Purisima v. Philippine Tobacco Institute
REITERATIONFacts
The Antecedents: Republic Act No. 10351, the Sin Tax Reform Law, restructured excise taxes on alcohol and tobacco products, amending the National Internal Revenue Code (NIRC). Specifically, Section 5 of the Act amended Section 145(C) of the NIRC concerning cigarettes packed by machine. This amendment increased excise tax rates and allowed cigarettes packed by machine to be packed in combinations not exceeding twenty sticks. The law stipulated tiered tax rates based on the net retail price per pack, increasing annually from 2013 to 2017, with a 4% annual increase thereafter. Procedural History: Following the enactment of RA 10351, the Secretary of Finance issued Revenue Regulation No. 17-2012 (RR 17-2012), and the Commissioner of Internal Revenue issued Revenue Memorandum Circular No. 90-2012 (RMC 90-2012). Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012 stipulated that the excise tax on cigarettes packed by machine, even in smaller combinations like 5's or 10's, would be based on the net retail price of each individual package. Philippine Tobacco Institute, Inc. (PTI), a member of which paid taxes under protest, filed a petition for declaratory relief with the Regional Trial Court (RTC) of Las Piñas City, seeking to nullify these regulations. The RTC granted the petition, declaring the assailed portions of RR 17-2012 and RMC 90-2012 void and ordering the petitioners to cease their implementation. The Secretary of Finance and the Commissioner of Internal Revenue then filed the instant petition for review on certiorari. The Petition: Petitioners, the Secretary of Finance and the Commissioner of Internal Revenue, seek review under Rule 45 of the Rules of Court, assailing the RTC's decision. They contend that RR 17-2012 and RMC 90-2012 merely clarified the excise tax rates set by RA 10351, which are imposed per pack regardless of the number of sticks within the allowed packaging combinations. Conversely, respondent PTI argues that RA 10351 permits packaging combinations not exceeding 20 sticks, and these should be taxed as a single unit, not individually. PTI asserts that the regulations imposed higher tax rates not authorized by RA 10351 and violated due process by not providing notice and hearing. The core issue is whether the RTC erred in nullifying Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012 for imposing excise tax on individual packaging combinations of 5's and 10's, rather than on the total pack of 20.
Issue(s)
Whether the RTC erred in nullifying Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012 in imposing excise tax to packaging combinations of 5's, 10's, etc. not exceeding 20 cigarette sticks packed by machine; and whether RR 17-2012 and RMC 90-2012, in imposing excise tax on individual pouches of 5's and 10's, went beyond the plain meaning of Republic Act No. 10351.
Ruling
The petition lacks merit. The Supreme Court affirmed the Decision of the RTC, declaring Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012 null and void.
Ratio Decidendi
On the issue of whether the RTC erred in nullifying Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012 in imposing excise tax to packaging combinations of 5's, 10's, etc. not exceeding 20 cigarette sticks packed by machine; and whether RR 17-2012 and RMC 90-2012, in imposing excise tax on individual pouches of 5's and 10's, went beyond the plain meaning of Republic Act No. 10351: The Supreme Court agreed with the RTC that the interpretation made by the Secretary of Finance and the CIR has no basis in law. Republic Act No. 10351, in amending Section 145(C) of the National Internal Revenue Code (NIRC), provided that "duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty." However, the law did not mention that these other packaging combinations of not more than 20 would be imposed individual tax rates based on their different packages of 5's or 10's. The Court noted that in such a case, a cigarette pack of 20's would only be subjected to an excise tax rate of P12.00 per pack, as opposed to packaging combinations of 5's or 10's which would be subjected to a higher excise tax rate of ₱24.00 for 10's and ₱48.00 for 5's, which is an absurd outcome. The legislative intent, as gleaned from the Bicameral Conference Committee deliberations, was to allow packaging combinations of not more than 20 sticks, and these combinations would be subjected to the excise tax as a whole, not on each individual pouch. The Court emphasized that the excise tax on cigarettes packed by machine is imposed per pack, and while "pack" was not clearly defined, it normally refers to a unit packaged as a whole. The allowance of packaging combinations of not more than 20 sticks, such as 4 pouches of 5 sticks (4x5's) or 2 pouches of 10 sticks (2x10's), means these should be treated as a single unit for taxation purposes, as long as they are bundled together. Therefore, the BIR, in issuing Section 11 of RR 17-2012 and Annex "D-1" of RMC 90-2012, went beyond the express provisions of RA 10351 by creating an additional tax liability for packaging combinations smaller than 20 cigarette sticks, effectively amending the law which is beyond the power of the BIR to do.
Main Doctrine
Revenue Regulations and Memorandum Circulars implementing Republic Act No. 10351 must not override, supplant, or modify the law but must remain consistent with it. An administrative regulation cannot amend the law it seeks to implement.