B!R action.
/iaG claims that he sponsored the approval of Rep%lic Act 771H (1-A. 3a&) and Rep%lic
Act +*2* (the 1))7 N!R") at the Fose of Representatives.
.im%olclaims that she served as Assistant Secretar$ of /.! and consltant of the .RB in the
past administration.
'etitioners alle#e that the B!R attempted drin# the administration of 'resident 4loria
;acapa#al7 Arro$o to impose -A. on toll fees. Bt the imposition &as deferred in vie& of the
consistent opposition of /iaG and other sectors to sch move.
Bt, pon 'resident Beni#no ". A=ino !!!s assmption of office in 2,1,, the B!R revived
the idea
and &old impose the challen#ed tax on toll fees %e#innin# A#st 1H, 2,1, nless Ediciall$
enEoined.
'etitioners hold the vie& thatC
"on#ress did not, &hen it enacted the N!R", intend to inclde toll fees &ithin the meanin# of
@sale of services@ that are s%Eect to -A.<
a toll fee is a @sers tax,@ not a sale of services<
to impose -A. on toll fees &old amont to a tax on p%lic service<
since -A. &as never factored into the formla for comptin# toll fees, its imposition &old
violate the non7impairment clase of the constittion.
"ort issed a .R0 enEoinin# the implementation of the -A..
.he "ort re=ired the #overnment, represented %$ respondents "esar -. 'risima, S05, and
Oim S. 8acinto7Fenares, "!R, to comment on the petition &ithin 1, da$s from notice.
3ater, the "ort issed another resoltion treatin# the petition as one for prohi%ition.
0ffice of the Solicitor 4eneral filed the #overnments comment.
.he #overnment (S0341N) avers thatC
1. N!R" imposes -A. on all 9inds of services of franchise #rantees, incldin# toll&a$
operations, except &here the la& provides other&ise< that the "ort shold see9 the meanin#
and intent of the la& from the &ords sed in the statte< and that the imposition of -A. on
toll&a$ operations has %een the s%Eect as earl$ as 2,,( of several B!R rlin#s and circlars.
2. petitioners have no ri#ht to invo9e the non7impairment of contracts clase since the$ clearl$
have no personal interest in existin# toll operatin# a#reements (.0As) %et&een the
#overnment and toll&a$ operators.
At an$ rate, the non7impairment clase cannot limit the States soverei#n taxin# po&er
&hich is #enerall$ read into contracts.
(. non7inclsion of -A. in the parametric formla for comptin# toll rates cannot exempt
toll&a$ operators from -A..
!n an$ event, it cannot %e claimed that the ri#hts of toll&a$ operators to a reasona%le rate of
retrn &ill %e impaired %$ the -A. since this is imposed on top of the toll rate. 5rther, the
imposition of -A. on toll fees &old have ver$ minimal effect on motorists sin# the
toll&a$s.
petitioners point ot that toll&a$ operators cannot %e re#arded as franchise #rantees nder the
N!R" since the$ do not hold le#islative franchises.
5inall$, B!R Revene ;emorandm "irclar H(72,1, (B!R R;" H(72,1,), &hich directs
toll
companies to record an accmlated inpt -A. of Gero %alance in their %oo9s as of A#st 1H,
2,1,, contravenes Section 111 of the N!R" &hich #rants entities that first %ecome lia%le to -A.
a transitional inpt tax credit of 2J on %e#innin# inventor$. 5or this reason, the -A. on toll fees
cannot %e implemented.
ISSES
procedral issesC
1. Bhether or not the "ort ma$ treat the petition for declarator$ relief as one for prohi%ition<
and
2. Bhether or not petitioners /iaG and .im%ol have le#al standin# to file the action.
s%stantive issesC
1. Bhether or not the #overnment is nla&fll$ expandin# -A. covera#e %$ incldin# toll&a$
operators and toll&a$ operations in the terms @franchise #rantees@ and @sale of services@ nder
Section 1,+ of the "ode< and
2. Bhether or not the imposition of -A. on toll&a$ operators
a. amonts to a tax on tax and not a tax on services<
%. &ill impair the toll&a$ operators ri#ht to a reasona%le retrn of investment nder their
.0As<
c. is not administrativel$ feasi%le and cannot %e implemented.
RLINGSC
A. 'rocedral !ssesC
there are precedents for treatin# a petition for declarator$ relief as one for prohi%ition if the
case has far7reachin# implications and raises =estions that need to %e resolved for the p%lic
#ood. .he "ort has also held that a petition for prohi%ition is a proper remed$ to prohi%it or
nllif$ acts of exective officials that amont to srpation of le#islative athorit$.
it is not onl$ the ri#ht, %t the dt$ of the "ort to ta9e co#niGance of and resolve the isses
that the petition raises (a%ove case is for the p%lic #ood)
Altho#h the petition does not strictl$ compl$ &ith the re=irements of Rle H5, the "ort has
ample po&er to &aive sch technical re=irements &hen the le#al =estions to %e resolved are of
#reat importance to the p%lic. .he same ma$ %e said of the re=irement of locs standi &hich is
a mere procedral re=isite.
B. 0n the S%stantive !ssesC
S" held it is s%Eect to -A. nder enmeration provided in Sec. 1,+ of N!R" (toll&a$
operators fall nder franchise #ratees)
-A. is levied, assessed, and collected, accordin# to Section 1,+, on the #ross receipts derived
from the sale or exchan#e of services as &ell as from the se or lease of properties.
.he third para#raph of Section 1,+ defines @sale or exchan#e of services@ as follo&sC
.he phrase sale or exchan#e of services means the performance of all 9inds of services
in the 'hilippines for others for a fee, remneration or considerationQQ.
!t is plain from the a%ove that the la& imposes -A. on @all 9inds of services@ rendered in
the 'hilippines for a fee, incldin# those specified in the list.
.he enmeration of affected services is not exclsive.
B$ =alif$in# @services@ &ith the &ords @all 9inds,@ "on#ress has #iven the term @services@
an
all7encompassin# meanin#.
.he listin# of specific services are intended to illstrate ho& pervasive and %road is the
-A.s reach rather than esta%lish concrete limits to its application.
.hs, ever$ activit$ that can %e ima#ined as a form of @service@ rendered for a fee
shold %e deemed inclded nless some provision of la& especiall$ excldes it.
'residential /ecree ('./.) 1112 or the .oll 0peration /ecree esta%lishes the le#al %asis for the
services that toll&a$ operators render. 1ssentiall$, toll&a$ operators constrct, maintain, and
operate express&a$s, also called toll&a$s, at the operators expense. .oll&a$s serve as
alternatives to re#lar p%lic hi#h&a$s that meander thro#h poplated areas and %ranch ot to
local roads. .raffic in the re#lar p%lic hi#h&a$s is for this reason slo&7movin#. !n
consideration for constrctin#
toll&a$s at their expense, the operators are allo&ed to collect #overnment7approved fees from
motorists sin# the toll&a$s ntil sch operators cold fll$ recover their expenses and earn
reasona%le retrns from their investments.
Bhen a toll&a$ operator ta9es a toll fee from a motorist, the fee is in effect for the latters
se of the
toll&a$ facilities over &hich the operator enEo$s private proprietar$ ri#hts12 that its contract and
the la& reco#niGe. !n this sense, the toll&a$ operator is no different from the follo&in# service
providers nder Section 1,+ &ho allo& others to se their properties or facilities for a feeC
1) 3essors of propert$, &hether personal or real<
2) Barehosin# service operators<
() 3essors or distri%tors of cinemato#raphic films<
*) 'roprietors, operators or 9eepers of hotels, motels, resthoses, pension hoses, inns, resorts<
5) 3endin# investors (for se of mone$)<
H) .ransportation contractors on their transport of #oods or car#oes, incldin# persons &ho
transport #oods or car#oes for hire and other domestic common carriers %$ land relative to their
transport of #oods or car#oes< and
7) "ommon carriers %$ air and sea relative to their transport of passen#ers, #oods or car#oes
from one place in the 'hilippines to another place in the 'hilippines.
!t does not help petitioners case that Section 1,+ s%Eects to -A. @all 9inds of services@
rendered for a fee @re#ardless of &hether or not the performance thereof calls for the exercise or
se of the ph$sical or mental faclties.@ .his means that @services@ to %e s%Eect to -A. need not
fall nder the traditional concept of services, the personal or professional 9inds that re=ire the
se of hman 9no&led#e and s9ills.
And not onl$ do toll&a$ operators come nder the %road term @all 9inds of services,@ the$
also
come nder the specific class descri%ed in Section 1,+ as @all other franchise #rantees@ &ho
are s%Eect to -A., @except those nder Section 11) of this "ode.@
'etitioners of corse contend that toll&a$ operators cannot %e considered @franchise #rantees@
nder Section 1,+ since the$ do not hold le#islative franchises. Bt nothin# in Section 1,+
indicates that the @franchise #rantees@ it spea9s of are those &ho hold le#islative franchises.
.he term @franchise@ has %een %roadl$ constred as referrin#, not onl$ to athoriGations that
"on#ress directl$ isses in the form of a special la&, %t also to those #ranted %$ administrative
a#encies to &hich the po&er to #rant franchises has %een dele#ated %$ "on#ress.
.033BAP 0'1RA.0RS AR1, 0B!N4 .0 .F1 NA.AR1 AN/ 0B81". 05 .F1!R
BAS!N1SS, @5RAN"F!S1 4RAN.11S.@
'etitioners ar#e that a toll fee is a @sers tax@ and to impose -A. on toll fees is tantamont
to taxin# a tax.
.he operation %$ the #overnment of a toll&a$ does not chan#e the character of the road as
one for p%lic se.
.oll&a$ fees are not taxes. .he$ are not assessed and collected %$ the B!R and do not #o to
the #eneral coffers of the #overnment.
5ees paid %$ the p%lic to toll&a$ operators for se of the toll&a$s, are not taxes in an$ sense.
A tax is imposed nder the taxin# po&er of the #overnment principall$ for the prpose of raisin#
revenes to fnd p%lic expenditres. .oll fees, on the other hand, are collected %$ private
toll&a$ operators as reim%rsement for the costs and expenses incrred in the constrction,
maintenance and operation of the toll&a$s, as &ell as to assre them a reasona%le mar#in of
income.
-A. on toll&a$ operations is not reall$ a tax on the toll&a$ ser, %t on the toll&a$ operator.
Ander Section 1,5 of the "ode, -A. is imposed on an$ person &ho, in the corse of trade or
%siness, sells or renders services for a fee. !n other &ords, the seller of services, &ho in this case
is the toll&a$ operator, is the person lia%le for -A.. .he latter merel$ shifts the %rden of -A. to
the toll&a$ ser as part of the toll fees.
-A. on toll&a$ operations cannot %e a tax on tax even if toll fees &ere deemed as a @sers
tax.@ -A. is assessed a#ainst the toll&a$ operators #ross receipts and not necessaril$ on the
toll fees. Altho#h the toll&a$ operator ma$ shift the -A. %rden to the toll&a$ ser, it &ill not
ma9e the latter directl$ lia%le for the -A.. .he shifted -A. %rden simpl$ %ecomes part of the
toll fees that one has to pa$ in order to se the toll&a$s.(2
.im%ol has no personalit$ to invo9e the non7impairment of contract clase on %ehalf of
private investors in the toll&a$ proEects. She &ill neither %e preEdiced %$ nor %e affected %$ the
alle#ed dimintion in retrn of investments that ma$ reslt from the -A. imposition. She has no
interest at all in the profits to %e earned nder the .0As. .he interest in and ri#ht to recover
investments solel$ %elon#s to the
private toll&a$ investors.
Accordin# to petitioners, -A. on toll&a$ operations is not administrativel$ feasi%le.
Administrative feasi%ilit$ is one of the canons of a sond tax s$stem. !t simpl$ means that the tax
s$stem shold %e capa%le of %ein# effectivel$ administered and enforced &ith the least
inconvenience to the taxpa$er. Non7o%servance of the canon, ho&ever, &ill not render a tax
imposition invalid @except to the extent that specific constittional or stattor$ limitations are
impaired.@ .hs, even if the imposition of -A. on toll&a$ operations ma$ seem %rdensome to
implement, it is not necessaril$ invalid nless some aspect of it is sho&n to violate an$ la& or the
"onstittion.
5or the same reason, the "ort cannot prematrel$ declare as ille#al, B!R R;" H(72,1,
&hich directs toll companies to record an accmlated inpt -A. of Gero %alance in their %oo9s
as of A#st 1H, 2,1,, the date &hen the -A. imposition &as spposed to ta9e effect. .he
issance alle#edl$ violates Section 111(A)(H of the "ode &hich #rants first time -A. pa$ers a
transitional inpt -A. of 2J on %e#innin# inventor$.
!n this connection, the B!R explained that B!R R;" H(72,1, is actall$ the prodct of
ne#otiations &ith toll&a$ operators &ho have %een assessed -A. as earl$ as 2,,5, %t failed
to char#e -A.7inclsive toll fees &hich %$ no& can no lon#er %e collected. .he toll&a$ operators
a#reed to &aive the 2J transitional inpt -A., in exchan#e for cancellation of their past de -A.
lia%ilities. Nota%l$, the ri#ht to claim the 2J transitional inpt -A. %elon#s to the toll&a$
operators &ho have not =estioned the circlars validit$. .he$ are ths the ones &ho have a
ri#ht to challen#e the circlar in a direct and proper action %ro#ht for the prpose.
"!R did not srp le#islative prero#ative or expand the -A. la&s covera#e &hen she
so#ht to impose -A. on toll&a$ operations. Section 1,+(A) of the "ode clearl$ states that
services of all other franchise #rantees are s%Eect to -A., except as ma$ %e provided nder
Section 11) of the "ode. .oll&a$ operators are not amon# the franchise #rantees s%Eect to
franchise tax nder the latter provision. Neither are their services amon# the -A.7exempt
transactions nder Section 1,) of the "ode.
the #rant of tax exemption is a matter of le#islative polic$ that is &ithin the exclsive
prero#ative of "on#ress. .he "orts role is to merel$ phold this le#islative polic$, as
reflected first and foremost in the lan#a#e of the tax statte. .hs, an$ n&arranted %rden that
ma$ %e perceived to reslt from enforcin# sch polic$ mst %e properl$ referred to "on#ress.
.he "ort has no discretion on the matter %t simpl$ applies the la&.
.he -A. on franchise #rantees has %een in the statte %oo9s since 1))* &hen R.A. 771H or
the 1xpanded -ale7Added .ax la& &as passed. !t is onl$ no&, ho&ever, that the exective has
earnestl$ prsed the -A. imposition a#ainst toll&a$ operators. .he exective exercises
exclsive discretion in matters pertainin# to the implementation and exection of tax la&s.
"onse=entl$, the exective is more properl$ sited to deal &ith the and practical conse=ences
of the -A. imposition.
4

.F1 "0;;!S!0N1R 05 !N.1RNA3 R1-1NA1,
'etitioner, vs. a"1S!.1 ('F!3!''!N1S) F0.13 "0R'0RA.!0N,
Respondent.
5A".SC
1. Acesite is the o&ner and operator of the Folida$ !nn ;anila 'avilion Fotel. !t leases H,7H+.5( s=are meters
of the hotel:s premises to the 'hilippine Amsement and 4amin# "orporation for casino operations
and caters food and %evera#es to 'A4"0R:s casino patrons thro#h the hotel:s restarant otlets.
2.5or the period 8anar$ )H to April 1))7, Acesite incrred -A. amontin# to '(,,152,+)2.,2 from its rental
income and sale of food and %evera#es to 'A4"0R drin# said period. Acesite tried to shift the said taxes to
'A4"0R %$ incorporatin# it in the amont assessed to 'A4"0R %t the latter refsed to pa$ the taxes on
accont of its tax exempt stats.
(. 'A4"0R paid the amont de to Acesite mins the '(,,152,+)2.,2 -A. &hile the latter paid the -A. to the
"ommissioner of !nternal Revene. *.Fo&ever, Acesite %elatedl$ arrived at the conclsion that its transaction &ith
'A4"0R &as s%Eect to Gero rate as it &as rendered to a tax7exempt entit$. 5. Acesite filed an
administrative claim for refnd &ith the "!R %t the latter failed to resolve the same. Acesite filed
a petition &ith the "ort of .ax Appeals ".A /ecisionC 'etitioner is s%Eect to Gero percent tax insofar as its #ross
income from rentals and sales to 'A4"0R, a tax exempt entit$ %$ virte of a special la&.
Accordin#l$, the amonts of '21,*1(,,2H.7+ and '+,7(),+H5.2*, representin# the 1,J 1-A. on its sales
of food and services and #ross rentals, respectivel$ from 'A4"0R shall %e refnded to the petitioner.. "A
/ecisionC
'A4"0R &as not onl$ exempt from direct taxes %t &as also exempt from indirect taxes li9e the -A.
and conse=entl$, the transactions %et&een respondent Acesite and 'A4"0R &ere @effectivel$ Gero7rated@
%ecase the$ involved the rendition of services to an entit$ exempt from indirect taxes.
!SSA1DSC

(1) &hether 'A4"0R:s tax exemption privile#e incldes the indirect tax of -A. to entitle Acesite to
Gero percent (,J) -A. rate< and (2) &hether the Gero percent (,J) -A. rate nder then Section 1,2 (%)(() of the
.ax "ode (no& Section 1,+ (B)(() of the .ax "ode of 1))7) le#all$ applies to Acesite.
F13/C 1. Pes. 'A4"0R is exempt from pa$ment of indirect taxes
!t is ndispted that './. 1+H), the charter creatin# 'A4"0R, #rants the latter an exemption from the pa$ment of
taxes. Section 1( of './. 1+H) pertinentl$ provides exemption. Ander the a%ove provision >Section 1( (2) (%) of
'./. 1+H)?, the term @"orporation@ or operator refers to 'A4"0R. Altho#h the la& does not specificall$
mention 'A4"0R:s exemption from indirect taxes, 'A4"0R is ndo%tedl$ exempt from sch taxes %ecase
the la& exempts from taxes persons or entities contractin# &ith 'A4"0R in casino operations
. Altho#h, differentl$ &orded, the provision clearl$ exempts 'A4"0R from indirect taxes. !n fact, it #oes
one step frther %$ #rantin# tax exempt stats to persons dealin# &ith 'A4"0R in casino operations . .he
nmista9a%le conclsion is that 'A4"0R is not lia%le for the '(,,152,+)2.,2 -A. and neither is Acesite as the
latter is effectivel$ s%Eect to Gero percent rate nder Sec. 1,+ B ((). R.A. +*2*. (1mphasis spplied.)
2. .he manner of char#in# -A. does not ma9e 'A4"0R lia%le to said tax
!t is tre that -A. can either %e incorporated in the vale of the #oods, properties, or services sold or leased, in
&hich case it is compted as 1D11 of sch vale, or char#ed as an additional 1,J to the vale. -eril$, the seller or
lessor has the option to follo& either &a$ in char#in# its clients and cstomer. !n the instant case, Acesite
follo&ed the latter method, that is, char#in# an additional 1,J of the #ross sales and rentals. Be
that as it ma$, the se of either method, and in particlar, the first method, does not deni#rate the fact that
'A4"0R is exempt from an indirect tax, li9e -A..
(. Pes. -A. exemption extends to Acesite
.hs, &hile it &as proper for 'A4"0R not to pa$ the 1,J -A. char#ed %$ Acesite, the latter is not lia%le for the
pa$ment of it as it is exempt in this particlar transaction %$ operation of la& to pa$ the indirect tax. Sch
exemption falls &ithin the former Section 1,2 (%) (() of the 1)77 .ax "ode, as amended (no& Sec. 1,+ >%? >(? of
R.A. +*2*), &hich providesC Section 1,2. -ale7added tax on sale of services
2
(a) Rate and %ase of tax
2
.here shall %e levied, assessed and collected, a vale7added tax e=ivalent to 1,J of #ross receipts derived %$ an$
person en#a#ed in the sale of services x x x< 'rovided, that the follo&in# services performed in the 'hilippines %$
-A.7re#istered persons shall %e s%Eect to ,J (()
Services rendered to persons or entities &hose exemption nder special la&s
or international a#reements to &hich the 'hilippines is a si#nator$ effectivel$ s%Eects the sppl$ of sch services
to Gero (,J) rate (emphasis spplied).
*. Acesite paid -A. %$ mista9e
"onsiderin# the fore#oin# discssion, there are ndo%tedl$ erroneos pa$ments of the -A. pertainin# to the
effectivel$ Gero7rate transactions %et&een Acesite and 'A4"0R. -eril$, Acesite has clearl$ sho&n that it paid the
s%Eect taxes nder a mista9e of fact, that is, &hen it &as not a&are that the transactions it had &ith 'A4"0R &ere
Gero7rated at the time it made the pa$ments.
S o l t i o i n d e % i t i applies to the 4overnment .ax refnds are %ased on the principle of
=asi7contract or soltio inde%iti and the pertinent la&s #overnin# this principle are fond in Arts. 21*2 and
215* of the "ivil "ode. Bhen mone$ is paid to another nder the inflence of a mista9e of fact, that is to sa$, on
the mista9en spposition of the existence of a specific fact, &here it &old not have %een 9no&n that the fact &as
other&ise, it ma$ %e recovered. Action for refnd strictl$ constred< Acesite dischar#ed the %rden of proof
Since an action for a tax refnd parta9es of the natre of an exemption, &hich cannot %e allo&ed nless #ranted in
the most explicit and cate#orical lan#a#e, it is strictl$ constred a#ainst the claimant &ho mst dischar#e sch
%rden convincin#l$
5. PAGCOR V. !IR GR NO. 1=20E= MARCH 15, 2011
P/%0o# 1. CIR
5A".SC
'A4"0R &as created prsant to '/ No. 1,H77A2 on 8anar$ 1, 1)77.
Simltaneos to its creation, './. No. 1,H77B( &as issed exemptin# 'A4"0R from the
pa$ment of an$ t$pe of tax, except a franchise tax of 5J of the #ross revene.
'./. No. 1()) &as later issed expandin# the scope of 'A4"0RMs exemption.
.o consolidate the la&s pertainin# to the franchise and po&ers of 'A4"0R, './. No. 1+H)H
Sec. 1(. 1xemptions. x x x
(1) "stoms /ties, taxes and other imposts on importations.
(2) !ncome and other taxes.
(a) 5ranchise FolderC
tax of an$ 9ind or form, income or other&ise, as &ell as fees, char#es, or levies of &hatever
natre
tax or char#e attach in an$ &a$ to the earnin#s of the "orporation, except a 5ranchise .ax of
5Jof the #ross revene or earnin#s derived %$ the "orporation from its operation nder this
5ranchise.
(%) 0thersC
earnin#s derived from the operations condcted nder the franchise
char#es, fees or levies, shall inre to the %enefit of and extend to corporation(s),
association(s),
a#enc$(ies), or individal(s) &ith &hom the "orporation or operator has an$ contractal
relationship in connection &ith the operations of the casino(s)Q
.he fee or remneration of forei#n entertainers contracted %$ the "orporation or operator in
prsance of this provision
(() /ividend !ncome.
provided that sch dividend income shall %e totall$ exempted from income or other form of
taxes if invested &ithin H months from the date the dividend income is received in the follo&in#C
(a) operation of the casino(s) or investments in an$ affiliate activit$ that &ill ltimatel$ redond
to the %enefit of the "orporation< or an$ other corporation &ith &hom the "orporation has an$
existin# arran#ements in connection &ith or related to the operations of the casino(s)<
(%) 4overnment %onds, secrities, treasr$ notes, or #overnment de%entres< or
(c) B0!7re#istered or export7oriented corporation(s).7
'A4"0RMs tax exemption &as removed thro#h './. No. 1)(1, %t it &as later restored %$
3etter of !nstrction No. 1*(,
R.A. No. +*2* too9 effect. Section 27 (c) of R.A. No. +*2* provides that 40""s shall pa$
corporate income tax, except petitioner 'A4"0R, 4S!S, SSS, 'F!", and '"S0
Bith the enactment of R.A. No. certain sections of the N!R" &ere amended. .he particlar
amendment that is at isse in this case is Section 1 of R.A. No. )((7, &hich amended Section 27
(c) of N!R" %$ excldin# 'A4"0R from the enmeration of 40""s that are exempt from
pa$ment of corporate income tax
/ifferent #rops came to this S" via petitions for certiorari and prohi%ition assailin# the
validit$ and constittionalit$ of R.A. No. )((7, in particlarC
1. Section *, &hich imposes a 1,J -ale Added .ax (-A.) on sale of #oods and properties<
Section 5, &hich imposes a 1,J -A. on importation of #oods< and
Section H, &hich imposes a 1,J -A. on sale of services and se or lease of properties, all
contain a niform proviso athoriGin# the 'resident, pon the recommendation of the Secretar$
of 5inance, to raise the -A. rate to 12J.
.he said provisions &ere alle#ed to %e violative of Section 2+ (2), Article -! of the "onstittion,
&hich section vests in "on#ress the exclsive athorit$ to fix the rate of taxes, and of Section 1,
Article !!! of the "onstittion on de process, as &ell as of Section 2H (2), Article -! of the
"onstittion, &hich section provides for the @no amendment rle@ pon the last readin# of a %ill<
2. Sections + and 12 &ere alle#ed to %e violative of Section 1, Article !!! of the "onstittion, or
the #arantee of e=al protection of the la&s, and Section 2+ (1), Article -! of the "onstittion<
and
(. other technical aspects of the passa#e of the la&, =estionin# the manner it &as passed.
"ort dismissed all the petitions and pheld the constittionalit$ of R.A. No. )((7.12
B!R issed RR No. 1H72,,5,1( specificall$ identif$in# 'A4"0R as one of the franchisees
s%Eect to 1,J -A. imposed nder Section 1,+ of the National !nternal Revene "ode of 1))7,
as amended %$ R.A. No. )((7.
!SSA1
&hether or not 'A4"0R is still exempt from corporate income tax and -A. &ith the enactment
of R.A. No. )((7.
RA3!N4
petition is 'AR.3P 4RAN.1/.
Section 1 of Rep%lic Act No. )((7, amendin# Section 27 (c) of the National !nternal
Revene "ode of 1))7, %$ excldin# petitioner 'A4"0R from the enmeration of #overnment7
o&ned and controlled corporations exempted from corporate income tax is valid and
constittional,
&hile RR No. 1H72,,5 insofar as it s%Eects 'A4"0R to 1,J -A. is nll and void for %ein#
contrar$ to the N!R", as amended %$ Rep%lic Act No. )((7.
Ander Section 1 of R.A. No. )((7, amendin# Section 27 (c) of the N!R" of 1)77, petitioner
is no lon#er exempt from corporate income tax as it has %een effectivel$ omitted from the list of
40""s that are exempt from it. 'A4"0R ar#es that sch omission is nconstittional, as it is
violative of its ri#ht to e=al protection of the la&s nder Section 1, Article !!! of the
"onstittionC
3e#islative %odies are allo&ed to classif$ the s%Eects of le#islation. !f the classification is
reasona%le, the la& ma$ operate onl$ on some and not all of the people &ithot violatin# the
e=al protection clase. .he classification mst, as an indispensa%le re=isite, not %e ar%itrar$.
.o %e valid, it mst conform to the follo&in# re=irementsC
1. !t mst %e %ased on s%stantial distinctions.
2. !t mst %e #ermane to the prposes of the la&.
(. !t mst not %e limited to existin# conditions onl$.
*. !t mst appl$ e=all$ to all mem%ers of the class.1+
!t is not contested that %efore the enactment of R.A. No. )((7, petitioner &as one of the five
40""s exempted from pa$ment of corporate income tax as sho&n in R.A. No. +*2*, Section 27
(c) of &hich, readsC
nder R.A. No. +*2*, the exemption of 'A4"0R from pa$in# corporate income tax &as not
%ased on a classification sho&in# s%stantial distinctions &hich ma9e for real differences, %t the
exemption &as #ranted pon the re=est of 'A4"0R that it %e exempt from the pa$ment of
corporate income tax.
Bith the s%se=ent enactment of R.A. No. )((7, amendin# R.A. No. +*2*, 'A4"0R has
%een exclded from the enmeration of 40""s that are exempt from pa$in# corporate income
tax. .he records of the Bicameral "onference ;eetin# dated April 1+, 2,,5, of the "ommittee
on the /isa#reein# 'rovisions of Senate Bill No. 1)5, and Fose Bill No. (555, sho& that it is
the le#islative intent that 'A4"0R %e s%Eect to the pa$ment of corporate income tax.
'A4"0R failed to prove that it is still exempt from the pa$ment of corporate income tax,
considerin# that Section 1 of R.A. No. )((7 amended Section 27 (c) of the National !nternal
Revene "ode of 1))7 %$ omittin# 'A4"0R from the exemption.
.he le#islative intent, as sho&n %$ the discssions in the Bicameral "onference ;eetin#, is to
re=ire 'A4"0R to pa$ corporate income tax< hence, the omission or removal of 'A4"0R
from exemption from the pa$ment of corporate income tax.
the express mention of the 40""s exempted from pa$ment of corporate income tax excldes
all others. Not %ein# excepted, petitioner 'A4"0R mst %e re#arded as comin# &ithin the
prvie& of the #eneral rle that 40""s shall pa$ corporate income tax, expressed in the maximC
exception
firmat re#lam in casi%s non exceptis.2+
'etitioner frther contends that Section 1 (c) of R.A. No. )((7 is nll and void a% initio for
violatin# the non7
As re#ards franchises, Section 11, Article R!! of the "onstittion(1 provides that no franchise
or ri#ht shall %e #ranted except nder the condition that it shall %e s%Eect to amendment,
alteration, or repeal %$ the "on#ress &hen the common #ood so re=ires.
!n this case, 'A4"0R &as #ranted a franchise to operate and maintain #am%lin# casinos,
cl%s and other recreation or amsement places, sports, #amin# pools, i.e., %as9et%all, foot%all,
lotteries, etcQ.
Ander Section 11, Article R!! of the "onstittion, 'A4"0Rs franchise is s%Eect to
amendment, alteration
or repeal %$ "on#ress sch as the amendment nder Section 1 of R.A. No. )(77. Fence, the
provision in Section 1 of R.A. No. )((7, amendin# Section 27 (c) of R.A. No. +*2* %$
&ithdra&in# the exemption of 'A4"0R from corporate income tax, &hich ma$ affect an$
%enefits to 'A4"0Rs transactions &ith private parties, is not violative of the non7impairment
clase of the "onstittion.
Anent the validit$ of RR No. 1H72,,5, the "ort holds that the provision s%Eectin# 'A4"0R
to 1,J -A. is invalid for %ein# contrar$ to R.A. No. )((7. No&here in R.A. No. )((7 is it
provided that petitioner can %e s%Eected to -A.. R.A. No. )((7 is clear onl$ as to the removal of
petitionerMs exemption from the pa$ment of corporate income tax, &hich &as alread$ addressed
a%ove %$ this "ort.
'etitioner contends that the tax exemption nder N!R" refers onl$ to 'A4"0RMs direct tax
lia%ilit$ and not to indirect taxes, li9e the -A.. S" disa#ree.
no distinction on &hether the taxes are direct or indirect< 'A4"0R is also exempt from
indirect taxes, li9e -A., as follo&sC
.he manner of char#in# -A. does not ma9e 'A4"0R lia%le to said tax.
!t is settled rle that in case of discrepanc$ %et&een the %asic la& and a rle or re#lation
issed to implement said la&, the %asic la& prevails, %ecase the said rle or re#lation cannot
#o %e$ond the terms and provisions of the %asic la&.
RR No. 1H72,,5, therefore, cannot #o %e$ond the provisions of R.A. No. )((7. Since
'A4"0R is exempt from -A. nder R.A. No. )((7, the B!R exceeded its athorit$ in s%Eectin#
'A4"0R to 1,J -A. nder RR No. 1H72,,5< hence, the said re#lator$ provision is here%$
nllified.
"!R -S A;R1R
2,,5
F/0('C
Respondent, a -A. taxpa$er, is the 'hilippine Branch of A;1R ASA and &as tas9ed &ith
servicin# a nit of A;1R7Fon#9on# Branch and facilitatin# the collections of A;1R7FO
receiva%les from card mem%ers sitated in the 'hilippines and pa$ment to service esta%lishments
in the 'hilippines.
!t filed &ith B!R a letter7re=est for the refnd of its 1))7 excess inpt taxes, citin# as %asis
Section 11,B of the 1))7 .ax "ode, &hich held that Ixxx An$ inpt tax attri%ta%le to the
prchase of capital #oods or to Gero7rated sales %$ a -A.7re#istered person ma$ at his option %e
refnded or credited a#ainst other internal revene taxes, s%Eect to the provisions of Section
112.L
!n addition, respondent relied on -A. Rlin# No. ,+,7+), &hich read, I!n Repl$, please %e
informed that, as a -A. re#istered entit$ &hose service is paid for in accepta%le forei#n crrenc$
&hich is remitted in&ardl$ to the 'hilippine and acconted for in accordance &ith the rles and
re#lations of the "entral Ban9 of the 'hilippines, $or service income is atomaticall$ Gero
rated xxxL
'etitioner claimed, amon# others, that the claim for refnd shold %e constred strictl$ a#ainst
the claimant as the$ parta9e of the natre of tax exemption.
".A rendered a decision in favor of respondent, holdin# that its services are s%Eect to Gero7rate.
"A affirmed this decision and frther held that respondent:s services &ere Iservices other than
the processin#, manfactrin# or repac9a#in# of #oods for persons doin# %siness otside the
'hilippinesL and paid for in accepta%le forei#n crrenc$ and acconted for in accordance &ith
the rles and re#lations of BS'.
I''u$C
BDN A;1R 'hils is entitled to refnd
H$l)C
H$'. Section 1,2 of the .ax "ode provides for the -A. on sale of services and se or lease of
properties. Section 1,2B particlarl$ provides for the services or transactions s%Eect to ,J rateC
(1) 'rocessin#, manfactrin# or repac9in# #oods for other persons doin# %siness otside the
'hilippines &hich #oods are s%se=entl$ exported, &here the services are paid for in accepta%le
forei#n crrenc$ and acconted for in accordance &ith the rles and re#lations of the BS'<
(2) Services other than those mentioned in the precedin# s%para#raph, e.#. those rendered %$
hotels and other service esta%lishments, the consideration for &hich is paid for in accepta%le
forei#n crrenc$ and acconted for in accordance &ith the rles and re#lations of the BS'
Ander s%para#raph 2, services performed %$ -A.7re#istered persons in the 'hilippines (other
than the processin#, manfactrin# or repac9a#in# of #oods for persons doin# %siness otside
the 'hilippines), &hen paid in accepta%le forei#n crrenc$ and acconted for in accordance &ith
the RSR of BS', are Gero7rated. Respondent renders service fallin# nder the cate#or$ of Gero
ratin#.
As a general rule, the -A. s$stem ses the )$'(&*/(&o* -#&*0&-l$ as a %asis for the Erisdictional
reach of the tax. 4oods and services are taxed onl$ in the contr$ &here the$ are consmed.
.hs, exports are Gero7rated, &hile imports are taxed.
!n the present case, the facilitation of the collection of receiva%les is different from the tiliGation
of consmption of the otcome of sch service. Bhile the facilitation is done in the 'hilippines,
the consmption is not. .he services rendered %$ respondent are performed pon its sendin# to
its forei#n client the drafts and %lls it has #athered from service esta%lishments here, and are
therefore, services also consmed in the 'hilippines. Ander the destination principle, sch
service is s%Eect to 1,J -A..
Fo&ever, the la& clearl$ provides for an exception to the destination principle< that is ,J -A.
rate for services that are performed in the 'hilippines, Ipaid for in accepta%le forei#n crrenc$
and acconted for in accordance &ith the RSR of BS'.L .he respondent meets the follo&in#
re=irements for exemption, and ths shold %e Gero7ratedC
(1) Service %e performed in the 'hilippines
(2) .he service fall nder an$ of the cate#ories in Section 1,2B of the .ax "ode
(() !t %e paid in accepta%le forei#n crrenc$ acconted for in accordance &ith BS' RSR.
CIR VS. S$?&'u& Ju'3& P3&l&--&*$', I*0. T/+F VAT @$#o"#/($) T#/*'/0(&o*'
G.R. NO. 14G7=1, July 21, 2007 F#/*0&' X/1&$# S&*o*
FACTSC Respondent is a )o,$'(&0 0o#-o#/(&o* dl$ or#aniGed and existin# nder and %$ virte
of the la&s of the 'hilippines &ith principal office located at the Special 1xport 'rocessin# 6one,
3a#na .echnopar9, BiTan, 3a#na. Se9isi 8shi is a PE@A $*(&(y en#a#ed in manfactre and
export of strappin# %ands and other pac9a#in# materials see9in# for refnd of ntiliGed inpt
taxes.
Favin# re#istered &ith the Brea of !nternal Revene (B!R) as a vale7added tax (-A.)
taxpa$er, respondent filed its =arterl$ retrns &ith the B!R, reflectin# therein &*-u( (/+$' in the
amont of '*,H(1,1(2.7, paid %$ it in connection &ith its domestic prchase of capital #oods
and services. Said inpt taxes remained ntiliGed since respondent has not en#a#ed in an$
%siness activit$ or transaction for &hich it ma$ %e lia%le for otpt tax and for &hich said inpt
taxes ma$ %e credited.
0n Novem%er 11, 1))+, respondent filed &ith the 0ne7Stop7Shop !nter7A#enc$ .ax
"redit and /t$ /ra&%ac9 "enter of the /epartment of 5inance ("1N.1R7/05) t&o (2)
separate applications for tax creditDrefnd of -A. inpt taxes paid. .here %ein# no action on its
application for tax creditDrefnd nder Section 112 (B) of the 1))7 National !nternal Revene
"ode (.ax "ode), as amended, private respondent filed, &ithin the t&o (2)7$ear prescriptive
period nder Section 22) of said "ode, a petition for revie& &ith the "ort of .ax Appeals.
.he ".A rled that respondent &as entitled to the refnd. Bhile the compan$ &as
re#istered &ith the '16A as an ecoGone and &as, as sch, exempt from income tax, it availed
itself of the fiscal incentive nder 1xective 0rder No. 22H. !t there%$ s%Eected itself to other
internal revene taxes li9e the -A.. .he ".A then fond that onl$ inpt taxes amontin# to
'*,(77,1,2.2H &ere dl$ s%stantiated %$ invoices and 0fficial Receipts. .he "ort of Appeals
pheld the /ecision of the ".A. Accordin# to the "A, respondent had complied &ith the
procedral and s%stantive re=irements for a claim %$ 1) s%mittin# receipts, invoices, and
spportin# papers as evidence< 2) pa$in# the s%Eect inpt taxes on capital #oods< () not appl$in#
the inpt taxes a#ainst an$ otpt tax lia%ilit$< and *) filin# the claim &ithin the t&o7$ear
prescriptive period nder Section 22) of the 1))7 .ax "ode. Fence, this 'etition.
ISSEC Bhether the respondent is entitled to the refnd or issance of tax credit certificate in
the amont of '*,(77,1,2.2H as alle#ed ntiliGed inpt taxes paid on domestic prchase of
capital #oods and services.
HEL:C HES. Since 1,, percent of the prodcts of respondent are exported, all its transactions
are deemed export sales and are ths -A. Gero7rated. !t has %een sho&n that respondent has no
otpt tax &ith &hich it cold offset its paid inpt tax. S&*0$ (3$ 'u6>$0( &*-u( (/+ &( -/&) .o#
&(' )o,$'(&0 -u#03/'$' o. 0/-&(/l %oo)' /*) '$#1&0$' #$,/&*$) u*u(&l&9$), &( 0/* 0l/&, /
#$.u*) .o# (3$ &*-u( VAT -#$1&ou'ly 03/#%$) 6y &(' 'u--l&$#'. .he amont of '*,(77,1,2.2H
is excess inpt taxes that Estif$ a refnd. Nota%l$, &hile an ecoGone is #eo#raphicall$ &ithin the
'hilippines, it is deemed a separate cstoms territor$ and is re#arded in la& as forei#n soil. Sales
%$ sppliers from otside the %orders of the ecoGone to this separate cstoms territor$ are
deemed as exports and treated as export sales. .hese sales are Gero7rated or s%Eect to a tax rate
of Gero percent.
CIR 1'. To'3&6/ I*.o#,/(&o* E;u&-,$*( GR No. 150154 )/($) Au%u'( G,2005
Rationale for Gero7ratin# of exports. .he 'hilippine -A. s$stem adheres tothe "ross Border
/octrine, accordin# to &hich, no -A. shall %e imposed toform part of the cost of #oods
destined for consmption otside of theterritorial %order of the taxin# athorit$.