Republic v. PAL

Facts:

see CIR & COC v. PAL

Issue:

Whether or not Sections 6 and 10 of R.A. 9334 repealed Section 13 of P.D. 1590.

Held:

No. In CIR v. PAL, the Court has already passed upon the very same issues raised by the same petitioners. The only differences are the taxable period involved and the amount of refundable tax. It is a basic principle in statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of the earlier statute. Provisions of P.D. 1590 and R.A. 9334 shows that there was no express repeal of the grant of exemption.

The franchise of PAL remains the governing law on its exemption from taxes. Its payment of either basic corporate income tax or franchise tax − whichever is lower − shall be in lieu of all other taxes, duties, royalties, registrations, licenses, and other fees and charges, except only real property tax. The phrase “in lieu of all other taxes” includes but is not limited to taxes, duties, charges, royalties, or fees due on all importations by the grantee of the commissary and catering supplies, provided that such articles or supplies or materials are imported for the use of the grantee in its transport and non-transport operations and other activities incidental thereto and are not locally available in reasonable quantity, quality, or price.

However, upon the amendment of the 1997 NIRC, Section 2211 of R.A. 933712 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter.

In this case, the CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary and catering supplies, provided it shows that 1) such articles or supplies or materials are imported for use in its transport and non-transport operations and other activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price.

As to the issue of PAL’s noncompliance with the conditions set by Section 13 of P.D. 1509 for the imported supplies to be exempt from excise tax, it must be noted that these are factual determinations that are best left to the CTA. The appellate court found that PAL had complied with these conditions. The CTA is a highly specialized body that reviews tax cases and conducts trial de novo. Therefore, without any showing that the findings of the CTA are unsupported by substantial evidence, its findings are binding on this Court.

CIR & Commissioner of Customs v. PAL

Facts:

On June 11, 1978, PAL was granted under Presidential Decree No. 1590 (PD 1590) a franchise to operate air transport services domestically and internationally. Section 133 of the decree prescribes the tax component of PAL’s franchise. Under it, PAL, during the lifetime of its franchise, shall pay the government either basic corporate income tax or franchise tax based on revenues and/or the rate defined in the provision, whichever is lower and the taxes thus paid under either scheme shall be in lieu of all other taxes, duties and other fees.

PAL was assessed excise taxes on its February and March 2007 importation of cigarettes and alcoholic drinks for its commissary supplies used in its international flights. In due time, PAL paid the corresponding amounts, as indicated below, under protest:

BOC Official Receipt Number	Date of Payment	Amount Paid
138110892	February 5, 2007	PhP 1,497,182
1138348761	February 26, 2007	PhP 1,525,480
138773503	March 23, 2007	PhP 1,528,196.85

PAL, filed separate administrative claims for refund before BIR for the alleged excise taxes it erroneously paid on said dates. As there was no appropriate action on the part of the then CIR and obviously to forestall the running of the two-year prescriptive period for claiming tax refunds, PAL filed before CTA a petition for review. CIR and COC were ordered to pay PAL by way of refund the amount of PhP 4,550,858.85. The amount represented the excise taxes paid in February and March 2007, covering PAL’s importation of commissary supplies. CIR and the COC interposed separate motions for reconsideration, both of which were, however, denied which prompted CIR to elevate the matter to the CTA en banc on a petition for review. CTA en banc, with two justices dissenting, dismissed the CIR and COC’s petitions, thereby effectively affirming the judgment of the CTA. Petitioners separately sought reconsideration, but the CTA en banc denied the motions.

Issue:

Whether or not PAL’s importations of alcohol and tobacco products for its commissary supplies are subject to excise tax.

Held:

The petition lacks merit. It is a basic principle of statutory construction that a later law, general in terms and not expressly repealing or amending a prior special law, will not ordinarily affect the special provisions of such earlier statute.

While it is true that Sec. 6 of RA9334 as previously quoted states that "the provisions of any special or general law to the contrary not withstanding," such phrase left alone cannot be considered as an express repeal of the exemptions granted under PAL’s franchise because it fails to specifically identify PD 1590 as one of the acts intended to be repealed. x x x

In addition, where there are two statutes, the earlier special and the later general – the terms of the general broad enough to include the matter provided for in the special – the fact that one is special and other general creates a presumption that the special is considered as remaining an exception to the general, one as a general law of the land and the other as the law of a particular case.

Any lingering doubt, however, as tothe continued entitlement of PAL under Sec. 13 of its franchise to excisetax exemption on otherwise taxable items contemplated therein, e.g., aviation gas, wine, liquor or cigarettes, should once and for all be put to restby the fairly recent pronouncement in Philippine Airlines, Inc. v. Commissioner of Internal Revenue. In that case, the Court, on the premise that the "propriety of a tax refund is hinged on the kind of exemption which forms its basis," declared in no uncertain terms that PAL has "sufficiently prove[d]" its entitlement to a tax refund of the excise taxes and that PAL’s payment of either the franchise tax or basic corporate income tax in the amount fixed thereat shall be in lieu of all other taxes or duties, and inclusive of all taxes on all importations of commissary and catering supplies, subject to the condition of their availability and eventual use.

PAL’s payment of either the basic corporate income tax or franchise tax, whichever is lower, shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges, except only real property tax. The phrase "in lieu of all other taxes" includes but is not limited to taxes that are "directly due from or imposable upon the purchaser orthe seller, producer, manufacturer, or importer of said petroleum products butare billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement." PAL is exempt from paying: (a) taxes directly due from or imposable upon it as the purchaser of the subject petroleum products; and (b) the cost of the taxes billed or passed on to it by the seller, producer, manufacturer, or importer of the said products either as part of the purchase price or by mutual agreement or other arrangement. Therefore, given the foregoing direct and indirect tax exemptions under its franchise, and applying the principles as above-discussed, PAL is endowed with the legal standing to file the subject tax refund claim, notwithstanding the fact that it is not the statutory taxpayer as contemplated by law.

In all then, PAL has presented in context a clear statutory basis for its refund claim of excise tax, a claim predicated on a statutory grant of exemption from that forced exaction. It thus behooves the government to refund what it erroneously collected.

Office of the Solicitor General v. CA and Municipal Government of Saguiran, Lanao del Sur

Facts:

The Municipality of Saguiran was named a respondent in a petition for mandamus4 filed with RTC of Lanao del Sur by the former members of the Sangguniang Bayan of Saguiran, namely, Macmod P. Masorong, Amrosi Macote Samporna, Alanie L. Dalama, Hassan P. Amai-Kurot and Cadalay S. Rataban. Therein petitioners sought to compel the Municipality of Saguiran to pay them the aggregate amount of 726,000.00, representing their unpaid terminal leave benefits under Section 5 of the Civil Service Commission Memorandum Circular Nos. 41, Series of 1998 and 14, Series of 1999. The Municipality of Saguiran sought the trial court’s dismissal of the petition through its Verified Answer with Affirmative Defenses and Counterclaim.

RTC issued an Order dismissing the petition on the ground that the act being sought by therein petitioners was not a ministerial duty. The RTC explained that the payment of terminal leave benefits had to undergo the ordinary process of verification, approval or disapproval by municipal officials. The Municipality of Saguiran partially appealed the order of the RTC to the CA. The OSG initially moved for a suspension of the period to file the required memorandum, explaining that it had not received any document or pleading in connection with the case. It asked for a period of 30 days from receipt of such documents within which to file the required memorandum. On April 23, 2010, the OSG’s motion was denied by the CA on the ground that the relief sought was not among the remedies allowed under the Rules of Court. The OSG was instead given a non-extendible period of 90 days from notice within which to file the memorandum. OSG filed a Manifestation and Motion12 requesting to be excused from filing the memorandum on the ground of lack of legal authority to represent the Municipality of Saguiran but it was denied.

Issue:

The Honorable CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in compelling the OSG to represent the municipal government of Saguiran, Lanao del Sur in its lawsuit.

Held:

Meritorious. OSG’s mandate under the Administrative Code must be construed taking into account the other statutes that pertain to the same subject of representation in courts. As the Court explained in Philippine Economic Zone Authority v. Green Asia Construction & Development Corporation:

Statutes are in pari materia when they relate to the same person or thing or to the same class of persons or things, or object, or cover the same specific or particular subject matter.

It is axiomatic in statutory construction that a statute must be interpreted, not only to be consistent with itself, but also to harmonize with other laws on the same subject matter, as to form a complete, coherent and intelligible system. The rule is expressed in the maxim, “interpretare et concordare legibus est optimus interpretandi,” or every statute must be so construed and harmonized with other statutes as to form a uniform system of jurisprudence.

Specifically for local government units, the LGC limits the lawyers who are authorized to represent them in court actions, as the law defines the mandate of a local government unit’s legal officer.

Evidently, this provision of the LGC not only identifies the powers and functions of a local government unit’s legal officer. It also restricts, as it names, the lawyer who may represent the local government unit as its counsel in court proceedings. Being a special law on the issue of representation in court that is exclusively made applicable to local government units, the LGC must prevail over the provisions of the Administrative Code, which classifies only as a general law on the subject matter.

Given the foregoing, the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the assailed resolutions which obligated the OSG to represent the Municipality of Saguiran.

The mere fact that the OSG initially filed before the CA a motion for extension of time to file the required memorandum could not have estopped it from later raising the issue of its lack of authority to represent the Municipality of Saguiran. Its mandate was to be traced from existing laws. No action of the OSG could have validated an act that was beyond the scope of its authority.