Estanislao v. Costales
REITERATIONFacts
The Antecedents: The Sangguniang Panglungsod of Zamboanga City passed Ordinance No. 44 on January 13, 1982, imposing a P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within its territorial jurisdiction. A copy was sent to the Minister of Finance for review on February 16, 1982, pursuant to P.D. No. 231 (Local Tax Code). Procedural History: On December 3, 1982, the Minister of Finance, through his Deputy, suspended the effectivity of Ordinance No. 44, citing its contravention of Section 19(a) of the Local Tax Code. The City of Zamboanga appealed this decision to the Regional Trial Court (RTC), Branch 14, Zamboanga City. On December 5, 1990, the RTC rendered a decision upholding the ordinance's validity, despite finding the tax not among those the Sanggunian could impose, on the ground that the Minister of Finance failed to act within the prescribed 120-day period. The Petition: The Secretary of Finance, through the Solicitor General, filed a petition for review on certiorari, alleging that the RTC erred in holding that the Minister's failure to suspend the ordinance within 120 days rendered it valid.
Issue(s)
Whether the failure of the Secretary of Finance to suspend the effectivity of Ordinance No. 44 within 120 days from receipt thereof rendered the said ordinance valid. Whether Ordinance No. 44 of Zamboanga City, imposing a P0.01 tax per liter of softdrinks produced, manufactured, and/or bottled within its jurisdiction, is valid under the Local Tax Code.
Ruling
The petition is granted. City Ordinance No. 44 dated January 13, 1982, enacted by the Sangguniang Panglunsod of Zamboanga City, is declared null and void. Any taxes paid under protest thereunder should be accordingly refunded to the taxpayers concerned.
Ratio Decidendi
On the effect of the 120-day period for review: The Court clarified that Section 44 of the Local Tax Code, which provides for a 120-day period for the Secretary of Finance to suspend a tax ordinance, does not mean that an otherwise invalid ordinance becomes valid if no action is taken within that period. The provision states that if no action is taken, the ordinance "shall remain in force." This phrase signifies that the ordinance continues to be operative pending review, but it does not validate an ordinance that is fundamentally flawed or ultra vires. The Court emphasized that the 120-day period is directory, and the Secretary of Finance may still review and act on the ordinance even after the lapse of the period, provided it is within a reasonable time. The failure to act within 120 days does not divest the Secretary of Finance of his authority to suspend or revoke an invalid ordinance thereafter. On the validity of Ordinance No. 44: The Court held that Ordinance No. 44 is ultra vires and beyond the authority of the City of Zamboanga to impose. Section 19(a) of the Local Tax Code allows cities to impose a tax on businesses, but Section 23, in relation to Section 19, provides that in lieu of the graduated fixed tax, a city may impose a percentage tax on sales of non-essential commodities not exceeding two percent and on essential commodities not exceeding one percent. The ordinance in question imposes a tax based on output or production (P0.01 per liter), not on gross sales or receipts, which is not authorized under the Local Tax Code. The Court distinguished this from the ruling in Pepsi-Cola Bottling Company vs. Municipality of Tanauan, Leyte, which was based on the Local Autonomy Act (Republic Act No. 2264) and not the later Local Tax Code, which superseded it.
Main Doctrine
A tax ordinance that is ultra vires and not within the authority of the local government to impose remains invalid even if the reviewing authority fails to act within the prescribed 120-day period. The failure to act within the period renders the ordinance in force, but it does not validate an otherwise invalid ordinance, nor does it divest the reviewing authority of its power to suspend or revoke it thereafter.