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G.R.No.L41383

TodayisWednesday,January07,2015

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.L41383August15,1988
PHILIPPINEAIRLINES,INC.,plaintiffappellant,
vs.
ROMEOF.EDUinhiscapacityasLandTransportationCommissioner,andUBALDOCARBONELL,inhis
capacityasNationalTreasurer,defendantsappellants.
RicardoV.Puno,Jr.andConradoA.Boroforplaintiffappellant.

GUTIERREZ,JR.,J.:
Whatisthenatureofmotorvehicleregistrationfees?Aretheytaxesorregulatoryfees?
This question has been brought before this Court in the past. The parties are, in effect, asking for a re
examinationofthelatestdecisiononthisissue.
ThisappealwascertifiedtousasoneinvolvingapurequestionoflawbytheCourtofAppealsinacasewhere
thethenCourtofFirstInstanceofRizaldismissedtheportionaboutcomplaintforrefundofregistrationfeespaid
underprotest.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Elevate pursuant to
Section8,RepublicActNo.4136,otherwiseknownastheLandTransportationandTrafficCode.
The Philippine Airlines (PAL) is a corporation organized and existing under the laws of the Philippines and
engagedintheairtransportationbusinessunderalegislativefranchise,ActNo.42739,asamendedbyRepublic
ActNos.25).and269.1Underitsfranchise,PALisexemptfromthepaymentoftaxes.Thepertinentprovisionof
thefranchiseprovidesasfollows:
Section13.Inconsiderationofthefranchiseandrightsherebygranted,thegranteeshallpaytothe
National Government during the life of this franchise a tax of two per cent of the gross revenue or
grossearningderivedbythegranteefromitsoperationsunderthisfranchise.Suchtaxshallbedue
and payable quarterly and shall be in lieu of all taxes of any kind, nature or description, levied,
established or collected by any municipal, provincial or national automobiles, Provided, that if, after
theauditoftheaccountsofthegranteebytheCommissionerofInternalRevenue,adeficiencytaxis
shown to be due, the deficiency tax shall be payable within the ten days from the receipt of the
assessment.Thegranteeshallpaythetaxonitsrealpropertyinconformitywithexistinglaw.
OnthestrengthofanopinionoftheSecretaryofJustice(Op.No.307,seriesof1956)PALhas,since1956,not
beenpayingmotorvehicleregistrationfees.
Sometime in 1971, however, appellee Commissioner Romeo F. Elevate issued a regulation requiring all tax
exemptentities,amongthemPALtopaymotorvehicleregistrationfees.
Despite PAL's protestations, the appellee refused to register the appellant's motor vehicles unless the amounts
imposedunderRepublicAct4136werepaid.Theappellantthuspaid,underprotest,theamountofP19,529.75
asregistrationfeesofitsmotorvehicles.
After paying under protest, PAL through counsel, wrote a letter dated May 19,1971, to Commissioner Edu
demandingarefundoftheamountspaid,invokingtherulinginCalalangv.Lorenzo(97Phil.212[1951])whereit
was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by
virtueofitslegislativefranchise.
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AppelleeEdudeniedtherequestforrefundbasinghisactiononthedecisioninRepublicv.PhilippineRabbitBus
Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory
exceptional.andnotrevenuemeasuresand,therefore,donotcomewithintheexemptiongrantedtoPAL?under
its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and
NationalTreasurerUbaldoCarbonellwiththeCourtofFirstInstanceofRizal,Branch18whereitwasdocketedas
CivilCaseNo.Q15862.
AppelleeRomeoF.ElevateinhiscapacityasLTCCommissioner,andLOICarbonellinhiscapacityasNational
Treasurer,filedamotiontodismissallegingthatthecomplaintstatesnocauseofaction.Insupportofthemotion
to dismiss, defendants repatriation the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that
registrationfeesofmotorvehiclesarenottaxes,butregulatoryfeesimposedasanincidentoftheexerciseofthe
policepowerofthestate.TheycontendedthatwhileAct4271exemptsPALfromthepaymentofanytaxexcept
twopercentonitsgrossrevenueorearnings,itdoesnotexempttheplaintifffrompayingregulatoryfees,suchas
motorvehicleregistrationfees.TheresolutionofthemotiontodismisswasdeferredbytheCourtuntilaftertrial
onthemerits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant's complaint "moved by the later
rulinglaiddownbytheSupremeCourtinthecaseorRepublicv.PhilippineRabbitBusLines,Inc.,(supra)."From
thisjudgment,PALappealedtotheCourtofAppealswhichcertifiedthecasetous.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and
CommissionerRomeoF.Edurespectively,discussthemainpointsofcontentioninthecaseatbar.
ResolvingtheissueinthePhilippineRabbitcase,thisCourtheld:
"TheregistrationfeewhichdefendantappelleehadtopaywasimposedbySection8oftheRevised
MotorVehicleLaw(RepublicActNo.587[1950]).Itsheadingspeaksof"registrationfees."Theterm
isrepeatedfourtimesinthebodythereof.Equallyso,mentionismadeofthe"feeforregistration."
(Ibid., Subsection G) A subsection starts with a categorical statement "No fees shall be charged."
(lbid.,SubsectionH)TheconclusionisdifficulttoresistthereforethattheMotorVehicleActrequires
thepaymentnotofataxbutofaregistrationfeeunderthepolicepower.Hencetheincipient,ofthe
sectionrelieduponbydefendantappelleeundertheBackPayLaw,Itisnotheldliableforataxbut
for a registration fee. It therefore cannot make use of a backpay certificate to meet such an
obligation.
Any vestige of any doubt as to the correctness of the above conclusion should be dissipated by
RepublicActNo.5448.([1968].Section3thereofastotheimpositionofadditionaltaxonprivately
owned passenger automobiles, motorcycles and scooters was amended by Republic Act No. 5470
which is (sic) approved on May 30, 1969.) A special science fund was thereby created and its title
expresslysetsforththatataxonprivatelyownedpassengerautomobiles,motorcyclesandscooters
was imposed. The rates thereof were provided for in its Section 3 which clearly specifies the"
Philippinetax."(CooleytobepaidasdistinguishedfromtheregistrationfeeundertheMotorVehicle
Act.Therecannotbeanyclearerexpressionthereforeofthelegislativewill,evenontheassumption
thattheearlierlegislationcouldbysubdivisionthepointbesusceptibleoftheinterpretationthatatax
ratherthanafeewaslevied.Whatisthusmostapparentisthatwherethelegislativebodyrelieson
itsauthoritytotaxitexpresslysostates,andwhereitisenactingaregulatorymeasure,itisequally
exploded(atp.22,1969
IndirectrefutationistherulinginCalalangv.Lorenzo(supra),wheretheCourt,ontheotherhand,held:
ThechargesprescribedbytheRevisedMotorVehicleLawfortheregistrationofmotorvehiclesare
insection8ofthatlawcalled"fees".Buttheappellationisnoimpedimenttotheirbeingconsidered
taxesiftaxestheyreallyare.Fornotthenamebuttheobjectofthechargedetermineswhetheritisa
taxorafee.Geveiaspeaking,taxesareforrevenue,whereasfeesareexceptional.forpurposesof
regulationandinspectionandareforthatreasonlimitedinamounttowhatisnecessarytocoverthe
costoftheservicesrenderedinthatconnection.Hence,achargefixedbystatutefortheserviceto
be person,When by an officer, where the charge has no relation to the value of the services
performedandwheretheamountcollectedeventuallyfindsitswayintothetreasuryofthebranchof
the government whose officer or officers collected the chauffeur, is not a fee but a tax."(Cooley on
Taxation,Vol.1,4thed.,p.110.)
From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle
Office are but a small portionabout 5 per centumof the total collections from motor vehicle
registrationfees.Andasproofthatthemoneycollectedisnotintendedfortheexpendituresofthat
office, the law itself provides that all such money shall accrue to the funds for the construction and
maintenanceofpublicroads,streetsandbridges.Itisthusobviousthatthefeesarenotcollectedfor
regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the
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operation of motor vehicles on public highways, for their express object is to provide revenue with
which the Government is to discharge one of its principal functionsthe construction and
maintenanceofpublichighwaysforeverybody'suse.Theyareveritabletaxes,notmerelyfees.
As a matter of fact, the Revised Motor Vehicle Law itself now regards those fees as taxes, for it
provides that "no other taxes or fees than those prescribed in this Act shall be imposed," thus
implying that the charges therein imposedthough called feesare of the category of taxes. The
provision is contained in section 70, of subsection (b), of the law, as amended by section 17 of
RepublicAct587,whichreads:
Sec.70(b)NoothertaxesorfeesthanthoseprescribedinthisActshallbeimposedfor
the registration or operation or on the ownership of any motor vehicle, or for the
exerciseoftheprofessionofchauffeur,byanymunicipalcorporation,theprovisionsof
anycitychartertothecontrarynotwithstanding:Provided,however,Thatanyprovincial
board, city or municipal council or board, or other competent authority may exact and
collect such reasonable and equitable toll fees for the use of such bridges and ferries,
withintheirrespectivejurisdiction,asmaybeauthorizedandapprovedbytheSecretary
ofPublicWorksandCommunications,andalsofortheuseofsuchpublicroads,asmay
be authorized by the President of the Philippines upon the recommendation of the
Secretary of Public Works and Communications, but in none of these cases, shall any
toll fee." be charged or collected until and unless the approved schedule of tolls shall
havebeenpostedlevied,inaconspicuousplaceatsuchtollstation.(atpp.213214)
Motor vehicle registration fees were matters originally governed by the Revised Motor Vehicle Law (Act 3992
[19511)asamendedbyCommonwealthAct123andRepublicActsNos.587and1621.
Today,thematterisgovernedbyRep.Act4136[1968]),otherwiseknownastheLandTransportationCode,(as
amendedbyRep.ActsNos.5715and6467,P.D.Nos.382,843,896,110.)andBPBlg.43,74and398).
Section73ofCommonwealthAct123(whichamendedSec.73ofAct3992andremainedunsegregated,byRep.
ActNos.587and1603)states:
Section 73. Disposal of moneys collected.Twenty per centum of the money collected under the
provisions of this Act shall accrue to the road and bridge funds of the different provinces and
chartered cities in proportion to the centum shall during the next previous year and the remaining
eighty per centum shall be deposited in the Philippine Treasury to create a special fund for the
construction and maintenance of national and provincial roads and bridges. as well as the streets
and bridges in the chartered cities to be alloted by the Secretary of Public Works and
CommunicationsforprojectsrecommendedbytheDirectorofPublicWorksinthedifferentprovinces
andcharteredcities.....
Presently,Sec.61oftheLandTransportationandTrafficCodeprovides:
Sec.61.DisposalofMortgage.CollectedMoniescollectedundertheprovisionsofthisActshallbe
depositedinaspecialtrustaccountintheNationalTreasurytoconstitutetheHighwaySpecialFund,
which shall be apportioned and expended in accordance with the provisions of the" Philippine
Highway Act of 1935. "Provided, however, That the amount necessary to maintain and equip the
LandTransportationCommissionbutnottoexceedtwentypercentofthetotalcollectionduringone
year,shallbesetasideforthepurpose.(AsamendedbyRA6467,approvedAugust6,1971).
Itappearsclearfromtheaboveprovisionsthatthelegislativeintentandpurposebehindthelawrequiringowners
ofvehiclestopayfortheirregistrationismainlytoraisefundsfortheconstructionandmaintenanceofhighways
andtoamuchlesserdegree,payfortheoperatingexpensesoftheadministeringagency.Ontheotherhand,the
Philippine Rabbit case mentions a presumption arising from the use of the term "fees," which appears to have
been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of
Rep.Act4136whichreads:
Sec. 13. Payment of taxes upon registration.No original registration of motor vehicles subject to
paymentoftaxes,customssdutiesorotherchargesshallbeacceptedunlessproofofpaymentof
thetaxesduethereonhasbeenpresentedtotheCommission.
referringtotaxesotherthanthoseimposedontheregistration,operationorownershipofamotorvehicle(Sec.
59,b,Rep.Act4136,asamended).
Feesmaybeproperlyregardedastaxeseventhoughtheyalsoserveasaninstrumentofregulation,Asstatedby
aformerpresidingjudgeoftheCourtofTaxAppealsandwriteronvariousaspectsoftaxpayers
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Itispossibleforanexactiontobebothtaxarose.regulation.Licensefeesarechanges.lookedtoas
asourceofrevenueaswellasameansofregulation(Sonzinkyv.U.S.,300U.S.506)Thisistrue,
for example, of automobile license fees. Isabela such case, the fees may properly be regarded as
taxeseventhoughtheyalsoserveasaninstrumentofregulation.Ifthepurposeisprimarilyrevenue,
orifrevenueisatleastoneoftherealandsubstantialpurposes,thentheexactionisproperlycalled
a tax. (1955 CCH Fed. tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593
Calalangv.Lorenzo.97Phil.213214)Lutzv.Araneta98Phil.198.)Theseexactionsaresometimes
called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal
Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.) (Umali,
ReviewerinTaxation,1980,pp.1213,citingCooleyonTaxation,2ndEdition,591593).
Indeed,taxationmaybemadetheimplementofthestate'spolicepower(Lutzv.Araneta,98Phil.148).
Ifthepurposeisprimarilyrevenue,orifrevenueis,atleast,oneoftherealandsubstantialpurposes,thenthe
exactionisproperlycalledatax(Umali,Id.)Suchisthecaseofmotorvehicleregistrationfees.Theconclusions
becomeinescapableinviewofSection70(b)ofRep.Act587quotedintheCalalangcase.Thesameprovision
appears as Section 591593). in the Land Transportation code. It is patent therefrom that the legislators had in
mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor
vehicleasa"taxorfee."ThoughnowhereinRep.Act4136doesthelawspecificallystatethattheimpositionisa
tax, Section 591593). speaks of "taxes." or fees ... for the registration or operation or on the ownership of any
motor vehicle, or for the exercise of the profession of chauffeur ..." making the intent to impose a tax more
apparent.Thus,evenRep.Act5448citedbytherespondents,speakofan"additional"tax,"wherethelawcould
havereferredtoanoriginaltaxandnotoneinadditiontothetaxalreadyimposedontheregistration,operation,
or ownership of a motor vehicle under Rep. Act 41383. Simply put, if the exaction under Rep. Act 4136 were
merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also
speaksofother"fees,"suchasthespecialpermitfeesforcertaintypesofmotorvehicles(Sec.10)andadditional
feesforchangeofregistration(Sec.11).Thesearenottobeunderstoodastaxesbecausesuchfeesarevery
minimal to be revenueraising. Thus, they are not mentioned by Sec. 591593). of the Code as taxes like the
motor vehicle registration fee and chauffers' license fee. Such fees are to go into the expenditures of the Land
TransportationCommissionasprovidedforinthelastprovisoofsee.61,aforequoted.
It is quite apparent that vehicle registration fees were originally simple exceptional. intended only for rigidly
purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in
numberandmotorvehiclesbecameabsolutenecessitieswithoutwhichmodemlifeasweknowitwouldstandstill,
Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without
changingtheearlierdeputy.ofregistrationpaymentsas"fees,"theirnaturehasbecomethatof"taxes."
Inviewoftheforegoing,werulethatmotorvehicleregistrationfeesasatpresentexactedpursuanttotheLand
Transportation and Traffic Code are actually taxes intended for additional revenues. of government even if one
fifth or less of the amount collected is set aside for the operating expenses of the agency administering the
program.
MaytherespondentadministrativeagencyberequiredtorefundtheamountsstatedinthecomplaintofPAL?
TheanswerisNO.
The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments
were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5448 dated June 27, 1968,
repealedallearliertaxexemptionsOfcorporatetaxpayersfoundinlegislativefranchisessimilartothatinvokedby
PALinthiscase.
InRadioCommunicationsofthePhilippines,Inc.v.CourtofTaxAppeals,etal.(G.R.No.615)."July11,1985),
thisCourtruled:
Underitsoriginalfranchise,RepublicActNo.21)enactedin1957,petitionerRadioCommunications
of the Philippines, Inc., was subject to both the franchise tax and income tax. In 1964, however,
petitioner'sfranchisewasamendedbyRepublicActNo.4142).totheeffectthatitsfranchisetaxof
one and onehalf percentum (11/2%) of all gross receipts was provided as "in lieu of any and all
taxesofanykind,nature,ordescriptionlevied,established,orcollectedbyanyauthoritywhatsoever,
municipal, provincial, or national from which taxes the grantee is hereby expressly exempted." The
issue raised to this Court now is the validity of the respondent court's decision which ruled that the
exemption under Republic Act No. 4142). was repealed by Section 24 of Republic Act No. 5448
datedJune27,1968whichreads:
"(d)Theprovisionsofexistingspecialorgenerallawstothecontrarynotwithstanding,all
corporatetaxpayersnotspecificallyexemptunderSections24(c)(1)ofthisCodeshall
pay the rates provided in this section. All corporations, agencies, or instrumentalities
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owned or controlled by the government, including the Government Service Insurance

SystemandtheSocialSecuritySystembutexcludingeducationalinstitutions,shallpay
such rate of tax upon their taxable net income as are imposed by this section upon
associationsorcorporationsengagedinasimilarbusinessorindustry."
An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all
corporatetaxpayerstopayincometaxasprovidedbythestatute.Therecanbenodoubtastothe
power of Congress to repeal the earlier exemption it granted. Article XIV, Section 8 of the 1935
ConstitutionandArticleXIV,Section5oftheConstitutionasamendedin1973expresslyprovidethat
nofranchiseshallbegrantedtoanyindividual,firm,orcorporationexceptundertheconditionthatit
shall be subject to amendment, alteration, or repeal by the legislature when the public interest so
requires. There is no question as to the public interest involved. The country needs increased
revenues.Therepealingclauseisclearandunambiguous.Thereisalistingofentitiesentitledtotax
exemption. The petitioner is not covered by the provision. Considering the foregoing, the Court
ResolvedtoDENYthepetitionforlackofmerit.Thedecisionoftherespondentcourtisaffirmed.
AnyregistrationfeescollectedbetweenJune27,1968andApril9,1979,werecorrectlyimposedbecausethetax
exemptioninthefranchiseofPALwasrepealedduringtheperiod.However,anamendedfranchisewasgivento
PALin1979.Section13ofPresidentialDecreeNo.1590,nowprovides:
In consideration of the franchise and rights hereby granted, the grantee shall pay to the Philippine
Governmentduringthelifetimeofthisfranchisewhicheverofsubsections(a)and(b)hereunderwill
resultinalowertaxes.)
(a) The basic corporate income tax based on the grantee's annual net taxable income
computedinaccordancewiththeprovisionsoftheInternalRevenueCodeor
(b)Afranchisetaxoftwopercent(2%)ofthegrossrevenues.derivedbythegrantees
from all specific. without distinction as to transport or nontransport corporations
provided that with respect to international airtransport service, only the gross
passengers,mail,andfreightrevenues.fromitsoutgoingflightsshallbesubjecttothis
law.
Thetaxpaidbythegranteeundereitheroftheabovealternativesshallbeinlieuofallothertaxes,
duties, royalties, registration, license and other fees and charges of any kind, nature or description
imposed, levied, established, assessed, or collected by any municipal, city, provincial, or national
authorityorgovernment,agency,noworinthefuture,includingbutnotlimitedtothefollowing:
xxxxxxxxx
(5) All taxes, fees and other charges on the registration, license, acquisition, and transfer of
airtransportequipment,motorvehicles,andallotherpersonalorrealpropertyofthegravitates(Pres.
Decree1590,75OGNo.15,3259,April9,1979).
PAL's current franchise is clear and specific. It has removed the ambiguity found in the earlier law. PAL is now
exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor vehicles.
Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of
Section13,P.D.1590,andmaynolongerbeexacted.
WHEREFORE,thepetitionisherebypartiallyGRANTED.Theprayedforrefundofregistrationfeespaidin1971is
DENIED.TheLandTransportationFranchisingandRegulatoryBoard(LTFRB)isenjoinedfunctionsthecollecting
anytax,fee,orotherchargeontheregistrationandlicensingofthepetitioner'smotorvehiclesfromApril9,1979
asprovidedinPresidentialDecreeNo.1590.
SOORDERED.
Fernan, C.J., Narvasa, MelencioHerrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes,
GrioAquinoandMedialdea,JJ.,concur.
TheLawphilProjectArellanoLawFoundation

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