THE CITY OF MANILA vs. THE INTER-ISL INTER-ISLAND AND GAS SERVICE, INC. Nature of the Case This is an appeal from a judgment judgment of the court of First First Instance of Manila.
Fa!ts muni nici cipa pall co corp rpora orati tion on cr creat eated ed and " That the Plaintif ’ is a mu existing under the laws of the Philippines and that the Deendant is a co corp rpor orat atiion lik ikew ewis ise e cr crea eate ted d by an and d existing under the laws of the Philippines sold at retail in the !ity of Manila from # That the Deendant sold the "th #uarter of $%"% to the "th #uarter of $%&$' inclusi(e' cooking appliances and li#ue)ed petroleum gas in cylinders. paid id the di di*e *ere rent nt am amou ounts nts al alle lege ged d in $ That the Deendant pa paragraph " of the complaint corresponding to the #uarters therein stated under +rdinance ,o. $%-&' as last amended by +r +rdi dina nanc nce e ,o ,o.. /" /"'' bas ased ed on it its s sa sale les s of coo ooki king ng appliances only the total claim of the Plaintif against against % That the Deendant under under section $' 0roup -' of +rdinance ,o. $%-&' as last amended by +rdinance ,o. /" is ’ s sa sale les s al alle lege ged d in &"",#'(.((' based on the Deendant ’s para pa ragr grap aph h - of th the e co com mpl plai aint nt com omp put uted ed at th the e ra rate te of P$'-&1.11 P$'-& 1.11 #uarterly corresponding corresponding to the )rst' second' third and fourth #uarters of $%&$' and the )rst #uarter of $%&-. has s pai aid d the pres escr crib ibed ed fe fees es un und der ' That the Deendant ha +rdi +r dinan nance ce ,o ,o.. -&% &% of the !i !ity ty of Ma Mani nila la'' 23 23n n +r +rdi dina nance nce presc pr escrib ribing ing re regul gulati ations ons for sto storag rage' e' ins instal tallat lations ions'' use and trans tra nspo porta rtatio tion n of co comp mpre ress ssed ed and li li#u #ue)e e)ed d in4 in4amm ammab able le gases other than acetylene' and pro(iding fees therefor the refor..
Mer!ha)*+se is de)ned as the object of commerce' the subjects of commerce and tra5c' whate(er is usually bought and sold in trade or market or by merchants' goods' wares' commodities or wares and sold for gain' commodities or goods to trade with' a commercial commodities in general. 3nything mo(able' anything customarily bought and sold for pro)t and comes within the pur(iew of the ordinary import of the word.
Grou # 6 7etail delears in new 8 not yet used 9 merchandise' which dealers are not yet subject to the payment of any municipal tax' such as $.9 7etail dealers general merchandise and -.9 retail dealers exclusi(ely engaged in the sale of electrical supplies' sporting goods' o5ce e#uipment and materials' rice' textile including knitted wares' hardwares' including glasswares' cooking utensils and construction materials' papers ' books including stationary.
Se!t+o) " of the Rev+se* Charter of 0Reu1/+! A!t %(2 3 author+4+)5 sa+* !+t6
Ma)+/a
7.3 To tax' )x the license fee and regulate the storage and sale of petroleum or any of the products thereof and of all other highly combustible or explosi(e materials. o.3 To tax and )x the license fee on dealers in general merchandise.
Ma+) Issue " 8hether or )ot L+9ue:e* F/a77a1/e Gas !o7es ;+th+) the urv+e; of Se!. ", Grou #, of Or*+)a)!e No. "2#' of the C+t6 of Ma)+/a, as a7e)*e* 16 No. $$<%= # 8hether or )ot L+9ue:e* F/a77a1/e Gas +)!/u*e* ;+th+) the &urv+e; Of the ter7 Mer!ha)*+se=
$ 8hat )ature of ta> +7ose* o) L+9ue:e* F/a77a1/e Gas= % 8hether or )ot the Stora5e a)* I)sta//at+o) are su1?e!t to fees=
Ru/+)5 "st Issue :i#ue)ed Flammable 0as comes within the pur(iew of ;ec.$' 0roup -' of +rdinance ,o. $%-& of the !ity of Manila 3s amended by +rdinance ,o. /" which pro(ides that there shall be paid to the !ity Treasurer for engaging in any of the businesses or occupations' #uarterly license fees based on gross sales or receipts reali
8not yet used9 merchandise' which dealers are not yet subject to the payment of any municipal tax. :i#ue)ed Flammable 0as is a =new> object of commerce and hence' a merchandise' dealers of which the !ity of Manila has under its re(ised charter authority to tax.
#)* Issue :i#ue)ed Flammable 0as is merchandise and comes within the pur(iew of the ordinary import of the word. The word merchandise as used in +rdinance ,o. $%-& as amended of the city of Manila has no restricti(e meaning. It is a new object of commerce and hence merchandise' dealers of which the city of Manila has under its re(ised charter authority to tax. In as much as li#ue)ed 4ammable gas may be and is being bought and sold in trade' it is merchandise and comes within the pur(iew of the ordinary import of the word.
$r* Issue This is not a percentage tax. It is a graduated tax not based on a gi(en ratio between the gross income and the burden imposed upon the taxpayer.
%th Issue The fees paid by the +rdinance ,o. -&% for the storage installation' use and transportation of compressed in4ammable gases was charged by way of license fees' in the exercise of the police power of the ;tate not under its inherent power of taxation and ?ouble taxation is not prohibited in our constitution.
De!+s+o) @herefore' the decision appealed from is hereby a5rmed with costs against the ?efendant 6 3ppellant.
EN @ANC G.R. No. L-B22. Au5ust $", "2'<. THE CITY OF MANILA, Plaintif - Appellee, vs. THE INTER-ISLAND GAS SERVICE, INC., Deendant Appellant . DECISION CONCE&CION, J.: The !ity of Manila instituted this action for the collection of a sum of money allegedly due from the Deendant InterAIsland 0as ;er(ice' Inc.' by way of de)ciency municipal tax. The main issue is whether li#ue)ed 4ammable gas comes within the pur(iew of section $' 0roup -' of +rdinance ,o. $%-& of the !ity of Manila' as amended by +rdinance ,o. /" thereof' which pro(ides thatB there shall be paid to the !ity Treasurer for engaging in any of the businesses or occupations below enumerated' #uarterly license fees based on gross sales or receipts reali
prescribedB Pro(ided' howe(er' That a person engaging in any business or occupation for the )rst time shall pay the initial license fee based on the probable gross sales or receipts for the )rst #uarter beginning from the date of the opening of the business as indicated herein for the corresponding business or occupation. xxx
xxx
x x x.
=0roup -. C 7etail dealers in new 8not yet used9 merchandise' which dealers are not yet subject to the payment of any municipal tax' such as. 8$9 7etail dealers in general merchandise and 8-9 retail dealers exclusi(ely engaged in the sale of electrical supplies sporting goods o5ce e#uipment and materials rice textile including knitted wares hardwares' including' glasswares cooking utensils and construction materials papers books' including stationary.>
@oth art+es st+u/ate* ". That the Plaintif ’ is a municipal corporation created and existing under the laws of the Philippines and that the Deendant is a corporation likewise created by and existing under the laws of the Philippines #. That the Deendant sold at retail in the !ity of Manila from the "th #uarter of $%"% to the "th #uarter of $%&$' inclusi(e' cooking appliances and li#ue)ed petroleum gas in cylinders in the following amountsB &er+o* of sa/es A7ou)t of sa/es "th #uarter $%"% P -1D'/&$.& $st #uarter $%&1 $%1'%/.%-nd #uarter $%&1 $EE'D%/.D% rd #uarter $%&1 -$-'&"-.& "th #uarter $%&1 -1/'/%/.-/
$st #uarter $%&$ -$/'"/./% -nd #uarter $%&$ -$%'-E."& rd #uarter $%&$ $E"'-%1.E& "th #uarter $%&$ $%$'$E./-
$. That the Deendant paid the di*erent amounts alleged in paragraph " of the complaint corresponding to the #uarters therein stated under +rdinance ,o. $%-&' as last amended by +rdinance ,o. /"' based on its sales of cooking appliances only the total claim of the Plaintif against %. That the Deendant under section $' 0roup -' of +rdinance ,o. $%-&' as last amended by +rdinance ,o. /" is &"",#'(.((' based on the Deendant ’s sales alleged in paragraph - of the complaint computed at the rate of P$'-&1.11 #uarterly corresponding to the )rst' second' third and fourth #uarters of $%&$' and the )rst #uarter of $%&- and
'. That the Deendant has paid the prescribed fees under +rdinance ,o. -&% of the !ity of Manila' 23n +rdinance prescribing regulations for storage' installations' use and transportation of compressed and li#ue)ed in4ammable gases other than acetylene' and pro(iding fees therefor’' co(ering the same #uarters mentioned in paragraph " of the complaint.> Then the case was submitted for decision' whereupon the !ourt of First Instance of Manila rendered judgment for the Plaintif ' the dispositi(e part of which' as amended' reads as followsB =Therefore' this !ourt is of the opinion and so holds' that the !ity 0o(ernment of Manila has the right to impose tax on li#ue)ed 4ammable gas under +rdinance ,o. $%-&' as amended by +rdinance ,o. /". 3nd for this reason' the Deendant InterA Island 0as ;er(ice' Inc.' is hereby sentenced to pay to the !ity of Manila the sum of &,$<" as de)ciency tax due from the year $%&-' inclusi(e' including the amount of P&1 as surcharge thereon' and the payment of the costs c
The Deendant has aea/e* fro7 th+s *e!+s+o) a)* )o; +) 7a+)ta+)s that
$. =The lower court erred in not holding and declaring that the ,o. $%-& as amended 8imposing a tax for purposes of re(enue9' does not clearly pro(ided that it applies to the sale of li#ue)ed 4ammable gas. -. =The lower court erred in not holding and declaring that the pro(isions of section $' 0roup -' of +rdinance ,o. $%-&' as amended by +rdinance ,o. -/"' are and clearly within the legislati(e powers granted to the Municipal oard of Manila' if said +rdinance is applied to the sale of li#ue)ed 4ammable gas. . =That assuming arguendo that under the pro(isions of section $' 0roup -' of +rdinance ,o. $%-&' as last amended by +rdinance ,o. /"' li#ue)ed 4ammable gas is included' still the lower court erred in not )nding and declaring that said +rdinance ,o. $%-&' as amended' is a percentage tax hence' the complaint does not state a cause of action because no allegation has been made that the ordinance in #uestion had pre(iously been appro(ed by the President of the Philippines. ". =Further assuming arguendo that +rdinance ,o. $%-&' as amended' is (alid' yet the lower court erred in not )nding that to apply it to the li#ue)ed gas business of the Deendant will constitute double taxation hence' unconstitutional and (oid. &. =The lower court erred in ordering the Deendant to pay the !ity of Manila the sum of PE'E/$.11 as de)ciency tax due under +rdinance ,o. $%-&' as amended by +rdinance ,o. /"' and to pay the costs.> In support of the )rst two assignments of error Appellant cites paragraphs 8m9 and 8o9 of section $E of the 7e(ised !harter of Manila 87epublic 3ct ,o. "1%9 authori
073 To tax' )x the license fee and regulate the storage and sale of petroleum or any of the products thereof and of all other highly combustible or explosi(e materials. xxx
xxx
x x x.
0o3 To tax and )x the license fee on dealers in general merchandise c
Then Appellant argues that li#ue)ed 4ammable gas is included in said paragraph 073 a)*, he)!e, e>!/u*e* fro7 the !o))otat+o) of the ;or* 7er!ha)*+se, as use* +) ara5rah 0o3. This argument at )rst impressed the court' but' upon further re4ection' we are persuaded that it is not decisi(e on the issue before us. Indeed' although the clause =petroleum or any of the products thereof and all other highly combustible or explosi(e material'> appearing in said paragraph 8m9 may indicate the intent of !ongress of the Philippines to include li#ue)ed 4ammable gas within the pur(iew of said paragraph' it does not follow necessarily that in using the word =merchandise>' in Municipal +rdinance ,o. $%-&' as amended' the Municipal oard of Manila intended to con(ey thereto the restricted meaning allegedly gi(en to the term =merchandise> in paragraph 8o9 of ;ection $E of its 7e(ised !harter' or to exclude li#ue)ed 4ammable gas from the operation of said ordinance. In this connection' it should be noted that the authority of the !ity of Manila to tax dealers in li#ue)ed 4ammable gas under its 7e(ised !harter' is conceded. 3ccordingly' the #uestion whether the grant of power appears in paragraph 8m9 or in paragraph 8o9 of the aforementioned ;ection $E' is immaterial to the exercise of said authority. 3s already ad(erted to' the case hinges on the connotation of the term =merchandise> as used in said ordinance' or the interest of the Municipal oard in connection therewith. 7eferring to the meaning of said word' !orpus Guris ;ecundum has the following to say =The word 2merchandise'’ employed as a noun' is de)ned as meaning the objects of commerce the subjects of commerce and tra5c whate(er is usually bought and sold in trade' or market' or by merchants goods wares commodities commodities' goods' or wares bought and sold for gain commodities or goods to trade with a commercial commodity or commercial commodities in general. =The term is also de)ned as meaning things which are ordinarily bought and sold anything mo(able' anything customarily bought and sold for pro)t any mo(able object of trade or tra5c any article which is the object of commerce' or which may be bought
or sold in trade the staple of a mercantile business that which is passed from hand to hand by purchase and sale.> 8Hol. &D pp. $1&/A$1&D.9 Inasmuch as' admittedly' li#ue)ed gas may be' and is being' bought and sold in trade' it clearly is a merchandise' and comes within the pur(iew of the ordinary import or this world. @as it used in this sense in +rdinance ,o. $%-&' as amended' as' in e*ect' held by the lower court' or did the Municipal oard intend to con(ey therewith the meaning allegedly gi(en thereto in paragraph 8o9 of ;ection $E of 7epublic 3ct ,o. "1%' as contended by Deendant A Appellant @e )nd oursel(es unable to accept the latter (iew' not only because the former is more in accord with the simple and usual connotation of said term' but' also' because it appears that said ordinance has not followed the classi)cation made in ;ection $E of 7epublic 3ct ,o. $1%. Thus' for instance' although the word =merchandise> appears in paragraph 8o9 of said ;ection $E' it is included in 0roup - of said ordinance' together with electrical supplies' sporting goods' textiles' hardwares' including glasswares' and cooking utensils' which are found in paragraph 8n9 of said 3rticle $E. Moreo(er' said 0roup refers to =retail dealers in new 8not yet used9 merchandise' which dealers are not yet subject to the payment of any municipal tax' such asB8$9 7etail dealers in general merchandise > +b(iously' the enumeration made in said 0roup - is not all inclusi(e. It merely illustrates some of the objects the dealers in which are taxed under its pro(ision. The word =merchandise> as used therein has not restricti(e meaning. ;aid group taxes dealers in all =new 8not yet used9 merchandise' which dealers are not yet subject to the payment of any municipal tax.> :i#ue)ed 4ammable gas is a =new> object of commerce' and hence' merchandise' and' at the time of the passage of said ordinance' dealers therein were not' as yet' subject to the payment of any municipal tax. In short' the )rst and second assignments of error are untenable. Jnder the third assignment of error' it is claimed that the tax imposed under the ordinance in #uestion is in the nature of a percentage tax. The schedule of taxes under the aforementioned 0roup - is a followsB
C/ass uarter/6 5ross sa/es uarter/6 /+!e)se fee $. +(er to P$-&'111.11 P$'-&1.11 -. P$11'111.11 to $-&'111.11 P$'$-&.11 . %1'111.11 to %%'%%%.%% $'111.11 ". E1'111.11 to E%'%%%.%% %11.11 &. D1'111.11 to D%'%%%.%% E11.11 /. /1'111.11 to /%'%%%.%% D11.11 D. &1'111.11 to &%'%%%.%% /11.11 E. "&'111.11 to "%'%%%.%% &11.11 %. "1'111.11 to ""'%%%.%% "&1.11 $1. /'111.11 to %'%%%.%% "11.11 $$. '111.11 to &'%%%.%% /1.11 $-. 1'111.11 to -'%%%.%% 1.11 $. -D'&11.11 to -%'%%%.%% 11.11 $". -&'D&1.11 to -D'"%%.%% -D&.11 $&. --'&11.11 to -"'%%%.%% -&1.11 $/. -1'&11.11 to --'"%%.%% --&.11 $D. $E'D11.11 to -1'"%%.%% -1&.11 $E. $D'-11.11 to $E'/%%.%% $ED.11 $%. $&'&11.11 to $D'$%%.%% $D-.11 -1. $"'$11.11 to $&'"%%.%% $&&.11 -$. $-'D11.11 to $"'1%%.%% $"$.11 --. $$'&11.11 to $-'/%%.%% $-D.11 -. $1'&11.11 to $$'"%%.%% $$&.11 -". %'&11.11 to $1'"%%.%% $1&.11 -&. E'D11.11 to %'"%%.%% %&.11 -/. E'111.11 to E'/%%.%% ED.11 -D. D'-11.11 to D'%%%.%% E1.11 -E. /'11.11 to D'$%%.%% D-.11
-%. &'&11.11 to /'-%%.%% /.11 1. &'111.11 to &'"%%.%% &&.11 $. "'&11.11 to "'%%%.%% &1.11 -. "'"11.11 to "'%%%.%% "&.11 . '&11.11 to '%%%.%% "1.11 ". :ess than to '&11.11 &.11 P7+HI?K?' That retail dealers selling only rice' whose #uarterly sales do not exceed two thousand pesos 8P-'1119 shall only pay a #uarterLy license fee of eighteen pesos 8P$E9.> 8 Appellee’s rief' pp. -A.9 This is not a percentage tax. It is a graduated tax' not based on a gi(en ratio between the gross income and the burden imposed upon the taxpayer. The fourth assignment of error is e(en more de(oid of merit becauseB 8$9 the fees paid by the Deendant under +rdinance ,o. -&% C for the storage' installation' use and transportation of compressed in4ammable gases C was charged by way of license fees' in the exercise of the police power of the ;tate' not under its inherent power of taxation and 8-9 double taxation is not prohibited in our !onstitution. eing a mere conse#uence of the pre(ious assignments of error' the last one needs no discussion. @herefore' the decision appealed from is hereby a5rmed' with costs against the Deendant A Appellant . It is SO ORDERED.
&aras, C.J., @e)54o), &a*+//a, Mo)te7a6or, @aut+sta A)5e/o, La1ra*or, Re6es, [email protected]., a)* Fe/+>, JJ., !o)!ur.
