Pepsi-Cola Bottling Company v. Municipality of Tanauan
REITERATIONFacts
The Antecedents: Plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., filed a complaint for injunction seeking to declare Section 2 of Republic Act No. 2264 (Local Autonomy Act) unconstitutional for undue delegation of taxing authority, and to nullify Municipal Ordinances Nos. 23 and 27 of the Municipality of Tanauan, Leyte. Ordinance No. 23, approved September 25, 1962, levied a tax of 1/16 of a centavo per bottle of soft drink corked. Ordinance No. 27, approved October 28, 1962, imposed a tax of P0.01 per gallon of volume capacity on soft drinks produced or manufactured within the municipality. The Acting Municipal Treasurer sought to enforce Ordinance No. 27. Procedural History: The Court of First Instance of Leyte dismissed the complaint, upholding the constitutionality of Section 2 of R.A. 2264 and the validity of Ordinances Nos. 23 and 27. The plaintiff appealed to the Court of Appeals, which certified the case to the Supreme Court due to involving pure questions of law. The Petition: The appeal raised three main questions: whether Section 2 of R.A. 2264 is an undue delegation of power, confiscatory and oppressive; whether Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes; and whether Ordinances Nos. 23 and 27 are unjust and unfair.
Issue(s)
Whether Section 2 of Republic Act No. 2264 constitutes an undue delegation of power, is confiscatory and oppressive. Whether Municipal Ordinances Nos. 23 and 27 of Tanauan, Leyte, constitute double taxation and impose percentage or specific taxes. Whether Municipal Ordinances Nos. 23 and 27 of Tanauan, Leyte, are unjust and unfair.
Ruling
The Supreme Court upheld the constitutionality of Section 2 of Republic Act No. 2264 and declared Municipal Ordinance No. 27 of Tanauan, Leyte, series of 1962, valid and legal. Municipal Ordinance No. 23 was deemed repealed by Ordinance No. 27.
Ratio Decidendi
On the constitutionality of Section 2, Republic Act No. 2264: The Court reiterated that the power of taxation is an inherent attribute of sovereignty and can be delegated to municipal corporations for matters of local concern, as sanctioned by immemorial practice and the Constitution. The delegation of taxing power under R.A. 2264 is not an undue delegation, nor is it confiscatory or oppressive. The State is not limited to the exact measure of its own taxing power when delegating. While due process must be observed, it is not violated by a tax for a public purpose, within the jurisdiction, with uniformity, and with proper notice and hearing where required. The Court clarified that due process is not violated even if the tax purpose might result in injury to a specific taxpayer, nor does it require judicial inquiry for assessment or notice for apportionment. On double taxation and the nature of the taxes imposed by Ordinances Nos. 23 and 27: The Court found that Ordinance No. 23 was effectively repealed by Ordinance No. 27, as the latter was intended as a substitute and its provisions were inconsistent with the former. Therefore, only Ordinance No. 27 was being enforced, negating the claim of double taxation. Furthermore, the Court clarified that double taxation is not prohibited per se in the Philippines. Ordinance No. 27 imposes a tax of P0.01 per gallon of volume capacity, which is levied on the produce itself, not on sales, and thus is not a percentage tax or a sales tax. It also does not partake of the nature of a specific tax, as soft drinks are not among the articles enumerated in the National Internal Revenue Code for specific taxes. The tax is based on volume capacity for determining the rate, not on a set ratio between sales volume and tax amount. On whether Ordinances Nos. 23 and 27 are unjust and unfair: The tax imposed by Ordinance No. 27, equivalent to 1.5 centavos per case, was deemed not unjust, unfair, oppressive, or confiscatory. Municipal corporations are granted wide discretion in determining tax rates, aligning with the constitutional policy of local autonomy. Courts are reluctant to strike down an ordinance as unreasonable unless the amount is excessively prohibitive. Compliance with such ordinances is encouraged to realize the goal of strengthening local autonomy.
Main Doctrine
Section 2 of Republic Act No. 2264, the Local Autonomy Act, is a valid delegation of taxing power to municipalities. Municipal ordinances imposing taxes, when not within the exceptions and limitations provided by law, are valid. Double taxation is not prohibited per se in the Philippines, and the tax imposed by Ordinance No. 27 of Tanauan, Leyte, is neither a percentage tax nor a specific tax, and is not unjust or oppressive.