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Case Digests Taxation Tuesday, February 21, 2012
Case Digests Taxation Tuesday, February 21, 2012
. 167274-75, July 21, cigars and cigarettes packed by machine, among others, effective on 1 January
2008] 2000.
Post under case digests, Taxation at Tuesday, February 21, 2012 Posted by
Schizophrenic Mind Clearly, Section 145 mandates a new rate of excise tax for cigarettes packed by
machine due to the 12% increase effective on 1 January 2000 without regard to
Facts: Respondent FTC is a domestic corporation that manufactures cigarettes whether the revenue collection starting from this period may turn out to be
packed by machine under several brands. Prior to January 1, 1997, Section 142 lower than that collected prior to this date.
of the 1977 Tax Code subjected said cigarette brands to ad valorem tax. Annex
D of R.A. No. 4280 prescribed the cigarette brands’ tax classification rates The qualification added by RR No. 17-99 imposes a tax which is the higher
based on their net retail price. On January 1, 1997, R.A. No. 8240 took effect. amount between the ad valorem tax being paid at the end of the 3-year transition
Sec. 145 thereof now subjects the cigarette brands to specific tax and also period and the specific tax under Section 145, as increased by 12%—a situation
provides that: (1) the excise tax from any brand of cigarettes within the next not supported by the plain wording of Section 145 of the 1997 Tax Code.
three (3) years from the effectivity of R.A. No. 8240 shall not be lower than the Administrative issuances must not override, supplant or modify the law, but
tax, which is due from each brand on October 1, 1996; (2) the rates of excise tax must remain consistent with the law they intend to carry out.
on cigarettes enumerated therein shall be increased by 12% on January 1, 2000;
and (3) the classification of each brand of cigarettes based on its average retail Revenue generation is not the sole purpose of the passage of the 1997 Tax
price as of October 1, 1996, as set forth in Annex D shall remain in force until Code. The shift from the ad valorem system to the specific tax system in the
revised by Congress. Code is likewise meant to promote fair competition among the players in the
industries concerned and to ensure an equitable distribution of the tax burden.
The Secretary of Finance issued RR No. 17-99 to implement the provision for
the 12% excise tax increase. RR No. 17-99 added the qualification that “the new 2. Commissioner of Internal Revenue vs. Central Luzon Drug Corporation
specific tax rate xxx shall not be lower than the excise tax that is actually being
paid prior to January 1, 2000.” In effect, it provided that the 12% tax increase
must be based on the excise tax actually being paid prior to January 1, 2000 and G.R. No. 159647 April 15, 2005
not on their actual net retail price.
FTC filed 2 separate claims for refund or tax credit of its purportedly overpaid
excise taxes for the month of January 2000 and for the period January 1- Facts:
December 31, 2002. It assailed the validity of RR No. 17-99 in that it enlarges Respondents operated six drugstores under the business name Mercury Drug.
Section 145 by providing the aforesaid qualification. In this petition, petitioner From January to December 1996 respondent granted 20% sales discount to
CIR alleges that the literal interpretation given by the CTA and the CA of qualified senior citizens on their purchases of medicines pursuant to RA 7432
Section 145 would lead to a lower tax imposable on 1 January 2000 than that for a total of ₱ 904,769.
imposable during the transition period, which is contrary to the legislative intent
to raise revenue. On April 15, 1997, respondent filed its annual Income Tax Return for taxable
year 1996 declaring therein net losses. On Jan. 16, 1998 respondent filed with
Issue: Should the 12% tax increase be based on the net retail price of the petitioner a claim for tax refund/credit of ₱ 904,769.00 allegedly arising from
cigarettes in the market as outlined in Section 145 of the 1997 Tax Code? the 20% sales discount. Unable to obtain affirmative response from petitioner,
respondent elevated its claim to the Court of Tax Appeals. The court dismissed
Held: YES. Section 145 is clear and unequivocal. It states that during the the same but upon reconsideration, the latter reversed its earlier ruling and
transition period, i.e., within the next 3 years from the effectivity of the 1997 ordered petitioner to issue a Tax Credit Certificate in favor of respondent citing
Tax Code, the excise tax from any brand of cigarettes shall not be lower than CA GR SP No. 60057 (May 31, 2001, Central Luzon Drug Corp. vs. CIR)
the tax due from each brand on 1 October 1996. This qualification, however, is citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or
conspicuously absent as regards the 12% increase which is to be applied on erroneously paid taxes but that there are other situations which may warrant a
tax credit/refund. 3. SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. CEMENT
MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, THE SECRETARY OF THE
CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required DEPARTMENT OF TRADE AND INDUSTRY, THE SECRETARY OF THE
neither a tax liability nor a payment of taxes by private establishments prior to DEPARTMENT OF FINANCE and THE COMMISSIONER OF THE BUREAU OF
the availment of a tax credit. Moreover, such credit is not tantamount to an CUSTOMS, respondents.
unintended benefit from the law, but rather a just compensation for the taking
of private property for public use.
Facts:
Issue:
Whether or not respondent, despite incurring a net loss, may still claim the Republic Act No. 8800, the Safeguard Measures Act (SMA), which was one of
20% sales discount as a tax credit. the laws enacted by Congress soon after the Philippines ratified the General
Agreement on Tariff and Trade (GATT) and the World Trade Organization
Ruling: (WTO) Agreement.[3] The SMA provides the structure and mechanics for the
Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of imposition of emergency measures, including tariffs, to protect domestic
obtaining a 20% discount on their purchase of medicine from any private industries and producers from increased imports which inflict or could inflict
establishment in the country. The latter may then claim the cost of the discount
serious injury on them.
as a tax credit. Such credit can be claimed even if the establishment operates at
a loss.
Petitioner Southern Cross Cement Corporation (Southern Cross) is a domestic
A tax credit generally refers to an amount that is “subtracted directly from corporation engaged in the business of cement manufacturing, production,
one’s total tax liability.” It is an “allowance against the tax itself” or “a importation and exportation. Its principal stockholders are Taiheiyo Cement
deduction from what is owed” by a taxpayer to the government. Corporation and Tokuyama Corporation, purportedly the largest cement
A tax credit should be understood in relation to other tax concepts. One of manufacturers in Japan.[5]
these is tax deduction – which is subtraction “from income for tax purposes,”
or an amount that is “allowed by law to reduce income prior to the application
of the tax rate to compute the amount of tax which is due.” In other words, Private respondent Philippine Cement Manufacturers Corporation[6]
whereas a tax credit reduces the tax due, tax deduction reduces the income (Philcemcor) is an association of domestic cement manufacturers. It has
subject to tax in order to arrive at the taxable income. eighteen (18) members,[7] per Record. While Philcemcor heralds itself to be
an association of domestic cement manufacturers, it appears that
A tax credit is used to reduce directly the tax that is due, there ought to be a tax considerable equity holdings, if not controlling interests in at least twelve (12)
liability before the tax credit can be applied. Without that liability, any tax of its member-corporations, were acquired by the three largest cement
credit application will be useless. There will be no reason for deducting the manufacturers in the world, namely Financiere Lafarge S.A. of France, Cemex
latter when there is, to begin with, no existing obligation to the S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank
government. However, as will be presented shortly, the existence of a tax Financiere Glaris, Ltd., then Holderfin B.V.).
credit or its grant by law is not the same as the availment or use of such
credit. While the grant is mandatory, the availment or use is not. If a net loss is the DTIs disagreement with the conclusions of the Tariff Commission, but at
reported by, and no other taxes are currently due from, a business
the same time, ultimately denying Philcemcors application for safeguard
establishment, there will obviously be no tax liability against which any tax
measures on the ground that the he was bound to do so in light of the Tariff
credit can be applied. For the establishment to choose the immediate availment
Commissions negative findings.
of a tax credit will be premature and impracticable.
Philcemcor challenged this Decision of the DTI Secretary by filing with the Issue:
Court of Appeals a Petition for Certiorari, Prohibition and Mandamus[11]
seeking to set aside the DTI Decision, as well as the Tariff Commissions
Whether or not the decision of DTI Secretary, to impose safeguard measures
Report. The Court of Appeals Twelfth Division, in a Decision[13] penned by
is valid.
Court of Appeals Associate Justice Elvi John Asuncion,[14] partially granted
Philcemcors petition.
Held:
On 23 June 2003, Southern Cross filed the present petition, arguing that the
Court of Appeals has no jurisdiction over Philcemcors petition, as the proper NO, due to the nature of this case, the Court found that the DTI should follow
remedy is a petition for review with the CTA conformably with the SMA, and; the regulations prescribed by SMA. The Court held that he assailed Decision of
that the factual findings of the Tariff Commission on the existence or non- the Court of Appeals is DECLARED NULL AND VOID and SET
existence of conditions warranting the imposition of general safeguard ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED
measures are binding upon the DTI Secretary. NULL AND VOID and SET ASIDE. No Costs.
Despite the fact that the Court of Appeals Decision had not yet become final, Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time
its binding force was cited by the DTI Secretary when he issued a new Decision that that in light of the appellate courts Decision there was no longer any legal
on 25 June 2003, wherein he ruled that that in light of the appellate courts impediment to his deciding Philcemcors application for definitive safeguard
Decision, there was no longer any legal impediment to his deciding measures.[41] He made a determination that, contrary to the findings of the
Philcemcors application for definitive safeguard measures. Tariff Commission, the local cement industry had suffered serious injury as a
result of the import surges.[42] Accordingly, he imposed a definitive safeguard
measure on the importation of gray Portland cement, in the form of a
The Court of Appeals had held that based on the foregoing premises,
definitive safeguard duty in the amount of P20.60/40 kg. bag for three years
petitioner’s prayer to set aside the findings of the Tariff Commission in its
on imported gray Portland Cement.
assailed Report dated March 13, 2002 is DENIED. On the other hand, the
assailed April 5, 2002 Decision of the Secretary of the Department of Trade
and Industry is hereby SET ASIDE. Consequently, the case is REMANDED to the 4. CIR v. SM PRIME HOLDINGS, GR No. 183505, 2010-02-26
public respondent Secretary of Department of Trade and Industry for a final
decision in accordance with RA 8800 and its Implementing Rules and
Facts:
Regulations. Hence, the appeal.
Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia Realty
Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time
Development Corporation (First Asia) are domestic corporations duly
that that in light of the appellate courts Decision there was no longer any legal
organized and existing under the laws of the Republic of the Philippines. Both
impediment to his deciding Philcemcors application for definitive safeguard
are engaged in the business of operating cinema houses, among... others.
measures.[41] He made a determination that, contrary to the findings of the
Tariff Commission, the local cement industry had suffered serious injury as a
result of the import surges.[42] Accordingly, he imposed a definitive safeguard On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM Prime a
measure on the importation of gray Portland cement, in the form of a Preliminary Assessment Notice (PAN) for value added tax (VAT) deficiency on
definitive safeguard duty in the amount of P20.60/40 kg. bag for three years cinema ticket sales in the amount of P119,276,047.40 for taxable year
on imported gray Portland Cement. Hence, the appeal.
2000.[8] In response, SM Prime... filed a letter-protest dated December 15, derived from admission tickets by cinema/theater operators or proprietors
2003. are subject to VAT.
On September 6, 2004, the BIR denied the protest filed by SM Prime and On September 22, 2006, the First Division of the CTA rendered a Decision
ordered it to pay the VAT deficiency for taxable year 2000 in the amount of granting the Petition for Review.
P124,035,874.12.
Issues:
On May 15, 2002, the BIR sent First Asia a PAN for VAT deficiency on... cinema
ticket sales for taxable year 1999 in the total amount of P35,823,680.93.[13]
(1) In not finding/holding that the gross receipts derived by
First Asia protested the PAN in a letter dated July 9, 2002.
operators/proprietors of cinema houses from admission tickets [are] subject
to the 10% VAT because:
On September 6, 2004, the BIR rendered a Decision denying the protest and
ordering First Asia to pay the amount of P35,823,680.93 for VAT deficiency for
(a)
taxable year 1999.
Also, the collection of income tax via the CWT on a per transaction basis, i.e.,
upon consummation of the sale, is not contrary to the Tax Code which calls for
the payment of the net income at the end of the taxable period. The taxes
withheld are in the nature of advance tax payments by a taxpayer in order to
cancel its possible future tax obligation. They are installments on the annual tax
which may be due at the end of the taxable year. The withholding agent-buyer’s
act of collecting the tax at the time of the transaction, by withholding the tax due 13.
from the income payable, is the very essence of the withholding tax method of
tax collection.
On the alleged violation of the equal protection clause, the taxing power has the
authority to make reasonable classifications for purposes of taxation.
Inequalities which result from singling out a particular class for taxation, or
exemption, infringe no constitutional limitation. The real estate industry is, by
itself, a class and can be validly treated differently from other business
enterprises.
In Iloilo City, the appellees Eusebio Villanueva and Remedios S. Villanueva are
owners of five tenement houses, aggregately containing 43 apartments, while
the other appellees and the same Remedios S. Villanueva are owners of ten
apartments. By virtue of the ordinance in question, the appellant City collected
from spouses Eusebio Villanueva and Remedios S. Villanueva, for the years
1960-1964, the sum of P5,824.30, and from the appellees Pio Sian Melliza,
Teresita S.
Topacio, and Remedios S. Villanueva, for the years 1960-1964, the sum of
P1,317.00.
On July 11, 1962 and April 24, 1964, the plaintiffs-appellees filed acomplaint,
and an amended complaint, respectively, against the City of Iloilo, praying that
Ordinance 11, series of 1960, be declared "invalid for being beyond the powers
of the Municipal Council of the City of Iloilo to enact, and unconstitutional for
being violative of the rule as to uniformity of taxation and for depriving said
plaintiffs of the equal protection clause of the Constitution," and that the City be
ordered to refund the amounts collected from them under the said ordinance.
The lower court rendered judgment declaring the ordinance illegal.
Issues:
(1) Whether or not the City of Iloilo is empowered by the Local Autonomy Act
to impose tenement taxes.
(2) Whether or not Ordinance 11, series of 1960, does violate the rule of
uniformity of taxation.
Held:
(1) Yes. The lower court has interchangeably denominated the tax in
question as a tenement tax or an apartment tax. Called by either name, it is not
14. Villanueva vs. City of Iloilo [December 28, 1968, L-26521] among the exceptions listed in Section 2 of the Local Autonomy Act. The
imposition by the ordinance of a license tax on persons engaged in the business
of operating tenement houses finds authority in Section 2 of the Local
Autonomy Act which provides that chartered cities have the authority to impose royalties arguing that, the antecedent facts attending respondents case fall
municipal license taxes or fees upon persons engaged in any occupation or squarely within the same circumstances under which said MacGeorge and
business, or exercising privileges within their respective territories, and Gillette rulings were issued. Since the agreement was approved by the
"otherwise to levy for public purposes, just and uniform taxes, licenses, or fees." Technology Transfer Board, the preferential tax rate of 10% should apply to
the respondent. So, royalties paid by the respondent to SC Johnson and Son,
(2) No. The ordinance is not violative of the rule of uniformity in taxation. USA is only subject to 10% withholding tax.
The Supreme Court has already ruled that tenement houses constitute a distinct
class of property. It has likewise ruled that "taxes are uniform and equal when The Commissioner did not act on said claim for refund. Private respondent
imposed upon all property of the same class or character within the taxing SC Johnson & Son, Inc. then filed a petition for review before the CTA, to
authority." The fact, therefore, that the owners of other classes of buildings in claim a refund of the overpaid withholding tax on royalty payments from July
the City of Iloilo do not pay the taxes imposed by the ordinance in question is 1992 to May 1993.
no argument at all against uniformity and equality of the tax imposition. Neither
is the rule of equality and uniformity violated by the fact that tenement taxes are On May 7, 1996, the CTA rendered its decision in favor of SC Johnson and
not imposed in other cities, for the same rule does not require that taxes for the ordered the CIR to issue a tax credit certificate in the amount of P163,266.00
same purpose should be imposed in different territorial subdivisions at the same representing overpaid withholding tax on royaltypayments beginning July 1992
time. So long as the burden of the tax falls equally and impartially on all owners to May 1993.
or operators of tenement houses similarly classified or situated, equality and
The CIR thus filed a petition for review with the CA which rendered the
uniformity of taxation is accomplished.
decision subject of this appeal on November 7, 1996 finding no merit in the
Hence, the judgment of the lower court is reversed. The ordinance in question is petition and affirming in toto the CTA ruling.
valid.
Issue: Whether or not tax refunds are considered as tax exemptions.
Consequently, Petron sent a letter to petitioner stating that in view of the Facts:
pendency of its appeal with the LBAA, any action by the Treasurer's Office on
the subject properties would be premature. However, petitioner replied that conducted a fraud investigation for all internal revenue taxes to
only Petron's payment under protest shall bar the collection of the realty ascertain/determine the tax liabilities of respondent L. M. Camus Engineering
taxes due, pursuant to Sections 231 and 252 of the LGC. On even date, Petron Corporation (LMCEC) for the... taxable years 1997, 1998 and 1999.
filed with the Regional Trial Court of Bataan the instant case (docketed as Civil a criminal complaint was instituted by the Bureau of Internal Revenue (BIR)
Case No. 8801) for prohibition with prayer for the issuance of a temporary against LMCEC on January 19, 2001
restraining order (TRO) and preliminary injunction. The trial court issued the
assailed Order granting Petron's petition for issuance of writ of preliminary Based on data obtained from an "informer" and various clients of LMCEC... it
injunction, subject to Petron's posting of a P444,967,503.52 bond in addition was discovered that LMCEC filed fraudulent tax returns with substantial
to its previously posted surety bond of P1,286,057,899.54, to complete the underdeclarations of taxable income for the years 1997, 1998 and 1999.
total amount equivalent to the revised assessment of P1,731,025,403.06. The
Petitioner thus assessed the... company of total deficiency taxes
trial court held that in scheduling the sale of the properties despite the
pendency of Petron's appeal and posting of the surety bond with the LBAA, The Preliminary Assessment Notice (PAN) was received by LMCEC on February
petitioner deprived Petron of the right to appeal. 22, 2001.
In view of the above findings, assessment notices together with a formal letter
of demand dated August 7, 2002 were sent to LMCEC through personal
Issue/Held: W/N the trial court properly issued the injunction order- YES
service on October 1, 2002
Petitioner appealed to respondent Secretary of Justice but the latter denied its Respondent Secretary, however, fully concurred with private respondents'
petition for review contention that the assessment notices were invalid for being unnumbered
and the tax liabilities therein stated have already been settled and/or
On the allegation of fraud, respondent Secretary ruled that petitioner failed to terminated.
establish the existence of the following circumstances indicating fraud in the
settlement of LMCEC's tax liabilities: (1) there must be intentional and As it is, the formality of a control number in the assessment notice is not a
substantial understatement of tax liability by... the taxpayer; (2) there must be requirement for its validity but rather the contents thereof which should
intentional and substantial overstatement of deductions or exemptions; and inform the taxpayer of the declaration of deficiency tax against said taxpayer.
(3) recurrence of the foregoing circumstances. Both the formal letter of demand and the notice... of assessment shall be void
if the former failed to state the fact, the law, rules and regulations or
second, the claim... that the tax fraud investigation was precipitated by an jurisprudence on which the assessment is based, which is a mandatory
alleged "informant" has not been corroborated nor was it clearly established, requirement under Section 228 of the NIRC.
hence there is no other conclusion but that the Bureau engaged in a "fishing
expedition" Principles:
Petitioner filed the criminal complaint against the private respondents for The rationale for dismissing the complaint on the ground of lack of control
violation of the following provisions of the NIRC,... Respondent Secretary number in the assessment... notice likewise betrays a lack of awareness of tax
concurred with the Chief State Prosecutor's conclusion that there is laws and jurisprudence, such circumstance not being an element of the
insufficient evidence to establish probable cause to charge private offense.
respondents... the assessment notices... are unnumbered, hence irregular and 18. PEOPLE OF THE PHILIPPINES, PETITIONER, VS. THE HONORABLE
suspect SANDIGANBAYAN (FIFTH DIVISION) AND EFREN L. ALAS, RESPONDENTS. D E C
Issues: ISION
Corporation Code which is Batas Pambansa Blg. 68. It was registered with the
Securities and Exchange Commission under SEC No. AS094-005593 on June 22,
CORONA, J.: 1994 with a lifetime of fifty (50) years. Under its Articles of Incorporation the
purpose for which said entity is formed was primarily for business, xxx
Likewise, a scrutiny of the seven (7) secondary purposes of the corporation
Does the Sandiganbayan have jurisdiction over presidents, directors or points to the conclusion that it exists for business. Obviously, it is not
trustees, or managers of government-owned or controlled corporations involved in the performance of a particular function in the exercise of
organized and incorporated under the Corporation Code for purposes of the government power. Thus, its officers and employees are not covered by the
provisions of RA 3019, otherwise known as the Anti-Graft and Corrupt GSIS and are under the SSS law, and actions for reinstatement and backwages
Practices Act? The petitioner, represented by the Office of the Special are not within the jurisdiction of the Civil Service Commission but by the
Prosecutor (OSP), takes the affirmative position in this petition for certiorari National Labor Relations Commission (NLRC). The Supreme Court, in the case
under Rule 65 of the Rules of Court. Respondent Efren L. Alas contends of Trade Unions of the Philippines and Allied Services vs. National Housing
otherwise, together with the respondent court. Pursuant to a resolution Corp., 173 SCRA 33, held that the Civil Service now covers only government
dated September 30, 1999 of the Office of the Ombudsman, two separate owned or controlled corporations with original or legislative charters, those
informations[1] for violation of Section 3(e) of RA 3019, otherwise known as created by an act of Congress or by special law, and not those incorporated
the Anti-Graft and Corrupt Practices Act, were filed with the Sandiganbayan under and pursuant to a general legislation. The Highest Court categorically
on November 17, 1999 against Efren L. Alas. The charges emanated from the ruled that the Civil Service does not include government-owned or controlled
alleged anomalous advertising contracts entered into by Alas, in his capacity corporation which are organized as subsidiaries of government-owned or
as President and Chief Operating Officer of the Philippine Postal Savings Bank controlled corporation under the general corporation law. In Philippine
(PPSB), with Bagong Buhay Publishing Company which purportedly caused National Oil Company – Energy Development Corporation vs. Leogardo, 175
damage and prejudice to the government. On October 30, 2002, Alas filed a SCRA 26, the Supreme Court emphasized that:
motion to quash the informations for lack of jurisdiction, which motion was
vehemently opposed by the prosecution. After considering the arguments of
both parties, the respondent court ruled that PPSB was a private corporation The test in determining whether a government-owned or controlled
and that its officers, particularly herein respondent Alas, did not fall under corporation is subject to the Civil Service Law is the manner of its creation
Sandiganbayan jurisdiction. According to the Sandiganbayan: such that government corporation created by special charter are subject to its
provision while those incorporated under the general corporation law are not
within its coverage.
After a careful consideration of the arguments of the accused-movant as well
as of that of the prosecution, we are of the considered opinion that the
instant motion of the accused is well taken. Indeed, it is the basic thrust of Likewise in Davao City Water District vs. Civil Service Commission, 201 SCRA
Republic Act as well as (sic) Presidential Decree No. 1606 as amended by 601 it was held that “by government-owned or controlled corporation with
President Decree No. 1486 and Republic Act No. 7975 and Republic Act No. original charter we mean government-owned or controlled corporation
8249 that the Sandiganbayan has jurisdiction only over public officers unless created by a special law and not under the Corporation Code of the
private persons are charged with them in the commission of the offenses. The Philippines” while in Llenes vs. Dicdican, et al., 260 SCRA 207, a public officer
records disclosed that while Philippine Postal Savings Bank is a subsidiary of has been ruled, as a person whose duties involve the exercise of discretion in
the Philippine Postal Corporation which is a government owned corporation, the performance of the function of government. Clearly, on the basis of the
the same is not created by a special law. It was organized and incorporated foregoing pronouncements of the Supreme Court, the accused herein cannot
under the
be considered a public officer. Thus, this Court may not exercise jurisdiction From the foregoing, PPSB fits the bill as a government-owned or controlled
over his act.[2] corporation, and organized and incorporated under the Corporation Code as a
subsidiary of the Philippine Postal Corporation (PHILPOST). More than 99% of
the authorized capital stock of PPSB belongs to the government while the rest
Dissatisfied, the People, through the Office of the Special Prosecutor (OSP), is nominally held by its incorporators who are/were themselves officers of
filed this petition[3] arguing, in essence, that the PPSB was a government- PHILPOST. The creation of PPSB was expressly sanctioned by Section 32 of RA
owned or controlled corporation as the term was defined under Section 2(13) 7354, otherwise known as the Postal Service Act of 1992, for purposes of,
of the Administrative Code of 1987. [4] Likewise, in further defining the among others, “to encourage and promote the virtue of thrift and the habit of
jurisdiction of the Sandiganbayan, RA 8249 did not make a distinction as to the savings among the general public, especially the youth and the marginalized
manner of creation of the government-owned or controlled corporations for sector in the countryside xxx” and to facilitate postal service by “receiving
their officers to fall under its jurisdiction. Hence, being President and Chief collections and making payments, including postal money orders.”[7] It is not
disputed that the Sandiganbayan has jurisdiction over presidents, directors or
Operating Officer of the PPSB at the time of commission of the crimes trustees, or managers of government-owned or controlled corporations with
charged, respondent Alas came under the jurisdiction of the Sandiganbayan. original charters whenever charges of graft and corruption are involved.
Quoting at length from the assailed resolution dated February 15, 2001, However, a question arises whether the Sandiganbayan has jurisdiction over
respondent Alas, on the other hand, practically reiterated the the same officers in government-owned or controlled corporations organized
pronouncements made by the respondent court in support of his conclusion and incorporated under the Corporation Code in view of the delimitation
that the PPSB was not created by special law, hence, its officers did not fall provided for in Article IX-B Section 2(1) of the 1987 Constitution which states
within the jurisdiction of the Sandiganbayan.[5] We find merit in the petition. that:
Section 2(13) of EO 292[6] defines government-owned or controlled
corporations as follows:
SEC. 2. (1) The Civil Service embraces all branches, subdivisions,
instrumentalities, and agencies of the government, including government-
owned or controlled corporations with original charters.
Sec. 2. General Terms Defined – Unless the specific words of the text or the
context as a whole or a particular statute, shall require a different meaning:
xxx xxx xxx (13) government owned or controlled corporations It should be pointed out however, that the jurisdiction of the Sandiganbayan is
refer to any agency organized as a stock or non-stock corporation vested with separate and distinct from the Civil Service Commission. The same is governed
functions relating to public needs whether governmental or proprietary in by Article XI, Section 4 of the 1987 Constitution which provides that “the
nature, and owned by the government directly or indirectly or through its present anti-graft court known as the Sandiganbayan shall continue to
instrumentalities either wholly, or where applicable as in the case of stock function and exercise its jurisdiction as now or hereafter may be provided by
corporations to the extent of at least 51% of its capital stock: provided, that law.” This provision, in effect, retained the jurisdiction of the anti-graft court
government owned or controlled corporations maybe further categorized by as defined under Article XIII, Section 5 of the 1973 Constitution which
the department of the budget, the civil service commission and the mandated its creation, thus:
commission on audit for the purpose of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such
corporations. Sec. 5. The Batasang Pambansa shall create a special court, to be known as
Sandiganbayan, which shall have jurisdiction over criminal and civil cases
involving graft and corrupt practices and such other offense committed by The deliberate omission, in our view, clearly reveals the intention of the
public officers and employees, including those in government-owned or legislature to include the presidents, directors or trustees, or managers of
controlled corporations, in relation to their office as may be determined by both types of corporations within the jurisdiction of the Sandiganbayan
law. (Italics ours) whenever they are involved in graft and corruption. Had it been otherwise, it
could have simply made the necessary distinction. But it did not. It is a basic
principle of statutory construction that when the law does not distinguish, we
On March 30, 1995, Congress, pursuant to its authority vested under the 1987 should not distinguish. Ubi lex non distinguit nec nos distinguere debemos.
Constitution, enacted RA 7975[8] maintaining the jurisdiction of the Corollarily, Article XI Section 12 of the 1987 Constitution, on the jurisdiction of
Sandiganbayan over presidents, directors or trustees, or managers of the Ombudsman (the government’s prosecutory arm against persons charged
government-owned or controlled corporations without any distinction with graft and corruption), includes officers and employees of government-
whatsoever. Thereafter, on February 5, 1997, Congress enacted RA 8249[9] owned or controlled corporations, likewise without any distinction. In
which preserved the subject provision: Quimpo v. Tanodbayan,[10] this Court, already mindful of the pertinent
provisions of the 1987 Constitution, ruled that the concerned officers of
government-owned or controlled corporations, whether created by special
law or formed under the Corporation Code, come under the jurisdiction of the
Section 4, Jurisdiction. The Sandiganbayan shall exercise exclusive original
Sandiganbayan for purposes of the provisions of the Anti-Graft and Corrupt
jurisdiction in all cases involving:
Practices Act. Otherwise, as we emphasized therein, a major policy of
a. Violations of Republic Act No. 3019, as amended, otherwise known as the Government, which is to eradicate, or at the very least minimize, the graft and
Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, corruption that has permeated the fabric of the public service like a malignant
Section, Title VII, Book II of the Revised Penal Code, where one or more of the social cancer, would be seriously undermined. In fact, Section 1 of the Anti-
accused are officials occupying the following positions in the government, Graft and Corrupt Practices Act embodies this policy of the government, that
whether in a permanent, acting or interim capacity, at the time of the is, to repress certain acts not only of public officers but also of private persons
commission of the offense, constituting graft or corrupt practices or which may lead thereto. The
foregoing pronouncement has not outlived its usefulness. On the contrary, it
has become even more relevant today due to the rampant cases of graft and
(1) Officials of the executive branch occupying the positions of regional corruption that erode the people’s faith in government. For indeed, a
director, and higher, otherwise classified as grade “27” and higher, of the government-owned or controlled corporation can conceivably create as many
Compensation and Position Classification Act of 1989 (Republic Act No. 6758) subsidiary corporations under the Corporation Code as it might wish, use
specifically including: xxx xxx xxx (g) Presidents, directors or public funds, disclaim public accountability and escape the liabilities and
trustees, or managers of governmentowned or controlled corporations, state responsibilities provided by law. By including the concerned officers of
universities or educational institutions or foundations. (Italics ours) government-owned or controlled corporations organized and incorporated
under the Corporation Code within the jurisdiction of the Sandiganbayan, the
legislature evidently seeks to avoid just that. WHEREFORE, in view of the
foregoing, the petition is hereby GRANTED and the assailed resolution dated
The legislature, in mandating the inclusion of “presidents, directors or
February 15, 2001 of the respondent court is hereby REVERSED and SET ASIDE.
trustees, or managers of government-owned or controlled corporations”
SO ORDERED.
within the jurisdiction of the Sandiganbayan, has consistently refrained from
making any distinction with respect to the manner of their creation.