First Philippine Industrial Corporation v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner, First Philippine Industrial Corporation (FPIC), a grantee of a pipeline concession under Republic Act No. 387, applied for a mayor's permit. The City Treasurer of Batangas City assessed a business tax on FPIC based on its gross receipts for 1993, pursuant to Section 143 of the Local Government Code. FPIC paid the tax under protest, asserting it was exempt as a common carrier under Section 133(j) of the Local Government Code. Procedural History: FPIC filed a complaint for tax refund with the Regional Trial Court (RTC), which dismissed the complaint, ruling that FPIC was not a common carrier and that tax exemptions are strictly construed against the taxpayer. The Court of Appeals (CA) affirmed the RTC's decision. FPIC elevated the case to the Supreme Court. The Petition: FPIC argued that the CA erred in holding that it was not a common carrier or transportation contractor and that its claimed exemption was not clear under the law.
Issue(s)
Whether petitioner First Philippine Industrial Corporation is a common carrier. Whether petitioner is exempt from the business tax imposed by the City of Batangas.
Ruling
The petition is granted. The decision of the Court of Appeals is reversed and set aside. The City of Batangas is ordered to refund the business tax paid by petitioner.
Ratio Decidendi
On whether petitioner is a common carrier: Yes, petitioner is a common carrier. A common carrier is defined under Article 1732 of the Civil Code as any person or entity engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the public. The test includes being engaged in public employment, undertaking to carry specific kinds of goods, using a particular method of business, and transporting for hire. Petitioner, as a pipeline operator with a concession under Republic Act No. 387, transports petroleum products for hire as a public employment, offering its services to all who choose to employ them. The fact that it has a limited clientele does not exclude it from the definition of a common carrier, as established in De Guzman v. Court of Appeals. Furthermore, Republic Act No. 387 itself considers pipeline concessionaires as common carriers and petroleum operations as public utilities, obligating them to transport other petroleum offered for transport without discrimination and at approved rates. The Bureau of Internal Revenue also considers petitioner a common carrier. On whether petitioner is exempt from the business tax: Yes, petitioner is exempt from the business tax. Section 133(j) of the Local Government Code prohibits local government units from levying taxes on the gross receipts of transportation contractors and common carriers by air, land, or water. Petitioner, being a common carrier, falls within this exemption. The legislative intent behind this provision was to prevent the duplication of taxes already imposed by the national government, specifically the common carrier's tax. Petitioner is already paying a three percent (3%) common carrier's tax on its gross sales/earnings under the National Internal Revenue Code. Imposing an additional business tax on its gross receipts would contravene this legislative intent and overburden the petitioner. The lower courts erred in strictly construing the exemption against the petitioner without considering the specific nature of its business and the clear intent of the law.
Main Doctrine
A pipeline concessionaire engaged in transporting petroleum products for hire, even with a limited clientele, is considered a common carrier and is therefore exempt from local business taxes on its gross receipts under Section 133(j) of the Local Government Code, to prevent duplication of taxes already imposed under national law.