CTA Case No. 2674 (Decision)

UPVBLJC Of' THE i"lULIPPI"-')'!� a:KJRT OF TAX APPEAU t'flV.OM Clt":"' PANAY ELECTRIC COMPANY, INC., Pet.i t.ioner, - versus - C.T.A. CASE NO. 2674 COMMISSIONER OF INTERNAL REVENUE, Respondent. X- - - - - - - - - - x. DE C I S I 0 N amount. of l'l411 , 635.00 representing compensating taxes alleg.ed t:o have been en:.one:ously and/or illeg1ally impos.ed. and. collect:e'<ili on impor.tat.ions; under: its legislat.i ve franchise. Pet:-.i t:.ione.r: corpor:at:�.ion is a public utility auithor:iz.ed. to "construc.t:., maintain andi ope'r.at.e an e.lect.ric. light., he.at:. and~ power sys.te.m for the pur- pose of g;ener:at.ing andL/or. distr:ibut.ing, ele'ct.ric lig.ht, he.at. and. powe.r f :or s ale within t:he City of Iloilo and the municipalit::.ies of Sta. Barbara and Pavia both in the: province of Iloilo" under R.A. No. 5360 which took ef.f :ect. on June. 15, 1968. On d.if.fer:ent occasions d.ur:ing the year.s 1973�

DECISION CTA CASE NO. 2674. - 2- and 1974, peti1doner- impor:t:ed various. equipment and spare par:t:s such as Mirr-le:ss KV 16 Major. Dies-el Engine Generating Set:., diesel engine par-t.s, g,e.ne'- r-ator. par t:.s and t -ransfo r mers, for u s e in c.onnec:tion with it:.s franchise to operate~ an elect:.ric ligrht, he:at. andl power system as aut:hor:izecl by Republic: Act. No. 5360. As a condition t:o the withdrawal f.rom Customs' custody of the impor-ted ar: ticle~ s, the Collector of Customs of the Por t of Iloilo as. agent of the respondent Commissioner- of Int.ernal Revenue assessed and collec:tt.edl from pet.i t.ioner t �he corre-sponding compe.nsat:.ingj taxe�s presc-ribed, undter: Sect.ion 190 of the. Tax: Code ; as amende:d, aggr.e.gat�.ing �1411,635 . 00, aside from the cust oms d~u t-.ies, due. on t-he importa t::ions. On October l, 1974 and November 25, 1974, pe:ti- tioner. filed two separat�e let:tt:ers with the. Office of the. respondent claiming; the. refund of the c.om- pens a t �-ing taxes paid on t-he imported equipme:n t and spare: parts for use in i t.s f .ranchised operat:.ions on t �he ground of i t.s express ex.empt:.ion from any and all taxes other than fr:anchis.e. t:ax, under its le:g.is.lative g,r:ant., which provides: "Sec. 5. - In consider-a t -ion o f the franchise and rig,ht:.s her:eby g�rant.ed, t .he grantee. shall pay a franchise t .ax equal

DECISION - CTA CASE NO. 2674 -3 - to t:.he t .wo per. c.e.n tum of: the g,r.oss earnings for electr~ ic curr.en t . sold under this franchise: Provided, That. the said franchise of t:wo per. centum of the g,ross. eaJr.nings shall be in 1 ieu of t .axes, dtu t:..ies, and assessme.nts, licenses and- fees of whatever nature which may be levied by any governmental authority now and in the future upon pr.ivileges, earnings, income, machinery and equipment, wat.t .-hour meters, poles, wir.es, transformers, and insula tors used by the grantee, from which tax.es, dutie:s, licenses, f.e.es and. assessment.s the. grantee is expr~essly exempted." (R.A. No. 5360) �. And toward.s sustaining such tax pr ivileg,e pet.i tione:r contend~s that such subsist:.ing; grant:. is contractual in nature and could not have been impaired nor. with- a.rawn impliedly by the r~epealing, provision of Sec- t .ion 190 of: the Tax Code as amended by PD 69 which took ef:fect.ive on January 1, 1973. Taking exception, re.sponde.nt. sees nothing of any such sor.t . of an express ex:.empt.ion from the pay- ment:. of compe.nsating tax. on pet.it.ioner's import.- at.ions. under. Section 5 supra of it:.s franchise, otherwise, the. language in esse:nce would more likely have so spe.cif.ically provided. Respondent cite.s the: pronounce.ment in the MERALCO case (No. L-23847 & L-29987, October 22, 1975, 67 SCRA J60) .as con- t rolling that, "No just.ification can be found\ for giving, pe.ti t.ioner here.in pr.eferent:.ial t .reatment

DECISION CTA CASE NO. 2674 - 4- by reading, into its franchise an exemption from a part-icular kind. of. tax which is not t here. If it. had. been the leg_islat.ive int.ent. to exe.mpt. MERALCO tr.om paying_ a t.ax on the use of imported equipment., the legislative body could have easily d-One so by expamlingi the provision of. Sect.ion 9 and adding to the exempt.ion s.uch words as 1 com- pensat.ing tax.' or 'purchases from abroad for use in i t s business-' _and the like. We cannot ig,nore the principle that express ment.ion in a s-tat.u t .e of. an exemption precludes reading others into it.. (Heard v. Sears Roebuck & Co., 122 Conn. 185, 193, 188A. 269) �." Moreover, Section 190 (now Sec. 204) of. the Tax Cod.e, as amended by PD 69, providingi that., "The provision of. existing_ laws to the con- tr.ary not.wi thstanding, exemption from this tax. shall be limit.ed to the following:" repealed the ex.empt'ion provision in petit.ioner 1 s franchise ins-ofar. as regards compensating, tax. This case finds a two-fold concern: whether or. not 1) the "in lieu of. taxes" provision in bection 5 o f. R.A. No. 5360, supra, includes an exemption from compensat.ing tax, and 2) _the repeal- lng provision in Section 190 of the Tax Code, as amendLed, precludes the availmen t thereof, should any subsis t .�

DECISION CTA CASE NO. 2674 - 5- The f.ir st requires no tortured ra t .io- cination. Section 5 of pet.i tioner 's franc:hise pr.oviding that, "the franchise: tax of two pe:r centum of the gross earnings shall be in lieu of taxes, duties, and assessments, licenses and fees of whateve.r nature and which may be levied by any governmental authority now and. in the tuture upon privileges, earnings, income, machinery and. equipment., wat.t .-hour meters, poles, wires, transformers, and insulators used by the: grantee, from which t.axes, ~luties, licenses, fees and as-sessments the~ grantee is expressly exemp t .e(Il", appear:s quite explicit. in terms and unequivocal in tone. It. deserves to be measured by it.s own intent. There. is nothing cr.yptic or: abs.t .ract. in these: word.s as would. pose an ambigu i t.y or: obs- curity in their applicat.ion. As such, it. is not for us to fa shion the gover:ning rule of law accord- ing to our standard. What seems similar in many or: so in tenor: with the ME.RALCO grant. may not be. identical in ter.ms with respect to the availment of the tax privilege. We do not. in the case at bar. reach the same situat.ion. Thus, paragraph 9 of the MERALCO fr.anchise: provides that. "the grant.ee:

DECISION CTA CASE NO. 2674 -6 - shall be liable to pay the same taxes upon i t .s. real estate, buildings, plant (not including1 poles, wires, tr:ansfor:mer:s, and insulators) ~achinery and personal property as other persons are or may be hereafter required by law to pay" and fur.ther provides that. the percentage tax payable by peti- tioner as fixed therein "shall be in lieu of all taxes and assessme.nt.s of whatever nature and by whatsoever authority upon privileg,es, earnings, income, franchise~ and poles, wir:es, tr ansf.or.mers . and insulators of the. grantee from which taxes and assessments the grantee is hereby expressly exempted." The Supreme Court. then observed that the "last clause of paragraph 9 merely reaffirms, wi t:h regards the poles, wires, t .ransforme.rs and insulators, what has bee.n expressed in the first. sentence of the same. paragraph namely, exemption of: petitioner. fr om the payment of proper:ty t.ax.." It. concluded, in rejecting ME.RALCO 1 s. claimed ex.empt.ion 1 that compensat.ing tax. is not. a property tax but. in the nature of an excise. We need not belabor the author:i t.y relied upon by respond\ent. Commissioner of Internal Revenue more than to say that. the animat:.ing principles enunciated in the ME.RALCO decision do not:. portray the same meaning

DECISION CTA CASE NO. 2674 -7 - and intent as olL the h ere in pet:.i tioner ' s grant. As a point of simple fact, the specific inclusion of "duties" among the levies .enumerate.d und,er the "in lieu of taxes" provision in petit.ionet: ' S: franchise is a compelling indicat.ion that the exempt.ion need not be zeroed to property tax.es but. must have to be tacked to other imposit.ions. compat.ible with petitioner ' s undertaking authorized under the franchise. Duties as well as compensating tax.es ane' such imposts partaking the at.tribute.s of the lawful dues broug.ht to bear on importations. This we think may well be determinative. of the sense and extent of the cover age of the privilege. We feel therefot:e compelled to sustain petitioner' s _ ex.emption from the payment. of compensating tax on its impor t .a tions. The answer to the second quest.ion poses the rub. The exemption for particular tax was sub- sequent.ly eviscerated upon effectivi t.y of the. PD 69 repealing am.endme.nt.. in Section 190 of the Tax Code and is therefore largely nostalgic illusion, so t .o speak. The language of the amendment is not simply st.rung in syntactical correctness but by apt and certain words is intended to effectuate a purpose to be served. Thus provided:

DECISION CTA CASE NO. 2674 - 8- "Sec. 190. - Compensat:.ing, tax. x x x x "The provisions of exist.ing; laws to the contr:ary notwithstanding,, exemp- tion from the tax shall be limi te:d to the following.: 1. Those enumer.ated in this section; 2. Those granted under: Republic Act. No. 5J.86., as amencled, Republic Act:~ No. 6135, as amended, Republic Act. No. 5490; 3. Those grant:�ed in pur.suanc.e of or in compliance with international t .reat.ie.s or. commi t:men t::s, such as 1\:he ADB-RP Host. Ag,r.eement. (1966) , the i94.7 Convent.ion on � Privileges and Immuni t .ies of the United Nat.ions. and it.s Specialized Ag,encies; the Un i tecl S ta t.e s Ag,ency for. Inter:nat.ional Develop- ment.-RP Ag_ree'lTient.; the 1947 Mili tar.y Bases Ag;r:eement.; and other similar treaties or commi t:me.n t.s; and 4. Those that. may be granted by the President. upon recom- me:ndat.ion of the: NEDA in the in t.erest. of economic develop- ment.� " The pell uc id.i t:y o:f the: in t .endmen t . neecl not lapse into f .urther. ex.egesis. We must consider what�. the ame.ndment:. has e.xpr.essly r.eser.ved. Had it. been in tended t:o exte.nd the exemption, the. inclusion of public ut.ilit:.y franc-hises among; the: e.xcept:.ions should have suffice:d fo:r: t:he purpos-e. Far. from a quirky insight:.s of: the~ law maker:, the amendment. has on the contra.:r:y specially and

DECISION CT'A CASE NO. 2674 -9 - specifically enumerated the subj e:c:tts to be� ex.empit.ed fr.om the part.icular imposi t:.ion of com- pensat.ing tax.. If we take the: provision to mean what.. it. says, it:. g,ives such tax privilege to those expressly ment.ioned andl to no othe r. follow- ing the well-known rule of. law, Expr-essio unius est exclusio al t.erius . It will be of immense naivet.te if. we d.o not. presume that:. when the law- making body enacted the: amendment. it had full knowle.dge of prior exist.ing, laws and le.gislat.ions on the subject of the stat.ut:�e. and acted in accord- ance or. with respe.ct. thereto. (Tamiani Trial Tours v. Lee:, 194, So. J05; Manila Lodge No. 701 v. Court of Appeals, L-41061, Sept:ember 30, 1976;, 73 SCRA 163) �. And, when the. amendment. provides that., " The provisions of. existing, laws to the: contrary not.wit:�hstanding, exempt.ion from this. tax. shall be limited to the following,: ", the: lawmak ingi power cannot:. be said to have intended the establish- ment. of: conflicting and host:..ile systtems upon the same subject., or to leave in force provisions of a prior law by which the lat.e.r will of the leg.is- lat.ure may be. thwar t.ed. and overthrown. Such result would r.e.nder legislation a useless and i d le cere:- mony, ancdt subject::. the law to the. repr.oach of uncer tainty and untelligibility. (See Separate

DECISION - CTA CASE NO. 2674 - 10 - Opinion of Justice Jones in Lichuaco v. Apostol, Construct.ion; Bag_atsing v. Ramirez., 7 4 SCRA Jl3) ._ The omission of franchise.s among the exceptions ment.ionea under Section 190 of the Tax Code 1 as amended, is not. a legal lege.rde.main but. a pur.pose- ful and a.eliberate choice sufficient. to arrest the refund. of compensating tax a::>ught. in the case at bar. We d.ee.m it unnecessary to discuss the asser.t .ed "impairment" of the. contractual agreement. in peti- tioner �s_ grant. The obvious and decisive answer:, of. course, is the pervading, restraint. of the Const.i tution that., "Neither shall any such franchise or rig.ht be granted except. under the condit.ion that it. shall be subject to amen<;lment, alterat.ion or repeal." {Art.. XIV 1 Sec. 5) �. WHEREFORE, the petition for review is hereby dismissed with cost.s against the pet.i tioner. SO ORDERED. Quezon City, Metro Manila, July 30, 1982. Associat.e WE CONCUR: