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Prof. Joselito Guianan Chan's The Labor Code of the Philippines, Annotated Labor Standards & Social Legislation Volume I of a 3-Volume Series 2019 Edition (3rd Revised Edition)
 

 
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UNITED STATES SUPREME COURT JURISPRUDENCE
 

 
PHILIPPINE SUPREME COURT JURISPRUDENCE
 

   
August-1997 Jurisprudence                 

  • G.R. No. 112354 August 4, 1997 - LUVIMINO P. CASUELA v. OMBUDSMAN, ET AL.

  • G.R. No. 115903 August 4, 1997 - ROBERTO CORDENILLO v. EXECUTIVE SECRETARY, ET AL.

  • G.R. No. 106194 August 7, 1997 - SANTIAGO LAND DEVELOPMENT CORP. v. COURT OF APPEALS, ET AL.

  • G.R. No. 117188 August 7, 1997 - LOYOLA GRAND VILLAS HOMEOWNERS ASSN. v. COURT OF APPEALS, ET AL.

  • G.R. No. 121275 August 7, 1997 - CENTRO ESCOLAR UNIVERSITY v. NLRC, ET AL.

  • G.R. No. 122391 August 7, 1997 - FELIPE L. LAODENIO v. COMELEC, ET AL.

  • Adm. Matter No. RTJ-95-1303 August 11, 1997 - GLADDY S. BERNABE v. SALVADOR A. MEMORACION

  • G.R. No. 95089 August 11, 1997 - PEOPLE OF THE PHIL. v. NICOMEDES FABRO

  • G.R. No. 97898 August 11, 1997 - FLORANTE F. MANACOP v. COURT OF APPEALS, ET AL.

  • G.R. No. 99355 August 11, 1997 - PEOPLE OF THE PHIL. v. DOMINGO S. SALAZAR, ET AL.

  • G.R. No. 108234 August 11, 1997 - PEOPLE OF THE PHIL. v. FIDEL RAGAY, ET AL.

  • G.R. No. 109617 August 11, 1997 - PEOPLE OF THE PHIL. v. FELIPE SION, ET AL.

  • G.R. No. 111824 August 11, 1997 - PEOPLE OF THE PHIL. v. ELIZA D. BAGUS

  • G.R. No. 120988 August 11, 1997 - PEOPLE OF THE PHIL. v. ROSEMARIE N. DE LA CRUZ

  • G.R. No. 121210 August 11, 1997 - PEOPLE OF THE PHIL. v. RIZAL SAGUCIO

  • G.R. No. 121983 August 11, 1997 - PEOPLE OF THE PHIL. v. JUANILLO BAXINELA

  • G.R. No. 123240 August 11, 1997 - STATE INVESTMENT HOUSE, INC. v. COURT OF APPEALS, ET AL.

  • G.R. No. 107307 August 11, 1997 - PNCC v. NLRC, ET AL.

  • G.R. No. 110129 August 12, 1997 - PEOPLE OF THE PHIL. v. EDELCIANO AMACA

  • G.R. No. 110397 August 14, 1997 - PEOPLE OF THE PHIL. v. ARMANDO A. BINAMIRA

  • G.R. Nos. 116307-10 August 14, 1997 - PEOPLE OF THE PHIL. v. RUFINO BACALTO, ET AL.

  • G.R. No. 127255 August 14, 1997 - JOKER P. ARROYO, ET AL. v. JOSE DE VENECIA, ET AL.

  • Adm. Matter No. P-96-1219 August 15, 1997 - COURT OF APPEALS v. MARCELO ESCALANTE

  • G.R. No. 121466 August 15, 1997 - PMI COLLEGES v. NLRC, ET AL.

  • G.R. Nos. 109645 & 112564 August 15, 1997 - ORTIGAS & CO. LTD. PARTNERSHIP v. TIRSO VELASCO, ET AL.

  • G.R. No. 110399 August 15, 1997 - SAN MIGUEL CORP. SUPERVISORS, ET AL. v. BIENVENIDO E. LAGUESMA, ET AL.

  • G.R. Nos. 111066-67 August 15, 1997 - PEOPLE OF THE PHIL. v. VILLAMOR ORDOÑA

  • G.R. No. 112180 August 15, 1997 - PEOPLE OF THE PHIL. v. MILDRED N. VILLAS

  • G.R. No. 115844 August 15, 1997 - CESAR G. VIOLA v. RAFAEL M. ALUNAN III, ET AL.

  • G.R. No. 117398 August 15, 1997 - PEOPLE OF THE PHIL. v. ANDRES DABBAY

  • G.R. No. 120064 August 15, 1997 - FERDINAND PALOMARES, ET AL. v. NLRC, ET AL.

  • G.R. No. 121377 August 15, 1997 - PEOPLE OF THE PHIL. v. JOSEPH GELERA, ET AL.

  • G.R. No. 123290 August 15, 1997 - AURORA DE LEON v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. P-97-1234 August 18, 1997 - CRISTETA ORFILA v. RONA S. QUIROZ

  • G.R. No. 95523 August 18, 1997 - REYNALDO R. GONZALES v. COURT OF APPEALS, ET AL.

  • G.R. No. 119252 August 18, 1997 - COMMISSIONER OF INTERNAL REVENUE, ET AL. v. APOLINARIO B. SANTOS, ET AL.

  • G.R. No. 124520 August 18, 1997 - NILO CHA, ET AL. v. COURT OF APPEALS, ET AL.

  • Adm. Matter No. RTJ-96-1350 August 18, 1997 - OFFICE OF THE COURT ADMINISTRATOR v. DELIA H. PANGANIBAN

  • G.R. No. 95449 August 18, 1997 - PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC. v. NLRC, ET AL.

  • G.R. No. 98107 August 18, 1997 - BENJAMIN C. JUCO v. NLRC, ET AL.

  • G.R. No. 101832 August 18, 1997 - PEOPLE OF THE PHIL. v. JOSE O. TABALESMA

  • G.R. Nos. 113245-47 August 18, 1997 - PEOPLE OF THE PHIL. v. RICARDO DISIPULO, ET AL.

  • G.R. No. 115527 August 18, 1997 - ROSSELINI L. DE LA CRUZ, ET AL. v. NLRC, ET AL.

  • G.R. No. 117682 August 18, 1997 - PEOPLE OF THE PHIL. v. SILVINO SALARZA, JR.

  • G.R. No. 118815 August 18, 1997 - PEOPLE OF THE PHIL. v. ANITA MELGAR-MERCADER

  • G.R. No. 119288 August 18, 1997 - REPUBLIC OF THE PHIL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 119368 August 18, 1997 - PEOPLE OF THE PHIL. v. MARCELINO ERARDO

  • G.R. No. 119696 August 18, 1997 - PEOPLE OF THE PHIL. v. RAZUL GUIAMIL, ET AL.

  • G.R. No. 120256 August 18, 1997 - HERMITO CABCABAN v. NLRC, ET AL.

  • G.R. No. 123276 August 18, 1997 - MARIO TIU, ET AL. v. NLRC, ET AL.

  • G.R. No. 108611 August 20, 1997 - PEOPLE OF THE PHIL. v. JOSE ASTO, ET AL.

  • Adm. Matter No. 93-9-1237-RTC August 21, 1997 - LOSS OF COURT EXHIBITS AT RTC, BR. 136, MAKATI CITY

  • Adm. Matter No. 96-11-402-RTC August 21, 1997 - REPORT ON THE JUDICIAL AUDIT CONDUCTED IN THE REGIONAL TRIAL COURT

  • Adm. Matter No. 97-2-12-MTC August 21, 1997 - ISSUANCE OF SUBPOENA TO PRISONER NICANOR DE GUZMAN, JR.

  • G.R. No. 94723 August 21, 1997 - KAREN E. SALVACION, ET AL. v. CENTRAL BANK OF THE PHIL., ET AL.

  • G.R. No. 96176 August 21, 1997 - PEOPLE OF THE PHIL. v. ZENAIDA ISLA

  • G.R. No. 110249 August 21, 1997 - ALFREDO TANO, ET AL. v. SALVADOR P. SOCRATES, ET AL.

  • G.R. No. 101829 August 21, 1997 - PEOPLE OF THE PHIL. v. BONIFACIO ZAMORA

  • G.R. No. 102018 August 21, 1997 - PEOPLE OF THE PHIL. v. JERRY GABAYRON

  • G.R. No. 103959 August 21, 1997 - REGALADO SANTIAGO, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. Nos. 108183-85 August 21, 1997 - PEOPLE OF THE PHIL. v. DIONE PALOMAR, ET AL.

  • G.R. No. 112513 August 21, 1997 - EDGAR R. DEL CASTILLO v. CSC, ET AL.

  • G.R. No. 113032 August 21, 1997 - WESTERN INSTITUTE OF TECHNOLOGY INC., ET AL. v. RICARDO T. SALAS, ET AL.

  • G.R. No. 116294 August 21, 1997 - PEOPLE OF THE PHIL. v. ANTONIO CHAVEZ

  • G.R. Nos. 116602-03 August 21, 1997 - CARMELITA SARAO v. COURT OF APPEALS, ET AL.

  • G.R. No. 120691 August 21, 1997 - BIONIC HEAVY EQUIPMENTS, ET AL. v. NLRC, ET AL.

  • G.R. No. 123053 August 21, 1997 - PEOPLE OF THE PHIL. v. LEONARDO L. CARIZO, ET AL.

  • G.R. No. 123492 August 21, 1997 - DANILO A. YAP v. NLRC, ET AL.

  • G.R. No. 126749 August 21, 1997 - ERIBERTO M. SUSON v. COURT OF APPEALS, ET AL.

  • G.R. No. 127896 August 21, 1997 - ADRIANO A. ARELLANO, JR. v. NLRC, ET AL.

  • G.R. No. 109578 August 27, 1997 - PEOPLE OF THE PHIL. v. RONALDO FABRO, ET AL.

  • G.R. No. 97642 August 29, 1997 - AVON INSURANCE PLC, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 123581 August 29, 1997 - RODRIGO B. BANGAYAN, ET AL. v. COURT OF APPEALS, ET AL.

  • G.R. No. 115581 August 29, 1997 - PEOPLE OF THE PHIL. v. VACITA LATURA JONES

  • G.R. Nos. 116744-47 August 29, 1997 - PEOPLE OF THE PHIL. v. BERNARDO PANES, ET AL.

  • G.R. No. 119332 August 29, 1997 - PEOPLE OF THE PHIL. v. JACK V. SORREL

  •  





     
     

    G.R. No. 119252   August 18, 1997 - COMMISSIONER OF INTERNAL REVENUE, ET AL. v. APOLINARIO B. SANTOS, ET AL.

     
    PHILIPPINE SUPREME COURT DECISIONS

    FIRST DIVISION

    [G.R. No. 119252. August 18, 1997.]

    COMMISSIONER OF INTERNAL REVENUE and COMMISSIONER OF CUSTOMS, Petitioners, v. HON. APOLINARIO B. SANTOS, in his capacity as Presiding Judge of the Regional Trial Court, Branch 67, Pasig City; ANTONIO M. MARCO; JEWELRY BY MARCO & CO., INC., and GUILD OF PHILIPPINE JEWELERS, INC., Respondents.


    D E C I S I O N


    HERMOSISIMA, JR., J.:


    Of grave concern to this Court is the judicial pronouncement of the court a quo that certain provisions of the Tariff & Customs Code and the National Internal Revenue Code are unconstitutional. This provokes the issue: Can the Regional Trial Courts declare a law inoperative and without force and effect or otherwise unconstitutional? If it can, under what circumstances?

    In this petition, the Commissioner of Internal Revenue and the Commissioner of Customs jointly seek the reversal of the Decision, 1 dated February 16, 1995, of herein public respondent, Hon. Apolinario B. Santos, Presiding Judge of Branch 67 of the Regional Trial Court of Pasig City.chanroblesvirtual|awlibrary

    The following facts, concisely related in the petition 2 of the Office of the Solicitor General, appear to be undisputed:jgc:chanrobles.com.ph

    "1. Private respondent Guild of Philippine Jewelers, Inc., is an association of Filipino jewelers engaged in the manufacture of jewelries (sic) and allied undertakings. Among its members are Hans Brumann, Inc., Miladay Jewels, Inc., Mercelles, Inc., Solid Gold International Traders, Inc., Diagem Trading Corporation, and private respondent Jewelry by Marco & Co., Inc. Private respondent Antonio M. Marco is the President of the Guild.

    2. On August 5, 1988, Felicidad L. Viray, then Regional Director, Region No. 4-A of the Bureau of Internal Revenue, acting for and in behalf of the Commissioner of Internal Revenue, issued Regional Mission Order No. 109-88 to BIR officers, led by Eliseo Corcega, to conduct surveillance, monitoring, and inventory of all imported articles of Hans Brumann, Inc., and place the same under preventive embargo. The duration of the mission was from August 8 to August 20, 1988 (Exhibit ‘1’; Exhibit ‘A’).

    3. On August 17, 1988, pursuant to the aforementioned Mission Order, the BIR officers proceeded to the establishment of Hans Brumann, Inc., served the Mission Order, and informed the establishment that they were going to make an inventory of the articles involved to see if the proper taxes thereon have been paid. They then made an inventory of the articles displayed in the cabinets with the assistance of an employee of the establishment. They listed down the articles, which list was signed by the assistant employee. They also requested the presentation of proof of necessary payments for excise tax and value-added tax on said articles (pp. 10-15, TSN, April 12, 1993, Exhibits ‘2’, ‘2-A’, ‘3’, ‘3-A’).

    4. The BIR officers requested the establishment not to sell the articles until it can be proven that the necessary taxes thereon have been paid. Accordingly, Mr. Hans Brumann, the owner of the establishment, signed a receipt for Goods, Articles, and Things Seized under Authority of the National Internal Revenue Code (dated August 17, 1988), acknowledging that the articles inventoried have been seized and left in his possession, and promising not to dispose of the same without authority of the Commissioner of Internal Revenue pending investigation. 3

    5. Subsequently, BIR officer Eliseo Corcega submitted to his superiors a report of the inventory conducted and a computation of the value-added tax and ad valorem tax on the articles for evaluation and disposition. 4

    6. Mr. Hans Brumann, the owner of the establishment, never filed a protest with the BIR on the preventive embargo of the articles. 5

    7. On October 17, 1988, Letter of Authority No. 0020596 was issued by Deputy Commissioner Eufracio D. Santos to BIR officers to examine the books of accounts and other accounting records of Hans Brumann, Inc., for ‘stocktaking investigation for excise tax purposes for the period January 1, 1988 to present’ (Exhibit ‘C’). In a letter dated October 27, 1988, in connection with the physical count of the inventory (stocks on hand) pursuant to said Letter of Authority, Hans Brumann, Inc. was requested to prepare and make available to the BIR the documents indicated therein (Exhibit ‘D’).

    8. Hans Brumann, Inc., did not produce the documents requested by the BIR. 6

    9. Similar Letters of Authority were issued to BIR officers to examine the books of accounts and other accounting records of Miladay Jewels, Inc., Mercelles, Inc., Solid Gold International Traders, Inc., (Exhibits ‘E’, ‘G’ and ‘N’) and Diagem Trading Corporation 7 for ‘stocktaking/investigation for excise tax purpose for the period January 1, 1988 to present.’

    10. In the case of Miladay Jewels, Inc. and Mercelles, Inc., there is no account of what actually transpired in the implementation of the Letters of Authority.

    11. In the case of Solid Gold International Traders Corporation, the BIR officers made an inventory of the articles in the establishment. 8 The same is true with respect to Diagem Traders Corporation. 9

    12. On November 29, 1988, private respondents Antonio M. Marco and Jewelry By Marco & Co., Inc. filed with the Regional Trial Court, National Capital Judicial Region, Pasig City, Metro Manila, a petition for declaratory relief with writ of preliminary injunction and/or temporary restraining order against herein petitioners and Revenue Regional Director Felicidad L. Viray (docketed as Civil Case No. 56736) praying that Sections 126, 127(a) and (b) and 150(a) of the National Internal Revenue Code and Hdg. No. 71.01, 71.02, 71.03, and 71.04, Chapter 71 of the Tariff and Customs Code of the Philippines be declared unconstitutional and void, and that the Commissioner of Internal Revenue and Customs be prevented or enjoined from issuing mission orders and other orders of similar nature. . . .

    13. On February 9, 1989, herein petitioners filed their answer to the petition. . . .

    14. On October 16, 1989, private respondents filed a Motion with Leave to Amend Petition by including as petitioner the Guild of Philippine Jewelers, Inc., which motion was granted. . . .

    15. The case, which was originally assigned to Branch 154, was later reassigned to Branch 67.

    16. On February 16, 1995, public respondent rendered a decision, the dispositive portion of which reads:chanrob1es virtual 1aw library

    ‘In view of the foregoing reflections, judgment is hereby rendered, as follows:chanrob1es virtual 1aw library

    1. Declaring Section 104 of the Tariff and the Customs Code of the Philippines, Hdg. 71.01, 71.02, 71.03, and 71.04, Chapter 71 as amended by Executive Order No. 470, imposing three to ten (3% to 10%) percent tariff and customs duty on natural and cultured pearls and precious or semi-precious stones, and Section 150 par. (a) the National Internal Revenue Code of 1977, as amended, renumbered and rearranged by Executive Order 273, imposing twenty (20%) percent excise tax on jewelry, pearls and other precious stones, as INOPERATIVE and WITHOUT FORCE and EFFECT insofar as petitioners are concerned.

    2. Enforcement of the same is hereby enjoined. No cost.

    SO ORDERED,’"

    Section 150 (a) of Executive Order No. 273 reads:jgc:chanrobles.com.ph

    "SEC. 150. Non-essential goods. — There shall be levied, assessed and collected a tax equivalent to 20% based on the wholesale price or the value of importation used by the Bureau of Customs in determining tariff and customs duties; net of the excise tax and value-added tax, of the following goods:chanrob1es virtual 1aw library

    (a) All goods commonly or commercially known as jewelry, whether real or imitation, pearls, precious and semi-precious stones and imitations thereof; goods made of, or ornamented, mounted and fitted with, precious metals or imitations thereof or ivory (not including surgical and dental instruments, silver-plated wares, frames or mountings for spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the teeth); opera glasses and lorgnettes. The term ‘precious metals’ shall include platinum, gold, silver, and other metals of similar or greater value. The term ‘imitations thereof’ shall include platings and alloys of such metals." chanrobles.com:cralaw:red

    Section 150 (a) of Executive Order No. 273, which took effect on January 1, 1988, amended the then Section 163 (a) of the Tax Code of 1986 which provided that:jgc:chanrobles.com.ph

    "SEC. 163. Percentage tax on sales of non-essential articles. — There shall be levied, assessed and collected, once only on every original sale, barter, exchange or similar transaction for nominal or valuable consideration intended to transfer ownership of, or title to, the articles herein below enumerated a tax equivalent to 50% of the gross value in money of the articles so sold, bartered, exchanged or transferred, such tax to be paid by the manufacturer or producer:chanrob1es virtual 1aw library

    (a) All articles commonly or commercially known as jewelry, whether real or imitation, pearls, precious and semi-precious stones, and imitations thereof, articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical and dental instruments, silver-plated wares, frames or mounting for spectacles or eyeglasses, and dental gold or gold alloys and other precious metal used in filling, mounting or fitting of the teeth); opera glasses, and lorgnettes. The term ‘precious metals’ shall include platinum, gold, silver, and other metals of similar or greater value. The term ‘imitations thereof, shall include platings and alloys of such metals."cralaw virtua1aw library

    Section 163 (a) of the 1986 Tax Code was formerly Section 194(a) of the 1977 Tax Code and Section 184(a) of the Tax Code, as amended by Presidential Decree No. 69, which took effect on January 1, 1974.

    It will be noted that, while under the present law, jewelry is subject to a 20% excise tax in addition to a 10% value-added tax under the old law, it was subjected to 50% percentage tax. It was even subjected to a 70% percentage tax under then Section 184(a) of the Tax Code, as amended by P.D. 69.

    Section 104, Hdg. Nos. 17.01, 17.02, 17.03 and 17.04 Chapter 71 of the Tariff and Customs Code, as amended by Executive Order No. 470, dated July 20, 1991, imposes import duty on natural or cultured pearls and precious or semi-precious stones at the rate of 3% to 10% to be applied in stages from 1991 to 1994 and 30% in 1995.

    Prior to the issuance of E.O. 470, the rate of import duty in 1988 was 10% to 50% when the petition was filed in the court a quo.

    In support of their petition before the lower court, the private respondents submitted a position paper purporting to be an exhaustive study of the tax rates on jewelry prevailing in other Asian countries, in comparison to tax rates levied on the same in the Philippines. 10

    The following issues were thus raised therein

    "1. Whether or not the Honorable Court has jurisdiction over the subject matter of the petition.

    2. Whether the petition states a cause of action or whether the petition alleges a justiciable controversy between the parties.

    3. Whether Section 150, par. (a) of the NIRC and Section 104, Hdg. 71.01, 71.02, 71.03 and 71.04 of the Tariff and Customs Code are unconstitutional.

    4. Whether the issuance of the Mission Order and Letters of Authority is valid and legal."cralaw virtua1aw library

    In the assailed decision, the public respondent held indeed that the Regional Trial Court has jurisdiction to take cognizance of the petition since "jurisdiction over the nature of the suit is conferred by law and it is determine[d] through the allegations in the petition," and that the "Court of Tax Appeals has no jurisdiction to declare a statute unconstitutional much less issue writs of certiorari and prohibition in order to correct acts of respondents allegedly committed with grave abuse of discretion amounting to lack of jurisdiction."cralaw virtua1aw library

    As to the second issue, the public respondent, made the holding that there exists a justiciable controversy between the parties, agreeing with the statements made in the position paper presented by the private respondents, and considering these statements to be factual evidence, to wit:jgc:chanrobles.com.ph

    "Evidence for the petitioners indeed reveals that government taxation policy treats jewelry, pearls, and other precious stones and metals as non-essential luxury items and therefore, taxed heavily; that the atmospheric cost of taxation is killing the local manufacturing jewelry industry because they cannot compete with neighboring and other countries where importation and manufacturing of jewelry is not taxed heavily, if not at all; that while government incentives and subsidies exist, local manufacturers cannot avail of the same because officially many of them are unregistered and are unable to produce the required official documents because they operate underground, outside the tariff and tax structure; that local jewelry manufacturing is under threat of extinction, otherwise discouraged, while domestic trading has become more attractive; and as a consequence, neighboring countries, such as: Hongkong, Singapore, Malaysia, Thailand, and other foreign competitors supplying the Philippine market either through local channels or through the black market for smuggled goods are the ones who are getting business and making money, while members of the petitioner Guild of Philippine Jewelers, Inc. are constantly subjected to bureaucratic harassment instead of being given by the government the necessary support in order to survive and generate revenue for the government, and most of all fight competitively not only in the domestic market but in the arena of world market where the real contest is.

    Considering the allegations of fact in the petition which were duly proven during the trial, the Court holds that the petition states a cause of action and there exists a justiciable controversy between the parties which would require determination of constitutionality of the laws imposing excise tax and customs duty on jewelry." 11 (Emphasis ours)

    The public respondent, in addressing the third issue, ruled that the laws in question are confiscatory and oppressive. Again, virtually adopting verbatim the reasons presented by the private respondents in their position paper, the lower court stated:jgc:chanrobles.com.ph

    "The Court finds that indeed government taxation policy trats(sic) hewelry(sic) as non-essential luxury item and therefore, taxed heavily. Aside from the ten (10%) percent value added tax (VAT), local jewelry manufacturers contend with the (manufacturing) excise tax of twenty (20%) percent (to be applied in stages) customs duties on imported raw materials, the highest in the Asia-Pacific region. In contrast, imported gemstones and other precious metals are duty free in Hongkong, Thailand, Malaysia and Singapore.

    The Court elaborates further on the experiences of other countries in their treatment of the jewelry sector.

    MALAYSIA

    Duties and taxes on imported gemstones and gold and the sales tax on jewelry were abolished in Malaysia in 1984. They were removed to encourage the development of Malaysia’s jewelry manufacturing industry and to increase exports of jewelry.

    THAILAND

    Gems and jewelry are Thailand’s ninth most important export earner. In the past, the industry was overlooked by successive administrations much to the dismay of those involved in developing trade. Prohibitive import duties and sales tax on precious gemstones restricted the growht (sic) of the industry, resulting in the most of the business being unofficial. It was indeed difficult for a government or businessman to promote an industry which did not officially exist.

    Despite these circumstances, Thailand’s Gem business kept growing up in (sic) businessmen began to realize it’s potential. In 1978, the government quietly removed the severe duties on precious stones, but imposed a sales tax of 3.5%. Little was said or done at that time as the government wanted to see if a free trade in gemstones and jewelry would increase local manufacturing and exports or if it would mean more foreign made jewelry pouring into Thailand. However, as time progressed, there were indications that local manufacturing was indeed being encouraged and the economy was earning more from exports. The government soon removed the 3% sales tax too, putting Thailand at par with Hongkong and Singapore. In these countries, there are no more import duties and sales tax on gems. (Cited in pages 6 and 7 of Exhibit ‘M’. The Center for Research and Communication in cooperation with the Guild of Philippine Jewelers, Inc., June 1986).chanrobles.com : virtual law library

    To illustrate, shown hereunder is the Philippine tariff and tax structure on jewelry and other precious and semi-precious stones compared to other neighboring countries, to wit:chanrob1es virtual 1aw library

    Tariff on

    imported

    Jewelry and

    precious (Manufacturing) Sales Tax 10% (VAT)

    stones Excise tax

    Philippines 3% to 10% 20% 10% VAT

    to be applied

    in stages

    Malaysia None None None

    Thailand None None None

    Singapore None None None

    Hongkong None None None

    In this connection, the present tariff and tax structure increases manufacturing costs and renders the local jewelry manufacturers uncompetitive against other countries even before they start manufacturing and trading. Because of the prohibitive cast (sic) of taxation, most manufacturers source from black market for smuggled goods, and that while manufacturers can avail of tax exemption and/or tax credits from the (manufacturing) excise tax, they have no documents to present when filing this exemption because, as pointed out earlier, most of them source their raw materials from the black market, and since many of them do not legally exist or operate onofficially (sic), or underground, again they have no records (receipts) to indicate where and when they will utilize such tax credits. (Cited in Exhibit ‘M’ — Buencamino Report).

    Given these constraints, the local manufacturer has no recourse but to the back door for smuggled goods if only to be able to compete even ineffectively, or cease manufacturing activities and instead engage in the tradinf (sic) of smuggled finished jewelry.

    Worthy of note is the fact that indeed no evidence was adduced by respondents to disprove the foregoing allegations of fact. Under the foregoing factual circumstances, the Court finds the questioned statutory provisions confiscatory and destructive of the proprietary right of the petitioners to engage in business in violation of Section 1, Article III of the Constitution which states, as follows:chanrob1es virtual 1aw library

    ‘No person shall be deprived of the life, liberty, or property without due process of law . . .’" 12

    Anent the fourth and last issue, the herein public respondent did not find it necessary to rule thereon, since, in his opinion, "the same has been rendered moot and academic by the aforementioned pronouncement." 13

    The petitioners now assail the decision rendered by the public respondent, contending that the latter has no authority to pass judgment upon the taxation policy of the government. In addition, the petitioners impugn the decision in question by asserting that there was no showing that the tax laws on jewelry are confiscatory and destructive of private respondent’s proprietary rights.

    We rule in favor of the petitioners.

    It is interesting to note that public respondent, in the dispositive portion of his decision, perhaps keeping in mind his limitations under the law as a trial judge, did not go so far as to declare the laws in question to be unconstitutional. However, therein he declared the laws to be inoperative and without force and effect insofar as the private respondents are concerned. But, respondent judge, in the body of his decision, unequivocally but wrongly declared the said provisions of law to be violative of Section 1, Article III of the Constitution. In fact, in their Supplemental Comment on the Petition for Review, 14 the private respondents insist that Judge Santos, in his capacity as judge of the Regional Trial Court, acted within his authority in passing upon the issues, to wit:jgc:chanrobles.com.ph

    "A perusal of the appealed decision would undoubtedly disclose that public respondent did not pass judgment on the soundness or wisdom of the government’s tax policy on jewelry. True, public respondent, in his questioned decision, observed, inter alia, that indeed government tax policy treats jewelry as non-essential item, and therefore, taxed heavily; that the present tariff and tax structure increase manufacturing cost and renders the local jewelry manufacturers uncompetitive against other countries even before they start manufacturing and trading; that many of the local manufacturers do not legally exist or operate unofficially or underground; and that the manufacturers have no recourse but to the back door for smuggled goods if only to be able to compete even if ineffectively or cease manufacturing activities.

    BUT, public respondent did not, in any manner, interfere with or encroach upon the prerogative of the legislature to determine what should be the tax policy on jewelry. On the other hand, the issue raised before, and passed upon by, the public respondent was whether or not Section 150, paragraph (a) of the National Internal Revenue Code (NIRC) and Section 104, Hdg. 71.01, 71.02, 71.03 and 71.04 of the Tariff and Customs Code are unconstitutional, or differently stated, whether or not the questioned statutory provisions affect the constitutional right of private respondents to engage in business.

    It is submitted that public respondent confined himself on this issue which is clearly a judicial question."cralaw virtua1aw library

    We find it incongruous, in the face of the sweeping pronouncements made by Judge Santos in his decision, that private respondents can still persist in their argument that the former did not overreach the restrictions dictated upon him by law. There is no doubt in the Court’s mind, despite protestations to the contrary, that respondent judge encroached upon matters properly falling within the province of legislative functions. In citing as basis for his decision unproven comparative data pertaining to differences between tax rates of various Asian countries, and concluding that the jewelry industry in the Philippines suffers as a result, the respondent judge took it upon himself to supplant legislative policy regarding jewelry taxation. In advocating the abolition of local tax and duty on jewelry simply because other countries have adopted such policies, the respondent judge overlooked the fact that such matters are not for him to decide. There are reasons why jewelry, a non-essential item, is taxed as it is in this country, and these reasons, deliberated upon by our legislature, are beyond the reach of judicial questioning. As held in Macasiano v. National Housing Authority. 15

    "The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid in the absence of a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers which enjoins upon each department a becoming respect for the acts of the other departments. The theory is that as the joint act of Congress and the President of the Philippines, a law has been carefully studied and determined to be in accordance with the fundamental law before it was finally enacted." (Emphasis ours)

    What we see here is a debate on the WISDOM of the laws in question. This is a matter on which the RTC is not competent to rule. 16 As Cooley observed: "Debatable questions are for the legislature to decide. The courts do not sit to resolve the merits of conflicting issues." 17 In Angara v. Electoral Commission, 18 Justice Laurel made it clear that "the judiciary does not pass upon questions of wisdom, justice or expediency of legislation." And fittingly so, for in the exercise of judicial power, we are allowed only "to settle actual controversies involving rights which are legally demandable and enforceable", and may not annul an act of the political departments simply because we feel it is unwise or impractical. 19 This is not to say that Regional Trial Courts have no power whatsoever to declare a law unconstitutional. In J.M. Tuason and Co. v. Court of Appeals, 20 we said that ‘[p]lainly the Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review of final judgments of inferior courts in cases where such constitutionality happens to be in issue." This authority of lower courts to decide questions of constitutionality in the first instance was reaffirmed in Ynos v. Intermediate Court of Appeals. 21 But this authority does not extend to deciding questions which pertain to legislative policy.

    The trial court is not the proper forum for the ventilation of the issues raised by the private respondents. The arguments they presented focus on the wisdom of the provisions of law which they seek to nullify. Regional Trial Courts can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence. Granting arguendo that the private respondents may have provided convincing arguments why the jewelry industry in the Philippines should not be taxed at it is, it is to the legislature that they must resort to for relief, since with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) and situs (place) of taxation. This Court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment. 22

    As succinctly put in Lim v. Pacquing. 23 "Where a controversy may be settled on a platform other than one involving constitutional adjudication, the court should exercise becoming modesty and avoid the constitutional question." As judges, we can only interpret and apply the law and, despite our doubts about its wisdom, cannot repeal or amend it. 24chanroblesvirtualawlibrary

    The respondents presented an exhaustive study on the tax rates on jewelry levied by different Asian countries. This is meant to convince us that compared to other countries, the tax rates imposed on said industry in the Philippines is oppressive and confiscatory. This Court, however, cannot subscribe to the theory that the tax rates of other countries should be used as a yardstick in determining what may be the proper subjects of taxation in our own country. It should be pointed out that in imposing the aforementioned taxes and duties, the State, acting through the legislative and executive branches, is exercising its sovereign prerogative. It is inherent in the power to tax that the State be free to select the subjects of taxation, and it has been repeatedly held that "inequalities which result from a singling out of one particular class for taxation, or exemption, infringe no constitutional limitation."25cralaw:red

    WHEREFORE, premises considered, the petition is hereby GRANTED, and the Decision in Civil Case No. 56736 is hereby REVERSED and SET ASIDE. No costs.chanrobles virtuallawlibrary

    SO ORDERED.

    Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

    Endnotes:



    1. Civil Case No. 56736.

    2. Rollo, pp. 8-29.

    3. TSN, April 12, 1993, pp. 18-19; Exhibit "4" ; Exhibit "B."cralaw virtua1aw library

    4. TSN, April 12, 1993, pp. 20-21; Exhibits "5" & "5-A."cralaw virtua1aw library

    5. TSN, June 16, 1993, p. 16.

    6. TSN, October 21, 1992, p. 11.

    7. TSN, September 16, 1992, pp. 9-14; pp. 44-45.

    8. TSN, December 7, 1992, pp. 6-7.

    9. TSN, September 16, 1992, pp. 9-14; pp. 44-45.

    10. This position paper was prepared by a certain J. Antonio Buencamino of the Corporate Planning Services Division, Center for Research and Communication, in cooperation with the Guild of Philippine Jewelers, Inc.

    11. Decision, pp. 7-8; Rollo, pp. 36-37.

    12. Decision, pp. 10-12; Rollo, pp. 39-41.

    13. Decision, p. 13; Rollo, p. 42.

    14. Rollo, pp. 146-147.

    15. Macasiano v. National Housing Authority, 224 SCRA 236 (1993), citing Garcia v. Executive Secretary, 204 SCRA 516 (1991).

    16. Ibid.

    17. Ibid.

    18. 63 Phil. 139 (1936).

    19. Macasiano v. National Housing Authority, supra.

    20. 3 SCRA 696 [1961].

    21. 148 SCRA 659 [1987].

    22. Tan v. Del Rosario, Jr., 237 SCRA 324 (1994).

    23. 240 SCRA 649 (1995). See separate opinion.

    24. Pangilinan v. Maglaya, 225 SCRA 511 (1993).

    25. Lutz v. Araneta, 98 Phil. 148 (1955); Sison Jr. v. Ancheta, 130 SCRA 654, 663 (1984); Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988); Tolentino v. Secretary of Finance, 249 SCRA 628 (1995).

    G.R. No. 119252   August 18, 1997 - COMMISSIONER OF INTERNAL REVENUE, ET AL. v. APOLINARIO B. SANTOS, ET AL.


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