1ST CASE

SECOND DIVISION                                                                  COMMISSIONER OF INTERNAL  G.R. Nos. 167274-75REVENUE,                                               Petitioner,                                Present:                                                                    QUISUMBING, J.,

                                      Chairperson,                                                                   YNARES-SANTIAGO,

-  versus  -                                        CARPIO MORALES,          TINGA, and

VELASCO, JR.,  JJ.                      

FORTUNE TOBACCO          CORPORATION,                                     Promulgated:                      Respondent.                                                                    July 21, 2008 x---------------------------------------------------------------------------x  

D E C I S I O N 

TINGA, J.:            Simple and uncomplicated is the central issue involved, yet whopping is the

amount at stake in this case. 

          After much wrangling in the Court of Tax Appeals (CTA) and the Court of Appeals, Fortune Tobacco Corporation (Fortune Tobacco) was granted a tax

refund or tax credit representing specific taxes erroneously collected from its

tobacco products.  The tax refund is being re-claimed by the Commissioner of Internal Revenue (Commissioner) in this petition. 

           The following undisputed facts, summarized by the Court of Appeals, are

quoted in the assailed Decision[1] dated 28 September 2004:           CAG.R. SP No. 80675 

x x x x  Petitioner[2] is a domestic corporation duly organized and existing under

and by virtue of the laws of the Republic of the Philippines, with principal address at Fortune Avenue, Parang, Marikina City.

 Petitioner is the manufacturer/producer of, among others, the following

cigarette brands, with tax rate classification based on net retail price prescribed by Annex “D” to R.A. No. 4280, to wit:

              Brand                                              Tax RateChampion M 100                                             P1.00Salem M 100                                                   P1.00Salem M King                                      P1.00Camel F King                                                   P1.00Camel Lights Box 20’s                         P1.00 Camel Filters Box 20’s                         P1.00Winston F Kings                                               P5.00 Winston Lights                                     P5.00 Immediately prior to January 1, 1997, the above-mentioned cigarette

brands were subject to ad valorem tax pursuant to then Section 142 of the Tax Code of 1977, as amended.  However, onJanuary 1, 1997, R.A. No. 8240 took effect whereby a shift from the ad valorem tax (AVT) system to the specific tax system was made and subjecting the aforesaid cigarette brands to specific tax under [S]ection 142 thereof, now renumbered as Sec. 145 of the Tax Code of 1997, pertinent provisions of which are quoted thus:

                                          Section 145.  Cigars and Cigarettes- 

(A) Cigars. – There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.

 “(B)  Cigarettes packed by hand. – There shall be levied,

assessesed and collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack.

 (C) Cigarettes packed by machine. – There shall be levied,

assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:

 (1) If the net retail price (excluding the excise tax and the value-

added tax) is above Ten pesos ( P 10.00)  per pack, the tax shall be Twelve (P12.00) per pack;

       (2) If the net retail price (excluding the excise tax and the value

added tax) exceeds Six pesos and Fifty centavos ( P 6.50)  but does not exceed Ten pesos (P10.00) per pack, the tax shall beEight Pesos ( P 8.00) per pack.

 (3) If the net retail price (excluding the excise tax and the value-

added tax) is Five pesos ( P 5.00) but does not exceed Six Pesos and fifty centavos ( P 6.50) per pack , the tax shall be Five pesos ( P 5.00) per pack ;

(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos ( P 5.00) per pack , the tax shall be One peso ( P 1.00)  per pack;

“Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity      of R.A. No. 8240 shall be taxed under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996. Provided, however, that in cases were (sic) the excise tax rate imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.

 

 

 

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000. (Emphasis supplied)

New brands shall be classified according to their current net retail price.

For the above purpose, ‘net retail price’ shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax.  For brands which are marketed only outside Metro [M]anila, the ‘net retail price’ shall mean the price at which the cigarette is sold in five (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex “D,” shall remain in force until revised by Congress.

Variant of a brand shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which carries the same logo or design of the existing brand.

To implement the provisions for a twelve percent (12%) increase of excise tax on, among others, cigars and cigarettes packed by machines by January 1, 2000, the Secretary of Finance, upon recommendation of the respondent Commissioner of Internal Revenue, issued Revenue Regulations No. 17-99, dated December 16, 1999, which provides the increase on the applicable tax rates on cigar and cigarettes as follows:

 

 

SECTION DESCRIPTION OF

ARTICLES

PRESENT SPECIFIC TAX RATE PRIOR

TO JAN. 1, 2000

NEW SPECIFIC TAX RATE

EFFECTIVE JAN. 1, 2000

145 (A) P1.00/cigar P1.12/cigar

  (B)Cigarettes packed by machine

(1) Net retail price (excluding VAT and excise) exceedsP10.00 per pack

(2) Exceeds P10.00 per pack

(3) Net retail price (excluding VAT and excise) is P5.00 toP6.50 per pack

(4) Net Retail Price (excluding VAT and excise) is belowP5.00 per pack

 

 

 

P12.00/pack

 

P8.00/pack

 

P5.00/pack

 

 

P1.00/pack

 

 

 

 

P13.44/ pack

 

P8.96/pack

 

P5.60/pack

 

 

P1.12/pack

 

 

Revenue Regulations No. 17-99 likewise provides in the last paragraph of Section 1 thereof, “(t)hat the new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.”

For the period covering January 1-31, 2000, petitioner allegedly paid specific taxes on all brands manufactured and removed in the total amounts of P585,705,250.00.

 

 

 

On February 7, 2000, petitioner filed with respondent’s Appellate Division a claim for refund or tax credit of its purportedly overpaid excise tax for the month of January 2000 in the amount ofP35,651,410.00

On June 21, 2001, petitioner filed with respondent’s Legal Service a letter dated June 20, 2001 reiterating all the claims for refund/tax credit of its overpaid excise taxes filed on various dates, including the present claim for the month of January 2000 in the amount of P35,651,410.00.

As there was no action on the part of the respondent, petitioner filed the instant petition for review with this Court on December 11, 2001, in order to comply with the two-year period for filing a claim for refund.

In his answer filed on January 16, 2002, respondent raised the following Special and Affirmative Defenses;

4.    Petitioner’s alleged claim for refund is subject to administrative routinary investigation/examination by the Bureau;

5.             The amount of P35,651,410 being claimed by petitioner as alleged overpaid excise tax for the month of January 2000 was not properly documented.

6.             In an action for tax refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to its claim for refund/credit.

7.             Petitioner must show that it has complied with the provisions of Section 204(C) in relation [to] Section 229 of the Tax Code on the prescriptive period for claiming tax refund/credit;

8.             Claims for refund are construed strictly against the claimant for the same partake of tax exemption from taxation; and

9.             The last paragraph of Section 1 of Revenue Regulation[s] [No.]17-99 is a valid implementing regulation which has the force and effect of law.”

 

CA G.R. SP No. 83165

The petition contains essentially similar facts, except that the said case questions the CTA’s December 4, 2003 decision in CTA Case No. 6612 granting respondent’s[3] claim for refund of the amount of P355,385,920.00 representing erroneously or illegally collected specific taxes covering the period January 1, 2002 to December 31, 2002, as well as its March 17, 2004 Resolution denying a reconsideration thereof.

            x x x x

                        In both CTA Case Nos. 6365 & 6383 and CTA No. 6612, the Court of Tax Appeals reduced the issues to be resolved into two as stipulated by the  parties, to wit: (1) Whether or not the last paragraph of Section 1 of Revenue Regulation[s] [No.] 17-99 is in accordance with the pertinent provisions of Republic Act [No.] 8240, now incorporated in Section 145 of the Tax Code of 1997; and (2) Whether or not petitioner is entitled to a refund of P35,651,410.00 as alleged overpaid excise tax for the month of January 2000.

x x x x

                        Hence, the respondent CTA in its assailed October 21, 2002 [twin] Decisions[s]  disposed in CTA Case Nos. 6365 & 6383:

                        WHEREFORE, in view of the foregoing, the court finds the instant petition meritorious and in accordance with law. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount of P35,651.410.00 representing erroneously paid excise taxes for the period January 1 to January 31, 2000.

                                    SO ORDERED.

                        Herein petitioner sought reconsideration of the above-quoted decision.  In [twin] resolution[s] [both] dated July 15, 2003, the Tax Court, in an apparent change of heart, granted the petitioner’s consolidated motions for reconsideration, thereby denying the respondent’s claim for refund.

 

 

                        However, on consolidated motions for reconsideration filed by the respondent in CTA Case Nos. 6363 and 6383, the July 15, 2002 resolution was set aside, and the Tax Court ruled, this time with a semblance of finality, that the respondent is entitled to the refund claimed. Hence, in a resolution dated November 4, 2003, the tax court reinstated its December 21, 2002 Decision and disposed as follows:

                        WHEREFORE, our Decisions in CTA Case Nos. 6365 and 6383 are hereby REINSTATED.  Accordingly, respondent is hereby ORDERED to REFUND petitioner the total amount of P680,387,025.00 representing erroneously paid excise taxes for the period January 1, 2000 to January 31, 2000 and February 1, 2000 to December 31, 2001.

                        SO ORDERED.

                        Meanwhile, on December 4, 2003, the Court of Tax Appeals rendered decision in CTA Case No. 6612 granting the prayer for the refund of the amount of P355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002.  The tax court disposed of the case as follows:

                        IN VIEW OF THE FOREGOING, the Petition for Review is GRANTED.  Accordingly, respondent is hereby ORDERED to REFUND to petitioner the amount ofP355,385,920.00 representing overpaid excise tax for the period covering January 1, 2002 to December 31, 2002.

                        SO ORDERED.

                        Petitioner sought reconsideration of the decision, but the same was denied in a Resolution dated March 17, 2004.[4] (Emphasis supplied) (Citations omitted)

 

                                   

            The Commissioner appealed the aforesaid decisions of the CTA.  The petition questioning the grant of refund in the amount of P680,387,025.00 was

docketed as CA-G.R. SP No. 80675, whereas that assailing the grant of refund in the amount of P355,385,920.00 was docketed as CA-G.R. SP No. 83165.  The

petitions were consolidated and eventually denied by the Court of Appeals.  The appellate court also denied reconsideration in its Resolution[5] dated 1 March  2005.

            In its Memorandum[6] 22 dated November 2006, filed on behalf of the Commissioner, the Office of the Solicitor General (OSG) seeks to convince the

Court that the literal interpretation given by the CTA and the Court of Appeals of Section 145 of the Tax Code of 1997 (Tax Code) would lead to a lower tax

imposable on 1 January 2000 than that imposable during the transition period.  Instead of an increase of 12% in the tax rate effective on 1 January 2000 as

allegedly mandated by the Tax Code, the appellate court’s ruling would result in a significant decrease in the tax rate by as much as 66%.

          The OSG argues that Section 145 of the Tax Code admits of several interpretations, such as:

1.      That by January 1, 2000, the excise tax on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed under the ad valorem tax system plus the 12% increase imposed by par. 5, Sec. 145 of the Tax Code;

2.      The increase of 12% starting on January 1, 2000 does not apply to the brands of cigarettes listed under Annex “D” referred to in par. 8, Sec. 145 of the Tax Code;

3.      The 12% increment shall be computed based on the net retail price as indicated in par. C, sub-par. (1)-(4), Sec. 145 of the Tax Code even if the resulting figure will be lower than the amount already being paid at the end of the transition period.  This is the interpretation followed by both the CTA and the Court of Appeals.[7]

 

This being so, the interpretation which will give life to the legislative intent to raise revenue should govern, the OSG stresses.

          Finally, the OSG asserts that a tax refund is in the nature of a tax exemption and must, therefore, be construed strictly against the taxpayer, such as Fortune

Tobacco.

          In its Memorandum[8] dated 10 November 2006, Fortune Tobacco argues that

the CTA and the Court of Appeals merely followed the letter of the law when they ruled that the basis for the 12% increase in the tax rate should be the net retail price

of the cigarettes in the market as outlined in paragraph  C, sub paragraphs (1)-(4), Section 145 of the Tax Code.  The Commissioner allegedly has gone beyond his

delegated rule-making power when he promulgated, enforced and implemented Revenue Regulation No. 17-99, which effectively created a separate classification

for cigarettes based on the excise tax “actually being paid prior to January 1, 2000.”[9]

 

          It should be mentioned at the outset that there is no dispute between the fact

of payment of the taxes sought to be refunded and the receipt thereof by the Bureau of Internal Revenue (BIR).  There is also no question about the mathematical

accuracy of Fortune Tobacco’s claim since the documentary evidence in support of the refund has not been controverted by the revenue agency. Likewise, the claims

have been made and the actions have been filed within the two (2)-year prescriptive period provided under Section 229 of the Tax Code.

 The power to tax is inherent in the State, such power being inherently legislative, based on the principle that taxes are a grant of the people who are

taxed, and the grant must be made by the immediate representatives of the people; and where the people have laid the power, there it must remain and be exercised.[10]

          This entire controversy revolves around the interplay between Section 145 of the Tax Code and Revenue Regulation 17-99.  The main issue is an inquiry into

whether the revenue regulation has exceeded the allowable limits of legislative delegation.

          For ease of reference, Section 145 of the Tax Code is again reproduced in full as follows:

  

Section 145.  Cigars and Cigarettes- 

(A) Cigars.—There shall be levied, assessed and collected on cigars a tax of One peso (P1.00) per cigar.

 (B).  Cigarettes packed by hand.—There shall be levied, assessed and

collected on cigarettes packed by hand a tax of Forty centavos (P0.40) per pack. (C) Cigarettes packed by machine.—There shall be levied, assessed and

collected on cigarettes packed by machine a tax at the rates prescribed below: (1) If the net retail price (excluding the excise tax and the value-added tax)

is above Ten pesos (P10.00) per pack, the tax shall be Twelve pesos (P12.00) per pack;

(2) If the net retail price (excluding the excise tax and the value added tax) exceeds Six pesos and Fifty centavos ( P 6.50)  but does not exceed Ten pesos (P10.00) per pack, the tax shall be Eight Pesos (P8.00) per pack.

 (3) If the net retail price (excluding the excise tax and the value-added tax)

is Five pesos (P5.00) but does not exceed Six Pesos and fifty centavos (P6.50) per pack, the tax shall be Five pesos (P5.00) per pack;

(4) If the net retail price (excluding the excise tax and the value-added tax) is below Five pesos (P5.00) per pack, the tax shall be One peso (P1.00) per pack;

Variants of existing brands of cigarettes which are introduced in the domestic market after the effectivity of R.A. No. 8240 shall be taxed under the highest classification of any variant of that brand.

The excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996.Provided, however, That in cases where the excise tax rates imposed in paragraphs (1), (2), (3) and (4) hereinabove will result in an increase in excise tax of more than seventy percent (70%), for a brand of cigarette, the increase shall take effect in two tranches: fifty percent (50%) of the increase shall be effective in 1997 and one hundred percent (100%) of the increase shall be effective in 1998.

 

Duly registered or existing brands of cigarettes or new brands thereof packed by machine shall only be packed in twenties.

The rates of excise tax on cigars and cigarettes under paragraphs (1), (2) (3) and (4) hereof, shall be increased by twelve percent (12%) on January 1, 2000.

New brands shall be classified according to their current net retail price.

For the above purpose, ‘net retail price’ shall mean the price at which the cigarette is sold on retail in twenty (20) major supermarkets in Metro Manila (for brands of cigarettes marketed nationally), excluding the amount intended to cover the applicable excise tax and value-added tax.  For brands which are marketed only outside Metro Manila, the ‘net retail price’ shall mean the price at which the cigarette is sold in five (5) major intended to cover the applicable excise tax and the value-added tax.

The classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex “D,” shall remain in force until revised by Congress.

Variant of a brand’ shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of the brand and/or a different brand which carries the same logo or design of the existing brand.[11](Emphasis supplied)

 

            Revenue Regulation 17-99, which was issued pursuant to the unquestioned authority of the Secretary of Finance to promulgate rules and regulations for the

effective implementation of the Tax Code,[12] interprets the above-quoted provision and reflects the 12% increase in excise taxes in the following manner:

 

 

SECTION DESCRIPTION OF

ARTICLES

PRESENT SPECIFIC TAX RATES PRIOR TO JAN. 1, 2000

NEW SPECIFIC TAX RATE

Effective Jan.. 1, 2000

145 (A) Cigars P1.00/cigar P1.12/cigar

  (B)Cigarettes packed by Machine

(1) Net Retail Price

 

 

 

 

(excluding VAT and Excise) exceedsP10.00 per pack

(2) Net Retail Price (excluding VAT and Excise) is P6.51 up toP10.00 per pack

(3) Net Retail Price (excluding VAT and excise) is P5.00 toP6.50 per pack

(4) Net Retail Price (excluding VAT and excise) is below P5.00 per pack)

 

P12.00/pack

 

 

P8.00/pack

 

P5.00/pack

 

 

P1.00/pack

 

 

P13.44/pack

 

 

P8.96/pack

 

P5.60/pack

 

 

P1.12/pack

 

         

          This table reflects Section 145 of the Tax Code insofar as it mandates a 12% increase effective on 1 January 2000 based on the taxes indicated under paragraph

C, sub-paragraph (1)-(4).  However, Revenue Regulation No. 17-99 went further and added  that “[T]he new specific tax rate for any existing brand of cigars,

cigarettes packed by machine, distilled spirits, wines and fermented liquor shall not be lower than the excise tax that is actually being paid prior to January 1,

2000.”[13] 

          Parenthetically, Section 145 states that during the transition

period, i.e., within the next three (3) years from the effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax due from

each brand on 1 October 1996.  This qualification, however, is conspicuously absent as regards the 12% increase which is to be applied on cigars and cigarettes

packed by machine, among others, effective on 1 January 2000.  Clearly and unmistakably, Section 145 mandates a new rate of excise tax for cigarettes packed

by machine due to the 12% increase effective on 1 January 2000 without regard to whether the revenue collection starting from this period may turn out to be lower

than that collected prior to this date.   

          By adding the qualification that the tax due after the 12% increase becomes

effective shall not be lower than the tax actually paid prior to 1 January 2000, Revenue Regulation No. 17-99 effectively imposes a tax which is the higher

amount between the ad valorem tax being paid at the end of the three (3)-year transition period  and the specific tax under paragraph C, sub-paragraph (1)-(4), as

increased by 12%—a situation not supported by the plain wording of Section 145 of the Tax Code. 

 

          This is not the first time that national revenue officials had ventured in the

area of unauthorized administrative legislation. 

In Commissioner of Internal Revenue v. Reyes,[14] respondent was not

informed in writing of the law and the facts on which the assessment of estate taxes was made pursuant to Section 228 of the 1997 Tax Code, as amended by Republic

Act (R.A.) No. 8424. She was merely notified of the findings by the Commissioner, who had simply relied upon the old provisions of the law and

Revenue Regulation No. 12-85 which was based on the old provision of the law. The Court held that in case of discrepancy between the law as amended and the

implementing regulation based on the old law, the former necessarily prevails. The law must still be followed, even though the existing tax regulation at that time

provided for a different procedure.[15]

          In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,[16] the tax authorities gave the term “tax credit” in Sections 2(i) and 4 of Revenue Regulation 2-94 a meaning utterly disparate from what R.A. No. 7432 provides. 

Their interpretation muddled up the intent of Congress to grant a mere discount privilege and not a sales discount.  The Court, striking down the revenue

regulation, held that an administrative agency issuing regulations may not enlarge, alter or restrict the provisions of the law it administers, and it cannot engraft

additional requirements not contemplated by the legislature.  The Court emphasized that tax administrators are not allowed to expand or contract the

legislative mandate and that the “plain meaning rule” or verba legis in statutory construction should be applied such that where the words of a statute are clear,

plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. 

          As we have previously declared, rule-making power must be confined to details for regulating the mode or proceedings in order to carry into effect the law

as it has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not covered by the statute. Administrative

regulations must always be in harmony with the provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic

law.[17]

In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,[18] Commissioner Jose Ong issued Revenue Memorandum Order (RMO) No. 15-91, as well as the clarificatory Revenue Memorandum Circular (RMC) 43-91,

imposing a 5% lending investor’s tax under the 1977 Tax Code, as amended by Executive Order (E.O.) No. 273, on pawnshops. The Commissioner anchored the

imposition on the definition of lending investors provided in the 1977 Tax Code which, according to him, was broad enough to include pawnshop

operators.  However, the Court noted that pawnshops and lending investors were subjected to different tax treatments under the Tax Code prior to its amendment by

the executive order; that Congress never intended to treat pawnshops in the same way as lending investors; and that the particularly involved section of the Tax

Code explicitly subjected lending investors and dealers in securities only to percentage tax. And so the Court affirmed the invalidity of the challenged

circulars, stressing that “administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry

out.”[19]

In Philippine Bank of Communications v. Commissioner of Internal

Revenue,[20] the then acting Commissioner issued RMC 7-85, changing the prescriptive period of two years to ten years for claims of excess quarterly income

tax payments, thereby creating a clear inconsistency with the provision of Section

230 of the 1977 Tax Code.  The Court nullified the circular, ruling that the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute

passed by Congress.  The Court held:

                        It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue.  It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts.  Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement.[21]

                     In Commissioner of Internal Revenue v. CA, et al.,[22] the central issue was

the validity of RMO 4-87 which had construed the amnesty coverage under E.O. No. 41 (1986) to include only assessments issued by the BIR after the

promulgation of the executive order on 22 August 1986 and not assessments made to that date.  Resolving the issue in the negative, the Court held: 

x x x all such issuances must not override, but must remain consistent and in harmony with, the law they seek to apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify, the law.[23]

 x x x If, as the Commissioner argues, Executive Order No. 41 had not been

intended to include 1981-1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have simply so provided in its exclusionary clauses. It did not. The conclusion is unavoidable, and it is that the executive order has been designed to be in the nature of a general grant of tax amnesty subject only to the cases specifically excepted by it.[24]    

            In the case at bar, the OSG’s argument that by 1 January 2000, the excise tax

on cigarettes should be the higher tax imposed under the specific tax system and the tax imposed under the ad valorem tax system plus the 12% increase imposed

by paragraph 5, Section 145 of the Tax Code, is an unsuccessful attempt to justify what is clearly an impermissible incursion into the limits of administrative

legislation.  Such an interpretation is not supported by the clear language of the law and is obviously only meant to validate the OSG’s thesis that Section 145 of the

Tax Code is ambiguous and admits of several interpretations.

          The contention that the increase of 12% starting on 1 January  2000 does not

apply to the brands of cigarettes listed under Annex “D”  is  likewise  unmeritorious,  absurd even.  Paragraph 8, Section 145 of the

Tax Code simply states that, “[T]he classification of each brand of cigarettes based on its average net retail price as of October 1, 1996, as set forth in Annex ‘D’, shall

remain in force until revised by Congress.”  This declaration certainly does not lend itself to the interpretation given to it by the OSG.  As plainly worded, the

average net retail prices of the listed brands under Annex “D,” which classify cigarettes according to their net retail price into low, medium or high, obviously

remain the bases for the application of the increase in excise tax rates effective on 1 January  2000.

          The foregoing leads us to conclude that Revenue Regulation No. 17-99 is indeed indefensibly flawed. The Commissioner cannot seek refuge in his claim that

the purpose behind the passage of the Tax Code is to generate additional revenues for the government.  Revenue generation has undoubtedly been a major

consideration in the passage of the Tax Code.  However, as borne by the legislative record,[25] the shift from the ad valorem system to the specific tax system

is  likewise  meant  to  promote  fair  competition among   the players  in  the industries concerned, to ensure an equitable distribution of the tax burden and to

simplify tax administration by classifying cigarettes, among others, into high, medium and low-priced based on their net retail price and accordingly graduating

tax rates. 

          At any rate, this advertence to the legislative record is merely gratuitous because, as we have held, the meaning of the law is clear on its face and free from

the ambiguities that the Commissioner imputes. We simply cannot disregard the letter of the law on the pretext of pursuing its spirit.[26]

         Finally, the Commissioner’s contention that a tax refund partakes the nature

of a tax exemption does not apply to the tax refund to which Fortune Tobacco is entitled.  There is parity between tax refund and tax exemption only when the

former is based either on a tax exemption statute or a tax refund statute.  Obviously, that is not the situation here. Quite the contrary, Fortune

Tobaccos claim for refund is premised on its erroneous payment of the tax, or better still the government’s exaction in the absence of a law.

 Tax exemption is a result of legislative grace.  And he who claims an

exemption from the burden of taxation must justify his claim by showing that the legislature intended to exempt him by words too plain to be mistaken.[27]  The rule

is that tax exemptions must be strictly construed such that the exemption will not be held to be conferred unless the terms under which it is granted clearly and

distinctly show that such was the intention.[28]

 

A claim for tax refund may be based on statutes granting tax exemption or tax refund.  In such case, the rule of strict interpretation against the taxpayer is

applicable as the claim for refund partakes of the nature of an exemption, a legislative grace, which cannot be allowed unless granted in the most explicit and

categorical language.  The taxpayer must show that the legislature intended to exempt him from the tax by words too plain to be mistaken.[29]

 

          Tax refunds (or tax credits), on the other hand, are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts

abhorring a person’s unjust enrichment at the expense of another.[30] The dynamic of erroneous payment of tax fits to a tee the prototypic quasi-contract, solutio

indebiti, which covers not only mistake in fact but also mistake in law.[31]  

 The Government is not exempt from the application of solutio indebiti.

[32]  Indeed, the taxpayer expects fair dealing from the Government, and the latter has the duty to refund without any unreasonable delay what it has erroneously

collected.[33]  If the State expects its taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding excess

(or erroneous) payments of such taxes.  It should not unjustly enrich itself at the expense of taxpayers.[34] And so, given its essence, a claim for tax refund

necessitates only preponderance of evidence for its approbation like in any other ordinary civil case. 

Under the Tax Code itself, apparently in recognition of the pervasive quasi-contract principle, a claim for tax refund may be based on the following: (a)

erroneously or illegally assessed or collected internal revenue taxes; (b) penalties imposed without authority; and (c) any sum alleged to have been excessive or in

any manner wrongfully collected.[35]

 

          What is controlling in this case is the well-settled doctrine of strict interpretation in the imposition of taxes, not the similar doctrine as applied to tax

exemptions. The rule in the interpretation of tax laws is that a statute will not be construed as imposing a tax unless it does so clearly, expressly, and

unambiguously.  A tax cannot be imposed without clear and express words for that purpose.  Accordingly, the general rule of requiring adherence to the letter in

construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication. In answering the question of

who is subject to tax statutes, it is basic that in case of doubt, such statutes are to be construed most strongly against the government and in favor of the subjects or

citizens because burdens are not to be imposed nor presumed to be imposed

beyond what statutes expressly and clearly import.[36]  As burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws.[37] 

          WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA G.R. SP No. 80675, dated 28 September 2004, and its Resolution,

dated 1 March 2005, are AFFIRMED. No pronouncement as to costs.

          SO ORDERED.

         

 

  

DANTE O. TINGA                                   

  Associate Justice 

 WE CONCUR:      

LEONARDO A. QUISUMBINGAssociate Justice

Chairperson 

    CONSUELO YNARES-SANTIAGO   CONCHITA CARPIO MORALES              

           Associate Justice                                          Associate Justice   

  

PRESBITERO J. VELASCO, JR.Associate Justice

  

ATTESTATION 

           I attest 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’s Division.                                                                      LEONARDO A. QUISUMBING                                                            Associate Justice                                                    Chairperson, Second Division  

CERTIFICATION 

          Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified 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’s Division.                                                          REYNATO S. PUNO                                                               Chief Justice                                                                                             

 

 

 

 

                 [1]Rollo, pp. 59-93; penned by Associate Justice Jose L. Sabio, Jr. and concurred in by Associate Justices Eubulo G. Verzola and Monina Arevalo-Zenarosa.                 [2]Herein respondent, Fortune Tobacco Corporation.  

[3]Herein respondent, Fortune Tobacco Corporation.                 [4]Rollo, pp.  60-73.                 [5]Id. at 95-101.                 [6]Id. at 456-495. 

[7]Rollo,, pp. 484, 486 and 487.                 [8]Id. at 407-455. 

[9]Id. at 409.                 [10]1 COOLEY TAXATION, 3rd Ed., p. 43 cited in DIMAAMPAO, TAX PRINCIPLE AND REMEDIES, p. 13.  

[11]TAX CODE, Sec. 145.                 [12]TAX CODE, Sec. 244, provides:                                 Sec. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations.—The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.                 See ABAKADA Guro Party List Officers v. Ermita, G.R. No. 168056, 1 September  2005, 469 SCRA 1.                

[13]Rollo, p. 104. [14]G.R. No. 159694, 27 January 2006, 480 SCRA 382. [15]Id. at 396. Citing Philippine Petroleum Corp. v. Municipality of Pililla, Rizal, 198 SCRA 82, 88, 3 June

1991, citing Shell Philippines, Inc. v. Central Bank of the Philippines, 162 SCRA 628, 634, 27 June 1988. 

                 [16]G.R. No. 159647, 15 April 2005, 456 SCRA 414.

                 [17]Landbank of the Philippines v. Court of Appeals, 327 Phil. 1047, 1052 (1996).

 [18]453 Phil. 1043 (2003).

  [19]Id. at 1052. Citing Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 108358, 20 January

1995, 240 SCRA 368, 372; Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles v. Home Development Mutual Fund, G.R. No. 131082, 19 June 2000; 333 SCRA 777, 786.

                 [20]361 Phil. 916 (1999). 

 [21]Id. at 928-929. [22]310 Phil. 392 (1995).

 [23]Id. at 399. This ruling was reiterated in Republic v. Court of Appeals, 381 Phil. 248 (2000). [24] Id. at 397.

                  [25]Record of the Senate, pp. 224-225.                 [26]Tañada  and Macapagal v. Cuenco, et al., 103 Phil. 1051, 1086 (1957), citing 82 C.J.S., 613.

 [27]Surigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue and Court of Tax Appeals ,

119 Phil. 33, 37 (1963).  

[28]Phil. Acetylene Co.  v. Commission of Internal Revenue, et al., 127 Phil. 461, 472 (1967);  Manila Electric Company v. Vera, G.R. No. L-29987, 22 October 1975, 67 SCRA 351, 357-358; Surigao Consolidated Mining Co. Inc. v. Commissioner of Internal Revenue, supra. 

[29]See Surigao Consolidated Mining Co. Inc. v. CIR, supra at 732-733; Philex Mining Corp. v. . Commissioner  of Internal Revenue, 365 Phil. 572, 579 (1999); Davao Gulf Lumber Corp. v. . Commissioner of Internal Revenue, 354 Phil. 891-892 (1998); . Commissioner of Internal Revenue  v. Tokyo Shipping Co., Ltd., 314 Phil. 220, 228 (1995). 

[30]Ramie Textiles, Inc. v. Hon. Mathay, Sr., 178 Phil. 482 (1979);  Puyat & Sons v. City of Manila, et al., 117 Phil. 985 (1963).  

[31]CIVIL CODE, Arts. 2142, 2154 and 2155. 

[32]Commissioner of Internal Revenue  v. Fireman’s Fund Insurance Co., G.R. No. L-30644, 9 March 1987, 148 SCRA 315, 324-325; Ramie Textiles, Inc. v. Mathay, supra; Gonzales Puyat & Sons v. City of Manila, supra. 

[33] Commissioner  of Internal Revenue  v. Tokyo Shipping Co., supra at 338. 

[34]AB Leasing and Finance Corporation v. . Commissioner of Internal Revenue, 453 Phil. 297.. Citing BPI-Family Savings Bank, Inc. v. Court of Appeals, 330 SCRA 507, 510, 518 (200). 

[35]TAX CODE (1997), Secs. 204(c) and 229.                 [36]CIR v. Court of Appeals, 338 Phil. 322, 330-331 (1997). 

                [37]CIR v. Philippine American Accident Insurance Company, Inc., G.R. No. 141658, March 18, 2005, 453 SCRA 668, 680.

CIR vs. Fortune Tobacco Corporation, [G.R. Nos. 167274-75, July 21, 2008]Post under case digests, Taxation at Tuesday, February 21, 2012 Posted by Schizophrenic Mind

Facts: Respondent FTC is a domestic corporation that manufactures cigarettes packed by machine under several brands. Prior to January 1, 1997, Section 142 of the 1977 Tax Code subjected said cigarette brands to ad valorem tax. Annex D of R.A. No. 4280 prescribed the cigarette brands’ tax classification rates based on their net retail price. On January 1, 1997, R.A. No. 8240 took effect. Sec. 145 thereof now subjects the cigarette brands to specific tax and also provides that: (1) the excise tax from any brand of cigarettes within the next three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the tax, which is due from each brand on October 1, 1996; (2) the rates of excise tax on cigarettes enumerated therein shall be increased by 12% on January 1, 2000; and (3) the classification of each brand of cigarettes based on its average retail price as of October 1, 1996, as set forth in Annex D shall remain in force until revised by Congress. 

The Secretary of Finance issued RR No. 17-99 to implement the provision for the 12% excise tax increase. RR No. 17-99 added the qualification that “the new specific tax rate xxx shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.” In

effect, it provided that the 12% tax increase must be based on the excise tax actually being paid prior to January 1, 2000 and not on their actual net retail price. 

FTC filed 2 separate claims for refund or tax credit of its purportedly overpaid excise taxes for the month of January 2000 and for the period January 1-December 31, 2002. It assailed the validity of RR No. 17-99 in that it enlarges Section 145 by providing the aforesaid qualification. In this petition, petitioner CIR alleges that the literal interpretation given by the CTA and the CA of Section 145 would lead to a lower tax imposable on 1 January 2000 than that imposable during the transition period, which is contrary to the legislative intent to raise revenue. 

Issue: Should the 12% tax increase be based on the net retail priceof the cigarettes in the market as outlined in Section 145 of the 1997Tax Code? 

Held: YES.  Section 145 is clear and unequivocal. It states that during the transition period, i.e., within the next 3 years from the effectivity of the 1997 Tax Code, the excise tax from any brand ofcigarettes shall not be lower than the tax due from each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards the 12% increase which is to be applied on cigars

andcigarettes packed by machine, among others, effective on 1 January 2000. 

Clearly, Section 145 mandates a new rate of excise tax for cigarettespacked by machine due to the 12% increase effective on 1 January 2000 without regard to whether the revenue collection starting from this period may turn out to be lower than that collected prior to this date. 

The qualification added by RR No. 17-99 imposes a tax which is the higher amount between the ad valorem tax being paid at the end of the 3-year transition period and the specific tax under Section 145, as increased by 12%—a situation not supported by the plain wording of Section 145 of the 1997 Tax Code. Administrative issuances must not override, supplant or modify the law, but must remain consistent with the law they intend to carry out. 

Revenue generation is not the sole purpose of the passage of the 1997 Tax Code. The shift from the ad valorem system to the specific tax system in the Code is likewise meant to promote fair competition among the players in the industries concerned and to ensure an equitable distribution of the tax burden. 

2ND CASE

EN BANC

ROSALINDA A. PENERA,

Petitioner,

G.R. No. 181613

Present:

PUNO, C.J.,

CARPIO,

CORONA,

CARPIO MORALES,

CHICO-NAZARIO,

VELASCO, JR.,

- versus - NACHURA,

LEONARDO-DE CASTRO,

            BRION,

            PERALTA,

            BERSAMIN,

            DEL CASTILLO,

            ABAD, and

            VILLARAMA, JR., JJ.

 

 

COMMISSION ON ELECTIONS               Promulgated:

and EDGAR T. ANDANAR,

Respondents.                       November 25, 2009

 

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  - - - - - - - - - x

 

 

R E S O L U T I O N

 

CARPIO, J.:

 

          We grant  Rosalinda A. Penera’s (Penera) motion for reconsideration of this Court’s Decision of 11 September 2009 (Decision). 

 

          The assailed Decision dismissed Penera’s petition and affirmed the Resolution dated 30 July 2008 of the COMELEC En Banc as well as the Resolution dated 24 July 2007 of the COMELEC Second Division.  The Decision disqualified Penera from running for the office of Mayor in Sta. Monica, Surigao del Norte and declared that the Vice-Mayor should succeed  Penera. 

 

          In support of her motion for reconsideration, Penera submits the following arguments:

 

1.         Penera was not yet a candidate at the time of the incident under Section 11 of RA 8436 as amended by Section 13 of RA 9369. 

2.            The petition for disqualification failed to submit convincing and substantial evidence against Penera for violation of Section 80 of the Omnibus Election Code. 

3.            Penera never admitted the allegations of the petition for disqualification and has consistently disputed the charge of  premature campaigning.

4.            The admission that Penera participated in a motorcade is not the same as admitting she engaged in premature election campaigning.

           Section 79(a) of the Omnibus Election Code defines a “candidate” as “any

person aspiring for or seeking an elective public office, who has filed a certificate of candidacy x x x.” The second sentence, third paragraph,  Section 15 of RA

8436, as amended by Section 13 of RA 9369, provides that “[a]ny person who files his certificate of candidacy within [the period for filing] shall only be considered as a candidate at the start of the campaign period for which he filed his certificate of candidacy.”  The immediately succeeding proviso in the

same third paragraph states that “unlawful acts or omissions applicable to a candidate shall take effect only upon the start of the aforesaid campaign period.”   These two provisions determine the resolution of this case.

 

          The Decision states that “[w]hen the campaign period starts and [the person

who filed his certificate of candidacy] proceeds with his/her candidacy, his/her intent turning into actuality, we can already consider his/her acts, after the filing of his/her COC and prior to the campaign period, as the promotion of his/her election as a candidate, hence, constituting premature campaigning, for which he/she may be disqualified.”[1] 

 

         Under the Decision, a candidate may already be liable  for premature campaigning after the filing of the certificate of candidacy but even before the start of the campaign period.  From the filing of the certificate of candidacy, even long before the start of the campaign period, the Decision considers the

partisan political acts of a person so filing a certificate of candidacy “as the promotion of his/her election as a candidate.”  Thus, such person can be

disqualified for premature campaigning for acts done  before the start of the campaign period.   In short, the Decision considers a person who files a certificate of candidacy already a “candidate” even before the start of the campaign period.            The assailed Decision is contrary to the clear intent and letter of the law.

 

         The Decision reverses Lanot v. COMELEC,[2] which held that a person who files a certificate of candidacy is not a candidate until the start of the campaign period.  In Lanot, this Court  explained:          

              Thus, the essential elements for violation of Section 80 of the Omnibus Election Code are: (1) a person engages in an election campaign or partisan political activity; (2) the act is designed to promote the election or defeat of a particular candidate or candidates; (3) the act is done outside the campaign period.

   The second element requires the existence of a “candidate.” Under Section 79(a), a candidate is one who “has filed a certificate of candidacy” to an elective public office. Unless one has filed his certificate of candidacy, he is not a “candidate.” The third element requires that the campaign period has not started when the election campaign or partisan political activity is committed.         

   Assuming that all candidates to a public office file their certificates of candidacy on the last day, which under Section 75 of the Omnibus Election Code is the day before the start of the campaign period, then no one can be prosecuted for violation of Section 80 for acts done prior to such last day. Before such last day, there is no “particular candidate or candidates” to campaign for or against. On the day immediately after the last day of filing, the campaign period starts and Section 80 ceases to apply since Section 80 covers only acts done “outside” the campaign period.         

   Thus, if all candidates file their certificates of candidacy on the last day, Section 80 may only apply to acts done on such last day, which is before the start of the campaign period and after at least one candidate has filed his certificate of candidacy. This is perhaps the reason why those running for elective public office usually file their certificates of candidacy on the last day or close to the last day.

   There is no dispute that Eusebio’s acts of election campaigning or partisan political activities were committed outside of the campaign period. The only question is whether Eusebio, who filed his certificate of candidacy on 29 December 2003, was a “candidate” when he committed those acts before the start of the campaign period on 24 March 2004.

   Section 11 of Republic Act No. 8436 (“RA 8436”) moved the deadline for the filing of certificates of candidacy to 120 days before election day. Thus, the original deadline was moved from 23 March 2004 to 2 January 2004, or 81 days earlier. The crucial question is: did this change in the deadline for filing the certificate of candidacy make one who filed his certificate of candidacy before 2 January 2004 immediately liable for violation of Section 80 if he engaged in election campaign or partisan political activities prior to the start of the campaign period on 24 March 2004?          

   Section 11 of RA 8436 provides:

            SECTION 11. Official Ballot. – The Commission shall prescribe the size and form of the official ballot which shall contain the titles of the positions to be filled and/or the propositions to be voted upon in an initiative, referendum or plebiscite. Under each position, the names of candidates shall be arranged alphabetically by surname and uniformly printed using the same type size. A fixed space where the chairman of the Board

of Election Inspectors shall affix his/her signature to authenticate the official ballot shall be provided.

   Both sides of the ballots may be used when necessary.

   For this purpose, the deadline for the filing of certificate of candidacy/petition for registration/ manifestation to participate in the election shall not be later than one hundred twenty (120) days before the elections: Provided, That, any elective official, whether national or local, running for any office other than the one which he/she is holding in a permanent capacity, except for president and vice-president, shall be deemed resigned only upon the start of the campaign period corresponding to the position for which he/she is running:  Provided, further, That, unlawful acts or omissions applicable to a candidate shall take effect upon the start of the aforesaid campaign period: Provided, finally, That, for purposes of the May 11, 1998 elections, the deadline for filing of the certificate of candidacy for the positions of President, Vice-President, Senators and candidates under the party-list system as well as petitions for registration and/or manifestation to participate in the party-list system shall be on February 9, 1998 while the deadline for the filing of certificate of candidacy for other positions shall be on March 27, 1998.

   The official ballots shall be printed by the National Printing Office and/or the Bangko Sentral ng Pilipinas at the price comparable with that of private printers under proper security measures which the Commission shall adopt.           The Commission may contract the services of private printers upon certification by the National Printing Office/Bangko Sentral ng Pilipinas that it cannot meet the printing requirements. Accredited political parties and deputized citizens’ arms of the Commission may assign watchers in the printing, storage and distribution of official ballots.

            To prevent the use of fake ballots, the Commission through the Committee shall ensure that the serial number on the ballot stub shall be printed in magnetic ink that shall be easily detectable by inexpensive hardware and shall be impossible to reproduce on a photocopying machine, and that identification marks, magnetic strips, bar codes and other technical and security markings, are provided on the ballot.

            The official ballots shall be printed and distributed to each city/municipality at the rate of one (1) ballot for every registered voter with a provision of additional four (4) ballots per precinct. 

            Under Section 11 of RA 8436, the only purpose for the early filing of certificates of candidacy is to give ample time for the printing of official ballots. This is clear from the following deliberations of the Bicameral Conference Committee:

SENATOR GONZALES. Okay. Then, how about the campaign period, would it be the same[,] uniform for local and national officials?

THE CHAIRMAN (REP. TANJUATCO). Personally, I would agree to retaining it at the present periods.

SENATOR GONZALES. But the moment one files a certificate of candidacy, he’s already a candidate, and there are many prohibited acts on the part of candidate.

THE CHAIRMAN (REP. TANJUATCO). Unless we. . . .

SENATOR GONZALES. And you cannot say that the campaign period has not yet began (sic).

THE CHAIRMAN (REP. TANJUATCO). If we don’t provide that the filing of the certificate will not bring about one’s being a candidate.

SENATOR GONZALES. If that’s a fact, the law cannot change a fact.

THE CHAIRMAN (REP. TANJUATCO). No, but if we can provide that the filing of the certificate of candidacy will not result in that official vacating his position, we can also provide that insofar he is concerned, election period or his being a candidate will not yet commence. Because here, the reason why we are doing an early filing is to afford enough time to prepare this machine readable ballots.

So, with the manifestations from the Commission on Elections, Mr. Chairman, the House Panel will withdraw its proposal and will agree to the 120-day period provided in the Senate version.

THE CHAIRMAN (SENATOR FERNAN). Thank you, Mr. Chairman.

x x x x

SENATOR GONZALES. How about prohibition against campaigning or doing partisan acts which apply immediately upon being a candidate?

THE CHAIRMAN (REP. TANJUATCO). Again, since the intention of this provision is just to afford the Comelec enough time to print the ballots, this provision does not intend to change the campaign periods as presently, or rather election periods as presently fixed by existing law.

THE ACTING CHAIRMAN (SEN. FERNAN). So, it should be subject to the other prohibition.

THE CHAIRMAN (REP. TANJUATCO). That’s right.

THE ACTING CHAIRMAN (SEN. FERNAN). Okay.

THE CHAIRMAN (REP. TANJUATCO). In other words, actually, there would be no conflict anymore because we are talking about the 120-day period before election as the last day of filing a certificate of candidacy, election period starts 120 days also. So that is election period already. But he will still not be considered as a candidate.  

            Thus, because of the early deadline of 2 January 2004 for purposes of printing of official ballots, Eusebio filed his certificate of candidacy on 29 December 2003. Congress, however, never intended the filing of a certificate of candidacy before 2 January 2004 to make the person filing to become immediately a “candidate” for purposes other than the printing of ballots. This legislative intent prevents the immediate application of Section 80 of the Omnibus Election Code to those filing to meet the early deadline. The clear intention of Congress was to preserve the “election periods as x x x fixed by existing law” prior to RA 8436 and that one who files to meet the early deadline “will still not be considered as a candidate.”[3] (Emphasis in the original)

           Lanot was decided on the ground that one who files  a certificate of

candidacy is not a candidate until the start of the campaign period. This ground was based on the deliberations of the legislators who explained the intent of the

provisions of RA 8436, which laid the legal framework for an automated election system.  There was no express provision in the original RA 8436 stating that one

who files a certificate of candidacy is not a candidate until the start of the campaign period.

 

          When Congress amended RA 8436, Congress decided to expressly

incorporate the Lanot doctrine into law, realizing that Lanot merely relied on the deliberations of Congress in holding that —

 

The clear intention of Congress was to preserve the “election periods as   x x x fixed by existing law” prior to RA 8436 and that one who files to meet the early deadline “will still not be considered as a candidate.”[4] (Emphasis supplied)

 

          Congress wanted to insure that no person filing a certificate of candidacy under the early deadline required by the automated election system would be

disqualified or penalized for any partisan political act done before the start of the campaign period. Thus, in enacting RA 9369, Congress expressly wrote

the Lanot doctrine into the second sentence, third paragraph of the amended Section 15 of RA 8436, thus:

             x x x

   For this purpose, the Commission shall set the deadline for the  filing of certificate of candidacy/petition for registration/manifestation to participate in the election.  Any person who files his certificate of candidacy within this period shall only be considered as a candidate at the start of the campaign period for which he filed his certificate of candidacy:  Provided, That, unlawful acts or omissions applicable to a candidate shall take effect only upon the start of the aforesaid campaign period:  Provided, finally, That any person holding a public appointive office or position, including active members of the armed forces, and officers and employees in government-owned or -controlled corporations, shall be considered ipso facto resigned from his/her office and must vacate the same at the start of the day of the filing of his/her certificate of candidacy.  (Boldfacing and underlining supplied)

           Congress elevated the Lanot doctrine into a statute by specifically inserting it

as the second sentence of the third paragraph of the amended Section 15 of RA 8436, which cannot be annulled by this Court except on the sole ground of its

unconstitutionality.  The Decision cannot reverse Lanot without repealing this second sentence, because to reverse Lanot would mean repealing this second sentence.            

         The assailed Decision, however, in reversing Lanot does not claim that this second sentence or any portion of Section 15 of RA 8436, as amended by RA

9369, is unconstitutional.  In fact, the Decision considers the entire Section 15 good law.   Thus, the Decision is self-contradictory — reversing Lanot but

maintaining the constitutionality of the second sentence, which embodies the Lanot doctrine.  In so doing, the Decision is  irreconcilably in conflict with the

clear intent and letter of the second sentence, third paragraph, Section 15 of RA 8436, as amended by RA 9369.           In enacting RA 9369, Congress even further clarified the first proviso in the

third paragraph of Section 15 of RA 8436.  The original provision in RA 8436 states — 

 

 

 x x x Provided, further, That, unlawful acts or omissions applicable to a candidate shall take effect upon the start of the aforesaid campaign period, x x x.

 In RA 9369, Congress inserted the word “only”  so that the first proviso now reads

—

 

 x x x Provided, That, unlawful acts or omissions applicable to a candidate shall take effect only upon the start of the aforesaid campaign period        x x x.  (Emphasis supplied) 

           Thus, Congress not only reiterated but also strengthened its mandatory

directive that election offenses can be committed by a candidate “only” upon the start of the campaign period. This clearly means that before the start of the

campaign period, such election offenses cannot be so committed.

 

          When the applicable provisions of RA 8436, as amended by RA 9369, are read together, these provisions of law do not consider Penera a candidate for

purposes other than the printing of ballots, until the start of the campaign period.   There is absolutely no room for any other interpretation.

 

          We quote with approval the Dissenting Opinion of Justice Antonio T.

Carpio:

 

             x x x The definition of a “candidate” in Section 79(a) of the Omnibus Election Code should be read together with the amended Section 15 of RA 8436.  A “‘candidate’ refers to any person aspiring for or seeking an elective public office, who has filed a certificate of candidacy by himself or through an accredited political party, aggroupment or coalition of parties.”  However, it is no longer enough to merely file a certificate of candidacy for a person to  be considered  a  candidate because   “any person who files his certificate of candidacy within [the filing] period shall only be considered a candidate at the start of the campaign period for which he filed his certificate of candidacy.”  Any person may thus file a certificate of candidacy on any day within the prescribed period for filing a certificate of candidacy yet that person shall be considered a candidate, for purposes of determining one’s possible violations of election laws, only during the campaign period.  Indeed, there is no “election campaign” or “partisan political activity” designed to promote the election or defeat of a particular candidate or candidates to public office simply because there is no “candidate” to speak of prior to the start of the campaign period.  Therefore, despite the filing of her certificate of candidacy, the law does not consider Penera a candidate at the time of the questioned motorcade which was conducted a day before the start of the campaign period.  x x x

   The campaign period for local officials began on 30 March 2007 and ended on 12 May 2007.  Penera filed her certificate of candidacy on 29 March 2007.  Penera was thus a candidate on 29 March 2009 only for purposes of printing the ballots.  On 29 March 2007, the law still did not consider Penera a candidate for purposes other than the printing of ballots.  Acts committed by Penera prior to 30 March 2007, the date when she became a “candidate,” even if constituting election campaigning or partisan political activities, are not punishable under Section 80 of the Omnibus Election Code.  Such acts are within the realm of a citizen’s protected freedom of expression.  Acts committed by Penera within the campaign period are not covered by Section 80 as Section 80 punishes only acts outside the campaign period.[5]

 

          The assailed Decision gives a specious reason in explaining away the first proviso in the third paragraph, the amended Section 15 of RA 8436

that election offenses applicable to candidates take effect only upon the start of the campaign period.  The Decision states that: 

            x x x [T]he line in Section 15 of Republic Act No. 8436, as amended, which provides that “any unlawful act or omission applicable to a candidate shall take effect only upon the start of the campaign period,” does not mean that the acts constituting premature campaigning can only be committed, for which the offender may be disqualified, during the campaign period.  Contrary to the pronouncement in the dissent, nowhere in said proviso was it stated that campaigning before the start of the campaign period is lawful, such that the offender may freely carry out the same with impunity.

  As previously established, a person, after filing his/her COC but prior to his/her becoming a candidate (thus, prior to the start of the campaign period), can already commit the acts described under Section 79(b) of the Omnibus Election Code as election campaign or partisan political activity,  However, only after said person officially becomes a  candidate, at the beginning of the campaign period, can said acts be given effect as premature campaigning under Section 80 of the Omnibus Election Code.  Only after said person officially becomes a candidate, at the start of the campaign period, can his/her disqualification be sought for acts constituting premature campaigning.  Obviously, it is only at the start of the campaign period, when the person officially becomes a candidate, that the undue and iniquitous advantages of his/her prior acts, constituting premature campaigning, shall accrue to his/her benefit.  Compared to the other candidates who are only about to begin their election campaign, a candidate who had previously engaged in premature campaigning already enjoys an unfair headstart in promoting his/her candidacy.[6]  (Emphasis supplied)

 

         It is a basic principle of law that any act is lawful unless expressly declared unlawful by law.  This is specially true to expression or speech,  which

Congress cannot outlaw  except on very narrow grounds involving clear, present and imminent danger to the State.  The mere fact that the law does not declare an

act unlawful ipso facto means that the act is lawful.  Thus, there is no need for Congress to declare in Section 15 of RA 8436, as amended by RA 9369, that

political partisan activities before the start of the campaign period are lawful.  It is sufficient for Congress to state that “any unlawful act or omission applicable to a candidate shall take effect only upon the start of the campaign period .”  The only inescapable and logical result is that the same acts, if done before the start of

the campaign period, are lawful. 

          In layman’s language, this means that a candidate is liable for an election offense only for acts done during the campaign period, not before.   The law is

clear as daylight —  any election offense that may be committed by a candidate under any election law cannot be committed before the start of the campaign

period.  In ruling that Penera is liable for premature campaigning for partisan political acts before the start of the campaigning, the assailed Decision ignores the

clear and express provision of the law.

 

         The Decision rationalizes that a candidate who commits premature campaigning can be disqualified or prosecuted only after the start of the  campaign

period.  This is not what the law says.  What the law says is “any unlawful act or omission applicable to a candidate shall take effect only upon the start of the campaign period.”  The plain meaning of this provision is that the effective date when partisan political acts become unlawful as to a candidate is when the

campaign period starts.  Before the start of the campaign period, the same partisan political acts are lawful.            The law does not state, as the assailed Decision asserts, that partisan political

acts done by a candidate before the campaign period are unlawful, but may be prosecuted only upon the start of the campaign period.   Neither does the law state

that partisan political acts done by a candidate before the campaign period are  temporarily lawful, but becomes unlawful upon the start of the campaign

period.  This is clearly not the language of the law.   Besides, such a law as envisioned in the Decision, which defines a criminal act and curtails freedom of

expression and speech, would be void for vagueness. 

 

          Congress has laid down the law — a candidate is liable for election offenses only upon the start of the campaign period. This Court has no power to ignore the

clear and express mandate of the law that “any person who files his certificate of candidacy within [the filing] period shall only be considered a candidate at the start of the campaign period for which he filed his certificate of candidacy.”  Neither can this Court turn a blind eye to the express and clear

language of the law that “any unlawful act or omission applicable to a candidate shall take effect only upon the start of the campaign period.”            The forum for examining the wisdom of the law, and enacting remedial

measures, is not this Court but the Legislature.   This Court has no recourse but to apply a law that is as clear, concise and express as the second sentence, and its

immediately succeeding proviso, as written in the third paragraph of Section 15 of RA 8436, as amended by RA 9369.

 

          WHEREFORE, we GRANT petitioner Rosalinda A. Penera’s Motion for

Reconsideration.  We SET ASIDE the Decision of this Court in G.R. No. 181613 promulgated on 11 September 2009, as well as the Resolutions dated 24 July 2007

and 30 January 2008 of the COMELEC Second Division and the COMELEC En Banc, respectively, in SPA No. 07-224.  Rosalinda A. Penera shall continue as

Mayor of Sta. Monica, Surigao del Norte.

 

          SO ORDERED.

 

 

                                                                       ANTONIO T. CARPIO                                                                               Associate Justice

  WE CONCUR:

REYNATO S. PUNOChief Justice

RENATO C. CORONA

Associate Justice

 

CONCHITA CARPIO MORALES

Associate Justice

MINITA V. CHICO-NAZARIO

  Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO

Associate Justice

  

 

 

Associate Justice

  

 

ARTURO D. BRION

Associate Justice  

 DIOSDADO M. PERALTAAssociate Justice

  

 

LUCAS P. BERSAMINAssociate Justice

 

MARIANO C. DEL CASTILLOAssociate Justice

ROBERTO A. ABADAssociate Justice

  

 

MARTIN S. VILLARAMA, JR.Associate Justice

 

CERTIFICATION           Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Resolution 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]     Decision, p. 23 (Boldfacing and underscoring supplied).[2]               G.R. No. 164858, 16 November 2006, 507 SCRA 114.[3]     Id. at 147-152.[4]              Id. at 152.[5]     Dissenting Opinion of Justice Antonio T. Carpio, pp. 4-6.[6]     Decision, p. 24.