STANDARD-VACUUM OIL COMPANY, PLAINTIFF AND APPELLANT, VS. M. D. ANTIGUA, AS MUNICIPAL TREASURER OF OPON AND THE MUNICIPALITY OF OPON, DEFENDANTS AND APPELLEES.

This is an action to recover from the Municipal Treasurer of Opon, Cebu, the
sum of P26,639.50 collected by said town official from the plaintiff-appellant
Standard Vacuum Oil Company and paid by the latter under protest. The facts in
this case are simple and not disputed. Section 1 of Commonwealth Act 472 known
as the Municipality Autonomy Act reads thus:

“Section 1. A municipal council or municipal district council shall have
authority to impose municipal license taxes upon person engaged in any
occupation or business, or exercising privileges in the municipality or
municipal district, by requiring them to secure licenses at rates fixed by the
municipal council, or municipal district council, and to collect fees and
charges, for service rendered by the municipality or municipal district and
shall otherwise have power to levy for public local purposes, and for school
purposes, including teacher’s salaries, just and uniform taxes other than
percentages taxes and taxes on specified articles.”

Under the above reproduced legal provision, the municipal council of Opon
passed Ordinance No. 9, series of 1949, imposing a graduated license tax on the
business of manufacturing tin cans based on the maximum output capacity of the
factory. Said ordinance was duly approved by the Department of Finance.

The plaintiff-appellant Standard Vacuum Oil Company, a foreign corporation
duly licensed to transact business in the Philippines, having its principal
office in the City of Manila and with branch office in the City of Cebu, is
engaged in the importation, distribution and sale of gasoline, kerosene and
other fuel oils. Some of its products, especially kerosene are placed in
5-gallon tin cans and then distributed and sold throughout the Philippines. The
company’s branch in Cebu operates and maintains an establishment in the
Municipality of Opon known as Opon Terminal where it stores the gasoline,
kerosene and other fuel oils it imports from abroad and where it manufactures
gallon tin cans. To give an idea of the output of its tin can factory, the
evidence shows that for the years 1950 and 1951 appellant company manufactured
2,796,911 and 2,523,975 tin cans, respectively, or a total of 5,320,886. This
will explain the relatively large amount of tax collected by the defendant
Municipal Treasurer for two years.

Appellant contends that the municipal ordinance is null and void because the
graduated license tax imposed is said to partake of the nature of a percentage
or specific tax, being an indirect percentage tax on specified articles, namely,
the tin cans, and as such percentage tax is outside the powers of a municipal
corporation to impose under the above-cited legal provision; and that assuming
that it is not a percentage but an occupation” tax, still it does not apply to
the tin can factory of plaintiff-appellant because it is not a business operated
for profit but is merely incidental to its main business of importing gasoline,
kerosene and other fuel oils and later placing them in tin cans for distribution
and sale.

The trial court held that the manufacture of tin cans by plaintiff company to
be used as containers of its gasoline, kerosene and other fuel oils1 is an
occupation by itself from which the plaintiff derives benefit by not buying said
tin cans from other persons who would otherwise manufacture them; and that were
the plaintiff exempted from paying the tax on the cans manufactured and used for
the distribution of its commodity while others engaged in the manufacture of tin
cans are required to pay the tax, then the said tax ceases to be just and
uniform. Plaintiff is now appealing from that decision of the trial court
holding that the municipal ordinance was not only valid but was also applicable
to the plaintiff and that consequently, the amount of the tax should not be
refunded to it.

We are satisfied that the graduated license tax imposed by the ordinance in
question is an occupation tax, imposed not under the police or regulatory power
of the municipality but by virtue of its taxing power for purposes of revenue,
and is in accordance with the last part of section 1 of Commonwealth Act 472. It
is, therefore, valid. The question now to be determined is whether it is
applicable to the plaintiff corporation. To us, it is clear that if a company
manufactures tin cans to be sold to the public or to companies engaged in the
sale and distribution of liquids, then said manufacture would be a business or
occupation subject to the tax imposed by the ordinance. However, where the
manufacture of tin cans as in the present case is conducted not as an
independent business, and for profit but merely as an incident to or part of its
main business, then it may not be considered as an occupation or business which
may be taxed separately. The plaintiff company as already stated, is engaged in
the importation, distribution and sale ois. gasoline, kerosene and other fuel
oils and it is already paying the specific tax of two centavos and seven
centavos per liter of kerosene and gasoline, respectively, being sold by it.
While gasoline may be sold and distributed to its dealers and to the public at
gasoline stations and without the use of tin cans this may not be done with
kerosene or petroleum which is being sold not only in small towns which have no
kerosene stations but in distant barrios; hence the necessity of providing
suitable containers such as 5-gallon tin cans. According to the findings of the
trial court which we must accept here, because the appeal was made directly to
this Tribunal on purely questions of law, the tin cans in question were not
manufactured by the appellant company “for sale to the public, but for the
purpose of distributing its products which are in liquid form.”

The case of Smith, Bell & Co. vs. Municipality of Zamboanga
reported in 55 Phil., 466, involved a company engaged in the purchase and sale
of hemp which operated a motor engine used for baling hemp for shipment. The
Municipality of Zamboanga enacted an ordinance requiring payment of a license
fee of P100 a year for every motor engine used for baling hemp. The company
objected to the payment of the fee saying that the use of its motor engine was
an incident to its business of purchase and sale of hemp. After paying the fee
under protest. the company brought an action to recover the same from the
municipality. This Tribunal affirming the judgment of the lower court which
decided in favor of the company said that a company that has already paid taxes
or impost for the operation of its main business of purchase and sale of hemp
may not be further taxed for its possession and operation of a motor engine to
bale hemp for the reason that the baling of hemp is connected with, incidental
to and part of plaintiff’s business, particularly its sale and shipment of said
commodity.

In the case of Craig vs. Ballard & Ballard Co., 196 Sc 238, it
was held that:

“Where a person or corporation is engaged in a distinct business and, as a
feature thereof, in an activity merely incidental which serves no other person
or business, the incidental and restricted activity is not to be considered as
intended to be separately or additionally taxed.”

In conclusion, we hold that when a person or company is already taxed on its
main business, it may not be further taxed for doing. something or engaging in
an activity or work which is merely a part of, incidental to and is necessary to
its main business.

In view of the foregoing, the decision appealed from is hereby reversed, and
the Municipal Treasurer of Opon Cebu, is hereby ordered to return to the
plaintiff-appellant the sum of P26,639.50, without interest, but with costs.

Pablo, Acting C.J., Bengzon, Reyes, A., Bautista Angelo, and
Labrador, JJ., concur.

Judgment reversed.