1.

Cocofed vs Republic GR 177857-58 Jan 24 2012

Facts: In 1971, RA 6260 created the Coconut Investment Company (CIC) to administer the Coconut Investment
Fund, a fund to be sourced from levy on the sale of copra. The copra seller was, or ought to be, issued COCOFUND
receipts. The fund was placed at the disposition of COCOFED, the national association of coconut producers having
the largest membership. When martial law started in 1972, several presidential decrees were issued to improve the
coconut industry through the collection and use of the coconut levy fund. PD 276 established the Coconut
Consumers Stabilization Fund (CCSF) and declared the proceeds of the CCSF levy as trust fund, to be utilized to
subsidize the sale of coconut-based products, thus stabilizing the price of edible oil. PD 582 created the Coconut
Industry Development Fund (CIDF) to finance the operation of a hybrid coconut seed farm. In 1973, PD 232 created
the Philippine Coconut Authority (PCA) to accelerate the growth and development of the coconut and palm oil
industry. Then came P.D. No. 755 in July 1975, providing under its Section 1 the policy to provide readily available
credit facilities to the coconut farmers at preferential rates. Towards achieving this, Section 2 of PD 755 authorized
PCA to utilize the CCSF and the CIDF collections to acquire a commercial bank and deposit the CCSF levy
collections in said bank, interest free, the deposit withdrawable only when the bank has attained a certain level of
sufficiency in its equity capital. It also decreed that all levies PCA is authorized to collect shall not be considered as
special and/or fiduciary funds or form part of the general funds of the government. Both P.D. Nos. 961 and 1468 also
provide that the CCSF shall not be construed by any law as a special and/or trust fund, the stated intention being that
actual ownership of the said fund shall pertain to coconut farmers in their private capacities. Shortly before the
issuance of PD 755 however, PCA had already bought from Peping Cojuangco 72.2% of the outstanding capital
stock of FUB / UCPB. In that contract, it was also stipulated that Danding Cojuanco shall receive equity in FUB
amounting to 10%, or 7.22 % of the 72.2%, as consideration for PCAs buy-out of what Danding Conjuanco claim as
his exclusive and personal option to buy the FUB shares. The PCA appropriated, out of its own fund, an amount for
the purchase of the said 72.2% equity. It later reimbursed itself from the coconut levy fund. While the 64.98% (72.2 %
7.22%) portion of the option shares ostensibly pertained to the farmers, the corresponding stock certificates
supposedly representing the farmers equity were in the name of and delivered to PCA. There were, however, shares
forming part of the 64.98% portion, which ended up in the hands of non-farmers. The remaining 27.8% of the FUB
capital stock were not covered by any of the agreements. Through the years, a part of the coconut levy funds went
directly or indirectly to various projects and/or was converted into different assets or investments. Of particular
relevance to this was their use to acquire the FUB / UCPB, and the acquisition by UCPB, through the CIIF and
holding companies, of a large block of San Miguel Corporation (SMC) shares.

Issue 1: W/N the mandate provided under PD 755, 961 and 1468 that the CCSF shall not be construed by any law
as a special and/or trust fund is valid

No. The coconut levy funds can only be used for the special purpose and the balance thereof should revert back to
the general fund. Article VI, Section 29 (3) of the Constitution provides that all money collected on any tax levied for a
special purpose shall be treated as a special fund and paid out for such purpose only, and if the purpose for which a
special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general
funds of the Government. Here, the CCSF were sourced from forced exactions with the end-goal of developing the
entire coconut industry. Therefore, the subsequent reclassification of the CCSF as a private fund to be owned by
private individuals in their private capacities under P.D. Nos. 755, 961 and 1468 is unconstitutional Not only is it
unconstitutional, but the mandate is contrary to the purpose or policy for which the coco levy fund was created.

Issue 2: W/N the coco levy fund may be owned by the coconut farmers in their private capacities
No. The coconut levy funds are in the nature of taxes and can only be used for public purpose. They cannot be used
to purchase shares of stocks to be given for free to private individuals. Even if the money is allocated for a special
purpose and raised by special means, it is still public in character. Accordingly, the presidential issuances which
authorized the PCA to distribute, for free, the shares of stock of the bank it acquired to the coconut farmers under
such rules and regulations the PCA may promulgate is unconstitutional. It is unconstitutional because first, it have
unduly delegated legislative power to the PCA, and second, it allowed the use of the CCSF to benefit directly private
interest by the outright and unconditional grant of absolute ownership of the FUB/UCPB shares paid for by PCA
entirely with the CCSF to the undefined coconut farmers, which negated or circumvented the national policy or
public purpose declared by P.D. No. 755. Hence, the so-called Farmers shares do not belong to the coconut farmers
in their private capacities, but to the Government. The coconut levy funds are special public funds and any property
purchased by means of the coconut levy funds should likewise be treated as public funds or public property, subject
to burdens and restrictions attached by law to such property.

2. OSMEA vs. ORBOS 220 SCRA 703 GR No. 99886, March 31, 1993

DOCTRINE: " To avoid the taint of unlawful delegation of the power to tax, there must be a standard which implies
that the legislature determines matter of principle and lays down fundamental policy."

FACTS: Senator John Osmea assails the constitutionality of paragraph 1c of PD 1956, as amended by EO 137,
empowering the Energy Regulatory Board (ERB) to approve the increase of fuel prices or impose additional amounts
on petroleum products which proceeds shall accrue to the Oil Price Stabilization Fund (OPSF) established for the
reimbursement to ailing oil companies in the event of sudden price increases. The petitioner avers that the collection
on oil products establishments is an undue and invalid delegation of legislative power to tax. Further, the petitioner
points out that since a 'special fund' consists of monies collected through the taxing power of a State, such amounts
belong to the State, although the use thereof is limited to the special purpose/objective for which it was created. It
thus appears that the challenge posed by the petitioner is premised primarily on the view that the powers granted to
the ERB under P.D. 1956, as amended, partake of the nature of the taxation power of the State.

ISSUE: 1. Is there an undue delegation of the legislative power of taxation?

2. Is the OPSF constitutional?

HELD: 1. None. It seems clear that while the funds collected may be referred to as taxes, they are exacted in the
exercise of the police power of the State. Moreover, that the OPSF as a special fund is plain from the special
treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to
as a "trust liability account," the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is
satisfied that these measures comply with the constitutional description of a "special fund." With regard to the
alleged undue delegation of legislative power, the Court finds that the provision conferring the authority upon the
ERB to impose additional amounts on petroleum products provides a sufficient standard by which the authority must
be exercised. In addition to the general policy of the law to protect the local consumer by stabilizing and subsidizing
domestic pump rates, P.D. 1956 expressly authorizes the ERB to impose additional amounts to augment the
resources of the Fund.

2. Yes. The tax collected is not in pure exercise of the taxing power. It is levied with a regulatory purpose, to provide
a means for the stabilization of the petroleum products industry. The levy is primarily in the exercise of the police
power of the State.
 3. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation GR No. 159647, April 15,
2005

Facts: Respondent is a domestic corporation engaged in the retailing of medicines and other pharmaceutical
products. In 1996 it operated six (6) drugstores under the business name and style Mercury Drug. From January to
December 1996 respondent granted 20% sales discount to qualified senior citizens on their purchases of medicines
pursuant to RA 7432. For said period respondent granted a total of 904,769. On April 15, 1997, respondent filed its
annual ITR for taxable year 1996 declaring therein net losses. On Jan. 16, 1998 respondent filed with petitioner a
claim for tax refund/credit of 904,769.00 alledgedly arising from the 20% sales discount. Unable to obtain
affirmative response from petitioner, respondent elevated its claim to the CTA via Petition for Review. CTA dismissed
the same but on MR, CTA reversed its earlier ruling and ordered petitioner to issue a Tax Credit Certificate in favor of
respondent citing CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug Corp. vs. CIR) citing that Sec. 229 of RA
7432 deals exclusively with illegally collected or erroneously paid taxes but that there are other situations which may
warrant a tax credit/refund. CA affirmed CTA decision reasoning that RA 7432 required neither a tax liability nor a
payment of taxes by private establishments prior to the availment of a tax credit. Moreover, such credit is not
tantamount to an unintended benefit from the law, but rather a just compensation for the taking of private property for
public use.

ISSUE: W/N respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.

RULING: Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount
on their purchase of medicine from any private establishment in the country. The latter may then claim the cost of the
discount as a tax credit. Such credit can be claimed even if the establishment operates at a loss. A tax credit
generally refers to an amount that is subtracted directly from ones total tax liability. It is an allowance against the
tax itself or a deduction from what is owed by a taxpayer to the government. A tax credit should be understood in
relation to other tax concepts. One of these is tax deduction which is subtraction from income for tax purposes, or
an amount that is allowed by law to reduce income prior to the application of the tax rate to compute the amount of
tax which is due. In other words, whereas a tax credit reduces the tax due, tax deduction reduces the income subject
to tax in order to arrive at the taxable income. Since a tax credit is used to reduce directly the tax that is due, there
ought to be a tax liability before the tax credit can be applied. Without that liability, any tax credit application will be
useless. There will be no reason for deducting the latter when there is, to begin with, no existing obligation to the
government. However, as will be presented shortly, the existence of a tax credit or its grant by law is not the same
as the availment or use of such credit. While the grant is mandatory, the availment or use is not. If a net loss is
reported by, and no other taxes are currently due from, a business establishment, there will obviously be no tax
liability against which any tax credit can be applied. For the establishment to choose the immediate availment of a
tax credit will be premature and impracticable. Nevertheless, the irrefutable fact remains that, under RA 7432,
Congress has granted without conditions a tax credit benefit to all covered establishments. However, for the losing
establishment to immediately apply such credit, where no tax is due, will be an improvident usance. In addition, while
a tax liability is essential to the availment or use of any tax credit, prior tax payments are not. On the contrary, for the
existence or grant solely of such credit, neither a tax liability nor a prior tax payment is needed. The Tax Code is in
fact replete with provisions granting or allowing tax credits, even though no taxes have been previously paid. Petition
is denied.

4. CARLOS SUPERDRUG vs DSWD

FACTS: Petitioners are domestic corporations and proprietors operating drugstores in the Philippines. Meanwhile,
AO 171 or the Policies and Guidelines to Implement the Relevant Provisions of Republic Act 9257, otherwise known
as the Expanded Senior Citizens Act of 2003 was issued by the DOH, providing the grant of twenty percent (20%)
discount in the purchase of unbranded generic medicines from all establishments dispensing medicines for the
exclusive use of the senior citizens. DOH issued Administrative Order No 177 amending A.O. No. 171. Under A.O.
No. 177, the twenty percent discount shall not be limited to the purchase of unbranded generic medicines only, but
shall extend to both prescription and non-prescription medicines whether branded or generic. Thus, it stated that
[t]he grant of twenty percent (20%) discount shall be provided in the purchase of medicines from all establishments
dispensing medicines for the exclusive use of the senior citizens. Petitioners assert that Section 4(a) of the law is
unconstitutional because it constitutes deprivation of private property. Compelling drugstore owners and
establishments to grant the discount will result in a loss of profit and capital because 1) drugstores impose a mark-up
of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly
compensated for the discount.

RULING: The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private
property for public use or benefit. This constitutes compensable taking for which petitioners would ordinarily become
entitled to a just compensation. Just compensation is defined as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is used to
intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement of the
senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises
the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose
upon private establishments the burden of partly subsidizing a government program. The Court believes so. The law
grants a twenty percent discount to senior citizens for medical and dental services, and diagnostic and laboratory
fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places of culture,
leisure and amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging
establishments, restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment
of senior citizens. As a form of reimbursement, the law provides that business establishments extending the twenty
percent discount to senior citizens may claim the discount as a tax deduction. The law is a legitimate exercise of
police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not
capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness
to meet all exigencies and provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits. Accordingly, it has been described as the most essential,
insistent and the least limitable of powers, extending as it does to all the great public needs. It is [t]he power vested
in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws,
statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be
for the good and welfare of the commonwealth, and of the subjects of the same. For this reason, when the
conditions so demand as determined by the legislature, property rights must bow to the primacy of police power
because property rights, though sheltered by due process, must yield to general welfare. Police power as an attribute
to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss
of earnings and capital, the questioned provision is invalidated. Moreover, in the absence of evidence demonstrating
the alleged confiscatory effect of the provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor. Given these, it is incorrect for petitioners to insist that the
grant of the senior citizen discount is unduly oppressive to their business, because petitioners have not taken time to
calculate correctly and come up with a financial report, so that they have not been able to show properly whether or
not the tax deduction scheme really works greatly to their disadvantage. The Court is not oblivious of the retail side of
the pharmaceutical industry and the competitive pricing component of the business. While the Constitution protects
property rights, petitioners must accept the realities of business and the State, in the exercise of police power, can
intervene in the operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for
the protection of property, various laws and jurisprudence, particularly on agrarian reform and the regulation of
contracts and public utilities, continuously serve as a reminder that the right to property can be relinquished upon the
command of the State for the promotion of public good.

5. GEROCHI vs DEPARTMENT OF ENERGY 527 SCRA 696

FACTS: Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network, Inc.
come before this Court in this original action praying that Section 34 of Republic Act 9136, otherwise known as the
Electric Power Industry Reform Act of 2001, imposing the Universal Charge, and Rule 18 of the Rules and
Regulations which seeks to implement the said imposition, be declared unconstitutional.

SECTION 34. Universal Charge. Within one (1) year from the effectivity of this Act, a universal charge to be
determined, fixed and approved by the ERC, shall be imposed on all electricity end-users for the following purposes:

(a) Payment for the stranded debts in excess of the amount assumed by the National Government and
stranded contract costs of NPC and as well as qualified stranded contract costs of distribution utilities
resulting from the restructuring of the industry;

(b) Missionary electrification;[6]

(c) The equalization of the taxes and royalties applied to indigenous or renewable sources of energy vis--
vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour (P0.0025/kWh),
which shall accrue to an environmental fund to be used solely for watershed rehabilitation and management.
Said fund shall be managed by NPC under existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a period not exceeding three (3) years

The universal charge shall be a non-bypassable charge which shall be passed on and collected from all end-users on
a monthly basis by the distribution utilities. Collections by the distribution utilities and the TRANSCO in any given
month shall be remitted to the PSALM Corp. on or before the fifteenth (15th) of the succeeding month, net of any
amount due to the distribution utility. Any end-user or self-generating entity not connected to a distribution utility shall
remit its corresponding universal charge directly to the TRANSCO. The PSALM Corp., as administrator of the fund,
shall create a Special Trust Fund which shall be disbursed only for the purposes specified herein in an open and
transparent manner. All amount collected for the universal charge shall be distributed to the respective beneficiaries
within a reasonable period to be provided by the ERC. Petitioners submit that the assailed provision of law and its
IRR which sought to implement the same are unconstitutional on the ground that the universal charge provided for
under Sec. 34 of the EPIRA and sought to be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax
which is to be collected from all electric end-users and self-generating entities. The power to tax is strictly a
legislative function and as such, the delegation of said power to any executive or administrative agency like the ERC
is unconstitutional, giving the same unlimited authority. The assailed provision clearly provides that the Universal
Charge is to be determined, fixed and approved by the ERC, hence leaving to the latter complete discretionary
legislative authority.
ISSUE: Whether or not there is undue delegation of legislative power to tax on the part of the ERC

RULING: No. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a
tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition
a tax. In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power, particularly
its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the purposes for which
the Universal Charge is imposed and which can be amply discerned as regulatory in character. From the Declaration
pf Policy of EPIRA (Section 2), it can be gleaned that the assailed Universal Charge is not a tax, but an exaction in
the exercise of the State's police power. Public welfare is surely promoted. Moreover, it is a well-established doctrine
that the taxing power may be used as an implement of police power. The principle of separation of powers ordains
that each of the three branches of government has exclusive cognizance of and is supreme in matters falling within
its own constitutionally allocated sphere. A logical corollary to the doctrine of separation of powers is the principle of
non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been
delegated cannot be delegated). This is based on the ethical principle that such delegated power constitutes not only
a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through
the intervening mind of another. In the face of the increasing complexity of modern life, delegation of legislative
power to various specialized administrative agencies is allowed as an exception to this principle. Given the volume
and variety of interactions in today's society, it is doubtful if the legislature can promulgate laws that will deal
adequately with and respond promptly to the minutiae of everyday life. Hence, the need to delegate to administrative
bodies - the principal agencies tasked to execute laws in their specialized fields - the authority to promulgate rules
and regulations to implement a given statute and effectuate its policies. All that is required for the valid exercise of
this power of subordinate legislation is that the regulation be germane to the objects and purposes of the law and that
the regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These
requirements are denominated as the completeness test and the sufficient standard test. Under the first test, the law
must be complete in all its terms and conditions when it leaves the legislature such that when it reaches the delegate,
the only thing he will have to do is to enforce it. The second test mandates adequate guidelines or limitations in the
law to determine the boundaries of the delegate's authority and prevent the delegation from running riot. The Court
finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential
terms and conditions, and that it contains sufficient standards. Although Sec. 34 of the EPIRA merely provides that
within one (1) year from the effectivity thereof, a Universal Charge to be determined, fixed and approved by the
ERC, shall be imposed on all electricity end-users, and therefore, does not state the specific amount to be paid as
Universal Charge, the amount nevertheless is made certain by the legislative parameters provided in the law itself.
Thus, the law is complete and passes the first test for valid delegation of legislative power.

RATIO: Doctrine of non-delegation not absolute: Requisites for Delegation. - The requisites for such delegation are:
(a) the completeness of the statute making the delegation; and (b) the presence of sufficient standard

6. PHILEX MINING CORP. v. CIR GR No. 125704, August 28, 1998 294 SCRA 687

FACTS: Petitioner Philex Mining Corp. assails the decision of the Court of Appeals affirming the Court of Tax
Appeals decision ordering it to pay the amount of P110.7 M as excise tax liability for the period from the 2nd quarter of
1991 to the 2nd quarter of 1992 plus 20% annual interest from 1994 until fully paid pursuant to Sections 248 and 249
of the Tax Code of 1977. Philex protested the demand for payment of the tax liabilities stating that it has pending
claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P120 M plus
interest. Therefore these claims for tax credit/refund should be applied against thetax liabilities.
ISSUE: Can there be an off-setting between the tax liabilities vis-a-vis claims of tax refund of the petitioner?

HELD: No. Philex's claim is an outright disregard of the basic principle in tax law that taxes are the lifeblood of the
government and so should be collected without unnecessary hindrance. Evidently, to countenance Philex's whimsical
reason would render ineffective our tax collection system. Too simplistic, it finds no support in law or in jurisprudence.
To be sure, Philex cannot be allowed to refuse the payment of its tax liabilities on the ground that it has a pending tax
claim for refund or credit against the government which has not yet been granted.Taxes cannot be subject to
compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each
other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate
capacity, while taxes are due to the Government in its sovereign capacity. xxx There can be no off-setting of taxes
against the claims that the taxpayer may have against the government. A person cannot refuse to pay a tax on the
ground that the government owes him an amount equal to or greater than the tax being collected. The collection of a
tax cannot await the results of a lawsuit against the government.