Today is Saturday, February 01, 2014 search Republic of the Philippines SUPREME !URT Manila SE !"# #$%$S$!

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&'R' "o' 12()4*

#ece+ber 2), 1))*

F$RST P,$-$PP$"E $"#USTR$.- !RP!R.T$!", petitioner, /s' !URT !F .PPE.-S, ,!"!R.0-E P.TER"! %' T. 1.", 0.T."&.S $T2 and .#!R. $!" ' .RE--."!, in her official capacity as ity Treasurer of 0atan3as, respondents'

M.RT$"E4, 5'6 This petition for re/ie7 on certiorari assails the #ecision of the ourt of .ppeals dated "o/e+ber 2), 1))(, in .1&'R' SP "o' 89*01, affir+in3 the decision of the Re3ional Trial ourt of 0atan3as ity, 0ranch *4, in i/il ase "o' 42)8, 7hich dis+issed petitioners: co+plaint for a business ta; refund i+posed by the ity of 0atan3as' Petitioner is a 3rantee of a pipeline concession under Republic .ct "o' 8*<, as a+ended, to contract, install and operate oil pipelines' The ori3inal pipeline concession 7as 3ranted in 1)9< 1 and rene7ed by the Ener3y Re3ulatory 0oard in 1))2' 2 So+eti+e in 5anuary 1))(, petitioner applied for a +ayor:s per+it 7ith the !ffice of the Mayor of 0atan3as ity' ,o7e/er, before the +ayor:s per+it could be issued, the respondent ity Treasurer re=uired petitioner to pay a local ta; based on its 3ross receipts for the fiscal year 1))8 pursuant to the -ocal &o/ern+ent ode 8' The respondent ity Treasurer assessed a business ta; on the petitioner a+ountin3 to P)(9,0<9'04 payable in four install+ents based on the 3ross receipts for products pu+ped at &PS11 for the fiscal year 1))8 7hich a+ounted to P1*1,9*1,1(1'00' $n order not to ha+per its operations, petitioner paid the ta; under protest in the a+ount of P28),01)'01 for the first =uarter of 1))8' !n 5anuary 20, 1))4, petitioner filed a letter1protest addressed to the respondent Treasurer, the pertinent portion of 7hich reads6 ity

Please note that our o+pany >FP$ ? is a pipeline operator 7ith a 3o/ern+ent concession 3ranted under the Petroleu+ .ct' $t is en3a3ed in the business of transportin3 petroleu+ products fro+ the 0atan3as refineries, /ia pipeline, to Sucat and 5TF Pandacan Ter+inals' .s

such, our o+pany is e;e+pt fro+ payin3 ta; on 3ross receipts under Section 188 of the -ocal &o/ern+ent ode of 1))1 ' ' ' ' Moreo/er, Transportation contractors are not included in the enu+eration of contractors under Section 181, Para3raph >h? of the -ocal &o/ern+ent ode' Therefore, the authority to i+pose ta; @on contractors and other independent contractors@ under Section 148, Para3raph >e? of the -ocal &o/ern+ent ode does not include the po7er to le/y on transportation contractors' The i+position and assess+ent cannot be cate3oriAed as a +ere fee authoriAed under Section 14< of the -ocal &o/ern+ent ode' The said section li+its the i+position of fees and char3es on business to such a+ounts as +ay be co++ensurate to the cost of re3ulation, inspection, and licensin3' ,ence, assu+in3 ar3uendo that FP$ is liable for the license fee, the i+position thereof based on 3ross receipts is /iolati/e of the aforecited pro/ision' The a+ount of P)(9,0<9'04 >P28),01)'01 per =uarter? is not co++ensurate to the cost of re3ulation, inspection and licensin3' The fee is already a re/enue raisin3 +easure, and not a +ere re3ulatory i+position' 4 !n March *, 1))4, the respondent ity Treasurer denied the protest contendin3 that petitioner cannot be considered en3a3ed in transportation business, thus it cannot clai+ e;e+ption under Section 188 >B? of the -ocal &o/ern+ent ode' ( !n 5une 1(, 1))4, petitioner filed 7ith the Re3ional Trial ourt of 0atan3as ity a co+plaint 9 for ta; refund 7ith prayer for 7rit of preli+inary inBunction a3ainst respondents ity of 0atan3as and .doracion .rellano in her capacity as ity Treasurer' $n its co+plaint, petitioner alle3ed, inter alia, that6 >1? the i+position and collection of the business ta; on its 3ross receipts /iolates Section 188 of the -ocal &o/ern+ent odeC >2? the authority of cities to i+pose and collect a ta; on the 3ross receipts of @contractors and independent contractors@ under Sec' 141 >e? and 1(1 does not include the authority to collect such ta;es on transportation contractors for, as defined under Sec' 181 >h?, the ter+ @contractors@ e;cludes transportation contractorsC and, >8? the ity Treasurer ille3ally and erroneously i+posed and collected the said ta;, thus +eritin3 the i++ediate refund of the ta; paid' < Tra/ersin3 the co+plaint, the respondents ar3ued that petitioner cannot be e;e+pt fro+ ta;es under Section 188 >B? of the -ocal &o/ern+ent ode as said e;e+ption applies only to @transportation contractors and persons en3a3ed in the transportation by hire and co++on carriers by air, land and 7ater'@ Respondents assert that pipelines are not included in the ter+ @co++on carrier@ 7hich refers solely to ordinary carriers such as trucDs, trains, ships and the liDe' Respondents further posit that the ter+ @co++on carrier@ under the said code pertains to the +ode or +anner by 7hich a product is deli/ered to its destination' * !n !ctober 8, 1))4, the trial court rendered a decision dis+issin3 the co+plaint, rulin3 in this 7ise6 ' ' ' Plaintiff is either a contractor or other independent contractor' ' ' ' the e;e+ption to ta; clai+ed by the plaintiff has beco+e unclear' $t is a rule that ta; e;e+ptions are to be strictly construed a3ainst the ta;payer, ta;es bein3 the lifeblood of the 3o/ern+ent' E;e+ption +ay therefore be 3ranted only by clear and une=ui/ocal pro/isions of la7'

Plaintiff clai+s that it is a 3rantee of a pipeline concession under Republic .ct 8*<' >E;hibit .? 7hose concession 7as lately rene7ed by the Ener3y Re3ulatory 0oard >E;hibit 0?' 2et neither said la7 nor the deed of concession 3rant any ta; e;e+ption upon the plaintiff' E/en the -ocal &o/ern+ent ode i+poses a ta; on franchise holders under Sec' 18< of the -ocal Ta; ode' Such bein3 the situation obtained in this case >e;e+ption bein3 unclear and e=ui/ocal? resort to distinctions or other considerations +ay be of help6 1' That the e;e+ption 3ranted under Sec' 188 >B? enco+passes only co++on carriers so as not to o/erburden the ridin3 public or co++uters 7ith ta;es' Plaintiff is not a co++on carrier, but a special carrier e;tendin3 its ser/ices and facilities to a sin3le specific or @special custo+er@ under a @special contract'@ 2' The -ocal Ta; ode of 1))2 7as basically enacted to 3i/e +ore and effecti/e local autono+y to local 3o/ern+ents than the pre/ious enact+ents, to +aDe the+ econo+ically and financially /iable to ser/e the people and dischar3e their functions 7ith a conco+itant obli3ation to accept certain de/olution of po7ers, ' ' ' So, consistent 7ith this policy e/en franchise 3rantees are ta;ed >Sec' 18<? and contractors are also ta;ed under Sec' 148 >e? and 1(1 of the ode' ) Petitioner assailed the aforesaid decision before this ourt /ia a petition for re/ie7' !n February 2<, 1))(, 7e referred the case to the respondent ourt of .ppeals for consideration and adBudication' 10 !n "o/e+ber 2), 1))(, the respondent court rendered a decision 11 affir+in3 the trial court:s dis+issal of petitioner:s co+plaint' Petitioner:s +otion for reconsideration 7as denied on 5uly 1*, 1))9' 12 ,ence, this petition' .t first, the petition 7as denied due course in a Resolution dated "o/e+ber 11, 1))9' 18 Petitioner +o/ed for a reconsideration 7hich 7as 3ranted by this ourt in a Resolution 14 of 5anuary 22, 1))<' Thus, the petition 7as reinstated' Petitioner clai+s that the respondent ourt of .ppeals erred in holdin3 that >1? the petitioner is not a co++on carrier or a transportation contractor, and >2? the e;e+ption sou3ht for by petitioner is not clear under the la7' There is +erit in the petition' . @co++on carrier@ +ay be defined, broadly, as one 7ho holds hi+self out to the public as en3a3ed in the business of transportin3 persons or property fro+ place to place, for co+pensation, offerin3 his ser/ices to the public 3enerally' .rt' 1<82 of the i/il ode defines a @co++on carrier@ as @any person, corporation, fir+ or association en3a3ed in the business of carryin3 or transportin3 passen3ers or 3oods or both, by land, 7ater, or air, for co+pensation, offerin3 their ser/ices to the public'@ The test for deter+inin3 7hether a party is a co++on carrier of 3oods is6 1' ,e +ust be en3a3ed in the business of carryin3 3oods for others as a public e+ploy+ent, and +ust hold hi+self out as ready to en3a3e in the transportation of 3oods for person 3enerally as a business and not as a casual occupationC 2' ,e +ust undertaDe to carry 3oods of the Dind to 7hich his business is confinedC

8' ,e +ust undertaDe to carry by the +ethod by 7hich his business is conducted and o/er his established roadsC and 4' The transportation +ust be for hire' 1(

0ased on the abo/e definitions and re=uire+ents, there is no doubt that petitioner is a co++on carrier' $t is en3a3ed in the business of transportin3 or carryin3 3oods, i'e' petroleu+ products, for hire as a public e+ploy+ent' $t undertaDes to carry for all persons indifferently, that is, to all persons 7ho choose to e+ploy its ser/ices, and transports the 3oods by land and for co+pensation' The fact that petitioner has a li+ited clientele does not e;clude it fro+ the definition of a co++on carrier' $n #e &uA+an /s' ourt of .ppeals 19 7e ruled that6 The abo/e article >.rt' 1<82, i/il ode? +aDes no distinction bet7een one 7hose principal business acti/ity is the carryin3 of persons or 3oods or both, and one 7ho does such carryin3 only as an ancillary acti/ity >in local idio+, as a @sideline@?' .rticle 1<82 ' ' ' a/oids +aDin3 any distinction bet7een a person or enterprise offerin3 transportation ser/ice on a re3ular or scheduled basis and one offerin3 such ser/ice on an occasional, episodic or unscheduled basis' "either does .rticle 1<82 distin3uish bet7een a carrier offerin3 its ser/ices to the @3eneral public,@ i'e', the 3eneral co++unity or population, and one 7ho offers ser/ices or solicits business only fro+ a narro7 se3+ent of the 3eneral population' Ee thinD that .rticle 1*<< deliberately refrained fro+ +aDin3 such distinctions' So understood, the concept of @co++on carrier@ under .rticle 1<82 +ay be seen to coincide neatly 7ith the notion of @public ser/ice,@ under the Public Ser/ice .ct > o++on7ealth .ct "o' 1419, as a+ended? 7hich at least partially supple+ents the la7 on co++on carriers set forth in the i/il ode' Under Section 18, para3raph >b? of the Public Ser/ice .ct, @public ser/ice@ includes6 e/ery person that no7 or hereafter +ay o7n, operate' +ana3e, or control in the Philippines, for hire or co+pensation, 7ith 3eneral or li+ited clientele, 7hether per+anent, occasional or accidental, and done for 3eneral business purposes, any co++on carrier, railroad, street rail7ay, traction rail7ay, sub7ay +otor /ehicle, either for frei3ht or passen3er, or both, 7ith or 7ithout fi;ed route and 7hate/er +ay be its classification, frei3ht or carrier ser/ice of any class, e;press ser/ice, stea+boat, or stea+ship line, pontines, ferries and 7ater craft, en3a3ed in the transportation of passen3ers or frei3ht or both, shipyard, +arine repair shop, 7harf or docD, ice plant, ice1refri3eration plant, canal, irri3ation syste+ 3as, electric li3ht heat and po7er, 7ater supply and po7er petroleu+, se7era3e syste+, 7ire or 7ireless co++unications syste+s, 7ire or 7ireless broadcastin3 stations and other si+ilar public ser/ices' >E+phasis Supplied? .lso, respondent:s ar3u+ent that the ter+ @co++on carrier@ as used in Section 188 >B? of the -ocal &o/ern+ent ode refers only to co++on carriers transportin3 3oods and passen3ers throu3h +o/in3 /ehicles or /essels either by land, sea or 7ater, is erroneous' .s correctly pointed out by petitioner, the definition of @co++on carriers@ in the i/il ode +aDes no distinction as to the +eans of transportin3, as lon3 as it is by land, 7ater or air' $t does not pro/ide that the transportation of the passen3ers or 3oods should be by +otor /ehicle' $n fact, in the United States, oil pipe line operators are considered co++on carriers' 1< Under the Petroleu+ .ct of the Philippines >Republic .ct 8*<?, petitioner is considered a @co++on carrier'@ Thus, .rticle *9 thereof pro/ides that6

.rt' *9'Pipe line concessionaire as co++on carrier' F . pipe line shall ha/e the preferential ri3ht to utiliAe installations for the transportation of petroleu+ o7ned by hi+, but is obli3ated to utiliAe the re+ainin3 transportation capacity pro rata for the transportation of such other petroleu+ as +ay be offered by others for transport, and to char3e 7ithout discri+ination such rates as +ay ha/e been appro/ed by the Secretary of .3riculture and "atural Resources' Republic .ct 8*< also re3ards petroleu+ operation as a public utility' Pertinent portion of .rticle < thereof pro/ides6 that e/erythin3 relatin3 to the e;ploration for and e;ploitation of petroleu+ ' ' ' and e/erythin3 relatin3 to the +anufacture, refinin3, stora3e, or transportation by special +ethods of petroleu+, is hereby declared to be a public utility' >E+phasis Supplied? The 0ureau of $nternal Re/enue liDe7ise considers the petitioner a @co++on carrier'@ $n 0$R Rulin3 "o' 09)1*8, it declared6 ' ' ' since GpetitionerH is a pipeline concessionaire that is en3a3ed only in transportin3 petroleu+ products, it is considered a co++on carrier under Republic .ct "o' 8*< ' ' ' ' Such bein3 the case, it is not subBect to 7ithholdin3 ta; prescribed by Re/enue Re3ulations "o' 181<*, as a+ended' Fro+ the fore3oin3 dis=uisition, there is no doubt that petitioner is a @co++on carrier@ and, therefore, e;e+pt fro+ the business ta; as pro/ided for in Section 188 >B?, of the -ocal &o/ern+ent ode, to 7it6 Sec' 188' o++on -i+itations on the Ta;in3 Po7ers of -ocal &o/ern+ent Units' F Unless other7ise pro/ided herein, the e;ercise of the ta;in3 po7ers of pro/inces, cities, +unicipalities, and baran3ays shall not e;tend to the le/y of the follo7in36 ;;; ;;; ;;;

>B? Ta;es on the 3ross receipts of transportation contractors and persons en3a3ed in the transportation of passen3ers or frei3ht by hire and co++on carriers by air, land or 7ater, e;cept as pro/ided in this ode' The deliberations conducted in the ,ouse of Representati/es on the -ocal &o/ern+ent 1))1 are illu+inatin36 MR' .IU$"! >.?' ThanD you, Mr' SpeaDer' Mr' SpeaDer, 7e 7ould liDe to proceed to pa3e )(, line 1' $t states6 @SE ' 121 Gno7 Sec' 181H' &o/ern+ent Units'@ ' ' ' MR' .IU$"! >.'?' ThanD you Mr' SpeaDer' Still on pa3e )(, subpara3raph (, on ta;es on the business of transportation' This appears to be one of those bein3 dee+ed to be e;e+pted fro+ the ta;in3 po7ers of the local 3o/ern+ent o++on -i+itations on the Ta;in3 Po7ers of -ocal ode of

units' May 7e Dno7 the reason 7hy the transportation business is bein3 e;cluded fro+ the ta;in3 po7ers of the local 3o/ern+ent unitsJ MR' 5.%$ER >E'?' Mr' SpeaDer, there is an e;ception contained in Section 121 >no7 Sec' 181?, line 19, para3raph (' $t states that local 3o/ern+ent units +ay not i+pose ta;es on the business of transportation, e;cept as other7ise pro/ided in this code' "o7, Mr' SpeaDer, if the &entle+an 7ould care to 3o to pa3e )* of 0ooD $$, one can see there that pro/inces ha/e the po7er to i+pose a ta; on business enBoyin3 a franchise at the rate of not +ore than one1half of 1 percent of the 3ross annual receipts' So, transportation contractors 7ho are enBoyin3 a franchise 7ould be subBect to ta; by the pro/ince' That is the e;ception, Mr' SpeaDer' Ehat 7e 7ant to 3uard a3ainst here, Mr' SpeaDer, is the i+position of ta;es by local 3o/ern+ent units on the carrier business' -ocal 3o/ern+ent units +ay i+pose ta;es on top of 7hat is already bein3 i+posed by the "ational $nternal Re/enue ode 7hich is the so1called @co++on carriers ta;'@ Ee do not 7ant a duplication of this ta;, so 7e Bust pro/ided for an e;ception under Section 12( Gno7 Sec' 18<H that a pro/ince +ay i+pose this ta; at a specific rate' MR' .IU$"! >.'?' ThanD you for that clarification, Mr' SpeaDer' ' ' ' 1* $t is clear that the le3islati/e intent in e;cludin3 fro+ the ta;in3 po7er of the local 3o/ern+ent unit the i+position of business ta; a3ainst co++on carriers is to pre/ent a duplication of the so1 called @co++on carrier:s ta;'@ Petitioner is already payin3 three >8K? percent co++on carrier:s ta; on its 3ross salesLearnin3s under the "ational $nternal Re/enue ode' 1) To ta; petitioner a3ain on its 3ross receipts in its transportation of petroleu+ business 7ould defeat the purpose of the -ocal &o/ern+ent ode' E,EREF!RE, the petition is hereby &R."TE#' The decision of the respondent ourt of .ppeals dated "o/e+ber 2), 1))( in .1&'R' SP "o' 89*01 is RE%ERSE# and SET .S$#E' S! !R#ERE#' 0ellosillo, Puno and MendoAa, 55', concur' Footnotes 1 2 Rollo, pp' )01)4'

#ecision of the Ener3y Re3ulatory 0oard in ER0 ase "o' )21)4, rene7in3 the Pipeline oncession of petitioner First Philippine $ndustrial orporation, for+erly Dno7n as Meralco Securities $ndustrial orporation' >Rollo, pp' )(1100?' 8 Sec' 148' business6 ;;; ;;; ;;; Ta; on 0usiness' The +unicipality +ay i+pose ta;es on the follo7in3

>e? !n contractors and other independent contractors, in accordance 7ith the follo7in3 schedule6 Eith 3ross receipts for the precedin3.+ount of Ta; Per .nnu+ calendar year in the a+ount of ''' ''' at a rate not e;ceedin3 fifty

P2, 000,000'00 or +ore

percent >(0K? of one percent >1K? 4 ( 9 < * ) 10 -etter Protest dated 5anuary 20, 1))4, Rollo, pp' 1101111' -etter of respondent ity Treasurer, Rollo, p' 112'

o+plaint, .nne; @ @, Rollo, pp' (11(9' Rollo, pp' (11(<' .ns7er, .nne; @5@, Rollo, pp' 122112<' RT #ecision, Rollo, pp' (*192'

Rollo, p' *4'

11 .1&'R' SP "o' 89*01C Penned by 5ustice 5ose ' #e la Ra+a and concurred in by 5ustice 5ai+e M' -antin and 5ustice Eduardo &' Montene3roC Rollo, pp' 8814<' 12 18 Rollo, p' 4)' Resolution dated "o/e+ber 11, 1))9 e;cerpts of 7hich are hereunder =uoted6

@The petition is un+eritorious @.s correctly ruled by respondent appellate court, petitioner is not a co++on carrier as it is not offerin3 its ser/ices to the public' @.rt' 1<82 of the i/il ode defines o++on arriers as6 persons, corporations, fir+ or association en3a3ed in the business of carryin3 or transportin3 passen3ers or 3oods or both, by land, 7ater, or air, for co+pensation, offerin3 their ser/ices to the public' @Ee sustain the /ie7 that petitioner is a special carrier' 0ased on the facts on hand, it appears that petitioner is not offerin3 its ser/ices to the public' @Ee a3ree 7ith the findin3s of the appellate court that the clai+ for e;e+ption fro+ ta;ation +ust be strictly construed a3ainst the ta;payer' The present understandin3 of the concept of @co++on carries@ does not include carriers of petroleu+ usin3 pipelines' $t is hi3hly uncon/entional to say that the business of transportin3 petroleu+ throu3h pipelines in/ol/es @co++on carrier@ business' The -ocal &o/ern+ent ode intended to 3i/e e;e+ptions fro+

local ta;ation to co++on carriers transportin3 3oods and passen3ers throu3h +o/in3 /ehicles or /essels and not throu3h pipelines' The ter+ co++on carrier under Section 188 >B? of the -ocal &o/ern+ent ode +ust be 3i/en its si+ple and ordinary or 3enerally accepted +eanin3 7hich definitely not include operators of pipelines'@ 14 &'R' "o' 12()4* >First Philippine $ndustrial orporation /s' ourt of .ppeals, et' al'? F onsiderin3 the 3rounds of the +otion for reconsideration, dated #ece+ber 28, 1))9, filed by counsel for petitioner, of the resolution of "o/e+ber 11, 1))9 7hich denied the petition for re/ie7 on certiorari, the ourt Resol/ed6 >a? >b? 1( 19 to &R."T the +otion for reconsideration and to RE$"ST.TE the petitionC and to re=uire respondent to !MME"T on the petition, 7ithin ten >10? days fro+ notice' .3bayani, o++ercial -a7s of the Phil', 1)*8 Ed', %ol' 4, p' ('

19* S R. 91<191* G1)**H'

1< &iffin /' Pipe -ines, 1<2 Pa' (*0, 88 .lt' (<*C Producer Transp' o' /' Railroad o++ission, 241 US 22*, 94 - ed 28), 40 S t 181' 1* 5ournal and Record of the ,ouse of Representati/es, Fourth Re3ular Session, %olu+e 2, pp' *<1*), Septe+ber 9, 1))0C E+phasis !urs' 1) .nne; @#@ of Petition, Rollo, pp' 101110)'

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