Philippine Petroleum Corporation vs Municipality of Pililla Rizal
198 SCRA 82 [GR No. 90776 June 3, 1991]
Facts: Philippine Petroleum Corporation is a business enterprise engaged in the manufacture of lubricated oil base stocks which is a petroleum product, with its refinery plant situated at Malaya, Pilillia Rizal, conducting its business activities within the territorial jurisdiction of municipality of Pilillia, Rizal and is in continuous operation up to the present. PPC owns and maintains an oil refinery including 49 storage tanks for its petroleum products in Malaya, Pililla, Rizal. Under section 142 of NIRC of 1939, manufactured oils and other fuels are subject to specific tax. Respondent municipality of Pilillia, Rizal through municipal council resolution no. 25-s-1974 enacted municipal tax ordinance no. 1-s-1974 otherwise known as “The Pililla Tax Code Of 1974” on June 14, 1974 which took effect on July 1, 1974. Sections 9 and 10 of the said ordinance imposed a tax on business, except for those which fixed taxes are provided in the local tax code on manufacturers, importers, or producers of any article of commerce of whatever kind or nature, including brewers, distiller, rectifiers, repackers and compounders of liquors distilled spirits and/or wines in accordance with the schedule found in the local tax code, as well as mayor’s permit sanitary inspection fee and storage permit fee for flammable, combustible or explosive substances, while section 139 of the disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges. Enforcing the provisions of the above mentioned ordinance, the respondent filed a complaint on April 4, 1986 docketed as civil case no. 057-T against PPC for the collection of the business tax from 1979 to 1986; storage permit fees from 1975 to 1986; mayor’s permit fee and sanitary permit inspection fees from 1975 to 1984. PPC, however, have already paid the last named fees starting 1985.
Issue: Whether or not the Municipality may validly impose taxes on petitioner’s business.
Held: No. While section 2 of PD 436 prohibits the imposition of local taxes on petroleum products, said decree did not amend sections 19 and 19 (a) of PD 231 as amended by PD 426, wherein the municipality is granted the right to levy taxes on business of manufacturers, importers, producers of any article of commerce of whatever kind or nature. A tax on business is distinct from a tax on the article itself. Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products contravenes a declared national policy, it should have been expressly stated in PD No. 436.
The exercise by local governments of the power to tax is ordained by the present constitution. To allow the continuous effectivity of the prohibition set forth in PC no. 26-73 would be tantamount to restricting their power to tax by mere administrative issuances. Under section 5, article X of the 1987 constitution, only guidelines and limitations that may be established by congress can define and limit such power of local governments.
The storage permit fee being imposed by Pilillia’s tax ordinance is a fee for the installation and keeping in storage of any flammable, combustible or explosive substances. In as much as said storage makes use of tanks owned not by the Municipality of Pilillia but by petitioner PPC, same is obviously not a charge for any service rendered by the municipality as what is envisioned in section 37 of the same code.