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8/31/2016 G.R.No.

L6093

TodayisWednesday,August31,2016

RepublicofthePhilippines
SUPREMECOURT
Manila

ENBANC

G.R.No.L6093February24,1954

THESHELLCO.OFP.I.,LTD.,plaintiffappellant,
vs.
E.E.VAO,asMunicipalTreasureroftheMunicipalityofCordova,ProvinceofCebu,defendantappellee.

C.J.JohnstonandA.P.Deenforappellant.
ProvincialFiscalJoseC.BorromeoandAssistantProvincialFiscalAnaniasV.Maribaoforappellee.

PADILLA,J.:

TheMunicipalCouncilofCordova,ProvinceofCebu,adoptedthefollowingordinances:No.10,seriesof1946,
whichimposesanannualtaxofP150onoccupationortheexerciseoftheprivilegeofinstallationmanagerNo.9,
seriesof1947,whichimposesanannualtaxofP40forlocaldepositsindrumsofcombustibleandinflammable
materialsandanannualtaxofP200fortincanfactoriesandNo.11,seriesof1948,whichimposesanannualtax
of P150 on tin can factories having a maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a
foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the ordinances imposing
suchtaxesareultravires. The defendant denies that they are so. The controversy was submitted for judgment
uponstipulationoffactswhichreadsasfollows:

Comenowthepartiesintheaboveentitledcasebytheirundersignedattorneysandherebyagreetothe
followingstipulationoffacts:

1.ThatthepartiesadmittheallegationscontainedinParagraph1oftheAmendedComplaintreferringto
residence, personality, and capacity of the parties except the fact that E.E. Vao is now replaced by F.A.
CorboasMunicipalTreasurerofCordova,Cebu

2. That the parties admit the allegations contained in paragraph 2 of the Amended Complaint. Official
Receipts Nos. A1280606, A37607422, A3769852 and A21030388 are herein marked as Exhibits A, B,
C,andD,respectivelyfortheplaintiff

3.ThatthepartiesadmitthatpaymentsmadeunderExhibitsB,C,andDwereallunderprotestandplaintiff
admitsthatExhibitAwasnotpaidunderprotest

4.ThatthepartiesadmitthatOfficialReceiptNo.A1280606forP40andOfficialReceiptNo.A3760742for
P200werecollectedbythedefendantbyvirtueofOrdinanceNo.9,(Secs.E4andE6,respectively)under
ResolutionNo.31,seriesof1947,enactedDecember15,1947,approvedbytheProvincialBoardofCebu
initsResolutionNo.644,seriesof1948.CopyofsaidOrdinanceNo.9,seriesof1947,ishereinmarkedas
Exhibit"E"fortheplaintiff,andasExhibit"I"forthedefendant

5. That the parties admit that Official Receipt No. A3760852 for P150 was paid for taxes imposed on
Installation Managers, collected by the defendant by virtue of Ordinance No. 10 (section 3, E12) under
Resolution No. 38, series of 1946, approved by the Provincial Board of Cebu in its Resolution No. 1070,
seriesof1946.Copyof.saidOrdinanceNo.10,seriesof1946ismarkedasExhibit"F"fortheplaintiffand
asExhibit"2"forthedefendant

6.ThatthepartiesadmitthatOfficialReceiptNo.A21030388forP5,450waspaidbyplaintiffandthatsaid
amountwascollectedbydefendantbyvirtueofOrdinanceNo.11,seriesof1948(underResolutionNo.46)
enactedAugust31,1948andapprovedbytheProvincialBoardofCebuinitsResolutionNo.115,seriesof
1949,andsamewasapprovedbytheHonorableSecretaryofFinanceundertheprovisionsofsection4of
CommonwealthActNo.472.CopyofsaidOrdinanceNo.11,seriesof1948ishereinmarkedasExhibit"G"
for the plaintiff, and Exhibit "3" for the defendant. Copy of the approval of the Honorable Secretary of
FinanceofthesameOrdinanceishereinmarkedasExhibit"4"forthedefendant.

Wherefore,asidefromoralevidencewhichmaybeofferedbythepartiesandotherpointsnotcoveredby
thisstipulation,thiscaseisherebysubmittedupontheforegoingagreedfactsandrecordofevidence.

CebuCity,Philippines,January20,1950.

THESHELLCO.OFP.I.LTD. C.D.JOHNSTON&A.P.DEEN
(Sgd.)L.DEBLECHYNDEN (Sgd.)A.P.DEEN
Plaintiff Attys.fortheplaintiff

THEMUNICIPALITYOFCORDOVA (Sgd.)JOSEC.BORROMEO
(Sgd.)F.A.CORBO ProvincialFiscal
Defendant Attorneyforthedefendant

(RecordonAppeal,pp.1518.)

Thepartiesreservedtherighttointroduceparoleevidencebutnosuchevidencewassubmittedbyeitherparty.
Fromthejudgmentholdingtheordinancesvalidanddismissingthecomplainttheplaintiffhasappealed.

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8/31/2016 G.R.No.L6093

ItiscontendedthatasthemunicipalordinanceimposinganannualtaxofP40for"minorlocaldepositindrumsof
combustibleandinflammablematerials,"andofP200"fortinfactory"wasadoptedunderandpursuanttosection
2244 of the Revised Administrative Code, which provides that the municipal council in the exercise of the
regulativeauthoritymayrequireanypersonengagedinanybusinessoroccupation,suchas"storingcombustible
or explosive materials" or "the conducting of any other business of an unwholesome, obnoxious, offensive, or
dangerouscharacter,"toobtainapermitforwhichareasonablefee,innocasetoexceedP10perannum,may
becharged,theannualtaxofP40andP200areunauthorizedandillegal.Thepermitandthefeereferredtomay
berequiredandchargedbytheMunicipalCouncilofCordovaintheexerciseofitsregulativeauthority,whereas
the ordinance which imposes the taxes in question was adopted under and pursuant to the provisions of
Commonwealth Act No. 472, which authorizes municipal councils and municipal district councils "to impose
licensetaxesuponpersonsengagedinanyoccupationorbusiness,orexercisingprivilegesinthemunicipalityor
municipaldistrict,byrequiringthemtosecurelicensesatratesfixedbythemunicipalcouncilormunicipaldistrict
council," which shall be just and uniform but not "percentage taxes and taxes on specified articles." Likewise,
OrdinanceNo.10,seriesof1946,whichimposesanannualtaxofP150on"installationmanager"comesunder
theprovisionsofCommonwealthActNo.472.Butitisclaimedthat"installationmanager"isadesignationmade
bytheplaintiffandsuchdesignationcannotbedeemedtobea"calling"asdefinedinsection178oftheNational
Internal Revenue Code (Com. Act No. 466), and that the installation manager employed by the plaintiff is a
salariedemployeewhichmaynotbetaxedbythemunicipalcouncilundertheprovisionsofCommonwealthAct
No.472.Thiscontentioniswithoutmerit,becauseeveniftheinstallationmanagerisasalariedemployeeofthe
plaintiff, still it is an occupation "and one occupation or line of business does not become exempt by being
conducted with some other occupation or business for which such tax has been paid'1 and the occupation tax
must be paid "by each individual engaged in a calling subject thereto."2 And pursuant to section 179 of the
NationalInternalRevenueCode,"Thepaymentof...occupationtaxshallnotexemptanypersonfromanytax,.
..providedbylaworordinanceinplaceswheresuch...occupationin...regulatedbymunicipallaw,norshall
thepaymentofanysuchtaxbeheldtoprohibitanymunicipalityfromplacingataxuponthesame...occupation,
for local purposes, where the imposition of such tax is authorized by law." It is true that, according to the
stipulation of facts, Ordinance No. 10, series of 1946, was approved by the Provincial Board of Cebu in its
Resolution No. 1070, series of 1946, and that it does not appear that it was approved by the Department of
Finance, as provided for and required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of
municipaltaxbeinginexcessofP50perannum.ButatthispointontheapprovaloftheDepartmentofFinance
wasnotraisedinthecourtbelow,itcannotberaisedforthefirsttimeonappeal.Theissuejoinedbythepartiesin
theirpleadingsandthepointraisedbytheplaintiffisthatthemunicipalcouncilwasnotempoweredtoadoptthe
ordinanceandnotthatitwasnotapprovedbytheDepartmentofFinance.Thefactthatitwasnotstatedinthe
stipulationoffactsjustifiesthepresumptionthattheordinancewasapprovedinaccordancewithlaw.

The contention that the ordinance is discriminatory and hostile because there is no other person in the locality
who exercises such "designation" or occupation is also without merit, because the fact that there is no other
person in the locality who exercises such a "designation" or calling does not make the ordinance discriminatory
andhostile,inasmuchasitisandwillbeapplicabletoanypersonorfirmwhoexercisessuchcallingoroccupation
namedordesignatedas"installationmanager."

Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can factories having a
maximumannualoutputcapacityof30,000tincanswhich,accordingtothestipulationoffacts,wasapprovedby
the Provincial Board of Cebu and the Department of Finance, is valid and lawful, because it is neither a
percentagetaxnoroneonspecifiedarticleswhicharetheonlyexceptionsprovidedinsection1,Commonwealth
ActNo.472.Neitherdoesitfallunderanyoftheprohibitionsprovidedforinsection3ofthesameAct.Specific
taxesenumeratedintheNationalInternalRevenueCodearethosethatareimposedupon"thingsmanufactured
or produced in the Philippines for domestic sale or consumption" and upon "things imported from the United
Statesandforeigncountries,"suchasdistilledspirits,domesticdenaturedalcohol,fermentedliquors,productsof
tobacco,cigarsandcigarettes,matches,mechanicallighters,firecrackers,skimmedmilk,manufacturedoilsand
otherfuels,coal,bunkerfueloil,dieselfueloil,cinematographicfilms,playingcards,sacharine.3 And it is not a
percentage tax because it is tax on business and the maximum annual output capacity is not a percentage,
becauseitisnotashareorataxbasedontheamountoftheproceedsrealizedoutofthesaleofthetincans
manufacturedthereinbutonthebusinessofmanufacturingtincanshavingamaximumannualoutputcapacityof
30,000tincans.

Inanactionforrefundofmunicipaltaxesclaimedtohavebeenpaidandcollectedunderanillegalordinance,the
realpartyininterestisnotthemunicipaltreasurerbutthemunicipalityconcernedthatisempoweredtosueand
besued.4

Thejudgmentappealedfromisherebyaffirmed,withcostsagainsttheappellant.

Paras,C.J.,Pablo,Bengzon,Montemayor,Reyes,Jugo,BautistaAngelo,Labrador,ConcepcionandDiokno,JJ.,
concur.

Footnotes
1Section178,NationalInternalRevenueCode(Com.Act.No.466).

2Supra.

3Section178,NationalInternalRevenueCode(Com.ActNo.466).

4Tanvs.DelaFuenteetal.,90Phil.,519.

TheLawphilProjectArellanoLawFoundation

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