CTA Case No. 3506 (Decision)

------ ----- -- -----~ --- Ai.PUBLIC OP Ttl~ PHlLIPPIN!I COURT OF TAX APPEALS QUEZON CITY VISAYAN ELECTRIC CO., INC., Petitioner, - versus - C.T.A. CASE NO. 3506 COMMISSIONER OF INTERNAL REVENUE, . x. ---- Respondent.� -------X DE C I S I 0 N This case comes on a simple issue of whether peti- tioner's importations under its franchise, Act No. 3499 as amended by R.A. No . 6454, became subject to compen- sating tax upon the iss uance of Presidential Decree No . 69 amending Section 190 (now Sec. 204) _of t:he Tax Code limiti ng the coverage of the tax exemption t:.o specific exceptions . Petitione r Visayan Electric Co., Inc. (VECO) is a public utility authorized to operate an electric light, heat and powe r system in the cities of Cebu, Naga and Mandaue and t he municipali ties of Talisay, Minglanilla, San Fernando, Consolacion, Liloan and Campostela, all in the province of Cebu under a legislative franc h ise, Act No. 3499 dated December 8, 1928. It appears that on account of 'such fran chise, peti- tioner had not been paying any tax o n its importations, ( (~

DECISION - CTA CASE NO. 3506 - 2- \. viz.: machineries, equipment, supplies, watt-meters, poles, wires, transformers, insulators, capacitors, transportation equipment and other facilities for use in the electric light, heat and power system from the time of the grant iri 1928 up to 1 9 72 other than the 2% percentage tax, thus, Sec. B. -The grantee shall pay the same taxes as are now or may hereafter be required by law from other persons, on its real estate , buildings, plant, machinery, and other personal property, except property declared exempt in this section. In consideration of the franchise and rights hereby granted, the grantee shall pay into the municipal treasury of each munici- pality in which it i~ supplying electricity to the public under t~is franchise, a tax equal to two per centum of the gross earnings of electric current sold under this franchise. Said percentage shall be due and payable quar- terly and shall be in lieu of all taxes of any kind levied, established or collected by any authority whatsoever, now or in the future, on its poles , wires, insulators, switches, trans- formers and other structures, installations, conductors, and accessories, placed in and over the public streets, avenues, roads, tho- roughfares, squares, bridges, and other places, and on its franchises, rights, privileges, re- ceipts, revenues and profits, from which taxes the grantee is hereby expressly exempted. (Act 3499, December 8, 1928) ~ At this juncture it may be noted that in not a few cases conceived and clained as broad grant of exemption under an ''in lieu of all taxes" provision of the mold as the petitioner's franchise, the rule was and still is that the rights and privileges which the franchise exempts from taxation refer to those ( ,,

DECISION - CTA CASE NO. 3506 - 3- which are not enjoyed by the general public but only the grantee of a franchise. They therefore do not include the common rig hts or privileges of every citiz en to make purchases anywhere. The exemptions in the franchise do not cover compensating tax. (Panay Electric Co. v. Collector of Internal Revenue, G.R. No. L-6753, July 30, 1955; Manila G~s Corporation v. Collector of Internal Revenue, G.R. No. 11784, Octobe~ 24 , 1958; Borja v. Collec tor of Internal Revenue, G.R. No. L-1 2134, November 20, 19 61) ~ "If it had been the legislative intent to exempt MERALCO from paying a tax on the use of imported equipment, the legislative body could have easily done so by expanding the provision of paragraph 9 and adding to the exemption such words as 'compensating tax� or ' purchases from abroad f o r use in its business ' and the like. We cannot ignore the principle that express ment ion in a statute of one exemption precludes reading others into it." (Manila Electric Co. v. Commissioner of Internal Revenue, G.R. Nos. L-29987, and L-23847, October 22, 1975, 67 SCRA 35.1) �. If we go by the said pronouncements it is by no means clear why the petitioner throug,h. 1972 could have remained unperturbed when there was no long,er an occasion to speculate upon how the imposition of the compensat.i ng. tax should be enforced. Just as it is not clear why 1( u

DECISION - CTA CASE NO. 3 5 0 6 - 4- t here could be a random quirk of a variance in the tax application among similarly circumstanced franch i se holderse The treatment of petitioner '~ tax exemption p rivilege seems r a ther generous than candid. But this is water under the bridge . So it appears tha t petitioner finally awoke to the fa c t tha t the chips must s omehow fall . "Fearing that responde nt might also impose compensating taxes on its importations, petitioner went to the franchise grantor the then Congress of the Philipp ines which promptly enacted R.A. Act No. 6454, amending petitioner's ori- ginal franchise Act No. 3499 , as follows : "Sec. 2. The other provisions of Act Numbered Thirty-fo ur hundred ninety-~ine is amended insofar as they are inconsistent with the provisions of this amendatory Act~ Provided, That the phrase ' taxes of any kind' ~ppearing in Section ei g ht of Act Numbered Thirty-fou r hundred ninety-nine shall include duties, tariffs, imposts, assessments, licenses, and fees of whatever kind and nature which may be levied by any government authority whatsoever, now or in the fu ture, upon its franchises, rights and privileges, earnings, incomes, payments, revenues, or profits, and upon its machi- . neries, equipments, supplies, watt-~eters, poles, wires, transformers, insulators, capaci t ors, transportation equipments and other fac i lities used or intended� for use by the gran tee including, but not limited to , compensating taxes and other customs fees and assessments or licenses." (R.A. 6454 , J u ne 12~ 1 9 72, without executive approval) The clear and unambiguous consequence of the amendment entitles the petitioner to an exemption 101

DECISION - CTA CASE NO. 3506 - 5- \ from the payment of the compensating tax liabilities brought to bear upon the importations under the franchise. That seemed to be where the petitioner stood with respect to the enjoyment of t he priv i lege upon effecti- vity of R.A. No. 6454 on June 12 1 1972. But no sooner than it can fully avail of the tax exemption from such import liabilities i t wen t kerplunk upon coming to gr ip with Presidential Decree No. 69 dated November 24, 1972 which amended Section 190 (now Sec. 204) _of the Tax Code, providing, inter alia, "The provisions of existing laws to the contrary notwithstanding, exemption from thi s tax (compensating) _shall be limited to the following: (None of the specified exceptions refer to the petitioner's impo rt ations) ~" (Portions in paren- thesis supplied) ~ I n a que sera expectation, petitioner was required to pay the corresponding compensating taxes as a con- dition for the withdrawal of its var ious importations occas ioned in the years 1980, 1981 and 1982, aggregating ~2,071,888.00. And , petitioner having considered such imposition and collect ion erroneous, illegal and improper . protested and filed a claim for the refund or credit therefor with the respondent Commissioner of Internal Revenue simultaneous with the filing of the instant petit i on for review on August 5, 1982 . 10 ~

DECISION - CTA CASE NO. 3506 - 6- �' ., By and large, petitioner holds on to the propo- sition that its franchise (Act No. 3499 as amended by R.A. No. 6454), .a special law partaking the nature of a contract, cannot be amended, altered or repealed much less withdrawn impliedly by a general law such as P . D. No. 69. Respondent maintains that Section 190 of the 'Ji'�ax Code, as amended by P.D. No. 69, subjects all imported articles for use to compensating tax unless specifically exempt and the petitioner does not fall under any of the specified exemption . The law employs the word "limited" to exclude reading into . the law an exemption which is not there. The case before Us presents no dispute as to the relatively simple material facts but the parties seem trying to get the better of each other over by a quibble on the proper import of the repealing provision of Section 190 of the Tax Code, as amended by P.D. No. 69, on the particular exemption from compensating tax as provided in the amended franchise. We may say at the outset that we fail to find for petitioner. The issue now raised was squarely met in a case similar in many or so in tenor and terms involving as it does a like franchise. (Panay Electric Co. v. Commissioner of Internal Revenue, CTA Case No. 2674, July 30, 1982; affirmed oy the Supreme Court in G.R. No.

DECISION - CTA CASE NO. 350& - .7 - \ L-~2053, January 17, 1983) ._ It .may be necessary to repeat what we: said and which so plainly apply t.o the petitioner in the case at bar, as thus The answer to the second question poses. the rub. The exempt.ion for particular tax was. sub- . sequently eviscerated upon effectivity of the PD 69 repealing amendment in Section 190 of the Tax Code and is therefor:e lar:g1e�ly nostalgic illusion, so to speak. The language of the amendment is not. simply strung in syntac:tical correctness but by apt and certain words is intended to e:ffectuate a pur:pose to be senred. Thus provided: 11 Sec:. 190 e - .Compensating. tax. X X x: X. 11 The provisions of existing laws to the c:ontr:ar.y notwithstanding:, ex.ernption from the tax shall be limited to the following: 1. Those enumerated in this s.ection; 2. Those granted under Republic Act No. 5186, as amended, Republic Act No. 6135, as amended, Republic Act No. 5490; 3 . Those g,rante:d in pursuance of or in c:ompliance with international treaties or commitments., such as the ADB-~P Host Agreement (1966) , the 1947 Con- vention on Privileges "and Immunities. � of the United Nations and its Specialized Agencies; the United States Agency for International De- . velopment-~P Agr:eeme:nt.; the 1947 Military Bases Agreement; and other similar treaties. or commi trnen ts; and 4. Those that may be granted by th e President upon r:e:commendation of the NEDA in the interest of -economic development ... The pelluc:idi ty of the intendment need not lapse into f urther exegesis. We must consider what the amendment has expressly reserved . Had it been intended to extend the exemption, the inclusion of p ub lic utility franchises among the exceptions should have sufficed for the pur.pose. Far from a quirky insights of the lm�maker, the

DECISION - CTA CASE NO. 3506 - 8- 't amendment has on the contrary specially and specifically enumerated the subjects to be exempted from the particular imposition of compensating tax. If we take the provision to mean what it says, it gives such tax privilege to those expressly mentioned and to no other following the well-kn own rule of law, Expressio unius est exclus io alter ius . It will be of immense naivette if we do not presume that when the lawmaking body enacted the amendment it had full knowledge of prior existing laws and legislations on the subject of the statute and acted in accordance or with respect thereto . (Tamiani Trial Tours v. Lee, 194 So. 305; Manil~ Lodge No. 701 v . Court of Appeals, L-41061, September 30, 1976, 73 SCRA 163). And, when the amendment provides that, "The provisions of existing laws to the contrary notwithstanding, exemption from this tax shall be limited to the following:", the lawmaking power cannot be said to have intended the establishment of conflicting and hostile systems upon the same subject, or to leave in force provisions of a prior law by which the latter will of the legislature may be thwarted and overthrown. Such result would render legislation a useless and idle ceremony, and subject the law to the� reproach of uncer- . tainty and untellig i bility. (See Separate Opinion of Justice Jones in Lichuaco v. Apostol, Statutory Construction; Bagatsing v. Ramirez, 74 SCRA 313). The omission of franchises among the exceptioris mentioned under Section 190 of the Tax Code, as amended, is not a legal leger- demain but a purposeful and deliberate choice sufficient to arrest the refund of compensating tax sought in the case at bar. We deem it unnecessary to discuss the asserted "impairment" of the contractual agreement i n petitioner's grant. � The obvious and decisive answer, of course, is the pervading restraint of the Con stitution that, "Neither shall any such franchise or right be granted exc ept under the condition that it shall be sub ject to amendment, alteration or repeal." (Art. XIV , Sec. 5) �. 1Cv

DECISION - CTA CASE NO. 3506 - 9- �� We therefore reach a conclusion no different from the aforesaid decision as we see no reason to further graft a precip i tious distinction on a sati sfactorily settled legal situation. WHEREFORE, finding the petition to be without merit, the same is dismissed and the refund/credit sought is hereby denied. SO ORDERED. Quezon City, Metro Manila, June 14, 1985. WE CONCUR: � l Cb