Alcan Packaging Starpack Corp. v. The Treasurer of The City of Manila

Alcan Packaging Starpack Corp. v.
The Treasurer of the City of Manila

CTA AC No. 17, September 11, 2006
FACTS: Petitioner, Alcan Packaging Starpack Corporation, is a domestic corporation while respondent, the Treasurer of the
City of Manila, is tasked with the implementation of the City’s Revenue Code, as well as the collection and assessment of
business taxes, license fees and permit fees within the City.
For the period beginning fourth quarter of 1999 to the third quarter of 2001, petitioner paid business taxes under Section 21 of the
Manila Revenue Code (MRC) in the amount of P4,527,594.76.
The City of Manila collects business taxes from petitioner on the basis of Sections 14 & 21 of the MRC. However, the rates
imposed under these Sections were amended through the issuance of Ordinance Nos. 7988 and 8011, approved by the City
Mayor of Manila in the years 2000 and 2001, respectively.
Petitioner filed with the City Treasurer its claim for refund of the alleged excess payments of business taxes on the bases
that respondent City Treasurer had unlawfully collected the business taxes under Section 21 of the MRC which amounts to
double taxation, as well as, of the increased rates which arose from the amendments to the MRC by the aforementioned
ordinances.
Petitioner, then, filed a Petition for Refund before the Regional Trial Court of Manila.
Respondent City Treasurer submitted that there is no double taxation when the City collected from petitioner business taxes
pursuant to Sections 14 and 21 of the MRC. The rates prescribed under the amendments were issued within the powers of the
City to impose.
Sections 14 and 21 of the Manila Revenue Code provide:
Section 14. - Tax on Manufacturers, Assemblers and other Processors. - There is hereby imposed a graduated tax on
manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers and compounders of liquors, distilled spirits, and
wines and manufacturers of any article of commerce of whatever kind or nature, in accordance with the following schedule: x x x
Section 21. - Tax on Business Subject to the Excise, Value- added or Percentage Taxes Under the NIRC. — On any of the
following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal
Revenue Code hereinafter the NIRC, as amended, a tax of fifty percent (50%) of one percent (1%) per annum on the gross sales
or receipts of the preceding calendar year is hereby imposed:
A) On persons who sell goods and services in the course of trade or business; and those who import goods whether for business
or otherwise, as provided for in sections 100 to 103 of the NIRC as administered and determined by the Bureau of Internal
Revenue pursuant to pertinent provisions of said code.
RTC of the City of Manila: petitioner’s claim for refund was disallowed on the findings that there is no double taxation because
unlike the tax imposed on Section 14 of the MRC, the tax under Section 21 of the same Code is a tax not on the petitioner as a
manufacturer, but is rather a tax on the end-users of its products.
Hence this petition.
ISSUE: WON The enforcement of Section 21 of the City of Manila’s Revenue Code against petitioner constitutes double
taxation prohibited by law in view of taxes collected by the City and paid by petitioner under Section 14 of the Revenue Code.
[YES]
RULING: The Court agrees with the petitioner.
Sections 151 and 143 of the Local Government Code, from which Sections 14 and 21 of the Manila Revenue Code emanated,
provide thus:
SEC. 151. Scope of Taxing Powers. — Except as otherwise provided in this Code, the city may levy the taxes, fees, and charges
which the province or municipality may impose: Provided, however, That the taxes, fees and charges levied and collected by
highly urbanized and independent component cities shall accrue to them and distributed in accordance with the provisions of this
Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or municipality by not more
than fifty percent (50%) except the rates of professional and amusement taxes.
SEC. 143. Tax on Business. - The municipality may impose taxes on the following businesses:
(a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers and compounders of liquors,
distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature, in accordance with the
following schedule:
xxx xxx XXX
(h) On any business, not otherwise specified in the preceding paragraphs, which the sanggunian concerned may
deem proper to tax: Provided, That on any business subject to the excise, value-added or percentage tax under the National
Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (20/o) of gross sales or receipts of the preceding
calendar year.
The sanggunian concerned may prescribe a schedule of graduated taxes but in no case to exceed the rates prescribed herein.
Evidently, from the foregoing, both Sections 14 and 21 of the MRC took their root in only one provision of the LGC, that
is, Section 143. It is noteworthy to stress that under Section 143 of the LGC, the business tax which may be imposed on “any
business”, comes with the proviso “not otherwise specified in the preceding paragraphs”, which could only mean that the
municipality, or the city for that matter, shall only impose the tax in either one of the paragraphs but definitely not both.
When the City of Manila imposed through Sections 14 and 21 of their Revenue Code both taxes, such was clearly
contrary to the express mandate of Section 143(h) of the LGC. It is a well-established rule that rules and regulations
implementing the provisions of the law cannot go beyond what the law is.
Further, a close scrutiny of these Sections reveals that Section 14 is a tax on manufacturers, assemblers and other processors,
while Section 21 is a business tax on persons who sell goods and services in their trade or business, and those who import goods
whether for business or otherwise. Thus, there is no merit in the argument that the tax under Section 14 is a tax on business while
the tax under Section 21 is a tax on the end- users or on the persons paying for the services and not on the business itself.
Based on the definition of manufacturer in Section 131(20) of the LGC, a manufacturer essentially sells its goods for a fee. And
as such manufacturer, petitioner was made liable to pay the tax under Section 14 of the MRC. Additionally, petitioner was
likewise taxed under Section 21 of the MRC for “selling its goods in the course of its trade or business”.
Double taxation, in its strict sense, means:
a. taxing twice
b. by the same taxing authority
c. within the same jurisdiction or taxing district;
d. for the same purpose;
e. in the same taxing period; and
f. for some of the property in the territory.
In the present case, petitioner was taxed twice for its sale of goods in the course of its trade or business, by the same taxing
authority for the same taxing period and for the same purpose of raising revenue for the city and regulating the conduct of the
business, which is clearly a case of double taxation. In the case of Commissioner of Internal Revenue vs. Solidbank Corporation,
the Highest Tribunal ruled that “Double taxation means taxing the same property twice when it should be taxed only once;
that is x x x taxing the same person twice by the same jurisdiction for the same thing.“
On the issue of publication, Ordinance 7988 was only published for 2 days, while Ordinance 8011 was published for 3 days but
not consecutive. Both ordinances failed to comply with the mandatory requirement of publication. Hence, invalid.

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Alcan Packaging Starpack Corp. v.

The Treasurer of the City of Manila

Sections 14 and 21 of the Manila Revenue Code provide:

Hence this petition.

RULING: The Court agrees with the petitioner.

xxx xxx XXX

Double taxation, in its strict sense, means:

b. by the same taxing authority

c. within the same jurisdiction or taxing district;

d. for the same purpose;

e. in the same taxing period; and

f. for some of the property in the territory.

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