Floro v Gorospe
represented jointly in this action by its Municipal Treasurer
SUMMARY: Floro Cement is engaged in manufacturing and exporting
cement. They were taxed by the municipality of Lugait for
manufacturer’s and exporter’s tax pursuant to 2 municipal
ordinances. They alleged that they were exempted from the tax based
on PD 231 and PD 463 granting exemptions to mining products. The
court held that cement, which is the product of Floro, is not a mining
product. It is not cement that is mined but the ingredients of cement.
Hence, Floro is not covered by the exemption. Furthermore, we follow
the maxim that exemptions are strictly construed against the person
seeking to be exempted.
FACTS:
- Floro Cement is a domestic corporation duly organized and
existing under the laws of the Republic of the Philippines with
business establishment and office address at its compound in
the aforementioned municipality of Lugait
- As a mining operator of mineral land/lands situated at Lugait,
Misamis Oriental, Floro was granted by the Secretary of
Agriculture and Natural Resources a Certificate of
Qualification for Tax Exemption, dated July 7, 1960, entitling
defendant to exemption for a period of five years from April
30, 1969 to April 29, 1974, from the payment of all taxes,
except income tax,
- the certificate of tax exemption was amended and granted tax
exemption to Floro from May 17, 1974 to Jan. 1, 1978
- July 3, 1974, plaintiff, through its Municipal Mayor, wired the
Secretary of Finance, opposing the application of defendant
for the extension of its exemption from all forms of taxation,
including its application for extension of its exemption from
realty taxes, which opposition was not favorably acted upon
by the said Secretary of Finance
- The municipality of Lugait, province of Misamis Oriental,
and the Provincial Treasurer of the said province, filed with
this Court a verified complaint for collection of
manufacturer's and exporter's taxes including surcharge for
the period covering January 1, 1974 to September 30, 1975
against Floro based on its Municipal Ordinance No. 5,
otherwise known as the Municipal Revenue Code of 1974,
which was passed pursuant to Presidential Decree No. 231
dated June 28, 1973 and also Municipal Ordinance No. 10
passed on June 11, 1974 pursuant to Presidential Decree No.
426 dated March 30, 1974, amending Presidential Decree No.
231.
- Trial court ordered Floro to pay 161,875 as manufacturer’s
and exporter’s tax
Petitioner’s argument:
1. power of municipality repealed by sec. 5(m) of PD 231 and sec. 52 of
PD 463
Sec. 5(m) of P.D. No. 231, which reads:
"Sec. 5. Common Limitations on the Taxing Powers of Local
Governments.
The exercise of taxing power of provinces, cities, municipalities and
barrios shall not extend to the imposition of the following:
(m) Taxes on mines, mining operations and mineral products and their
by-products when sold domestically by the operator."
Petitioners allege that cement is a mineral product, hence, covered by
5(m)
Sec. 52. Power to Levy Taxes on Mines, Mining Corporation and
Mineral Products. Any law to the contrary notwithstanding, no
province, city, municipality, barrio or municipal district shall levy and
collect taxes, fees, rentals, royalties or charges of any kind whatsoever
on mines, mining claims, mineral products, or on any operation,
process or activity connected therewith
2. granted by the Secretary of Agriculture and Natural Resources a
Certificate of Qualification for Tax Exemption, CQTE No. 22, dated July
- Power of taxation is a high prerogative of sovereignty, the
7, 1960, entitling defendant to exemption for a period of five (5) years
from April 30, 1969 to April 29, 1974 from payment of all taxes, except
income tax, and which Certificate was amended on November 5, 1974
(CQTE P.D. 46322), entitling defendant to exemption from all taxes,
duties and fees except income tax, for five (5) years from the first date
of actual commercial production of saleable mineral products that is
from May 17, 1974 to January 1, 1978
- the exemption mentioned in Sec. 52 of P.D. No. 463 refers
Respondent’s argument: while respondent municipality admits that
petitioner Floro Cement Corporation undertakes exploration,
development and exploitation of mineral products, the taxes sought
to be collected were not imposed on these activities in view of the
mentioned prohibition under Sec. 52 of P.D. No. 463. Said taxes were
- by the parties’ own stipulation of facts submitted before the
levied on the corporation's business of manufacturing and exporting
cement. The business of manufacturing and exporting cement does
not fall under exploration, development nor exploitation of mineral
resources as defined in Sec. 2 of P.D. No. 463, hence, it is outside the
scope of application of Sec. 52 of said decree
ISSUES: whether or not Ordinances Nos. 5 and 10 of Lugait, Misamis
Oriental apply to petitioner Floro Corporation notwithstanding the
limitation on the taxing power of local government as provided for in
Sec. 5(m) of P.D. 231 and Sec. 52 of P.D. 463
HELD:
- Cement not a mineral product. While cement is composed of
80% minerals, it is not merely an admixture or blending of raw
materials, as lime, silica, shale and others. It is the result of a
definite process the crushing of minerals, grinding, mixing,
calcining, adding of retarder or raw gypsum. In short, before
cement reaches its saleable form, the minerals had already
undergone a chemical change through manufacturing process
relinquishment is never presumed and any reduction or
diminution thereof. He who claims an exemption must be able
to point out some provision of law creating the right; it cannot
be allowed to exist upon a mere vague implication or
inference. It must be shown indubitably to exist, for every
presumption is against it, and a well-founded doubt is fatal to
the claim
only to machineries, equipment, tools for production, etc., as
provided in Sec. 53 of the same decree. The manufacture and
the export of cement does not fall under the said provision for
it is not a mineral product. It is not cement that is mined, only
the mineral products composing the finished product
court a quo, it is admitted that Floro Cement Corporation is
engaged in the manufacturing and selling, including exporting
of cement. As such, and since the taxes sought to be collected
were levied on these activities pursuant to Sec. 19 of P.D. No.
231. Ordinances Nos. 5 and 10, which were enacted pursuant
to P.D. No. 231 and P.D. No. 426, respectively, properly apply
to petitioner Floro Cement Corporation