FLORO CEMENT CORPORATION, PETITIONER, VS. HON. BENJAMIN K. GOROSPE, JUDGE, CFI OF MISAMIS ORIENTAL, BRANCH I, AND THE MUNICIPALITY OF LUGAIT, RESPONDENTS.

This is a petition for
review on certiorari seeking to set aside and reverse the decision* of the then
Court of First Instance of Misamis Oriental in Civil
Case No. 4867, entitled “Municipality of Lugait, Misamis Oriental,
(represented) by the Municipal Treasurer and Provincial Treasurer vs. Floro Cement Corporation”, ordering defendant to pay
unto plaintiff the amount of P161,875.00 as manufacturer’s and exporter’s taxes
plus surcharges for the period from January 1, 1974 to September 30, 1975, and
that herein petitioner Floro Cement
Corporation be declared exempted from the coverage of Ordinances Nos. 5 and 10 of the Municipality of Lugait and that the taxes and fees it has paid pursuant to
said ordinances be refunded.

The facts of the case, as summarized in the decision of the trial court, are as follows:

“The municipality of Lugait,
province of Misamis Oriental, represented jointly in
this action by its Municipal Treasurer and the Provincial Treasurer of the said
province, filed with this Court a verified complaint for collection of taxes
against the defendant Floro Cement Corporation, a
domestic corporation duly organized and existing under the laws of the Republic
of the Philippines with business establishment and office address at its
compound in the aforementioned municipality of Lugait.  The taxes sought to be collected by the
plaintiff specifically refers to ‘manufacturer’s’ and ‘exporter’s’ taxes for
the period from January 1, 1974 to September 30, 1975, inclusive, in the total
amount of P161,875.00  plus 25% thereof
as surcharge.  Plaintiff alleged that the
imposition and collection of these taxes is based on its Municipal Ordinance No. 5, otherwise known as the Municipal
Revenue Code of 1974, which was passed pursuant to Presidential Decree No. 231
dated June 28, 1973 and also Municipal Ordinance No. 10 passed on June 11, 1974
pursuant to Presidential Decree No. 426 dated March 30, 1974, amending Presi­dential
Decree No. 231.

In its answer to the complaint, the defendant set up the defense
that it is not liable to pay manufacturer’s and exporter’s taxes alleging among
others that the plaintiff’s power to levy and collect taxes, fees, rentals,
royalties or charges of any kind whatsoever on defendant has been limited or withdrawn by Section 52 of
Presidential Decree No. 463 which provides:

‘Sec. 52.  Power to Levy
Taxes on Mines, Mining Corporation and Mineral Products.  – Any law to the contrary notwithstanding, no
province, city, munici­pality, barrio or municipal district shall levy and
collect taxes, fees, rentals, royalties or
charges of any kind whatsoever on mines, mining claims, mineral
products, or on any operation, process or activity connected therewith.’

Defendant also set up several
special/affirmative defenses, namely: 
(1) that plaintiff has no legal capacity to sue; (2) that the complaint
states no cause; (3) that plaintiff has absolutely no cause of action against
defendant; (4) that defendant was granted by the Secretary of Agriculture and
Natural Resources a Certificate of Qualification for Tax Exemption, CQTE No.
22, dated July 7, 1960, entitling defendant to exemption for a period of five
(5) years from April 30, 1969 to April 29, 1974 from payment of all taxes,
except income tax, and which Certificate was amended on November 5, 1974 (CQTE
P.D. 463-22), entitling defendant to exemption from all taxes, duties and fees
except income tax, for five (5) years from the first date of actual commercial
production of saleable mineral products that is from May 17, 1974 to January 1,
1978; and (5) that Republic Act No. 3823, as implemented by Mines
Administrative Order No. V-25, and P.D. No. 463 which are the basis for the
exemption granted to defendant are special laws; whereas, the municipal
ordinance mentioned in the complaint which are based on P.D. No. 231 and P.D. No.
426, respectively, are general laws; and that it is axiomatic that a special
law can not be amended and/or repealed by a general law unless there is an
express intent to repeal or abrogate the provisions of the special law.

After the issues were joined, the parties sub­mitted a written
stipulation of facts under date of May
21, 1976 the pertinent portion of which is quoted in full as
follows:

‘PLAINTIFF and DEFENDANT, by and through counsel, most respectfully
submit the following stipulation of facts:

1.  That plaintiff a political subdivision of the
Republic of the Philippines
created pursuant to EXECUTIVE ORDER NO. 425, entitled “CREATING THE
MUNICIPALITY OF LUGAIT, IN THE PROVINCE OF MISAMIS ORIENTAL”, a xerox copy of said executive order is attached hereto
marked ANNEX “A” and made an integral part hereof;

2.  That defendant is a corporation duly
organized and existing under and by virtue of the laws of the Philippines; with
plant and office at Lugait, Misamis
Oriental, and is engaged in the manufacture and selling, including exporting,
of cement, one of the essential ingredients of which is limestone;

3.  That defendant, as a mining operator of
mineral land/lands situated at Lugait, Misamis Oriental, was granted by the Secretary of
Agriculture and Natural Resources a Certificate of Qualification for Tax
Exemption, CQTE No. 22, dated July 7, 1960, entitling defendant to exemption
for a period of five (5) years from April 30, 1969 to April 29, 1974, from the
payment of all taxes, except income tax, a xerox copy
of which is attached marked ANNEX “A” to defendant’s answer and made
an integral part hereof;

4.  That the Certificate of Qualifica­tion for
Tax Exemption mentioned in the next preceding paragraph was amended on November
5, 1974, when the Honorable Secretary of Natural Resources, Mr. Jose J. Leido, Jr., upon recommendation of the Director of Mines,
granted to defendant a Certificate of Qualification for Tax Exemption, CQTE
P.D. 463-22, which entitled defendant to exemption from all taxes, duties, and
fees, except income tax, for five (5) years from May 17, 1974 to January 1,
1978, a xerox copy of which is attached marked ANNEX
“B” to defendant’s answer and made an integral part hereof; and that
a copy of the Certificate of Qualification for Tax Exemption, CQTE P.D. 463-22
was furnished the Municipal Treasurer of plaintiff on November 12, 1974, as
shown by a xerox copy of the letter of the Assistant
Director of the Bureau of Mines, Mr. Francisco. A. Comsti,
a copy of which is attached hereto marked ANNEX “B” and made an
integral part hereof;

5.  That the Certificate of Qualifica­tion for
Tax Exemption mentioned in the next preceding paragraph was issued pursuant to
the provisions of Sec. 52, P.D. No. 463, which reads as follows:

“Sec. 52.  Power to Levy
Taxes on Mines, Mining Operations and Mineral Products.  – Any law to the contrary notwithstanding, no
province, City, municipality, barrio or municipal district shall levy and
collect taxes, fees, rentals, royalties or charges of any kind whatsoever on mines,
mining claims, mineral products, or on any operation, process or activity
therewith.”

6.  That on or about July 3, 1974, plaintiff,
through its Municipal Mayor, wired the Secretary of Finance, opposing the
application of defendant for the extension of its exemption from all forms of
taxation, including its application for extension of its exemption from realty
taxes, which opposition was not favorably acted upon by the said Secretary of
Finance, as evidenced by a xerox copy of the letter
of the Honorable Secretary of Finance, Mr. Cesar Virata,
attached hereto marked ANNEX “C” and made an integral part hereof;

7.  That plaintiff, pursuant to P.D. No. 231
promulgated on June 28, 1973, passed Municipal Ordinance No. 5, otherwise known
as Municipal Revenue Code of 1974, effective January 1, 1974, Section 3 of
which is quoted in paragraph 2 of the complaint and made integral part hereof
by reference;

8.  That plaintiff, pursuant to P.D. No. 426
promulgated on March 30, 1974,
Municipal Revenue Ordinance No. 10, effective fifteen (15) days after its
passage, of which Section 4, Title I is quoted in paragraph 3 of the complaint
and made integral part hereof by reference;

9.  That pursuant (to) Municipal Ordinances Nos.
5 and 10, mentioned in paragraphs 7 and 8 hereof, respectively, plaintiff
demanded of defendant the payment of the manufacturer’s and exporter’s taxes
including surcharge for the period covering January 1, 1974 to September 30,
1975, broken down as shown in paragraph 5 of the complaint and made integral
part hereof by reference; but defendant refused because of the allegations
found in paragraphs 1, 2, 3, 4, 5 and 6 hereof.

WHEREFORE, it is most respectfully prayed that the foregoing
stipulation of facts be made the
basis of the judgment of this Honorable Court, after the parties hereto have
submitted their respective memoranda.

Cagayan de Oro City, May 21,
1976.”

(CFI Decision, pp. 1-6; Rollo, pp. 54-59).

As aforementioned, the trial court rendered its decision on November 29, 1976, the dispositive portion of which reads, as follows:

“WHEREFORE, premises considered, judgment is hereby rendered
ordering defendant Floro Cement Corporation to pay
unto plaintiff the amount of P161,875.00 as manufacturer’s and exporter’s taxes
and surcharges for the period from January 1, 1974 to September 30, 1975,
inclusive, and to pay the costs.

SO ORDERED.”

Hence, this appeal.

The petition was given due course by the First Division of this
Court on January 6, 1978 and
both parties were required to submit their simultaneous memoranda.  Respondent complied on February 17, 1978 while petitioner filed its
memorandum on March 9, 1978.

The principal issue in this case is whether or not Ordinances
Nos. 5 and 10 of Lugait, Misamis
Oriental apply to petitioner Floro Corporation
notwithstanding the limitation on the taxing
power of local government as provided for in Sec. 5(m) of P.D. 231 and Sec. 52 of P.D. 463.

Petitioner Floro Cement Corporation
holds that since Ordinances Nos. 5 and 10 were enacted pursuant to P.D. No. 231
and P.D. No. 426, respectively, said ordinances do not apply to its business in
view of the limitation on the taxing power of local government provided in Sec.
5(m) of P.D. No. 231, which reads:

“Sec. 5.  Common
Limitations on the Taxing Powers of Local Governments.  The exercise of taxing power of provinces,
cities, municipalities and barrios shall not extend to the imposition of the
following:

x x
x              x
x x                 x x x

(m) Taxes on mines,
mining operations and mineral products and their by-products when sold
domestically by the operator.”

Floro Cement Corporation likewise
contends that cement is a mineral
product, relying on the case of Cebu Portland Cement
Company vs. Commissioner of Internal Revenue, G.R. No. L-20563, October 29, 1968
(25 SCRA 789), and in the case
of Philippine Pipes and Merchandising Corporation vs. Commissioner of Internal
Revenue, CTA Case No. 1858, dated July 29, 1970 decided by the Court of Tax Appeals (Memorandum for the
Petitioner, Rollo pp. 89-90).

Petitioner further contends that the partial exemption
aforementioned was rendered absolute by Sec. 52 of P.D. No. 463 promulgated on May 17, 1974, which expressly prohibits
the province, city, municipality, barrio and municipal district from levying
and collecting taxes, fees, rentals, royalties or charges of any kind
whatsoever on mines, mining claims and mineral products, any law to the
contrary notwithstanding.  Said prohi­bition
includes any operation, process or activity connected with its production.  The manufacture of cement is a process
inherently connected with the mining operation undertaken by petitioner Floro Cement Corporation (Ibid., pp. 92-93).

On other hand, while respondent municipality admits that
petitioner Floro Cement Corporation undertakes exploration,
development and exploitation of mineral products, the taxes sought to be
collected were not imposed on these activities in view of the mentioned
prohibition under Sec. 52 of P.D. No. 463. 
Said taxes were levied on the corporation’s business of manufacturing
and exporting cement.  The business of
manufacturing and exporting cement does not fall under exploration, development
nor exploitation of mineral resources as
defined in Sec. 2 of P.D. No. 463, hence, it is outside the scope of
application of Sec. 52 of said decree (Memorandum for Respondent, p. 10; Rollo, p. 85).

The municipality’s power to levy taxes on manufacturers and
exporters is provided in Article 2, Sec. 19 of P.D. No. 231, as amended by P.D.
No. 426 which provides that “The municipality may impose a tax on business except those for which
fixed taxes are provided for in this
Code:

“(a) On
manufacturers, importers, or producers of any article of commerce of whatever
kind or nature, including brewers, distillers, rectifiers, repackers,
and compounders of liquors, distilled spirits and/or
wines in accordance with the following schedule:

x x x              x x x                 x x x

(a-1) On retailers,
independent wholesalers and distributors in accordance with the following
schedule:

x x x              x x x                 x x x

(Comment of the Respondent, Rollo, p. 72)

The petition is without merit.

On the question of whether or not cement is a mineral product,
this Court has consistently held that it is not a mineral product but rather a
manufactured product (Commissioner of Internal Revenue vs. Cebu
Portland Cement Company, 156 SCRA 535 [1987]; Commissioner of Internal Revenue
vs. Philippine Pipes and Merchandising Corporation, 153 SCRA 113 [1987];
Commissioner of Internal Revenue vs. Republic Cement Corporation, 149 SCRA 487
[1987]).  While cement is composed of 80%
minerals, it is not merely an admixture or blending of raw materials, as lime,
silica, shale and others.  It is the
result of a definite process – the crushing of minerals, grinding, mixing, calcining, adding of retarder or raw gypsum.  In short, before cement reaches its saleable
form, the minerals had already undergone a chemical change through
manufacturing process (Commissioner of Internal Revenue vs. Cebu
Portland Cement Company, supra, reiterating the ruling in Commissioner
of Internal Revenue vs. Republic Cement Corporation, 124 46 [1983]).  It appears evident that the foregoing cases
overruled the case of Cebu Portland Cement Company
vs. Commissioner of Internal Revenue, 25 SCRA 789 [1969] which was cited by
petitioner.

On the exemption claimed by petitioner, this Court has laid down
the rule that as the power of
taxation is a high prerogative of sovereignty, the relinquishment is never
presumed and any reduction or dimunition thereof with
respect to its mode or its rate, must be strictly construed, and the same must
be coached in clear and unmistakable terms in order that it may be
applied.  More specifically stated, the
general rule is that any claim for exemption from the tax statute should be
strictly construed against the taxpayer (Luzon Stevedoring Corporation vs.
Court of Tax Appeals, 163 SCRA 647 [1988]). 
He who claims an exemption must be able to point out some provision of
law creating the right; it cannot be
allowed to exist upon a mere vague implication or inference.  It must be shown indubitably to exist, for
every presumption is against it, and a well-founded doubt is fatal to the claim
(Manila Electric Company vs. Ver, 67 SCRA 351
[1975]).  The petitioner failed to meet
this requirement.

As held by the lower court, the exemption mentioned in Sec. 52 of
P.D. No. 463 refers only to machineries, equipment, tools for production, etc.,
as provided in Sec. 53 of the
same decree.  The manufacture and the
export of cement does not fall under the said provision for it is not a mineral
product (CFI Decision, Rollo, p. 62).  It is not cement that is mined, only the
mineral products composing the finished
product (Commissioner of Internal Revenue vs. Republic Cement Corporation, supra).

Furthermore, by the parties’ own stipulation of facts submitted
before the court a quo, it is admitted that Floro
Cement Corporation is engaged in the manufacturing and selling, including
exporting of cement (CFI Decision, Rollo, p.
57).  As such, and since the taxes sought
to be collected were levied on these activities pursuant to Sec. 19 of P.D. No.
231.  Ordinances Nos. 5 and 10, which
were enacted pursuant to P.D. No. 231 and P.D. No. 426, respectively, properly apply
to petitioner Floro Cement Corporation.

WHEREFORE, the petition is DENIED for lack of merit and
the decision dated November 29, 1976
of the then Court of First Instance of Misamis
Oriental is Affirmed.

SO ORDERED.

Fernan, C.J., (Chairman), Gutierrez,
Jr., Feliciano, and Davide,
Jr., JJ., concur.

* Rendered by Judge Benjamin K. Gorospe