First Philippine Industrial Corp v. CA
First Philippine Industrial Corp v. CA
First Philippine Industrial Corp v. CA
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals dated
November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the Regional Trial
Court of Batangas City, Branch 84, in Civil Case No. 4293, which dismissed petitioners'
complaint for a business tax refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to
contract, install and operate oil pipelines. The original pipeline concession was granted in
1967 1 and renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the
Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent
City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal
year 1993 pursuant to the Local Government Code 3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four installments based on the
gross receipts for products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax under protest in the
amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City
Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a government
concession granted under the Petroleum Act. It is engaged in the business of
transporting petroleum products from the Batangas refineries, via pipeline, to
Sucat and JTF Pandacan Terminals. As such, our Company is exempt from
paying tax on gross receipts under Section 133 of the Local Government Code
of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government Code.
Therefore, the authority to impose tax "on contractors and other independent
contractors" under Section 143, Paragraph (e) of the Local Government Code
does not include the power to levy on transportation contractors.
Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j)
encompasses onlycommon carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and facilities
to a single specific or "special customer" under a
"special contract."
2. The Local Tax Code of 1992 was basically
enacted to give more and effective local
autonomy to local governments than the previous
enactments, to make them economically and
financially viable to serve the people and
discharge their functions with a concomitant
obligation to accept certain devolution of
powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and
151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for review. On
February 27, 1995, we referred the case to the respondent Court of Appeals for consideration
and adjudication. 10 On November 29, 1995, the respondent court rendered a decision 11 affirming
the trial court's dismissal of petitioner's complaint. Petitioner's motion for reconsideration was
denied on July 18, 1996. 12
Hence, this petition. At first, the petition was denied due course in a Resolution dated
November 11, 1996.13 Petitioner moved for a reconsideration which was granted by this Court in a
Resolution 14 of January 22, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner
is not a common carrier or a transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as
engaged in the business of transporting persons or property from place to place, for
compensation, offering his services to the public generally.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or
association engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and
must hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e.
petroleum products, for hire as a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its services, and transports the
goods by land and for compensation. The fact that petitioner has a limited clientele does not
exclude it from the definition of a common carrier. In De Guzman vs. Court of Appeals 16we
ruled that:
The above article (Art. 1732, Civil Code) makes no distinction
between one whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying only
as an ancillary activity (in local idiom, as a "sideline"). Article
1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article
1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of
Appeals dated November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.