ase Digest by: Mawile, Vanessa R./ City v. Pilipinas Shell Petroleum Corp. G.R. No. 187631, July 8, 2015

 

Batangas City v. Pilipinas Shell Petroleum Corp.

G.R. No. 187631, July 8, 2015

 

FACTS:

            Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and depot in Tabagao, Batangas City, which manufactures and produces petroleum products that are distributed nationwide.

In 2002, respondent was only paying the amount of P98,964.71 for fees and other charges which include the amount of P1,180.34 as Mayor's Permit. However, on February 20, 2001, petitioner Batangas City, through its City Legal Officer, sent a notice of assessment to respondent demanding the payment of P92,373,720.50 and P312,656,253.04 as business taxes for its manufacture and distribution of petroleum products. In addition, respondent was also required and assessed to pay the amount of P4,299,851.00 as Mayor's Permit Fee based on the gross sales of its Tabagao Refinery. The assessment was allegedly pursuant of Section 134 of the LGC of 1991 and Section 23 of its Batangas City Tax Code of 2002.

Respondent maintained that petitioners have no authority to impose the said taxes and fees, and argued that the levy of local business taxes on the business of manufacturing and distributing gasoline and other petroleum products is contrary to law and against national policy.

Petitioners contended that the City of Batangas can legally impose taxes on the business of manufacturing and distribution of petroleum products, including the Mayor's Permit Fees upon respondent.

The CTA held that respondent is not subject to the business taxes on the manufacture and distribution of petroleum products because of the express limitation provided under Section 133 (h) of the LGC.

 

ISSUE:

            Whether or not LGU is empowered under the LGC to impose business taxes on person or entities engaged in the business of manufacturing and distribution of petroleum products.

 

RULING:

            No. It must be emphasized that although the power to tax is inherent in the State, the same is not true for LGUs because although the mandate to impose taxes granted to LGUs is categorical and long established in the 1987 Philippine Constitution, the same is not all encompassing as it is subject to limitations as explicitly stated in Section 5, Article X of the 1987 Constitution.

            Per Section 5, Article X of the 1987 Constitution, "the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges." Nevertheless, such authority is "subject to such guidelines and limitations as the Congress may provide."

            In conformity with Section 3, Article X of the 1987 Constitution, Congress enacted Republic Act No. 7160, otherwise known as the local Government Code of 1991. Book II of the LGC governs local taxation and fiscal matters.

            Among the common limitations on the taxing powers of LGUs under Section 133 of the LGC is paragraph (h) which states:chanRoblesvirtualLawlibrary

SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise provided herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:chanRoblesvirtualLawlibrary

(h) Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products.;¹³

From the foregoing, Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed by LGUs: (1) excise taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or charges on petroleum products.

Indisputably, the power of LGUs to impose business taxes derives from Section 143¹⁴ of the LGC. However, the same is subject to the explicit statutory impediment provided for under Section 133(h) of the same Code which prohibits LGUs from imposing "taxes, fees or charges on petroleum products." It can, therefore, be deduced that although petroleum products are subject to excise tax, the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the LGC to impose business taxes.      

WHEREFORE, in view of the foregoing, the Court hereby resolves to DENY present petition.

 

Case Digest by: Mawile, Vanessa R. JD-1