G.R. No. L-23794. February 17, 1968
ORMOC SUGAR COMPANY, INC., PLAINTIFF-APPELLANT, VS. THE TREASURER OF ORMOC CITY, THE MUNICIPAL BOARD OF ORMOC CITY, HON. ESTEBAN C. CONEJOS, AS MAYOR OF ORMOC CITY AND ORMOC CIT…
BENGZON, J.P., J.:
On January 29, 1964,
the Municipal Board of Ormoc City passed[1]
Ordinance No. 4, Series of 1964, imposing “on any and all productions of
centrifugal sugar milled at the Ormoc Sugar
Company, Inc., in Ormoc
City a municipal tax equivalent to
one per centum (1%) per export sale to the United
States of America and other foreign
countries.”[2]
Payments for said tax were made, under protest, by Ormoc Sugar Company, Inc. on March 20, 1964 for P7,087.50 and
on April 20, 1964 for
P5,000, or a total of P12,087.50.
On June 1, 1964, Ormoc Sugar Company,
Inc. filed before the Court of First Instance of Leyte,
with service of a copy upon the Solicitor General, a complaint[3]
against the City of Ormoc as well as its Treasurer,
Municipal Board and Mayor, alleging that the afore-stated ordinance is
unconstitutional for being violative of the equal protection
clause (Sec. 1 [1], Art. III, Constitution) and the rule of
uniformity of taxation (Sec. 22[1], Art, VI, Constitution), aside from being an
export tax forbidden under Section 2287 of the Revised Administrative Code. It further alleged that the tax is neither a
production nor a license tax which Ormoc City under
Section 15-kk of its charter and under Section 2 of Republic Act 2264, otherwise
known as the Local Autonomy Act; is authorized to impose; and that the tax
amounts to a customs duty, fee or charge in violation of paragraph 1 of Section
2 of Republic Act 2264 because the tax is on both the sale and export of
sugar.
Answering, the defendants asserted that the tax ordinance was
within defendant city’s power to enact under the Local Autonomy Act and that
the same did not violate the afore-cited constitutional limitations. After pre?trial and submission of the
case on memoranda, the Court of First Instance, on August 6, 1964, rendered a decision that upheld the
constitutionality of the ordinance and declared the taxing power of defendant
chartered city broadened by the Local Autonomy Act to include all other forms
of taxes, licenses or fees not excluded in its charter.
Appeal therefrom was directly taken to Us by plaintiff Ormoc Sugar
Company, Inc. Appellant alleges the same
statutory and constitutional violations in the aforesaid taxing ordinance
mentioned earlier.
Section 1 of the ordinance states: “There shall be paid to the City
Treasurer on any and all productions of centrifugal sugar milled at the Ormoc Sugar Company Incorporated in Ormoc City
a municipal tax equivalent to one per centum (1%) per export sale to the United
States of America and other foreign
countries.” Though referred to as a “production
tax”, the imposition actually amounts to a tax on the export of
centrifugal sugar produced at Ormoc Sugar Company,
Inc. For production of sugar
alone is not taxable; the only time the tax applies is when the sugar produced
is exported.
Appellant questions the authority of the defendant Municipal
Board to levy such an export tax, in view of Section 2287 of the Revised
Administrative Code which denies from municipal councils the power to impose
an export tax. Section 2287 in part
states: “It shall not be in the
power of the municipal council to impose a tax in any form whatever, upon goods
and merchandise carried into the municipality, or out of the same, and any
attempt to impose an import or export tax upon such, goods in the guise of an
unreasonable charge for wharfage, use of brides or
otherwise, shall be void.”
Subsequently, however, Section 2 of Republic Act 2264, effective June 19, 1959, gave chartered cities,
municipalities and municipal districts authority to levy for public purposes
just and uniform taxes, licenses or fees.
Anent the inconsistency between Section 2287 of the Revised
Administrative Code and Section 2 of Republic Act 2264, this Court, in Nin Bay Mining Co. v. Municipality of Roxas,[4]
held the former to have been repealed by the latter. And expressing Our
awareness the transcendental effects that municipal export or import taxes or
licenses will have on the national economy, due to Section 2 of Republic Act
2264, We stated that there was no other alternative until Congress acts to
provide remedial measures to forestall any unfavorable results.
The point remains to be determined, however, whether
constitutional limits on the power of taxation, specifically the equal
protection clause and rule of uniformity of taxation, were infringed.
The Constitution in the bill of rights provides: “x x x nor shall any person be
denied the equal protection op the laws.” (Sec. 1[1],
Art. III) In Felwa v. Salas,[5]
We ruled that the equal protection clause applies only to persons or things
identically situated and does not bar a reasonable classification of the
subject of legislation, and a classification is reasonable where (1) it is
based on substantial distinctions which make real differences; (2) these are
germane to the purpose of the law (3) the classification applies not only to
present conditions but also to future conditions which are substantially
identical to those of the present; (4) the classification applies only to those
who belong to the same class.
A perusal of the requisites instantly shows that the questioned
ordinance does not meet them, for it taxes only centrifugal sugar produced and
exported by the Ormoc Sugar Company, Inc. and none
other. At the time of the taxing
ordinance’s enactment, Ormoc Sugar Company, Inc., it
is true, was the only sugar central in the city of Ormoc. Still the classification, to be reasonable,
should be in terms applicable to future conditions as well. The taxing ordinance should not be singular
and exclusive to exclude any subsequently established sugar central, of the
same class as plaintiff, from the coverage of the tax. As it is now, even if later a similar company
is set up, it cannot be subject to the tax because the ordinance expressly
points only to Ormoc Sugar Company, Inc. as the
entity to be levied upon.
Appellant, however, is not entitled to interest on the refund
because the taxes were not arbitrarily collected (Collector of Internal Revenue
v. Binalbagan).[6]
At the time of collection, the ordinance provided a sufficient basis to
preclude arbitrariness, the same being then presumed constitutional until
declared otherwise.
WHEREFORE, the decision appealed from is hereby reversed,
the challenged ordinance is declared unconstitutional and the defendants-appellees are hereby ordered to refund the P12,087.50 plaintiff-appellant paid under protest. No costs.
SO ORDERED.
Concepcion, C.J, Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Angeles, and Fernando, JJ., concur.
[1] Resolution No. 30, Series of 1964.
[2]
Section 1, emphasis supplied.
[3]
An action for declaratory judgment was also filed on May 23, 1964 (Civil Case No.
665-0) but this and the present case were tried jointly.
[4]
L-20125, July 20, 1965.
[5]
L-26511, Oct. 29, 1966.
[6]
L-12752, Jan. 30, 1965.