cta_decision CTA Case No. AC-256AC-256 2023-05-10

SAN ROQUE POWER CORPORATION v. MUNICIPALITY OF SAN MANUEL, PANGASINAN and ELIZABETH T. CORPUZ in her capacity as MUNICIPAL TREASURER OF SAN MANUEL, PANGASINAN

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL SECOND DIVISION SAN ROQUE POWER CTA AC NO. 256 (Civil Case No. U-11272) CORPORATION, Members: Petitioner, -versus- BACORRO-VILLENA, Acting Chairperson, and MUNICIPALITY OF SAN CUI-DAVID, JJ. MANUEL, PANGASINAN, and ELIZABETH T. CORPUZ in her capacity as MUNICIPAL Promulgated: TREASURER OF SAN MANUEL, PANGASINAN, Respondents. -){ ){- - - - - - - - - - - - - - - - - - - - - - - - - DECISION ... CUI-DAVID, J.: Before this Court is a Petition for Review 1 filed on San Roque Power Corporation November 25, 2021 by petitioner of San Manuel, Pangasinan, against respo ndent Municipality aMts(haenuesedsnkaRisriceelitevspodpiasaoleDnndTendcrRueeisnualisltoaeunnEsr)deloiarzsf,naetudbthneeatdthshCeiedroTReu.SetrehsCtcoeootlirufDoptAneiuosczpni,p3sei(dioaana)nlt2sehdad(eaRnrtORdecCdc4atT(oMpAaba)a)e,c.3yritPR22yeu21tal,,iets2i2o800tn2h2eo11erf far(' 21odSpftCaieDfSeexoxccttEemiohpirdtsCeeaicimotyo.kbaCnein3ryesory.ftsomo-lmiWoarorVmwfunhrrosuAeioestlfrlv.gosimtinoirrieIolig,afwectnpyhIuoeapneflarft.itplupetCoe5herprfd-noeteel4i,amnatw3Cliotlom.;eiorrntrehmpiansvifesnamoRerilnrioeitouRshgnrdseeiieeriovrvtotoniyoenenoanwfedlficurlaTIleewyoanrsiotfpiimeatneCahrlsnftiduCtniafeitsloosirttpoorhuRrumnererettec.esvt-fiew,dneui(tnponaathuth)-dseyeesoAoeeSfetasfoepxasrcimaenapcrrretcoeetcetytrnpiarisnotyroaesyanddoolovotfprfrehferscireetuvsFlsseacedicloihnniymrrasuiidpbnesgaeucefiftcedftnoaeie,asxrdcblitetyrohjesaeunedsflreausSiorbewsnrersyddocsrifnmraucoreeotlfedtoiimanoneiurngntcsyspt,ile.msyaooriynIoarfonmayneTrl,xcerairarpanlpelusditepverlegoeiaenaartnoaiglluofnclyteondoionlrtcloIaateotnhcxfhcldetelettiuehisoCoc,seinnnttoorepauyordocer,fb,ftrtiitytttoohbhhhnydeaeee t3cotIaanoSfxkdlEeleIuesnCns.ctt.ettreor4ydn.,,tahtWlthehehReCeSerdoveeeucectrnroietustabieaopyrnpyofenooialrfildn;Arigusmgplboiruniedtcgfeeuodolorteufafarstiehtsp,eeapsaCsenpmadeotlemit.nth-imteo(saniRs)osefAriogonricnolraeanepriavmploieeTfawfrlCoifaruarlssortCmeopfomruaounsvrdd,tiedtichnoeiedfstihiSoinennetceeRorxrernuetarlrauelcrliyi4srnee2ogvofeoofnFfrtuithtnheheaeeitnraiRconxeurae,ilcsgetthisienoeroanrlSofojneCufcerotroihuesuetrdsatiC.lrcyyoTtimohooenrfm,TCiilssrlohseaauigdolraeltnlble&iyner Division shall act on the appeal.

DECISION CTA AC No. 256 n vs. Municipality of San Manuel, Pangasinan, and Elizabeth San Roque Power Corporatio Municipal Treasurer of San Manuel, Pangasinan T. Corpuz in her capacity as Page 2 of 23 ----------------- --------------------------------------x x----------------------------------- (assailed Resolution) of the Regional Trial Court (RTC) of Urdaneta City, Pangasinan, Branch 45 in Civil Case No. U- 11272 entitled "San Roque Power Corporation v. Municipality of San Manuel, Pangasinan and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan," denying petitioner's claim for refund or tax credit of the excess local business tax (LBT) in the amount of Two Million Fifty-One Thousand Four Hundred Sixty Pesos and 65/100 (P2,051 ,460.65). THE PARTIES Petitioner San Roque Power Corporation is a power generation company under Republic Act No. 9136, or the Electric Power Industry Reform Act of 2001, with principal office located in San Manuel, Pangasinan. It is a contractor under October 11, 1997 Power Purchase Agreement with the National Power Corporation, relative to its operation and maintenance of a power-generating facility in Pangasinan.4 Respondent Municipality of San Manuel (San Manuel) is a local government unit (LGU) created and existing under the laws of the Republic of the Philippines, with the seat of government at the Municipal Hall, San Manuel, Pangasinan. It is headed and represented by its Municipal Mayor, Kenneth Marco S. Perez. Respondent Ms. Elizabeth T. Corpuz is the Municipal Treasurer of the Municipality of San Manuel, with office address at the Municipal Hall, San Manuel, Pangasinan.s THE FACTS After the effectivity of the Local Government Code (LGC) of 1991, 6 respondent San Manuel passed four (4) revenue ordinances, namely: 1. Municipal Ordinance No. 94-01 {1994 Revenue Code); 2. Municipal Ordinance No. 2004-08 {2004 Revenue Code);7 4 Par. 8, Parties, Petition for Review, Docket- Vol. I, p. 9. 5 Par. 2, Parties, Memorandum (For the Respondents), Docket- Vol. li, p. 734. 6 Republic Act No. 7160, October 10, 1991. 7 Annex "F" of the Petition for Review, Docket- Vol. I, pp. 87-188.

DECISION CTS.aTnCA oRAroCpquNuzeoi.Pn2oh5we6errcCaoprapcoitryataios nMvus.niMciupnailcTipraelaitsyuorefrSoafnSMananMuealn, uPeal,ngPaasnignaasni,naannd Elizabeth xP-a-g-e--3---o-f--2-3------------------------------------------------------------------------------x 3. Municipal Ordinance No. 2012-01 (2012 Revenue Code);8 and 4. Municipal Ordinance No. 2017-12 (2018 Revenue Code).9 These ordinances are based on Sections 14310 and 191 11 e right of a municipality to impose a business of the LGC on th businesses operating within its territorial tax on certain jurisdiction.12 LtdahGneeadCl.eL1Tr3"GshcACoien,mn1tawo9rnan9hycg4itcaoRshrrutesicv"icmhelenpwpuoorhefosoceCvsodieomsdiLomegBnireTsmorcsapoesrlneeomsfS"awewelnhechtsateoitodleeonvtsrseharel1erkp4erisrc3no,edv(idbpia)sitnssiaotdrnnifndbsoaurot(tfeuo)ttrrhheosee",f 8 Annex "G" of the Petition for Review, Docket- Vol. I, pp. 189-314. 9(d1a0iA)sStniEOnllCneex.dm1"s4aHp3ni"r.uitoTfsaaf,cxtathunaerdnePdrwseB,tiintuaiesosssnieonmfreobmrslsRear-nesuTv,fihaerecweptm,uarDcueknroesiccrosikp,feapatli-nrtoyyVcaomerls.tasiyocI,rliespm,po.pbfo3rces1owe5met-a3rmsx3,ee3sr.dcoiesntoitlflhewershf,oalrtleeovcwteiirfnikegirnsb,dusaoinnrdensacsto:umrep, oinunadcecrosrdoafnlciequwoirtsh, the following schedule: ... or dealers in any article of commerce of whatever kind or nature in accordance with the (b) On wholesalers, distributors, following schedule: Amount ofTax With gross sales or receipts for the Per Annum preceding calendar year in the amount of at a rate not exceeding fifty percent 2,000,000.00 or more (50%) of one percent (1%). (c) On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or retailers of essential commodities enumerated hereunder at a rate not exceeding one-half(~) of the rates prescribed under subsection (a), (b) and (d) of this Section: ... (Poa(pdennWrr))doegiOOvtcTrhieondnhdgseircsirdrenoot,stygnsaahstiltcrloeheaarsworeclseouceto.nevrs.radie.rps.nreat,cadrsenTyfpidoheperaatsostortthhobsieneaf(rrPttahih3nnee0gdp,aae0rmyp0esec0one.su0ddhn0ieatn)nlgoltohcfcr aoalvnleeestnrsat,dhciaentroeytrhsxe,ecalircnuoasasifcveFceoiofpftryodmawtunhencorieuctsiowpanialteldhivtypitehestesa.oxfsoesl(lP,o5aws0i,np0gr0APo0svme.ci0rhdo0Aeeu)ddnnounturluoenlm:edfsTesar, xSinecthtieonca1se52o fhceirteioesf,, at a rate not exceeding fifty percent 2,000,000.00 or more (50%) of one percent (I%) r((fefgr)oc)meOOipnnftibsnpaaoennfdkctdshialeaelnrplsdereaeocsntiehgndeagirg,nefdgidincvaaiinndlecetninhaddleasir,snyarseleteinatturoatdlfisoearnonisnvy,epadmtrofaerprorecamrhtteayinnnadtoneitsdreeepsxtorc,orecfeiaodtrmitfinrmcoglmeifsisofeitfoyxnccphsoeamarnncmgedenedrtoic(sre5c,s0oa%auletn)toasofffrpraootrneomepneploerettnrydce,iexinnncgtes(uea1drca%tiinnv)cgieotiFnepisrft,ethymienipcguoermomsos.ess ((IpPhnr)5toe0pOr.en0nra0lta)onRpyteeavrbxeup:nsePuidnredoelCsvesiord,deanedno,,ntauTosahtlahlaymet.reownnidsaeendsy,ptbehcueisfriinaetedessionsfutthabexjepcsrhteatcolel dtnhionetgeepxxaccriesaeegd,ravtpwahlous,ep-weardhcdiecenhdt the sanggunian concerned may deem or percentage tax under the National (2%) of gross sales or receipts of the preceding calendar year. may prescribe a schedule of graduated tax rates but in no case to exceed the rates prescribed The sanggunian concerned herein. to Adjust Rates of Tax ordinances. -Lo cal units shall have the 11 SEC. 191. Authority of Local Government Units not oftener than once every five (5) years, but in no case shall such authority to adjust the tax rates as prescribed herein adjustment exceed ten percent (10%) of the rates fixed under this Code. 12 See Decision dated May 20,2021, Docket- Vol. I, p. 45. 13 Par. 11, Petition for Review, Docket- Vol. I, p. 10, vis-ci-vis par. 26, Comment(to the Petition for Review), Docket- Vol. II, p. 539 & pars. 25 and 32, Memorandum (For the Respondents), Docket- Vol. II, pp. 741 and 744, respectively.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan Page 4 of23 x------------------------------------------------------------------------------------------x preceding calendar year were at least P2,000,000.00, at a rate not exceeding 50% of 1% of their gross sales or receipts. The 2004 and 2012 Revenue Codes adjusted the rate of said LBT imposed on "wholesalers, distributors, dealers in any article of commerce of whatever kind and nature" and "contractors" at the rate of 55% of 1% and 60% of 1%, of their gross sales or receipts, respectively. The 2018 Revenue Code imposed an LBT of 65% of 1% of petitioner's gross sales or receipts for the preceding calendar year as provided under Sections 2A.02 (b) and (e). The LBT rates prescribed in the LGC and the foregoing ordinances are summarized below: LGC 2004 Revenue Code 2012 2018 Revenue Code Revenue Code Maximum Tax Rate Maximum Tax Rate Maximum Tax Rate Maximum Tax Rate imposable on wholesalers, imposable on imposable on imposable on distributors, or dealers in any article of commerce of wholesalers, distributors, wholesalers, distributors, wholesalers, whatever kind or nature under Section 2A.02 (b) or dealers in any article of or dealers in any article of distributors, or dealers commerce of whatever commerce of whatever in any article of kind or nature under kind or nature under commerce of whatever Section 143 (b) Section 2A.02 (b) kind or nature under Section 2A. 02 b) With gross Amount With gross Amount With gross Amount With gross Amount of or of Tax sales or Tax sales or of Tax sales or of Tax sales receipts for Per Annum receipts for Per receipts for Per receipts for Per the Annum the Annum the Annum the preceding preceding preceding preceding calendar year calendar year calendar year calendar year in the in the in the in the amount of: At a rate amount of: At a rate amount of: At a amount of: 1'13,000.00 2,000,000.00 not 2,000,000.00 not 2,000,000.00 rate of 2,000,000.00 plus sixty- or more exceeding or more exceeding or more sixty or more five (65%) fifty fifty-five percent of one percent percent (60%) of percent (50%) of (55%) of one (1%) in one one percent excess of percent percent (1%) 1'2,000.00 (1%) (1%) Maximum Tax Rate Maximum Tax Rate Maximum Tax Rate Maximum Tax Rate on imposable on contractors imposable on contractors imposable on contractors imposable and other independent and other independent contractors and other and other independent contractors under Section contractors under contractors under independent Section 143 (e): Section 2A.02 (e): contractors under 2A.02 (e): Section 2A.02 e): With gross Amount With gross Amount With gross Amount With gross Amount of or of Tax sales or Tax receipts for of Tax Per sales or of Tax sales the preceding Annum receipts for Per receipts for Per receipts for Per Annum Calendar the Annum the Annum the year in the preceding preceding preceding amount of: calendar year calendar year calendar year

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan Page 5 of23 X------------------------------------------------------------------------------------------X LGC 2004 Revenue Code 2012 2018 Revenue Code Revenue Code in the in the in the amount of: amount of: amount of: 2,000,000.00 At a rate 2,000,000.00 Fifty-five 2,000,000.00 At a 2,000,000.00 1'14,950.00 or more not percent exceeding or more (55%) of or more rate of or more plus sixty- fifty one percent percent sixty five (65%) (50%) of (1%) one percent of one percent (1%) (60%) of percent one (1%) in percent excess of (1%) 1'2,000.00 On December 4, 2018, petitioner assailed the validity of Sections 2A.02 (b) and (e) of the 2018 Revenue Code with the Secretary of the Department of Justice (DOJ) in accordance with Section 18714 of the LGC.1s In January 2019, San Manuel informed petitioner that it would not issue a business permit unless petitioner paid the LBT at 65% of 1% of the latter's gross sales or receipts for the preceding calendar year under the 2018 Revenue Code. 16 On January 18, 2019, petitioner paid the LBT of P13,334,494.22 17 for the calendar year 2019 to expedite its application for a business/mayor's permit without prejudice to its claim for refund.1s On the same date, petitioner filed with respondent Municipal Treasurer a written claim for refund under Section 196 of LGC. Petitioner requested that it be refunded the excess LBT in the amount of P2,051,460.65, representing the difference between the rate of 65% of 1% of gross sales under the 2018yvenue Code and the rate of 55% of 1% of gross sales. 19 ~ 14 SEC. 187. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures; Mandatory Public Hearings.- The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided, That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. 15 Par. 14, Petition for Review, Docket- Vol. I, p. 11. 16 Decision dated May 20, 2021, Docket- Vol. I, p. 45. 17 Annex "J", Docket- Vol. I, p. 368, computed as follows: Gross Sales: 1'2,051,460,648.77 Tax Rate: 65% of 1% Tax Due: 1'13,334,494.22 17 18 Par. 17, Petition for Review, Docket- Vol. I, p. 12. 19 Par. 18, Petition for Review, Docket- Vol. I, p. 12, vis�a�vis Decision dated May 20, 2021, Docket- Vol. I, p. 46; Annex "K", Docket- Vol. I, pp. 369-378.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan Page 6 of23 X------------------------------------------------------------------------------------------X In the meantime, when the DOJ Secretary did not act on petitioner's appeal within the period prescribed under the LGC, 2o on March 4, 2019, petitioner filed an appeal via a Petition (with Application for the Issuance of a Writ of Preliminary Injunction) with the RTC Urdaneta City, Pangasinan under Section 187 of the LGC. 21 The case was docketed as Civil Case No. U-11239 and was raffled to Branch 46 (First RTC Case).22 On April 17, 2019, petitioner filed another Petition23 with the RTC Urdaneta City, Pangasinan, praying that respondents be ordered to grant petitioner's claim for refund or tax credit for the excess LBT that the latter paid for the calendar year 20 19 under Section 196 of the LGC. The case was docketed as Civil Case No. U-11272 and was raffled to the court a quo (Second RTC Case).24 PROCEEDINGS BEFORE THE COURT A QUO On June 14, 2019, respondents filed their Answer25 asserting that their basis in imposing the LBT are Sections 143 (b) and (e), and 191 of the LGC. Respondents state that the 2018 Revenue Code is the fourth revision of the tax rates since the effectivity of the LGC in 1991. Respondents add that all revenue ordinances are in accordance with the LGC as they were adjusted not oftener than once every five years, and such adjustment did not exceed 10%. Hence, the adjusted tax rate of 65% of 1% of gross sales or receipts is valid. On January 14, 2020, petitioner filed a Motion for Summary Judgment26 stating that there is no genuine issue as to any material fact; hence, it prayed that the court a quo render summary judgment in petitioner's favor and against respondents and order respondents to (a) grant petitioner's January 18, 2019 claim, and (b) issue the corresponding refund Jvwl' 20 Par. 16, Petition for Review, Docket- Vol. I, p. 12, vis-a-vis Decision dated May 20, 2021, Docket- Vol. I, p. 46. 21 Docket- Vol. I, pp. 334-361; Annex "R-7", Docket- Vol. II, pp. 657-684. 22 Par. 16, Petition for Review, Docket- Vol. I, p. 12, vis-3.-vis Decision dated May 20, 2021, Docket- Vol. I, p. 46; Docket- Vol. I, pp. 334-361; Annex "R-7", Docket- Vol. II, pp. 657-684. 23 Annex "L", Petition, Docket- Vol. I, pp. 379-419, with annexes. 24 Id., par. 6, p. 382: petitioner alleged that under Section 195 of the LGC, the Municipal Treasurer had sixty (60) days, or until March 19, 2019, within which to render a decision on the protest and petitioner had thirty (30) days from receipt of the decision or the lapse of the 60-day period, or until April 18,2019, within which to appeal or file a petition in a competent court of jurisdiction; but respondent Municipal Treasurer made no decision by March 19, 2019; Petition for Review, par. 19, Docket- Vol. I, p. 13; Annex "L", par. 18, Docket- Vol. I, p. 387; Annex "M", Answer, par. 7, Docket - Voi.I, p. 421. 25 Annex "M", Answer, Docket- Vol. I, pp. 420-431. 26 Annex "E", Docket- Vol. I, pp. 62-86.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan Page 9 of23 X------------------------------------------------------------------------------------------X Petitioner's arguments:3B Petitioner submits that the court a quo's interpretation of Section 191 of the LGC contradicts (a) the very text of said Section 191, (b) Article 28139 of the Implementing Rules and Regulations (IRR) of the LGC, (c) prevailing jurisprudence, (d) interpretation of the Bureau of Local Government Finance (BLGF), (e) the Constitution, and (f) legislative intent. For petitioner, Section 191 of the LGC and Article 281 of the IRR limit the authority of the LGUs to increase LBT at a maximum of 10% of the tax rate imposed under Section 143 of the LGC. Petitioner argues that there is no indication in Section 191 of the LGC that "such adjustment" means "every adjustment." If so, Congress would have categorically stated it. Petitioner also claims that the case of De Lima v. City of Manila (De Lima case)40 supports its theory that the 10% cap under Section 191 of the LGC is a cap on aggregate adjustments based on the rates provided under the LGC and not the rates provided in the prevailing tax ordinance. Petitioner adds that the BLGF confirms petitioner's view that aggregate adjustments by the LGU cannot increase more than 10% of the rates fixed under the LGC, viz.: Based on the above-quoted provisions of Section 191 of the LGC, LGUs shall have the authority to adjust tax rates as "prescribed [t]herein," not oftener than once every five (5) years, but in no case shall such adjustment exceed ten percent (10%) of the rates fixed under the said Code. It must be stressed that the phrase "prescribed herein" refers to tax rates under Title One, Book II of the LGC and not existing rates of taxes in the local tax code of the LGU concerned.4 1 Hence, petitioner avers that respondents unlawfully required petitioner to pay LBT at a rate of 65% of 1%; respondents are bound to refund the excess LBT that petitioner paid in the amount ofP2,051,460.65. wl 38 Pars. 28 to 95, Petition for Review, Docket- Vol. I, pp. 18-38. 39 Art. 281. Authority to Adjust Rates ofTaxes.- LGUs shall be authorized to adjust the tax rates prescribed in this Rule not oftener than once every five (5) years, but in no case shall such adjustments exceed ten percent (10%) of the rates fixed in this Rules. 40 G.R. No. 222886. October 17.2018. 41 BLGF Opinion dated February 18. 2016.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x Petitioner further argues that the court a quo misapplied the doctrine of litis pendentia because the Second RTC Case it filed with the court a quo seeks to preserve its right to claim a refund or tax credit in accordance with Sections 195 and 196 of the LGC, while the First RTC Case seeks the nullity of the 20 18 Revenue Code under Section 187 of the LGC. There is no identity of parties, rights asserted, and reliefs prayed for between the two petitions. Petitioner also alleges that a ruling in the First RTC Case will not amount to res judicata in the Second RTC Case. Respondents' arguments:42 Respondents argue that the 2018 Revenue Code is well within the bounds of Sections 143 and 191 of the LGC and jurisprudence. Respondents state that the Supreme Court ruled in the case of De Lima case that the basis for adjustment would be the prevailing tax rate, to wit: On the other hand, were the LGU decides to make such adjustment, the basis for the increase would be the prevailing tax rate.... [Emphasis supplied] Moreover, respondents cite the case of Mindanao Shopping Corporation v. Duterte (Mindanao Shopping case}, 43 where the Supreme Court elucidated the maximum amounts of adjustment that can be imposed by an LGU, which are based on the prevailing tax rates. As a result, there is no legal basis for petitioner to be entitled to a refund or tax credit in the amount alleged to be more than the LBT that it paid for the calendar year 20 19. Respondents also claim that petitioner's reliance on a BLGF Opinion is misplaced because the Supreme Court did "not find that BLGF's interpretation of local tax laws to be authoritative and persuasive" 44 since "the BLGF was created merely to provide consultative services and technical assistance to local governments and the general public on local taxation, real property assessment, and other related matters, among others."45 WI 42 Pars. 18 to 103, Comment (to the Petition for Review), Docket- Vol. II, pp. 537-561. 43 G.R. No. 211093, June 6, 2017. 44 The City ofIloilo v. Smart Communications, Inc., G.R. No. 167260, February 27, 2009. 45 Philippine Long Distance Telephone Company, Inc. v. City ofDavao, G.R. No. 143867, August 22, 2001.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x Finally, respondents argue that the elements of litis pendentia and forum shopping are present in this case because there is identity of parties or at least such parties that represent the same interests in both actions. Respondents emphasize that a ruling on the claim for refund will not be possible without dwelling on the constitutionality and legality of the 2018 Revenue Code. Regardless of which party is successful, any judgment rendered in either case will amount to res judicata in the present petition. THE COURT'S RULING The Petition is not impressed with merit. The Court has jurisdiction over the instant petition. At the outset, the Court needs to determine whether it has jurisdiction over the instant Petition. Petitioner received the assailed Resolution of the RTC on October 26, 2021.46 Under Section 3(a), Rule 847 of the RRCTA, petitioner had thirty (30) days from receipt of the assailed Resolution on October 26, 2021, or until November 25, 2021, to file a Petition for Review before the Court of Tax Appeals (CTA). Petitioner timely filed the instant Petition for Review on November 25, 2021. Having settled that the Petition was timely filed, We likewise rule that this Court has the requisite jurisdiction to take cognizance of this Petition under Section 3(a)(3), Rule 448 of the RRCTA. We now proceed to the merits of the case. ri 46 Par. 4, Petition for Review, Docket~ Vol. I, p. 8. 47 SEC. 3. Who May Appeal; Period to File Petition. -(a) A party adversely affected by a decision, ruling or the inaction of the Commissioner oflntemal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling ofthe Commissioner of Customs, the Secretary of finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, ... (Emphasis supplied). 48 SEC. 3. Cases Within the Jurisdiction ofthe Court in Divisions.- The Court in Divisions shall exercise: (a) Exclusive original or appellate jurisdiction to review by appeal the following: (3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or resolved by them in the exercise of their original jurisdiction.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x In the Mindanao Shopping case, 5o the Supreme Court ruled that the application of Section 191 requires the concurrence of two elements, viz: 1. There is a tax ordinance that already imposes a tax in accordance with the provisions of the LGC; and 2. There is a second tax ordinance that made adjustment on the tax rate fixed by the first tax ordinance. The Court finds the presence of the said elements in the present case. As to the first element, respondent San Manuel enacted the first tax ordinance, i.e., the 1994 Revenue Code, to implement the provisions of the LGC. Anent the second element, respondent San Manuel enacted the second tax ordinance, i.e., the 2004 Revenue Code, adjusting the LBT rate in the first tax ordinance ten (10) years later. Then came respondent San Manuel's third tax ordinance, i.e., the 2012 Revenue Code, and the assailed fourth tax ordinance, i.e., the 2018 Revenue Code, adjusting the LBT rates fixed in the second and third tax ordinances, respectively. Petitioner did not question respondent San Manuel's authority to adjust the LBT rate. However, it argues that a plain and straightforward reading of Section 191 shows that the cumulative or aggregate adjustment to the rates must not exceed 10% of the rates fixed in the LGC.51 Petitioner insists that respondent San Manuel exceeded the maximum adjustment rate under Section 191, which purports to be 55% of 1% of gross sales or receipts,52 and went beyond its delegated power to tax when it adjusted the LBT to 65% of 1% of gross sales or receipts under Section 2A.02(b) and (e) of the assailed 2018 Revenue Code. 53 Thus, it filed with respondents a written claim for refund of excess LBT payment for the calendar year 2019 in the amount of PhP2,051,460.65, representing the difference between the rate of 65% of 1% and the rate of 55% of 1% of its gross sales which it alleged to be the 50 G.R. No. 211093, June 6, 2017. 51 Par. 32, Memorandum for Petitioner, Docket -Vol. II, pp. 704-705; Par. 32, Petition for Review, Docket -Vol. I, p. 19. 52 /d. 53 Pars.33-34, Memorandum for Petitioner, Docket -Vol. II, p.705; Par. 32, Petition for Review, Docket -Vol. I, p. 19.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x proper and lawful LBT rate that respondents may impose on local taxpayers.s4 Respondents counter that the pronouncements of the Supreme Court in the De Lima and Mindanao Shopping cases would negate the allegation of petitioner that the adjustment referred to in Section 191 is a cumulative or aggregate adjustment of the tax rates and that the adjustment be reckoned on the rates fixed under the LGc.ss Respondents further counter that:56 52. Moreover, if we follow the deductions of the Petitioner, on cumulative or aggregate adjustment, there will only be a total increase of 10% perpetually or forever. The words "not oftener than once every five (5) years" will be rendered absurd or nugatory since if the entire 10% increase is exhausted in one adjustment, there will no longer be adjustments for the next five, ten, or twenty years. With all due respect, the interpretation favored by the Petitioner runs counter to the very principle of autonomy, which is the essence of the passage of the Local Government Code. 53. In addition, emphasis must be given to the provision of the LGC, which is worded in this wise, "but in no case shall such adjustment exceed ten percent (10%) xxx". The word "adjustment" is use in singular tense. Meaning, the 10% cap applies only in one single adjustment or applies to each adjustment not oftener than once every five years, and not the accumulated or totality of adjustments/increases. 54. Further, if we stick to these propositions of the petitioner, then the rates of taxes will not coincide with the changes in the circumstances or the economy brought about by the passage of time. The rates of taxes will surely be left behind, stagnant so to speak and will not be of help to the government or to the development of the State or the local government unit. This, logically, is not the intention of the lawmakers, taking into account that taxes are the lifeblood of the government. The title itself of Section 191 of the LGC is a confirmation of the position of the LGU that the rates in the tax ordinance must be adjusted not oftener than once every five years. Otherwise, the statement would be that, the rates in the tax ordinance must be adjusted only once, not earlier than five (5) years after the effectivity of this Code. 54 Par. II, Memorandum for Petitioner, Docket- Vol. Il, p. 697; Petition for Review, Docket- Vol. I, p. 12. 55 Pars. 50-58, Memorandum (for the Respondents), Docket- Vol. ll, pp. 748-751. 56 /d.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x 58. From the foregoing, the 2018 Revenue Ordinance did not violate any of the limitations imposed by law or by the LGC itself as to its enactment and enforceability. [Emphasis supplied] We find merit in respondents' arguments. In the De Lima case, 57 the Supreme Court explicitly declared that the option to increase the tax rates under the LGC arises every five (5) years. When the LGU decides to take that option, the basis for the adjustment or increase would be the prevailing tax rate, viz.: ...The option to increase the tax rates under the LGC arises every five (5) years reckoned from the enactment of the ordinance sought to be adjusted. The decision of whether or not to exercise such option falls upon the LGU, through their respective sanggunian taking into consideration the status of each industry balanced with the needs of their respective territory. In the event that the LGU fails to make such adjustment within the five (5)-year period, the option to increase the prevailing ordinance remains open until such right is exercised, at which point, the five (5)-year period of limitation starts to run again. On the other hand, were the LGU decides to make such adjustment, the basis for the increase would be the prevailing tax rate . ... [Emphasis supplied] In the Mindanao Shopping case cited in the De Lima case, the Supreme Court clarified that the maximum 10% adjustment under Section 191 of the LGC is based on the adjusted tax rate: ... Thus, dictated by justice and fairness, in its initial attempt to implement the LGC, Davao City should, at the very least, start with 1% (the minimum tax rate) as provided under Section 143 (d) of the LGC. Considering that 11 years had already elapsed from its implementing in 2006, Davao City could adjust its tax rate twice now which will make its adJusted tax rate for retailers pegged at 1.2%, in accordance with Section 191 of the LGC. To clarify, from 2006-2011 (first 5 years), the initial tax rate should start with 1%;ss from 2011-2016 (next 5 years)- 1.1%; thus, for the years ~ 57 G.R. No. 222886, October 17,2018. 58 Implementing the 1% rate imposed in the LGC.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan X------------------------------------------------------------------------------------------X 2017-2021, the tax adjustment is 1.21%.59 However, for this purpose, Davao City should pass an ordinance to give effect to the above-discussed tax adjustments. [Emphasis supplied] The ruling that the tax adjustments must be based on the adjusted or prevailing tax rate was also shared and highlighted by Justice Marvic Leonen in his Separate Concurring Opinion in Mindanao Shopping case, viz.: However, I agree that Davao City, in its initial attempt to implement the tax rates under the Local Government Code of 1991 (Local Government Code), can impose the minimum tax rate of one percent (1%) on retailers reckoned from 2006 to 2011. I also agree that Davao City may adjust the tax rate on a staggered basis due to the lapse of a considerable length of time from the enactment of its new tax ordinance. Hence, the tax rate on retailers should be 1.1% from taxable years 2011 to 2016 and 1.21 % for taxable years 2017 to 2021, in accordance with the limitation under Section 191 of the Local Government Code. ACCORDINGLY, I concur in the result. Davao City may impose a tax rate of one percent (1%) on retailers from taxable years 2006 to 2011. Davao City may then adjust the tax rate on retailers on a staggered basis from 1 % to 1.1 %for taxable years 2011 to 2016 and from 1.1 % to 1.21 % for taxable years 20 17 to 2021. [Emphasis supplied] In the above case, the 10% adjustment was initially applied to the 1% minimum tax rate provided under Section 143 (d) of the LGC to get the adjusted tax rate of 1.1% for taxable years 2011 to 2016. After that, the 10% cap was applied to the adjusted tax rate of 1.1 %, which is the prevailing rate, to obtain the adjusted tax rate of 1.21 %for taxable years 2017 to 2021. Thus: 10% of 1% (initial tax rate) = .1% (maximum adjustment rate) . 1% (maximum adjustment rate) + 1% (prevailing LBT rate) = 1.1% adjusted tax rate (2011 to 2016) 10% of 1.1% (prevailing tax rate) = .11% (maximum adjustment rate) .11% (maximum adjustment rate) + 1.1% (prevailing LBT rate) = 1.21% adjusted tax rate (20 17 to 2021) 59 10% of 1.1% (prevailing LBT rate)= .11%(maximum rate of adjustment); .11% (maximum rate of adjustment)+ 1.1% (prevailing LBT rate)~ 1.21%

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x It must be emphasized that the Supreme Court computed the 1.21% adjusted rate based on the prevailing tax rate of 1.1% and not on the 1% minimum rate flxed under Section 143 (d) of the LGC. Given the foregoing jurisprudential pronouncement and the 10% threshold under Section 191, respondent San Manuel could have increased the LBT rate to 66% of 1% of gross sales or receipts. Still, it only imposed 65% of 1%, to wit: Revenue Prevailing 10% Total Actual LBT rate maximum maximum LBT rate CodeI Ordinance allowable rate LBT rate imposed 50% of adjustment LGC of 1991 50% (Sec. 191 of 50% 50% 1994 Revenue Code 50% 50% 50% LGCI 2004 Revenue Code 55% 55% 55% N/A 2012 Revenue Code NfA 60.5% 60% 60% 2018 Revenue Code 5% 66% 65% 5.5% 6% Indeed, respondent San Manuel did not violate Section 191 when it passed Section 2A.02 (b) and (e) of the 2018 Revenue Code, increasing the LBT rate from 60% of 1% to 65% of 1% in excess of PhP2,000,000.00 gross sales or receipts on "wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature" and on "contractors, and other independent contractors," based on the prevailing or adjusted tax rate. Verily, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the LGUs for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. 60 And so, it will be difficult for respondents to enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals61 if they could increase only up to 10% of the tax rates under the LGC during its entire existence. ~ 60 National Power Corporation v. City ofCabanatuan, G.R. No. 149110, April9, 2003. 61 LGC, SEC. 2. Declaration ofPolicy. ~(a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan Page 20 of23 x------------------------------------------------------------------------------------------x Second RTC case. It is well-settled that litis pendentia requires only substantial, and not absolute, identity of parties. 64 There is substantial identity of parties when there is a community of interest between a party in the first case and a party in the second case. 65 The filing of the First and Second RTC cases was made to disempower respondents from collecting the adjusted LBT rates per the 2018 Revenue Code. Second, there exists an identity of rights asserted and reliefs prayed for in the two cases since the reliefs sought are founded on the same facts and contained identical arguments. As aptly pointed out in the City of Caloocan v. Court of Appeals et al.,66 there is identity of causes of action if the same evidence will sustain the second action. The principle applies even if the relief sought in the two cases differs. 67 If the same facts or evidence would sustain both, the two (2) actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action; otherwise, it is not. 68 Here, the relief prayed for by petitioner in the First RTC Case is to annul Section 2A.02(b) and (e) of the 2018 Revenue Code,69 while in the Second RTC Case, which was elevated to this Court by way of Petition for Review, petitioner's prayer is that it be refunded or be issued a tax credit. 70 Despite the difference in the relief sought, a circumspect reading of the petitions in the First and Second RTC cases reveals that they contained the same allegations and arguments reproduced verbatim. 7 ' More, in the body of the petition filed in the Second RTC Case, which petitioner insists is a claim for refund or tax credit, petitioner also seeks to "annul Sections 2A.02 (b) and (e) of the 20 18 Revenue Code" allegedly because the rates imposed by respondents are void, excessive, and unlawful. 72 We quote with approval the finding of the court a quo on this point: 64 Guaranteed Hotels. Inc. v. Baltao, G. R. No. 164338, January 17,2005. 65 !d. 66 G.R. No. 145004, May 3, 2006. 67 /d, citing Korea Exchange Bonk v. Gonzales, G.R. Nos. 142286-87, April 15,2005. 68 Dy v. Yu, G.R. 202632, July 8, 2015, citing Benedicta v. Lacson. G.R. No. 141508, May 5, 2010. 69 Docket- Vol. I, p. 359; Annex "R-7", Petition (with Application for the Issuance of a Writ of Preliminary Injunction), Docket- Vol. II, p. 682. 70 Annex "L", Petition, Docket- Vol. I, p. 399. 71 Pars. 22-35, 37-44, Docket- Vol. I, pp. 346-356 & Docket- Vol. II, pp. 669-679, vis-a-vis pars. 19-40, Docket- Vol. I, pp. 388-397. 72 Par. 40, Annex "'L", Petition, Docket- Vol. I, p. 397.

DECISION CTA AC No. 256 San Roque Power Corporation vs. Municipality of San Manuel, Pangasinan, and Elizabeth T. Corpuz in her capacity as Municipal Treasurer of San Manuel, Pangasinan x------------------------------------------------------------------------------------------x Quite interestingly, [petitioner] is careful not to include as a relief in the present case the declaration of nullity of specific provisions of [the 2018 Revenue Code], albeit in the body of its petition, it clearly assails the validity of the said ordinance; thus, its prayer for a tax refund or tax credit. Verily, the court cannot grant or deny [petitioner]'s prayer for a tax refund or tax credit without ruling on the validity of Section 2A.02(b) of [the 2018 Revenue Code].73 [Emphasis supplied] Third, it is worth reiterating that the petitions in the First and Second RTC cases contained the same allegations and arguments reproduced verbatim. It follows that the same facts and evidence are necessary to resolve both causes of action. Pending resolution in the First RTC Case is the constitutionality and validity of the 2018 Revenue Code; on the other hand, petitioner's claim for refund or tax credit in the Second RTC Case is hinged primarily on the alleged unconstitutionality and invalidity of Section 2A.02(b) and (e) of 2018 Revenue Code. Hence, as correctly found by the court a quo, the courts must rule on the validity of specific sections of the 2018 Revenue Code in both cases. Consequently, a decision in one case will amount to res adjudicata in the other. Considering that the elements of litis pendentia are present, the conclusion is that forum shopping was committed.74 Petitioner is guilty of forum shopping. There is forum shopping "when a party repetitively avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in or already resolved adversely by some other court."75 The test for determining the existence of forum shopping is whether the elements of litis pendentia are present or whether 73 Decision dated May 20, 2021, Docket- Vol. I, p. 52. ~ 74 Dyv. Yu, G.R. 202632, July 8, 2015. 75 Daswani v. Banco De Oro Universal Bank, G.R. No. 190983, July 29,2015, citing Heirs ofSotto v. Palicte, G.R. No. 159691, February 17,2014.

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