106 - Southern Luzon Drug Corp vs.

DSWD (April 25, 2017)

Topic: Social Equality: Art Xiii, Sec 1

Petitioner: SOUTHERN LUZON DRUG CORPORATION

Respondents: THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, THE NATIONAL

Facts:

The petitioner is a domestic corporation engaged in the business of: drugstore

The case at bar is a Petition for Review on Certiorari assailing the Decision of the Court
of Appeals which dismissed the petition for prohibition filed by Southern Luzon Drug
Corporation (petitioner) against the Department of Social Welfare and Development , the
National Council for the Welfare of Disabled Persons (now National Council on Disability Affairs
or NCDA), the Department of Finance and the Bureau of Internal Revenue (collectively, the
respondents), which sought to prohibit the implementation of Section 4(a) of Republic Act
(R.A.) No. 9257, otherwise known as the "Expanded Senior Citizens Act of 2003" and Section
32 of R.A. No. 9442, which amends the "Magna Carta for Disabled Persons,".

One of the salient amendments in the law is the insertion of Chapter 8 in Title 2
thereof, which enumerates the other privileges and incentives of PWDs, including the grant of
20% discount on the purchase of medicines. Similar to R.A. No. 9257, covered establishments
shall claim the discounts given to PWDs as tax deductions from the gross income, based on the
net cost of goods sold or services rendered. Section 32 ofR.A. No. 9442 reads:

CHAPTER 8. Other Privileges and Incentives

SEC. 32. Persons with disability shall be entitled to the following:

(c) At least twenty percent (20%) discount for the purchase of medicines in all drugstores for
the exclusive use or enjoyment of persons with disability;

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The establishments may claim the discounts granted in subsections (a), (b), (c), (e), (t) and (g) as
tax deductions based on the net cost of the goods sold or services rendered: Provided,
however, That the cost of the discount shall be allowed as deduction from gross income for the
same taxable year that the discount is granted: Provided, further, That the total amount of the
claimed tax deduction net of value-added tax if applicable, shall be included in their gross sales
receipts for tax purposes and shall be subject to proper documentation and to the provisions of
the National Internal Revenue Code (NIRC), as amended.

The change in the tax treatment of the discount given to senior citizens did not sit
well with some drug store owners and corporations, claiming it affected the profitability of their
business.

Petitioner’s Contention:

The company alleged that because of the said laws, it experienced business losses, which were
backed-up by financial statements.

Challenging its constitutionality, Southern Drug pointed out three flaws, that is, a) the
government using its power of eminent domain, should have justly compensated the instant
corporation, having the tenor that tax deduction is not enough compensation; b) violation of
equal protection, since senior citizens and PWDs do not fall as “substantial distinctions”; c)
vagueness of the law since “PWDs” & “disability” per se were not sufficiently defined by the
law.

Issue:

Whether or not the 20% Sales Discount for Senior Citizens PWDs does not violate the
petitioner’s right to equal protection of the law

Ruling:

Yes. The subject laws do not violate the equal protection clause. The equal protection clause is
not infringed by legislation which applies only to those persons falling within a specified class. If
the groupings are characterized by substantial distinctions that make real differences, one class
may be treated and regulated differently from another." For a classification to be valid, (1) it
must be based upon substantial distinctions, (2) it must be germane to the purposes of the
law, (3) it must not be limited to existing conditions only, and (4) it must apply equally to all
members of the same class.

Other Issues:

1. Whether or not the Petition for Prohibition may be filed to question the
constitutionality of a law

Yes. Prohibition may be filed to question the constitutionality of a law. Generally, the
office of prohibition is to prevent the unlawful and oppressive exercise of authority and
is directed against proceedings that are done without or in excess of jurisdiction, or with
grave abuse of discretion, there being no appeal or other plain, speedy, and adequate
remedy in the ordinary course of law. It is the remedy to prevent inferior courts,
 corporations, boards, or persons from usurping or exercising a jurisdiction or power
with which they have not been vested by the law. This is, however, not the lone office of
an action for prohibition. In Diaz, et al. v. The Secretary of Finance, et al., prohibition
was also recognized as a proper remedy to prohibit or nullify acts of executive officials
that amount to usurpation of legislative authority. And, in a number of jurisprudence,
prohibition was allowed as a proper action to assail the constitutionality of a law or
prohibit its implementation.

2. Whether or not the case constitute stare decisis

No. The Court agrees that the ruling in Carlos Superdrug does not constitute stare
decisis to the instant case, not because of the petitioner's submission of financial
statements which were wanting in the first case, but because it had the good sense of
including questions that had not been raised or deliberated in the former case of Carlos
Superdrug, i.e., validity of the 20% discount granted to PWDs, the supposed vagueness
of the provisions of R.A. No. 9442 and violation of the equal protection clause.

3. Whether or not the definitions of Disabilities and PWDs are vague and violates the
petitioners right to due process of law

No. The definitions of "disabilities" and "PWDs" are clear and unequivocal.
Section 4(a) of R.A. No. 7277, the precursor of R.A. No. 94421 defines "disabled persons" as
follows:

(a) Disabled persons are those suffering from restriction or different abilities, as a result of a
mental, physical or sensory impairment, to perform an activity in the manner or within the
range considered normal for a human being[.]

On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442 as
follows:

5.1. Persons with Disability are those individuals defined under Section 4 of [R.A. No.] 7277 [or]
An Act Providing for the Rehabilitation, Self-Development and Self-Reliance of Persons with
Disability as amended and their integration into the Mainstream of Society and for Other
Purposes. This is defined as a person suffering from restriction or different abilities, as a result of
a mental, physical or sensory impairment, to perform an activity in a manner or within the
range considered normal for human being. Disability shall mean (1) a physical 1or mental
impairment that substantially limits one or more psychological, physiological or anatomical
function of an individual or activities of such individual; (2) a record of such an impairment; or
(3) being regarded as having such an impairment.
In view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257 and Section 32 of
Republic Act No. 9442 are hereby declared CONSTITUTIONAL.