EN BANC
|
REPUBLIC
OF THE PHILIPPINES, represented by THE HONORABLE SECRETARY OF FINANCE, THE
HONORABLE COMMISSIONER OF BUREAU OF INTERNAL REVENUE, THE HONORABLE
COMMISSIONER OF CUSTOMS, and THE COLLECTOR OF CUSTOMS OF THE PORT OF SUBIC, Petitioners, - versus - HON. RAMON
S. CAGUIOA, Presiding Judge, Branch 74, RTC, Third Judicial Region, Olongapo
City, INDIGO DISTRIBUTION CORP., herein represented by ARIEL G. CONSOLACION,
W STAR TRADING AND WAREHOUSING CORP., herein represented by HIERYN R. ECLARINAL,
FREEDOM BRANDS PHILS., CORP., herein represented by ANA LISA RAMAT, BRANDED
WAREHOUSE, INC., herein represented by MARY AILEEN S. GOZUN, ALTASIA INC.,
herein represented by ALAN HARROW, TAINAN TRADE (TAIWAN), INC., herein
represented by ELENA RANULLO, SUBIC PARK N’ SHOP, herein represented by NORMA
MANGALINO DIZON, TRADING GATEWAYS INTERNATIONAL PHILS., herein represented by
MA. CHARINA FE C. RODOLFO, DUTY FREE SUPERSTORE (DFS), herein represented by
RAJESH R. SADHWANI, CHJIMES TRADING INC., herein represented by ANGELO MARK
M. PICARDAL, PREMIER FREEPORT, INC., herein represented by ROMMEL P.
GABALDON, FUTURE TRADE SUBIC FREEPORT, INC., herein represented by WILLIE S.
VERIDIANO, GRAND COMTRADE INTERNATIONAL CORP., herein represented by JULIUS
MOLINDA, and FIRST PLATINUM INTERNATIONAL, INC., herein represented by ISIDRO
M. MUÑOZ, Respondents. |
G.R. No.
168584 Present: PUNO, C.J., QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO MORALES, AZCUNA, TINGA, CHICO-NAZARIO, GARCIA, VELASCO, JR., NACHURA, and REYES, JJ. PROMULGATED: |
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D E C I S I O N
CARPIO MORALES, J.:
Petitioners
seek via petition for certiorari and prohibition to annul (1) the May 4, 2005
Order[1]
issued by public respondent Judge Ramon S. Caguioa of the Regional Trial Court
(RTC), Branch 74, Olongapo City, granting private respondents’ application for
the issuance of a writ of preliminary injunction and (2) the Writ of
Preliminary Injunction[2]
that was issued pursuant to such Order, which stayed the implementation of
Republic Act (R.A.) No. 9334, AN ACT
INCREASING THE EXCISE TAX RATES IMPOSED ON ALCOHOL AND TOBACCO PRODUCTS,
AMENDING FOR THE PURPOSE SECTIONS 131, 141, 142, 143, 144, 145 AND 288 OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED.
Petitioners likewise seek to enjoin,
restrain and inhibit public respondent from enforcing the impugned issuances
and from further proceeding with the trial of Civil Case No. 102-0-05.
The
relevant facts are as follows:
In
1992, Congress enacted Republic Act (R.A) No. 7227[3] or
the Bases Conversion and Development Act
of 1992 which, among other things, created the Subic Special Economic
and Freeport Zone (SBF[4])
and the Subic Bay Metropolitan Authority (SBMA).
R.A.
No. 7227 envisioned the SBF to be developed into a “self-sustaining,
industrial, commercial, financial and investment center to generate employment
opportunities in and around the zone and to attract and promote productive
foreign investments.”[5] In line with this vision, Section 12 of the
law provided:
(b) The
Subic Special Economic Zone shall be operated and managed as a separate customs
territory ensuring free flow or movement of goods and capital within, into and
exported out of the Subic Special Economic Zone, as well as provide incentives
such as tax and duty-free importations of raw materials, capital and equipment.
However, exportation or removal of goods from the territory of the Subic
Special Economic Zone to the other parts of the Philippine territory shall be
subject to customs duties and taxes under the Customs and Tariff Code and other
relevant tax laws of the
(c) The
provisions of existing laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed within the
Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of
the gross income earned by all businesses and enterprises within the Subic
Special Economic Zone shall be remitted to the National Government, one percent
(1%) each to the local government units affected by the declaration of the zone
in proportion to their population area, and other factors. In addition, there
is hereby established a development fund of one percent (1%) of the gross
income earned by all businesses and enterprises within the Subic Special
Economic Zone to be utilized for the development of municipalities outside the
City of
In case of conflict between national and local laws with respect to tax exemption privileges in the Subic Special Economic Zone, the same shall be resolved in favor of the latter;
(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities and future shall be allowed and maintained in the Subic Special Economic Zone;
(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks and other financial institutions within the Subic Special Economic Zone;
(f) Banking and finance shall be liberalized with the establishment of foreign currency depository units of local commercial banks and offshore banking units of foreign banks with minimum Central Bank regulation;
(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than Two hundred fifty thousand dollars ($250,000), his/her spouse and dependent children under twenty-one (21) years of age, shall be granted permanent resident status within the Subic Special Economic Zone. They shall have freedom of ingress and egress to and from the Subic Special Economic Zone without any need of special authorization from the Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of this Act may also issue working visas renewal every two (2) years to foreign executives and other aliens possessing highly-technical skills which no Filipino within the Subic Special Economic Zone possesses, as certified by the Department of Labor and Employment. The names of aliens granted permanent residence status and working visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation within thirty (30) days after issuance thereof;
x x x x. (Emphasis supplied)
Pursuant to the law, private
respondents Indigo Distribution Corporation, W Star Trading and Warehousing
Corporation, Freedom Brands Philippines Corporation, Branded Warehouse, Inc.,
Altasia, Inc., Tainan Trade (Taiwan) Inc., Subic Park ‘N Shop, Incorporated,
Trading Gateways International Philipines, Inc., Duty Free Superstore (DFS)
Inc., Chijmes Trading, Inc., Premier Freeport, Inc., Future Trade Subic
Freeport, Inc., Grand Comtrade Int’l., Corp., and First Platinum International,
Inc., which are all domestic corporations doing business at the SBF, applied
for and were granted Certificates of Registration and Tax Exemption[6] by
the SBMA.
These certificates allowed them to
engage in the business either of trading, retailing or wholesaling, import and
export, warehousing, distribution and/or transshipment of general merchandise,
including alcohol and tobacco products, and uniformly granted them tax
exemptions for such importations as contained in the following provision of
their respective Certificates:
ARTICLE IV. The Company shall be entitled to tax and duty-free importation of raw materials, capital equipment, and household and personal items for use solely within the Subic Bay Freeport Zone pursuant to Sections 12(b) and 12(c) of the Act and Sections 43, 45, 46 and 49 of the Implementing Rules. All importations by the Company are exempt from inspection by the Societe Generale de Surveillance if such importations are delivered immediately to and for use solely within the Subic Bay Freeport Zone. (Emphasis supplied)
Congress subsequently passed R.A. No.
9334, however, effective on
Sec. 6. Section 131 of the National Internal Revenue Code of 1977, as amended, is hereby amended to read as follows:
Sec. 131. Payment of Excise Taxes on Imported Articles. –
(A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customshouse or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation.
The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zone, created under Republic Act No. 7227; x x x and such other freeports as may hereafter be established or created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty Free Philippines (DFP), shall be exempted from all applicable duties only: x x x Provided, finally, That the removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one Freeport to another Freeport, shall not be deemed an introduction into the Philippine customs territory. x x x. (Emphasis and underscoring supplied)
On the basis of Section 6 of R.A. No.
9334, SBMA issued on January 10, 2005 a Memorandum[8]
declaring that effective January 1, 2005, all importations of cigars,
cigarettes, distilled spirits, fermented liquors and wines into the SBF,
including those intended to be transshipped to other free ports in the Philippines,
shall be treated as ordinary importations subject to all applicable taxes,
duties and charges, including excise taxes.
Meanwhile, on
Accordingly, the Collector of Customs
of the port of Subic directed the SBMA Administrator to require payment of all
appropriate duties and taxes on all importations of cigars and cigarettes,
distilled spirits, fermented liquors and wines; and for all transactions
involving the said items to be covered from then on by a consumption entry and
no longer by a warehousing entry.[10]
On
On
Thus, private respondent enterprises,
through their representatives, brought before the RTC of Olongapo City a
special civil action for declaratory relief[14]
to have certain provisions of R.A. No. 9334 declared as unconstitutional, which
case was docketed as Civil Case No. 102-0-05.
In the main, private respondents
submitted that (1) R.A. No. 9334 should not be interpreted as altering,
modifying or amending the provisions of R.A. No. 7227 because repeals by
implication are not favored; (2) a general law like R.A. No. 9334 cannot amend
R.A. No. 7727, which is a special law; and (3) the assailed law violates the
one bill-one subject rule embodied in
Section 26(1), Article VI[15]
of the Constitution as well as the constitutional proscription against the
impairment of the obligation of contracts.[16]
Alleging that great and irreparable
loss and injury would befall them as a consequence of the imposition of taxes
on alcohol and tobacco products brought into the SBF, private respondents
prayed for the issuance of a writ of preliminary injunction and/or Temporary
Restraining Order (TRO) and preliminary mandatory injunction to enjoin the
directives of herein petitioners.
Petitioners
duly opposed the private respondents’ prayer for the issuance of a writ of
preliminary injunction and/or TRO, arguing that (1) tax exemptions are not
presumed and even when granted, are strictly construed against the grantee; (2)
an increase in business expense is not the injury contemplated by law, it being
a case of damnum absque injuria; and
(3) the drawback mechanism established in the law clearly negates the
possibility of the feared injury.[17]
Petitioners moreover pointed out that
courts are enjoined from issuing a writ of injunction and/or TRO on the grounds
of an alleged nullity of a law, ordinance or administrative regulation or
circular or in a manner that would effectively dispose of the main case. Taxes, they stressed, are the lifeblood of
the government and their prompt and certain availability is an imperious
need. They maintained that greater
injury would be inflicted on the public should the writ be granted.
On
As investors duly licensed to operate
inside the SBF, the trial court declared that private respondents were entitled
to enjoy the benefits of tax incentives under R.A. No. 7227, particularly the
exemption from local and national taxes under Section 12(c); the aforecited
provision of R.A. No. 7227, coupled with private respondents’ Certificates of
Registration and Tax Exemption from the SBMA, vested in them a clear and
unmistakable right or right in esse
that would be violated should R.A. No. 9334 be implemented; and the invasion of
such right is substantial and material as private respondents would be
compelled to pay more than what they should by way of taxes to the national
government.
The trial court thereafter ruled that
the prima facie presumption of
validity of R.A. No. 9334 had been overcome by private respondents, it holding that
as a partial amendment of the National Internal Revenue Code (NIRC) of 1997,[18]
as amended, R.A. No. 9334 is a general law that could not prevail over a
special statute like R.A. No. 7227 notwithstanding the fact that the assailed
law is of later effectivity.
The trial court went on to hold that
the repealing provision of Section 10 of R.A. No. 9334 does not expressly
mention the repeal of R. A. No. 7227, hence, its repeal can only be an implied
repeal, which is not favored; and since R.A. No. 9334 imposes new tax burdens,
whatever doubts arising therefrom should be resolved against the taxing
authority and in favor of the taxpayer.
The trial court furthermore held that
R.A. No. 9334 violates the terms and conditions of private respondents’
subsisting contracts with SBMA, which are embodied in their Certificates of
Registration and Exemptions in contravention of the constitutional guarantee
against the impairment of contractual obligations; that greater damage would be
inflicted on private respondents if the writ of injunction is not issued as
compared to the injury that the government and the general public would suffer
from its issuance; and that the damage that private respondents are bound to
suffer once the assailed statute is implemented – including the loss of
confidence of their foreign principals, loss of business opportunity and
unrealized income, and the danger of closing down their businesses due to
uncertainty of continued viability – cannot be measured accurately by any
standard.
With regard to the rule that
injunction is improper to restrain the collection of taxes under Section 218[19]
of the NIRC, the trial court held that what is sought to be enjoined is not per se the collection of taxes, but the
implementation of a statute that has been found preliminarily to be
unconstitutional.
Additionally, the trial court pointed
out that private respondents’ taxes have not yet been assessed, as they have
not filed consumption entries on all their imported tobacco and alcohol
products, hence, their duty to pay the corresponding excise taxes and the
concomitant right of the government to collect the same have not yet
materialized.
On May 11, 2005, the trial court
issued a Writ of Preliminary Injunction directing petitioners and the SBMA
Administrator as well as all persons assisting or acting for and in their
behalf “1) to allow the operations of [private respondents] in accordance with
R.A. No. 7227; 2) to allow [them] to file warehousing entries instead of
consumption entries as regards their importation of tobacco and alcohol
products; and 3) to cease and desist from implementing the pertinent provisions
of R.A. No. 9334 by not compelling [private respondents] to immediately pay
duties and taxes on said alcohol and tobacco products as a condition to their
removal from the port area for transfer to the warehouses of [private
respondents].”[20]
The injunction bond was approved at
One Million pesos (P1,000,000).[21]
Without moving for reconsideration,
petitioners have come directly to this Court to question the May 4, 2005 Order
and the Writ of Preliminary Injunction which, they submit, were issued by public
respondent with grave abuse of discretion amounting to lack or excess of
jurisdiction.
In particular, petitioners contend
that public respondent peremptorily and unjustly issued the injunctive writ
despite the absence of the legal requisites for its issuance, resulting in
heavy government revenue losses.[22]
They emphatically argue that since the tax exemption previously enjoyed by
private respondents has clearly been withdrawn by R.A. No. 9334, private
respondents do not have any right in esse
nor can they invoke legal injury to stymie the enforcement of R.A. No. 9334.
Furthermore, petitioners maintain
that in issuing the injunctive writ, public respondent showed manifest bias and
prejudice and prejudged the merits of the case in utter disregard of the caveat
issued by this Court in Searth
Commodities Corporation, et al. v. Court of Appeals[23]
and Vera v. Arca.[24]
Regarding the P1 million
injunction bond fixed by public respondent, petitioners argue that the same is
grossly disproportionate to the damages that have been and continue to be
sustained by the Republic.
In their Reply[25]
to private respondents’ Comment, petitioners additionally plead public
respondent’s bias and partiality in allowing the motions for intervention of a
number of corporations[26]
without notice to them and in disregard of their present pending petition for
certiorari and prohibition before this Court.
The injunction bond filed by private respondent Indigo Distribution
Corporation, they stress, is not even sufficient to cover all the original
private respondents, much less, intervenor-corporations.
The petition is partly meritorious.
At
the outset, it bears emphasis that only questions relating to the propriety of
the issuance of the May 4, 2005 Order and the Writ of Preliminary Injunction
are properly within the scope of the present petition and shall be so addressed
in order to determine if public respondent committed grave abuse of
discretion. The arguments raised by
private respondents which pertain to the constitutionality of R.A. No. 9334
subject matter of the case pending litigation before the trial court have no
bearing in resolving the present petition.
Section
3 of Rule 58 of the Revised Rules of Court provides:
SEC. 3. Grounds for issuance of preliminary injunction. – A preliminary injunction may be granted when it is established.
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.
For a writ of preliminary injunction
to issue, the plaintiff must be able to establish that (1) there is a clear and
unmistakable right to be protected, (2) the invasion of the right sought to be
protected is material and substantial, and (3) there is an urgent and paramount
necessity for the writ to prevent serious damage.[27]
Conversely, failure to establish
either the existence of a clear and positive right which should be judicially
protected through the writ of injunction, or of the acts or attempts to commit
any act which endangers or tends to endanger the existence of said right, or of
the urgent need to prevent serious damage, is a sufficient ground for denying
the preliminary injunction.[28]
It is beyond cavil that R.A. No. 7227
granted private respondents exemption from local and national taxes, including
excise taxes, on their importations of general merchandise, for which reason
they enjoyed tax-exempt status until the effectivity of R.A. No. 9334.
By subsequently enacting R.A. No.
9334, however, Congress expressed its intention to withdraw private
respondents’ tax exemption privilege on their importations of cigars,
cigarettes, distilled spirits, fermented liquors and wines. Juxtaposed to show this intention are the
respective provisions of Section 131 of the NIRC before and after its amendment
by R.A. No. 9334:
|
Sec. 131 of NIRC
before R.A. No. 9334 |
Sec. 131, as
amended by R.A. No. 9334 |
|
Sec. 131. Payment of Excise Taxes on Imported Articles. – (A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation.
The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. Provided, however, That this shall not apply to cigars and cigarettes, fermented spirits and wines brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic Zone, created under Republic Act No. 7903, and are not transshipped to any other port in the Philippines: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty Free Philippines (DFP), shall be exempted from all applicable duties, charges, including excise tax due thereon; Provided still further, That such articles directly imported by a government-owned and operated duty-free shop, like the Duty-Free Philippines, shall be labeled “tax and duty-free” and “not for resale”: Provided, still further, That if such articles brought into the duly chartered or legislated freeports under Republic Acts Nos. 7227, 7922 and 7903 are subsequently introduced into the Philippine customs territory, then such articles shall, upon such introduction, be deemed imported into the Philippines and shall be subject to all imposts and excise taxes provided herein and other statutes: Provided, finally, That the removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar articles, from one freeport to another freeport, shall not be deemed an introduction into the Philippine customs territory. x x x x. |
Sec. 131. Payment of Excise Taxes on Imported Articles. – (A) Persons Liable. – Excise taxes on imported articles shall be paid by the owner or importer to the Customs Officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customs house or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. The provision of any special or general law to the contrary notwithstanding, the importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the Philippines, even if destined for tax and duty free shops, shall be subject to all applicable taxes, duties, charges, including excise taxes due thereon. This shall apply to cigars and cigarettes, distilled spirits, fermented liquors and wines brought directly into the duly chartered or legislated freeports of the Subic Economic Freeport Zone, created under Republic Act No. 7227; the Cagayan Special Economic Zone and Freeport, created under Republic Act No. 7922; and the Zamboanga City Special Economic Zone, created under Republic Act No. 7903, and such other freeports as may hereafter be established or created by law: Provided, further, That importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly by a government-owned and operated duty-free shop, like the Duty Free Philippines (DFP), shall be exempted from all applicable duties only: Provided still further, That such articles directly imported by a government-owned and operated duty-free shop, like the Duty-Free Philippines, shall be labeled “tax and duty-free” and “not for resale”: Provided, finally, That the removal and transfer of tax and duty-free goods, products, machinery, equipment and other similar articles other than cigars and cigarettes, distilled spirits, fermented liquors and wines, from one Freeport to another Freeport, shall not be deemed an introduction into the Philippine customs territory. x x x x. |
(Emphasis and underscoring supplied)
To note, the old Section 131 of the
NIRC expressly provided that all taxes, duties, charges, including excise taxes
shall not apply to importations of
cigars, cigarettes, fermented spirits and wines brought directly into the duly
chartered or legislated freeports of the SBF.
On the other hand, Section 131, as
amended by R.A. No. 9334, now provides that such taxes, duties and charges,
including excise taxes, shall apply
to importation of cigars and cigarettes, distilled spirits, fermented liquors
and wines into the SBF.
Without necessarily passing upon the
validity of the withdrawal of the tax exemption privileges of private
respondents, it behooves this Court to state certain basic principles and
observations that should throw light on the propriety of the issuance of the
writ of preliminary injunction in this case.
First. Every
presumption must be indulged in favor of the constitutionality of a statute.[29] The burden of proving the unconstitutionality
of a law rests on the party assailing the law.[30] In passing upon the validity of an act of a
co-equal and coordinate branch of the government, courts must ever be mindful
of the time-honored principle that a statute is presumed to be valid.
Second. There is no vested right in a tax exemption,
more so when the latest expression of legislative intent renders its
continuance doubtful. Being a mere statutory privilege,[31] a
tax exemption may be modified or withdrawn at will by the granting authority.[32]
To state otherwise is to limit the
taxing power of the State, which is unlimited, plenary, comprehensive and
supreme. The power to impose taxes is one so unlimited in force and so
searching in extent, it is subject only to restrictions which rest on the
discretion of the authority exercising it.[33]
Third. As a
general rule, tax exemptions are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing authority.[34]
The burden of proof rests upon the party claiming exemption to prove that it is
in fact covered by the exemption so claimed.[35] In case of doubt, non-exemption is favored.[36]
Fourth. A tax
exemption cannot be grounded upon the continued existence of a statute which
precludes its change or repeal.[37]
Flowing from the basic precept of constitutional law that no law is
irrepealable, Congress, in the legitimate exercise of its lawmaking powers, can
enact a law withdrawing a tax exemption just as efficaciously as it may grant
the same under Section 28(4) of Article VI[38]
of the Constitution. There is no
gainsaying therefore that Congress can amend Section 131 of the NIRC in a
manner it sees fit, as it did when it passed R.A. No. 9334.
Fifth. The
rights granted under the Certificates of Registration and Tax Exemption of
private respondents are not absolute and unconditional as to constitute rights in esse – those clearly founded on or
granted by law or is enforceable as a matter of law.[39]
These certificates granting private
respondents a “permit to operate” their respective businesses are in the nature
of licenses, which the bulk of jurisprudence considers as neither a property
nor a property right.[40] The licensee takes his license subject to such
conditions as the grantor sees fit to impose, including its revocation at
pleasure.[41] A
license can thus be revoked at any time since it does not confer an absolute
right.[42]
While the tax exemption contained in the Certificates of Registration of private respondents may have been part of the inducement for carrying on their businesses in the SBF, this exemption, nevertheless, is far from being contractual in nature in the sense that the non-impairment clause of the Constitution can rightly be invoked.[43]
Sixth.
Whatever right may have been acquired on the basis of the Certificates of
Registration and Tax Exemption must yield to the State’s valid exercise of
police power.[44] It is
well to remember that taxes may be made the implement of the police power.[45]
It is not difficult to recognize that
public welfare and necessity underlie the enactment of R.A. No. 9334. As
petitioners point out, the now assailed provision was passed to curb the
pernicious practice of some unscrupulous business enterprises inside the SBF of
using their tax exemption privileges for smuggling purposes. Smuggling in whatever form is bad enough; it
is worse when the same is allegedly perpetrated, condoned or facilitated by
enterprises hiding behind the cloak of their tax exemption privileges.
Seventh. As a
rule, courts should avoid issuing a writ of preliminary injunction which would
in effect dispose of the main case without trial.[46]
This rule is intended to preclude a prejudgment of the main case and a reversal
of the rule on the burden of proof since by issuing the injunctive writ, the
court would assume the proposition that petitioners are inceptively duty bound
to prove.[47]
Eighth. A court may issue a writ of preliminary
injunction only when the petitioner assailing a statute has made out a case of
unconstitutionality or invalidity strong enough, in the mind of the judge, to
overcome the presumption of validity, in
addition to a showing of a clear legal right to the remedy sought.[48]
Thus, it is not enough that
petitioners make out a case of unconstitutionality or invalidity to overcome
the prima facie presumption of
validity of a statute; they must also be able to show a clear legal right that
ought to be protected by the court. The issuance of the writ is therefore not
proper when the complainant’s right is doubtful or disputed.[49]
Ninth. The
feared injurious effects of the imposition of duties, charges and taxes on
imported cigars, cigarettes, distilled spirits, fermented liquors and wines on
private respondents’ businesses cannot possibly outweigh the dire consequences
that the non-collection of taxes, not to mention the unabated smuggling inside
the SBF, would wreak on the government.
Whatever damage would befall private respondents must perforce take a
back seat to the pressing need to curb smuggling and raise revenues for
governmental functions.
All told, while the grant or denial
of an injunction generally rests on the sound discretion of the lower court,
this Court may and should intervene in a clear case of abuse.[50]
One such case of grave abuse obtained
in this case when public respondent issued his Order of
In holding that the presumption of
constitutionality and validity of R.A. No. 9334 was overcome by private respondents
for the reasons public respondent cited in his May 4, 2005 Order, he
disregarded the fact that as a condition sine
qua non to the issuance of a writ of preliminary injunction, private
respondents needed also to show a clear
legal right that ought to be protected.
That requirement is not satisfied in this case.
To stress, the possibility of
irreparable damage without proof of an
actual existing right would not justify an injunctive relief.[52]
Besides, private respondents are not
altogether lacking an appropriate relief under the law. As petitioners point out in their Petition[53]
before this Court, private respondents may avail themselves of a tax refund or
tax credit should R.A. No. 9334 be finally declared invalid.
Indeed, Sections 204[54]
and 229[55]
of the NIRC provide for the recovery of erroneously or illegally collected
taxes which would be the nature of the excise taxes paid by private respondents
should Section 6 of R.A. No. 9334 be declared unconstitutional or invalid.
It may not be amiss to add that
private respondents can also opt not to import, or to import less of, those
items which no longer enjoy tax exemption under R.A. No. 9334 to avoid the
payment of taxes thereon.
The Court finds that public respondent
had also ventured into the delicate area which courts are cautioned from taking
when deciding applications for the issuance of the writ of preliminary
injunction. Having ruled preliminarily
against the prima facie validity of
R.A. No. 9334, he assumed in effect the proposition that private respondents in
their petition for declaratory relief were duty bound to prove, thereby
shifting to petitioners the burden of proving that R.A. No. 9334 is not
unconstitutional or invalid.
In the same vein, the Court finds public
respondent to have overstepped his discretion when he arbitrarily fixed the
injunction bond of the SBF enterprises at only P1million.
The alleged sparseness of the
testimony of Indigo Corporation’s representative[56]
on the injury to be suffered by private respondents may be excused because
evidence for a preliminary injunction need not be conclusive or complete.
Nonetheless, considering the number of private respondent enterprises and the
volume of their businesses, the injunction bond is undoubtedly not sufficient
to answer for the damages that the government was bound to suffer as a
consequence of the suspension of the implementation of the assailed provisions
of R.A. No. 9334.
Rule 58, Section 4(b) provides that a
bond is executed in favor of the party enjoined to answer for all damages which it may sustain by
reason of the injunction. The purpose of
the injunction bond is to protect the defendant against loss or damage by
reason of the injunction in case the court finally decides that the plaintiff
was not entitled to it, and the bond is usually conditioned accordingly.[57]
Recalling this Court’s pronouncements
in Olalia v. Hizon[58]
that:
x x x [T]here is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages.
Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it,
it cannot be overemphasized that any
injunction that restrains the collection of taxes, which is the inevitable
result of the suspension of the
implementation of the assailed Section 6 of R.A. No. 9334, is a limitation upon
the right of the government to its lifeline and wherewithal.
The power to tax emanates from
necessity; without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people.[59] That the enforcement of tax laws and the
collection of taxes are of paramount importance for the sustenance of
government has been repeatedly observed. Taxes being the lifeblood of the government that
should be collected without unnecessary hindrance,[60] every
precaution must be taken not to unduly suppress it.
Whether this Court must issue the
writ of prohibition, suffice it to stress that being possessed of the power to
act on the petition for declaratory relief, public respondent can proceed to
determine the merits of the main case.
To halt the proceedings at this point may be acting too prematurely and
would not be in keeping with the policy that courts must decide controversies on
the merits.
Moreover, lacking the requisite proof
of public respondent’s alleged partiality, this Court has no ground to prohibit
him from proceeding with the case for declaratory relief. For these reasons,
prohibition does not lie.
WHEREFORE, the
Petition is PARTLY GRANTED. The writ of certiorari to nullify and set
aside the Order of
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
WE CONCUR:
REYNATO S.
PUNO
Chief Justice
|
LEONARDO A. QUISUMBING Associate
Justice ANGELINA SANDOVAL- GUTIERREZ Associate Justice |
CONSUELO YNARES- Associate Justice ANTONIO T. CARPIO Associate Justice |
|
MA. ALICIA AUSTRIA-MARTINEZ Associate
Justice |
RENATO C. CORONA Associate
Justice |
|
ADOLFO S. AZCUNA Associate
Justice MINITA V. CHICO-NAZARIO Associate Justice |
DANTE O. TINGA Associate
Justice CANCIO C. GARCIA
Associate Justice |
|
PRESBITERO J. VELASCO, JR. Associate
Justice |
ANTONIO EDUARDO B. NACHURA Associate
Justice |
RUBEN T. REYES
Associate
Justice
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, I certify that the conclusions in the above decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court.
REYNATO S. PUNO
Chief
Justice
[1] Rollo, pp. 57-60.
[2]
[3] "An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefor and for Other Purposes.”
[4] This is the accronym used under the Rules and Regulations Implementing R.A. No. 7227 when referring to the Subic Special Economic and Freeport Zone under Section 12 of the Act.
[5] Section 12(a).
[6] Rollo, pp. 120-144.
[7] Section 11 thereof.
[8] Rollo, p. 333; Annex “G” of Petition for Declaratory Relief.
[9]
[10]
[11]
[12]
“1. That we will
not trade any of the transshipped cigarettes inside the
x x x x
“3. That excepting fortuitous events, justifiable reasons, and acts beyond their controls x x x, [they] will load [their] transshipped cigarettes on board the departing vessels bound for foreign destinations in 1-3 days counted from the time of the arrival of the vessel at the Subic Port;
x x x x
“5. That both the Customs Office and the Seaport shall each have copies of the TALLY SHEETS for purposes of monitoring the inventories of [their] transshipped cigarettes;
x x x x.”
(Rollo, pp. 340-342.)
[13]
[14]
[15] SEC. 26. (1) Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.
[16] Constitution, Article II, Section 10.
[17]
[18] Republic Act No. 8424.
[19] SEC. 218. Injunction not Available to Restrain Collection of Tax. – No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by this Code.
[20]
[21] Ibid.
[22] As of the filing of the petition on July 8,
2005, petitioners reported that government revenue losses have amounted to One
Hundred Forty Six Million Two Hundred Ninety Three Thousand Five Hundred
Thirty-Three Pesos (P146,293,533) as shown by the certificate of the
Port Collector of SBF dated July 6, 2005, which was attached to the Petition as
Annex “C” (rollo, p. 62). According to petitioners, the Republic has
lost and continues to lose at least Eighteen Million pesos (P18,000,000)
for each day that the implementation of R.A. No. 9334 was and remains to be
suspended (id. at 44).
[23] G.R. No. 64220,
[24] G.R. No. L-25721,
[25] Rollo, pp. 700-709.
[26] The intervenor-corporations were identified by petitioners as Diageo Freeport Philippines, Inc., Siam Corporation, Transglobe Subic Corporation and Hundred Young Subic International, Inc. (Petitioners’ Motion for Reconsideration with Prayer for Inhibition, id. at 711-719).
[27] Boncodin v. National Power Corporation
Employees Consolidated Union (NECU), G.R. No. 162716, September 27, 2006, 503 SCRA 611, 622-623; Philippine Ports Authority v. Pier 8
Arrastre & Stevedoring Services, Inc., G.R. Nos. 147861 & 155252,
November 18, 2005, 475 SCRA 426, 435; Phil.
Sinter Corp. v. Cagayan Elec. Power and Light Co., Inc., 431 Phil. 324, 335
(2002); Philippine Ports Authority v.
Court of Appeals, G.R. Nos. 115786-87, February 5, 1996, 323 Phil. 260,
291.
[28] Rosauro v. Cuneta, G.R. No. L-69854,
[29] Basco v. Philippine Amusement and Gaming
Corporation, G.R. No. 91649, May 14, 1991, 197 SCRA 52, 68; Valley Trading Co., Inc. v. Court of First
Instance of Isabela, Branch II, G.R. No. 49529, March 31, 1989, 171 SCRA
501 508; Citizens’ Alliance for Consumer
Protection v. Energy Regulatory Board, G.R. Nos. 78888-90, June 23, 1988,
162 SCRA 521, 539; Lozano v. Martinez,
230 Phil. 406, 418 (1986).
[30] Mirasol v. Department of Public Works and
Highways, G.R. No. 158793, June 8, 2006, 490 SCRA 318, 348.
[31] United Paracale Mining Co. v. De la Rosa, G.R. Nos. 63786-87, April 7, 1993, 221 SCRA 108, 115.
[32] Supra; Abakada Guro Party List Officers v. Ermita,
G.R. Nos. 168056, 168207, 168461 and 168463,
September 1, 2005, 469 SCRA 1, 134.
[33] Tio v. Videogram Regulatory Board, G.R.
No. L-75697,
[34] Commissioner of Internal Revenue v. Seagate
Technology (Philippines), G.R. No. 153866, February 11, 2005, 451 SCRA 132,
152; Philippine Long Distance Telephone
Company, Inc. v. City of Davao, 447 Phil. 571, 584 (2003); Commissioner of Internal Revenue v. Arnoldus
Carpentry Shop, Inc., G.R. No. L-71122,
[35] Caltex
Philippines, Inc. v. Commission on Audit, G.R. No. 92585,
[36] Benguet
Corporation v. Central Board of Assessment Appeals, G.R. No. 100959, June
29, 1992, 210 SCRA 579, 587.
[37] Commissioner of Internal Revenue v. Court of Appeals, February 6, 1997, citing Asociacion de Agricultores de Talisay-Silay, Inc. v. Talisay-Silay Milling Co., Inc., 88 SCRA 294, 452.
[38] Sec. 28 (4) No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of Congress.
[39] Boncodin v. NECU, supra note 27 at 623.
[40] Chavez v. Romulo, G.R. No. 157036, June 9, 2004, 431 SCRA 534,560; Oposa v. Factoran, Jr., G.R.
No. 101083, July 30, 1993, 224 SCRA 792, 811-812.
[41] Chavez v. Romulo, supra
at 562.
[42] Supra.
[43] Manila
Electric Company v.
[44] Vide Kabiling v. National Housing Authority, G.R. No. L-57424,
[45] Osmeña v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703, 711; Caltex Philippines, Inc. v. Commission on
Audit, supra note 35 at 756;
Philippine Airlines, Inc. v. Edu, G.R. No. L-41383,
[46] Selegna Management and Development
Corporation v. United Coconut
Planters Bank, G.R. No. 165662, May 3, 2006, 489 SCRA 125, 145; Rivas v. Securities and Exchange Commission,
G.R. No. 53772, October 4, 1990, 190 SCRA 295, 305 citing Ortigas & Co. Ltd. Partnership v. CA, G.R. No. L-79128,
[47] Rivas v. Securities and Exchange Commission, supra.
[48] Metropolitan
[49] Boncodin v. NECU, note 27; Selegna Management and Development
Corporation v. United Coconut Planters Bank, supra note 46.
[50] Searth Commodities Corporation, et al. v. Court of Appeals, supra note 23 at 628; S & A Gaisano Incorporated v. Hidalgo, G.R. No. 80397, December 10, 1990, 192 SCRA 224, 229; Genoblazo v. Court of Appeals, G.R. No. 79303, June 20, 1989, 174 SCRA 124, 133.
[51] Vide Boncodin v. NECU, supra note 27 at 623.
[52] Almeida v. Court of Appeals, G.R. No.
159124,
[53] Rollo, p. 25.
[54] SEC. 204. Authority of the Commissioner to Compromise, Abate, and Refund or Credit Taxes. – The Commissioner may –
x x x x
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, x x x.
x x x x
[55] SEC. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or nor such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefore, refund or credit any tax, where on the face of the return upon which payment was made, such tax appears clearly to have been erroneously paid.
[56] Only Ariel G. Consolacion, Indigo Corporation’s vice president, testified for all the private respondents herein.
[57] Paramount Insurance Corporation v. Court of
Appeals, 369 Phil. 641, 653 (1999);
[58] G.R. No. 87913, May 6, 1991,196 SCRA 665, 672-673.
[59] National Power Corporation v. City of
[60] Marcos v. Court of Appeals, 339 Phil.
253, 263 (1997); Northern Lines, Inc. v.
Court of Tax Appeals, G.R. No. L-41376-77,