Southern Cross Cement Corp. v. Cement Manufacturers Assoc'n. of the Phils.

G.R. No. 158540 – August 3, 2005

Digest Author: Vito

Topic: Taxation > Purpose of Taxation > Non-revenue/Special or Regulatory

Case Summary: Private respondent Philcemcor applied with the DTI for it to impose a definitive safeguard
measure on the increased importation of gray Portland cement pursuant to the Safeguards Measures Act
(SMA), thus causing declines in domestic production, capacity utilization, market share, sales and employment,
as well as depressed local prices. Ultimately, DTI denied Philcemcor’s application because the Tariff
Commission, empowered by the SMA to investigate, found no imminent threat or serious injury, although DTI
did not agree with the latter. Upon appeal, the CA held that the DTI Secretary was not bound by the
recommendatory factual findings of the Tariff Commission. The DTI Secretary then imposed a definitive
safeguard measure on the importation of gray Portland cement, in the amount of P20.60/40-kg. bag for three
years. Petitioner Southern Cross then sought to enjoin the DTI Secretary arguing that it is the CTA and not
the CA that has jurisdiction over Philcemcor’s petition with the Tariff Commission’s factual findings binding
upon the DTI Secretary. This Court’s Second Division ruled in favor of petitioner; hence, the motions for
reconsideration.

In this Resolution, the Court affirmed its Decision which held that SMA, Section 29 explicitly vests jurisdiction
over such petitions on the CTA. The imposition of the safeguard measure is an issue definitely fraught with a
tax dimension. Furthermore, a “positive final determination” by the Tariff Commission antecedes, as a
condition precedent, the imposition of a general safeguard measure, a power that is vested in the DTI Secretary.
The assailed CA Decision, being an absolute nullity, the DTI Decision, which imposed the definitive safeguard
measure is also null and void. Most importantly, the Court held that the imposition of safeguard measures
is a taxation measure. The motivation behind many taxation measures is the implementation of police
power goals.

Doctrines/Laws Involved: Progressive income taxes alleviate the margin between rich and poor; the so-called
"sin taxes" on alcohol and tobacco manufacturers help dissuade the consumers from excessive intake of these
potentially harmful products. Taxation is distinguishable from police power as to the means employed to
implement these public good goals. Those doctrines that are unique to taxation arose from peculiar
considerations such as those especially punitive effects of taxation, and the belief that taxes are the lifeblood of
the state. These considerations necessitated the evolution of taxation as a distinct legal concept from police
power. Yet at the same time, it has been recognized that taxation may be made the implement of the
state's police power.

FACTS:

1. The Safeguard Measures Act (SMA) provides the structure and mechanics for the imposition of
emergency measures, including tariffs, to protect domestic industries and producers from
increased imports which inflict or could inflict serious injury on them.
 2. Private respondent Philippine Cement Manufacturers Corporation (Philcemcor), an association of
domestic cement manufacturers, applied with the DTI to impose a definitive safeguard measure on
the importation of gray Portland cement.
a. Philcemcor alleged that gray Portland cement was being imported in increased quantities, thus
causing declines in domestic production, capacity utilization, market share, sales and
employment, as well as depressed local prices.
b. DTI issued a provisional safeguard measure, which the Tariff Commission formally investigated
pursuant to Sec. 9 of the SMA.
c. Ultimately, DTI denied Philcemcor’s application although it did not agree with the Tariff
Commission and SOJ’s opinion that DTI could NOT impose a definitive safeguard measure.
3. Upon appeal, the CA held that the DTI Secretary was not bound by the recommendatory factual findings
of the Tariff Commission. Following this Decision which had NOT yet become final, the DTI
Secretary imposed a definitive safeguard measure on the importation of gray Portland cement, in
the amount of P20.60/40-kg. bag for three years.
4. Petitioner Southern Cross then sought to enjoin the DTI Secretary arguing that it is the CTA and
not the CA that has jurisdiction over Philcemcor’s petition with the Tariff Commission’s factual findings
binding upon the DTI Secretary.
5. This Court’s Second Division ruled in favor of petitioner. Sec. 5 of the SMA precisely required that the
Tariff Commission make a positive final determination before the DTI Secretary could impose these
measures.
6. Both the CA and DTI decisions were then declared null and void, the latter being based on the former’s
decision that was not yet final and executory. Hence, this motion for reconsideration.

ISSUES + HELD/RATIO:
1. Whether or not the CTA has jurisdiction over the petition filed by Philcemcor – YES
a. The Court affirms its decision relying on the plain reading that Section 29 explicitly vests
jurisdiction over such petitions on the CTA.
b. Under Section 29, there are three requisites to enable the CTA to acquire jurisdiction over the
petition for review contemplated therein:
i. there must be a ruling by the DTI Secretary;
ii. the petition must be filed by an interested party adversely affected by the ruling; and
iii. such ruling must be "in connection with the imposition of a safeguard measure."
c. "A ruling for the imposition of a safeguard measure," is different from one issued "in connection
with the imposition of a safeguard measure." The second does not contemplate only one kind
of ruling (to impose), but a myriad of rulings issued "in connection with the imposition of a
safeguard measure."
d. The said provision mandates that the CTA jurisdiction is broad enough to encompass more than
just a ruling imposing the safeguard measure.
e. Whether the ruling under review calls for the imposition or non-imposition of the safeguard
measure, the common question for resolution still is whether or not the tariff should be imposed
— an issue definitely fraught with a tax dimension. The determination of the question will call
upon the same kind of expertise that a specialized body as the CTA presumably possesses.
2. Whether or not the DTI Secretary could impose a general safeguard measure only upon a positive final
determination by the Tariff Commission – YES
 a. The safeguard measures imposable under the SMA generally involve duties on imported
products, tariff rate quotas, or quantitative restrictions on the importation of a product into the
country. Concerning as they do the foreign importation of products into the Philippines, these
safeguard measures fall within the ambit of Section 28(2), Article VI of the Constitution.
b. The SMA provides an exceptional instance wherein it is the DTI or Agriculture Secretary who is
tasked by Congress, in their capacities as alter egos of the President, to impose such
measures. Certainly, the DTI Secretary has no inherent power, even as alter ego of the President,
to levy tariffs and imports.
c. When Congress tasks the President or his/her alter egos to impose safeguard measures under the
delineated conditions, the President or the alter egos may be properly deemed as agents of
Congress to perform an act that inherently belongs as a matter of right to the legislature.
d. Section 5 of the SMA operates as a limitation validly imposed by Congress on the
presidential authority under the SMA to impose tariffs and imposts. That the positive final
determination operates as an indispensable requisite to the imposition of the safeguard measure,
and that it is the Tariff Commission which makes such determination, are legal propositions
plainly expressed in Section 5 for the easy comprehension for everyone but respondents.
e. A “positive final determination” by the Tariff Commission antecedes, as a condition precedent,
the imposition of a general safeguard measure, a power that is vested in the DTI Secretary. At
the same time, a positive final determination does not necessarily result in the imposition of a
general safeguard measure. Under Section 5, notwithstanding the TC’s positive final
determination, the DTI secretary may decide not to apply the safeguard measure in the interest of
the public.
f. The Tariff Commission makes its determination only after a formal investigation process, which
in turn is undertaken only if there is a positive preliminary determination by the DTI Secretary.
On the other hand, the latter may impose a definitive safeguard measure only if there is a positive
final determination by the Commission. In this respect, the DTI Secretary is bound by the
TC’s determination.
3. Whether or not the DTI Secretary may review the final determination of the Tariff Commission – NO
a. Congress, in enacting the SMA and prescribing the roles to be played therein by the Tariff
Commission and the DTI Secretary, did not envision that the President, or his/her alter ego,
could exercise supervisory powers over the Tariff Commission.
b. The Tariff Commission does not fall under the administrative supervision of the DTI.
c. The long-standing tradition has been for the Tariff Commission and the DTI to proceed
independently in the exercise of their respective functions.
d. In fact, the SMA indubitably establishes that the Tariff Commission is no mere flunky of the DTI
Secretary when it mandates that the positive final recommendation of the former be
indispensable to the latter's imposition of a general safeguard measure.
e. To insulate the factual determination from political pressure, and to assure that it be conducted
by an entity especially qualified by reason of its general functions to undertake such
investigation, Congress deemed it necessary to delegate to the Tariff Commission the function of
ascertaining whether or not those factual conditions exist to warrant the atypical imposition of
safeguard measures.
i. The matter of imposing a safeguard measure almost always involves not just one
industry, but the national interest as it encompasses other industries as well.
 ii. The legislated involvement of the Commission in the process assures some measure of
check and balance involving two different governmental agencies with disparate
specializations.
4. Whether or not the imposition of general safeguard measures should not be seen as a taxation measure,
but instead as an exercise of police power as respondents argue – NO
a. The vain hope of respondents in divorcing the safeguard measures from the concept of taxation
is to exclude from consideration Section 28(2), Article VI of the Constitution.
b. The motivation behind many taxation measures is the implementation of police power
goals.
i. Progressive income taxes alleviate the margin between rich and poor; the so-called "sin
taxes" on alcohol and tobacco manufacturers help dissuade the consumers from excessive
intake of these potentially harmful products.
ii. Taxation is distinguishable from police power as to the means employed to
implement these public good goals.
c. Those doctrines that are unique to taxation arose from peculiar considerations such as those
especially punitive effects of taxation, and the belief that taxes are the lifeblood of the state.
d. These considerations necessitated the evolution of taxation as a distinct legal concept from police
power. Yet at the same time, it has been recognized that taxation may be made the
implement of the state's police power.

DISPOSITIVE: WHEREFORE, respondents' Motions for Reconsideration are DENIED WITH FINALITY.
Respondent DTI Secretary is hereby ENJOINED from taking any further action on the pending Petition
for Extension of the Safeguard Measure.
Hironobu Ryu, President of petitioner Southern Cross Cement Corporation, and Angara Abello
Concepcion Regala & Cruz, counsel petitioner, are hereby given FIVE (5) days from receipt of this Resolution
to EXPLAIN why they should not be meted disciplinary sanction for failing to timely inform the Court of the
filing of Southern Cross's Petition for Review with the Court of Tax Appeals, as adverted to earlier in this
Resolution.

NOTES:
1. SMA, Section 29. Judicial Review. — Any interested party who is adversely affected by the ruling of
the Secretary in connection with the imposition of a safeguard measure may file with the CTA, a petition
for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing
of such petition for review shall not in any way stop, suspend or otherwise toll the imposition or
collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures, as the
case may be.
The petition for review shall comply with the same requirements and shall follow the same rules
of procedure and shall be subject to the same disposition as in appeals in connection with adverse
rulings on tax matters to the Court of Appeals.
2. Section 28(2), Article VI of the Constitution: The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates,
import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework
of the national development program of the Government.
3. SMA, Section 5. Conditions for the Application of General Safeguard Measures. — The Secretary
shall apply a general safeguard measure upon a positive final determination of the [Tariff] Commission
that a product is being imported into the country in increased quantities, whether absolute or relative to
the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic
industry; however, in the case of non-agricultural products, the Secretary shall first establish that the
application of such safeguard measures will be in the public interest.