Batangas City v. Pilipinas Shell
REITERATIONFacts
The Antecedents: Pilipinas Shell Petroleum Corporation (PSPC) operates an oil refinery and depot in Batangas City, manufacturing and distributing petroleum products nationwide. In 2002, Batangas City, through its City Treasurer and City Legal Officer, assessed PSPC for business taxes amounting to P92,373,720.50 for its manufacturing operations and P312,656,253.04 for its distribution activities. Additionally, PSPC was assessed P4,299,851.00 as a Mayor's Permit Fee based on its gross sales. PSPC protested this assessment, arguing it was not liable for local business taxes on petroleum products and that the Mayor's Permit Fee was exorbitant and confiscatory. The City of Batangas denied the protest, asserting its authority to impose these taxes and fees. Procedural History: PSPC filed a Petition for Review with the Regional Trial Court (RTC) of Batangas City, challenging the assessment. The RTC, in a Decision dated October 29, 2004, upheld the validity of the business taxes but found the Mayor's Permit Fee to be excessive and unreasonable, ordering its revocation subject to modification. Unsatisfied, PSPC filed a Motion for Partial Reconsideration, which the RTC denied. PSPC then elevated the case to the Court of Tax Appeals (CTA) Second Division via a Petition for Review. The CTA Second Division, in a Decision dated June 21, 2007, modified the RTC's ruling, declaring PSPC not liable for the business taxes due to limitations under Section 133(h) of the Local Government Code (LGC) and ordering a refund for the excessive Mayor's Permit Fee. This decision was later amended to correct the refund amount to P3,870,860.00. The CTA Second Division denied petitioners' motion for reconsideration. Subsequently, the CTA En Banc, in a Decision dated January 22, 2009, affirmed the amended decision of the CTA Second Division, and its Resolution dated April 13, 2009 denied the motion for reconsideration. This petition for review on certiorari followed. The Petition: Petitioners, Batangas City and its officials, seek review of the CTA En Banc's decision through a Petition for Review on Certiorari under Rule 45 of the Rules of Court. They argue that the CTA En Banc erred in ruling that the power of local government units (LGUs) to tax businesses is solely governed by Section 143 of the LGC and that the term "taxes" in Section 133(h) of the LGC does not include business taxes. Petitioners contend that the CTA En Banc disregarded the distinction between taxes on articles and taxes on business and incorrectly construed Section 133(h) as an express limitation on the power of LGUs to impose taxes on the manufacture and distribution of petroleum products. The core issue presented is whether an LGU is empowered under the LGC to impose business taxes on entities engaged in the manufacture and distribution of petroleum products.
Issue(s)
Whether a Local Government Unit (LGU) is empowered under the Local Government Code (LGC) to impose business taxes on persons or entities engaged in the business of manufacturing and distribution of petroleum products. Whether Section 133(h) of the LGC, which prohibits the imposition of "taxes, fees or charges on petroleum products," includes business taxes.
Ruling
The Supreme Court denied the petition, affirming the decision of the Court of Tax Appeals En Banc. It held that LGUs are expressly prohibited by Section 133(h) of the Local Government Code from imposing taxes, fees, or charges on petroleum products, and this specific prohibition prevails over the general power to tax businesses under Section 143 of the same Code.
Ratio Decidendi
On the issue of whether LGUs are empowered to impose business taxes on the manufacture and distribution of petroleum products: The Court reiterated that the power to tax of LGUs is not inherent but delegated by Congress and is subject to limitations provided by law, specifically Section 5, Article X of the 1987 Constitution. The Local Government Code of 1991 (LGC) outlines these powers and limitations. Section 133 of the LGC enumerates common limitations on the taxing powers of LGUs. Paragraph (h) of Section 133 explicitly states that the taxing powers of LGUs shall not extend to the levy of "excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products." This provision clearly prohibits LGUs from imposing any form of taxes, fees, or charges on petroleum products. The Court emphasized that this specific prohibition under Section 133(h) overrides the general power to tax businesses granted to LGUs under Section 143 of the LGC. The principle of statutory construction, "generalia specialibus non derogant" (general law does not repeal a special law), dictates that the specific provision limiting the taxing power on petroleum products must prevail over the general provision on business taxation. On whether Section 133(h) of the LGC includes business taxes: The Court clarified that Section 133(h) of the LGC explicitly prohibits LGUs from imposing "taxes, fees or charges on petroleum products." This prohibition is comprehensive and extends to all forms of levies, including business taxes, on petroleum products. The Court noted that while Section 143 of the LGC grants LGUs the power to impose taxes on businesses, this power is subject to the limitations found in Section 133. Therefore, the business taxes sought to be imposed by Batangas City on Pilipinas Shell Petroleum Corporation for its manufacture and distribution of petroleum products fall under the prohibition of Section 133(h). Furthermore, Article 232(h) of the Implementing Rules and Regulations (IRR) of the LGC of 1991 explicitly states that any business engaged in the production, manufacture, refining, distribution, or sale of oil, gasoline, and other petroleum products shall not be subject to any local tax imposed under that Article, reinforcing the prohibition against local taxation of petroleum products.
Main Doctrine
Local government units are expressly prohibited by Section 133(h) of the Local Government Code from imposing taxes, fees, or charges on petroleum products, which prohibition prevails over the general power to tax businesses under Section 143 of the same Code.