lawphil.

net

G.R. No. 92585

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 92585 May 8, 1992
CALTEX PHILIPPINES, INC., petitioner,
vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE COMMISSIONER
BARTOLOME C. FERNANDEZ and HONORABLE COMMISSIONER ALBERTO P.
CRUZ, respondents.
DAVIDE, JR., J.:
This is a petition erroneously brought under Rule 44 of the Rules of Court 1 questioning the
authority of the Commission on Audit (COA) in disallowing petitioner's claims for
reimbursement from the Oil Price Stabilization Fund (OPSF) and seeking the reversal of said
Commission's decision denying its claims for recovery of financing charges from the Fund and
reimbursement of underrecovery arising from sales to the National Power Corporation, Atlas
Consolidated Mining and Development Corporation (ATLAS) and Marcopper Mining
Corporation (MAR-COPPER), preventing it from exercising the right to offset its remittances
against its reimbursement vis-a-vis the OPSF and disallowing its claims which are still pending
resolution before the Office of Energy Affairs (OEA) and the Department of Finance (DOF).
Pursuant to the 1987 Constitution, 2 any decision, order or ruling of the Constitutional
Commissions 3 may be brought to this Court on certiorari by the aggrieved party within thirty
(30) days from receipt of a copy thereof. The certiorari referred to is the special civil action for
certiorari under Rule 65 of the Rules of Court. 4
Considering, however, that the allegations that the COA acted with:
(a) total lack of jurisdiction in completely ignoring and showing absolutely no respect for the
findings and rulings of the administrator of the fund itself and in disallowing a claim which is
still pending resolution at the OEA level, and (b) "grave abuse of discretion and completely
without jurisdiction" 5 in declaring that petitioner cannot avail of the right to offset any amount
that it may be required under the law to remit to the OPSF against any amount that it may receive
by way of reimbursement therefrom are sufficient to bring this petition within Rule 65 of the

Rules of Court, and, considering further the importance of the issues raised, the error in the
designation of the remedy pursued will, in this instance, be excused.
The issues raised revolve around the OPSF created under Section 8 of Presidential Decree (P.D.)
No. 1956, as amended by Executive Order (E.O.) No. 137. As amended, said Section 8 reads as
follows:
Sec. 8 . There is hereby created a Trust Account in the books of accounts
of the Ministry of Energy to be designated as Oil Price Stabilization Fund
(OPSF) for the purpose of minimizing frequent price changes brought
about by exchange rate adjustments and/or changes in world market prices
of crude oil and imported petroleum products. The Oil Price Stabilization
Fund may be sourced from any of the following:
a) Any increase in the tax collection from ad valorem tax or
customs duty imposed on petroleum products subject to tax
under this Decree arising from exchange rate adjustment, as
may be determined by the Minister of Finance in
consultation with the Board of Energy;
b) Any increase in the tax collection as a result of the lifting
of tax exemptions of government corporations, as may be
determined by the Minister of Finance in consultation with
the Board of Energy;
c) Any additional amount to be imposed on petroleum
products to augment the resources of the Fund through an
appropriate Order that may be issued by the Board of
Energy requiring payment by persons or companies
engaged in the business of importing, manufacturing and/or
marketing petroleum products;
d) Any resulting peso cost differentials in case the actual
peso costs paid by oil companies in the importation of
crude oil and petroleum products is less than the peso costs
computed using the reference foreign exchange rate as
fixed by the Board of Energy.
The Fund herein created shall be used for the following:
1) To reimburse the oil companies for cost increases in
crude oil and imported petroleum products resulting from
exchange rate adjustment and/or increase in world market
prices of crude oil;

2) To reimburse the oil companies for possible cost underrecovery incurred as a result of the reduction of domestic
prices of petroleum products. The magnitude of the
underrecovery, if any, shall be determined by the Ministry
of Finance. "Cost underrecovery" shall include the
following:
i. Reduction in oil company take as directed
by the Board of Energy without the
corresponding reduction in the landed cost
of oil inventories in the possession of the oil
companies at the time of the price change;
ii. Reduction in internal ad valorem taxes as
a result of foregoing government mandated
price reductions;
iii. Other factors as may be determined by
the Ministry of Finance to result in cost
underrecovery.
The Oil Price Stabilization Fund (OPSF) shall be administered by the
Ministry of Energy.
The material operative facts of this case, as gathered from the pleadings of the parties, are not
disputed.
On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI), hereinafter referred
to as Petitioner, directing the latter to remit to the OPSF its collection, excluding that unremitted
for the years 1986 and 1988, of the additional tax on petroleum products authorized under the
aforesaid Section 8 of P.D. No. 1956 which, as of 31 December 1987, amounted to
P335,037,649.00 and informing it that, pending such remittance, all of its claims for
reimbursement from the OPSF shall be held in abeyance. 6
On 9 March 1989, the COA sent another letter to petitioner informing it that partial verification
with the OEA showed that the grand total of its unremitted collections of the above tax is
P1,287,668,820.00, broken down as follows:
1986 P233,190,916.00
1987 335,065,650.00
1988 719,412,254.00;
directing it to remit the same, with interest and surcharges thereon, within sixty (60) days from
receipt of the letter; advising it that the COA will hold in abeyance the audit of all its claims for
reimbursement from the OPSF; and directing it to desist from further offsetting the taxes
collected against outstanding claims in 1989 and subsequent periods. 7

In its letter of 3 May 1989, petitioner requested the COA for an early release of its
reimbursement certificates from the OPSF covering claims with the Office of Energy Affairs
since June 1987 up to March 1989, invoking in support thereof COA Circular No. 89-299 on the
lifting of pre-audit of government transactions of national government agencies and governmentowned or controlled corporations. 8
In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the
reimbursement certificates from the OPSF and repeated its earlier directive to petitioner to
forward payment of the latter's unremitted collections to the OPSF to facilitate COA's audit
action on the reimbursement claims. 9
By way of a reply, petitioner, in a letter dated 31 May 1989, submitted to the COA a proposal for
the payment of the collections and the recovery of claims, since the outright payment of the sum
of P1.287 billion to the OEA as a prerequisite for the processing of said claims against the OPSF
will cause a very serious impairment of its cash position. 10 The proposal reads:
We, therefore, very respectfully propose the following:
(1) Any procedural arrangement acceptable to COA to
facilitate monitoring of payments and reimbursements will
be administered by the ERB/Finance Dept./OEA, as
agencies designated by law to administer/regulate OPSF.
(2) For the retroactive period, Caltex will deliver to OEA,
P1.287 billion as payment to OPSF, similarly OEA will
deliver to Caltex the same amount in cash reimbursement
from OPSF.
(3) The COA audit will commence immediately and will be
conducted expeditiously.
(4) The review of current claims (1989) will be conducted
expeditiously to preclude further accumulation of
reimbursement from OPSF.
On 7 June 1989, the COA, with the Chairman taking no part, handed down Decision No. 921
accepting the above-stated proposal but prohibiting petitioner from further offsetting remittances
and reimbursements for the current and ensuing years. 11 Decision No. 921 reads:
This pertains to the within separate requests of Mr. Manuel A. Estrella,
President, Petron Corporation, and Mr. Francis Ablan, President and
Managing Director, Caltex (Philippines) Inc., for reconsideration of this
Commission's adverse action embodied in its letters dated February 2,
1989 and March 9, 1989, the former directing immediate remittance to the
Oil Price Stabilization Fund of collections made by the firms pursuant to
P.D. 1956, as amended by E.O. No. 137, S. 1987, and the latter reiterating

the same directive but further advising the firms to desist from offsetting
collections against their claims with the notice that "this Commission will
hold in abeyance the audit of all . . . claims for reimbursement from the
OPSF."
It appears that under letters of authority issued by the Chairman, Energy
Regulatory Board, the aforenamed oil companies were allowed to offset
the amounts due to the Oil Price Stabilization Fund against their
outstanding claims from the said Fund for the calendar years 1987 and
1988, pending with the then Ministry of Energy, the government entity
charged with administering the OPSF. This Commission, however,
expressing serious doubts as to the propriety of the offsetting of all types
of reimbursements from the OPSF against all categories of remittances,
advised these oil companies that such offsetting was bereft of legal basis.
Aggrieved thereby, these companies now seek reconsideration and in
support thereof clearly manifest their intent to make arrangements for the
remittance to the Office of Energy Affairs of the amount of collections
equivalent to what has been previously offset, provided that this
Commission authorizes the Office of Energy Affairs to prepare the
corresponding checks representing reimbursement from the OPSF. It is
alleged that the implementation of such an arrangement, whereby the
remittance of collections due to the OPSF and the reimbursement of
claims from the Fund shall be made within a period of not more than one
week from each other, will benefit the Fund and not unduly jeopardize the
continuing daily cash requirements of these firms.
Upon a circumspect evaluation of the circumstances herein obtaining, this
Commission perceives no further objectionable feature in the proposed
arrangement, provided that 15% of whatever amount is due from the Fund
is retained by the Office of Energy Affairs, the same to be answerable for
suspensions or disallowances, errors or discrepancies which may be noted
in the course of audit and surcharges for late remittances without prejudice
to similar future retentions to answer for any deficiency in such
surcharges, and provided further that no offsetting of remittances and
reimbursements for the current and ensuing years shall be allowed.
Pursuant to this decision, the COA, on 18 August 1989, sent the following letter to Executive
Director Wenceslao R. De la Paz of the Office of Energy Affairs: 12
Dear Atty. dela Paz:
Pursuant to the Commission on Audit Decision No. 921 dated June 7,
1989, and based on our initial verification of documents submitted to us
by your Office in support of Caltex (Philippines), Inc. offsets (sic) for the
year 1986 to May 31, 1989, as well as its outstanding claims against the
Oil Price Stabilization Fund (OPSF) as of May 31, 1989, we are pleased to

inform your Office that Caltex (Philippines), Inc. shall be required to remit
to OPSF an amount of P1,505,668,906, representing remittances to the
OPSF which were offset against its claims reimbursements (net of
unsubmitted claims). In addition, the Commission hereby authorize (sic)
the Office of Energy Affairs (OEA) to cause payment of P1,959,182,612
to Caltex, representing claims initially allowed in audit, the details of
which are presented hereunder: . . .
As presented in the foregoing computation the disallowances totalled
P387,683,535, which included P130,420,235 representing those claims
disallowed by OEA, details of which is (sic) shown in Schedule 1 as
summarized as follows:
Disallowance of COA
Particulars Amount
Recovery of financing charges P162,728,475 /a
Product sales 48,402,398 /b
Inventory losses
Borrow loan arrangement 14,034,786 /c
Sales to Atlas/Marcopper 32,097,083 /d
Sales to NPC 558

P257,263,300
Disallowances of OEA 130,420,235

Total P387,683,535
The reasons for the disallowances are discussed hereunder:
a. Recovery of Financing Charges
Review of the provisions of P.D. 1596 as amended by E.O. 137 seems to
indicate that recovery of financing charges by oil companies is not among
the items for which the OPSF may be utilized. Therefore, it is our view
that recovery of financing charges has no legal basis. The mechanism for
such claims is provided in DOF Circular 1-87.
b. Product Sales Sales to International Vessels/Airlines
BOE Resolution No. 87-01 dated February 7, 1987 as implemented by
OEA Order No. 87-03-095 indicating that (sic) February 7, 1987 as the
effectivity date that (sic) oil companies should pay OPSF impost on export
sales of petroleum products. Effective February 7, 1987 sales to
international vessels/airlines should not be included as part of its domestic

sales. Changing the effectivity date of the resolution from February 7,

1987 to October 20, 1987 as covered by subsequent ERB Resolution No.
88-12 dated November 18, 1988 has allowed Caltex to include in their
domestic sales volumes to international vessels/airlines and claim the
corresponding reimbursements from OPSF during the period. It is our
opinion that the effectivity of the said resolution should be February 7,
1987.
c. Inventory losses Settlement of Ad Valorem
We reviewed the system of handling Borrow and Loan (BLA) transactions
including the related BLA agreement, as they affect the claims for
reimbursements of ad valorem taxes. We observed that oil companies
immediately settle ad valorem taxes for BLA transaction (sic). Loan
balances therefore are not tax paid inventories of Caltex subject to
reimbursements but those of the borrower. Hence, we recommend
reduction of the claim for July, August, and November, 1987 amounting to
P14,034,786.
d. Sales to Atlas/Marcopper
LOI No. 1416 dated July 17, 1984 provides that "I hereby order and direct
the suspension of payment of all taxes, duties, fees, imposts and other
charges whether direct or indirect due and payable by the copper mining
companies in distress to the national and local governments." It is our
opinion that LOI 1416 which implements the exemption from payment of
OPSF imposts as effected by OEA has no legal basis.
Furthermore, we wish to emphasize that payment to Caltex (Phil.) Inc., of
the amount as herein authorized shall be subject to availability of funds of
OPSF as of May 31, 1989 and applicable auditing rules and regulations.
With regard to the disallowances, it is further informed that the aggrieved
party has 30 days within which to appeal the decision of the Commission
in accordance with law.
On 8 September 1989, petitioner filed an Omnibus Request for the Reconsideration of the
decision based on the following grounds: 13
A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER
EXISTING RULES, ORDERS, RESOLUTIONS, CIRCULARS ISSUED
BY THE DEPARTMENT OF FINANCE AND THE ENERGY
REGULATORY BOARD PURSUANT TO EXECUTIVE ORDER NO.
137.
xxx xxx xxx

B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF

EXERCISE OF EXECUTIVE POWER BY DEPARTMENT OF
FINANCE AND ENERGY REGULATORY BOARD ARE LEGAL
AND SHOULD BE RESPECTED AND APPLIED UNLESS
DECLARED NULL AND VOID BY COURTS OR REPEALED BY
LEGISLATION.
xxx xxx xxx
C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT,
AS AUTHORIZED BY THE EXECUTIVE BRANCH OF
GOVERNMENT, REMAINS VALID.
xxx xxx xxx
On 6 November 1989, petitioner filed with the COA a Supplemental Omnibus Request for
Reconsideration. 14
On 16 February 1990, the COA, with Chairman Domingo taking no part and with Commissioner
Fernandez dissenting in part, handed down Decision No. 1171 affirming the disallowance for
recovery of financing charges, inventory losses, and sales to MARCOPPER and ATLAS, while
allowing the recovery of product sales or those arising from export sales. 15 Decision No. 1171
reads as follows:
Anent the recovery of financing charges you contend that Caltex Phil. Inc.
has the .authority to recover financing charges from the OPSF on the basis
of Department of Finance (DOF) Circular 1-87, dated February 18, 1987,
which allowed oil companies to "recover cost of financing working capital
associated with crude oil shipments," and provided a schedule of
reimbursement in terms of peso per barrel. It appears that on November 6,
1989, the DOF issued a memorandum to the President of the Philippines
explaining the nature of these financing charges and justifying their
reimbursement as follows:
As part of your program to promote economic recovery, . . .
oil companies (were authorized) to refinance their imports
of crude oil and petroleum products from the normal trade
credit of 30 days up to 360 days from date of loading . . .
Conformably . . ., the oil companies deferred their foreign
exchange remittances for purchases by refinancing their
import bills from the normal 30-day payment term up to the
desired 360 days. This refinancing of importations carried
additional costs (financing charges) which then became,
due to government mandate, an inherent part of the cost of
the purchases of our country's oil requirement.

We beg to disagree with such contention. The justification that financing

charges increased oil costs and the schedule of reimbursement rate in peso
per barrel (Exhibit 1) used to support alleged increase (sic) were not
validated in our independent inquiry. As manifested in Exhibit 2, using the
same formula which the DOF used in arriving at the reimbursement rate
but using comparable percentages instead of pesos, the ineluctable
conclusion is that the oil companies are actually gaining rather than losing
from the extension of credit because such extension enables them to invest
the collections in marketable securities which have much higher rates than
those they incur due to the extension. The Data we used were obtained
from CPI (CALTEX) Management and can easily be verified from our
records.
With respect to product sales or those arising from sales to international
vessels or airlines, . . ., it is believed that export sales (product sales) are
entitled to claim refund from the OPSF.
As regard your claim for underrecovery arising from inventory losses, . . .
It is the considered view of this Commission that the OPSF is not liable to
refund such surtax on inventory losses because these are paid to BIR and
not OPSF, in view of which CPI (CALTEX) should seek refund from BIR.
...
Finally, as regards the sales to Atlas and Marcopper, it is represented that
you are entitled to claim recovery from the OPSF pursuant to LOI 1416
issued on July 17, 1984, since these copper mining companies did not pay
CPI (CALTEX) and OPSF imposts which were added to the selling price.
Upon a circumspect evaluation, this Commission believes and so holds
that the CPI (CALTEX) has no authority to claim reimbursement for this
uncollected OPSF impost because LOI 1416 dated July 17, 1984, which
exempts distressed mining companies from "all taxes, duties, import fees
and other charges" was issued when OPSF was not yet in existence and
could not have contemplated OPSF imposts at the time of its formulation.
Moreover, it is evident that OPSF was not created to aid distressed mining
companies but rather to help the domestic oil industry by stabilizing oil
prices.
Unsatisfied with the decision, petitioner filed on 28 March 1990 the present petition wherein it
imputes to the COA the commission of the following errors: 16
I
RESPONDENT COMMISSION ERRED IN DISALLOWING
RECOVERY OF FINANCING CHARGES FROM THE OPSF.

II
RESPONDENT COMMISSION ERRED IN DISALLOWING
CPI's 17 CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY
ARISING FROM SALES TO NPC.
III
RESPONDENT COMMISSION ERRED IN DENYING CPI's CLAIMS
FOR REIMBURSEMENT ON SALES TO ATLAS AND MARCOPPER.
IV
RESPONDENT COMMISSION ERRED IN PREVENTING CPI FROM
EXERCISING ITS LEGAL RIGHT TO OFFSET ITS REMITTANCES
AGAINST ITS REIMBURSEMENT VIS-A-VIS THE OPSF.
V
RESPONDENT COMMISSION ERRED IN DISALLOWING CPI's
CLAIMS WHICH ARE STILL PENDING RESOLUTION BY (SIC)
THE OEA AND THE DOF.
In the Resolution of 5 April 1990, this Court required the respondents to comment on the petition
within ten (10) days from notice. 18
On 6 September 1990, respondents COA and Commissioners Fernandez and Cruz, assisted by
the Office of the Solicitor General, filed their Comment. 19
This Court resolved to give due course to this petition on 30 May 1991 and required the parties
to file their respective Memoranda within twenty (20) days from notice. 20
In a Manifestation dated 18 July 1991, the Office of the Solicitor General prays that the
Comment filed on 6 September 1990 be considered as the Memorandum for respondents. 21
Upon the other hand, petitioner filed its Memorandum on 14 August 1991.
I. Petitioner dwells lengthily on its first assigned error contending, in support thereof, that:
(1) In view of the expanded role of the OPSF pursuant to Executive Order No. 137, which added
a second purpose, to wit:
2) To reimburse the oil companies for possible cost underrecovery
incurred as a result of the reduction of domestic prices of petroleum
products. The magnitude of the underrecovery, if any, shall be determined

by the Ministry of Finance. "Cost underrecovery" shall include the

following:
i. Reduction in oil company take as directed by the Board
of Energy without the corresponding reduction in the
landed cost of oil inventories in the possession of the oil
companies at the time of the price change;
ii. Reduction in internal ad valorem taxes as a result of
foregoing government mandated price reductions;
iii. Other factors as may be determined by the Ministry of
Finance to result in cost underrecovery.
the "other factors" mentioned therein that may be determined by the Ministry (now Department)
of Finance may include financing charges for "in essence, financing charges constitute
unrecovered cost of acquisition of crude oil incurred by the oil companies," as explained in the 6
November 1989 Memorandum to the President of the Department of Finance; they "directly
translate to cost underrecovery in cases where the money market placement rates decline and at
the same time the tax on interest income increases. The relationship is such that the presence of
underrecovery or overrecovery is directly dependent on the amount and extent of financing
charges."
(2) The claim for recovery of financing charges has clear legal and factual basis; it was filed on
the basis of Department of Finance Circular No.
1-87, dated 18 February 1987, which provides:
To allow oil companies to recover the costs of financing working capital
associated with crude oil shipments, the following guidelines on the
utilization of the Oil Price Stabilization Fund pertaining to the payment of
the foregoing (sic) exchange risk premium and recovery of financing
charges will be implemented:
1. The OPSF foreign exchange premium shall be reduced to
a flat rate of one (1) percent for the first (6) months and
1/32 of one percent per month thereafter up to a maximum
period of one year, to be applied on crude oil' shipments
from January 1, 1987. Shipments with outstanding
financing as of January 1, 1987 shall be charged on the
basis of the fee applicable to the remaining period of
financing.
2. In addition, for shipments loaded after January 1987, oil
companies shall be allowed to recover financing charges
directly from the OPSF per barrel of crude oil based on the
following schedule:

F
i
n
a
n
c
i
n
g
P
e
r
i
o
d
R
e
i
m
b
u
r
s
e
m
e
n
t
R
a
t
e
P
e
s
o
s
p
e
r

B
a
r
r
e
l
Less than 180 days None
180 days to 239 days 1.90
241 (sic) days to 299 4.02
300 days to 369 (sic) days 6.16
360 days or more 8.28
The above rates shall be subject to review every sixty
days. 22
Pursuant to this circular, the Department of Finance, in its letter of 18 February 1987, advised the
Office of Energy Affairs as follows:
HON. VICENTE T. PATERNO
Deputy Executive Secretary
For Energy Affairs
Office of the President
Makati, Metro Manila
Dear Sir:
This refers to the letters of the Oil Industry dated December 4, 1986 and
February 5, 1987 and subsequent discussions held by the Price Review
committee on February 6, 1987.
On the basis of the representations made, the Department of Finance
recognizes the necessity to reduce the foreign exchange risk premium
accruing to the Oil Price Stabilization Fund (OPSF). Such a reduction
would allow the industry to recover partly associated financing charges on
crude oil imports. Accordingly, the OPSF foreign exchange risk fee shall
be reduced to a flat charge of 1% for the first six (6) months plus 1/32% of
1% per month thereafter up to a maximum period of one year, effective
January 1, 1987. In addition, since the prevailing company take would still
leave unrecovered financing charges, reimbursement may be secured from
the OPSF in accordance with the provisions of the attached Department of
Finance circular. 23
Acting on this letter, the OEA issued on 4 May 1987 Order No. 87-05-096 which contains the
guidelines for the computation of the foreign exchange risk fee and the recovery of financing
charges from the OPSF, to wit:

B. FINANCE CHARGES
1. Oil companies shall be allowed to recover financing
charges directly from the OPSF for both crude and product
shipments loaded after January 1, 1987 based on the
following rates:
F
i
n
a
n
c
i
n
g
P
e
r
i
o
d
R
e
i
m
b
u
r
s
e
m
e
n
t
R
a
t
e
(
P
B

b
l
.
)
Less than 180 days None
180 days to 239 days 1.90
240 days to 229 (sic) days 4.02
300 days to 359 days 6.16
360 days to more 8.28
2. The above rates shall be subject to review every sixty
days. 24
Then on 22 November 1988, the Department of Finance issued Circular No. 4-88 imposing
further guidelines on the recoverability of financing charges, to wit:
Following are the supplemental rules to Department of Finance Circular
No. 1-87 dated February 18, 1987 which allowed the recovery of
financing charges directly from the Oil Price Stabilization Fund. (OPSF):
1. The Claim for reimbursement shall be on a per shipment
basis.
2. The claim shall be filed with the Office of Energy
Affairs together with the claim on peso cost differential for
a particular shipment and duly certified supporting
documents provided for under Ministry of Finance No. 1185.
3. The reimbursement shall be on the form of
reimbursement certificate (Annex A) to be issued by the
Office of Energy Affairs. The said certificate may be used
to offset against amounts payable to the OPSF. The oil
companies may also redeem said certificates in cash if not
utilized, subject to availability of funds. 25
The OEA disseminated this Circular to all oil companies in its Memorandum Circular No. 88-12017. 26
The COA can neither ignore these issuances nor formulate its own interpretation of the laws in
the light of the determination of executive agencies. The determination by the Department of
Finance and the OEA that financing charges are recoverable from the OPSF is entitled to great
weight and consideration. 27 The function of the COA, particularly in the matter of allowing or
disallowing certain expenditures, is limited to the promulgation of accounting and auditing rules

for, among others, the disallowance of irregular, unnecessary, excessive, extravagant, or

unconscionable expenditures, or uses of government funds and properties. 28
(3) Denial of petitioner's claim for reimbursement would be inequitable. Additionally, COA's
claim that petitioner is gaining, instead of losing, from the extension of credit, is belatedly raised
and not supported by expert analysis.
In impeaching the validity of petitioner's assertions, the respondents argue that:
1. The Constitution gives the COA discretionary power to disapprove
irregular or unnecessary government expenditures and as the
monetary claims of petitioner are not allowed by law, the COA acted
within its jurisdiction in denying them;
2. P.D. No. 1956 and E.O. No. 137 do not allow reimbursement of
financing charges from the OPSF;
3. Under the principle of ejusdem generis, the "other factors"
mentioned in the second purpose of the OPSF pursuant to E.O. No.
137 can only include "factors which are of the same nature or
analogous to those enumerated;"
4. In allowing reimbursement of financing charges from OPSF,
Circular No. 1-87 of the Department of Finance violates P.D. No. 1956
and E.O. No. 137; and
5. Department of Finance rules and regulations implementing P.D.
No. 1956 do not likewise allow reimbursement of financing
charges. 29
We find no merit in the first assigned error.
As to the power of the COA, which must first be resolved in view of its primacy, We find the
theory of petitioner that such does not extend to the disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable expenditures, or use of government funds and
properties, but only to the promulgation of accounting and auditing rules for, among others, such
disallowance to be untenable in the light of the provisions of the 1987 Constitution and
related laws.
Section 2, Subdivision D, Article IX of the 1987 Constitution expressly provides:
Sec. 2(l). The Commission on Audit shall have the power, authority, and
duty to examine, audit, and settle all accounts pertaining to the revenue
and receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities, including government-owned

and controlled corporations with original charters, and on a post-audit

basis: (a) constitutional bodies, commissions and offices that have been
granted fiscal autonomy under this Constitution; (b) autonomous state
colleges and universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-governmental entities
receiving subsidy or equity, directly or indirectly, from or through the
government, which are required by law or the granting institution to
submit to such audit as a condition of subsidy or equity. However, where
the internal control system of the audited agencies is inadequate, the
Commission may adopt such measures, including temporary or special
pre-audit, as are necessary and appropriate to correct the deficiencies. It
shall keep the general accounts, of the Government and, for such period as
may be provided by law, preserve the vouchers and other supporting
papers pertaining thereto.
(2) The Commission shall have exclusive authority, subject to the
limitations in this Article, to define the scope of its audit and examination,
establish the techniques and methods required therefor, and promulgate
accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive,
extravagant, or, unconscionable expenditures, or uses of government funds
and properties.
These present powers, consistent with the declared independence of the Commission, 30 are
broader and more extensive than that conferred by the 1973 Constitution. Under the latter, the
Commission was empowered to:
Examine, audit, and settle, in accordance with law and regulations, all
accounts pertaining to the revenues, and receipts of, and expenditures or
uses of funds and property, owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies, or instrumentalities
including government-owned or controlled corporations, keep the general
accounts of the Government and, for such period as may be provided by
law, preserve the vouchers pertaining thereto; and promulgate accounting
and auditing rules and regulations including those for the prevention of
irregular, unnecessary, excessive, or extravagant expenditures or uses of
funds and property. 31
Upon the other hand, under the 1935 Constitution, the power and authority of the COA's
precursor, the General Auditing Office, were, unfortunately, limited; its very role was markedly
passive. Section 2 of Article XI thereof provided:
Sec. 2. The Auditor General shall examine, audit, and settle all accounts
pertaining to the revenues and receipts from whatever source, including
trust funds derived from bond issues; and audit, in accordance with law
and administrative regulations, all expenditures of funds or property

pertaining to or held in trust by the Government or the provinces or

municipalities thereof. He shall keep the general accounts of the
Government and the preserve the vouchers pertaining thereto. It shall be
the duty of the Auditor General to bring to the attention of the proper
administrative officer expenditures of funds or property which, in his
opinion, are irregular, unnecessary, excessive, or extravagant. He shall
also perform such other functions as may be prescribed by law.
As clearly shown above, in respect to irregular, unnecessary, excessive or extravagant
expenditures or uses of funds, the 1935 Constitution did not grant the Auditor General the power
to issue rules and regulations to prevent the same. His was merely to bring that matter to the
attention of the proper administrative officer.
The ruling on this particular point, quoted by petitioner from the cases of Guevarra vs. Gimenez
32
and Ramos vs. Aquino, 33 are no longer controlling as the two (2) were decided in the light of
the 1935 Constitution.
There can be no doubt, however, that the audit power of the Auditor General under the 1935
Constitution and the Commission on Audit under the 1973 Constitution authorized them to
disallow illegal expenditures of funds or uses of funds and property. Our present Constitution
retains that same power and authority, further strengthened by the definition of the COA's
general jurisdiction in Section 26 of the Government Auditing Code of the Philippines 34 and
Administrative Code of 1987. 35 Pursuant to its power to promulgate accounting and auditing
rules and regulations for the prevention of irregular, unnecessary, excessive or extravagant
expenditures or uses of funds, 36 the COA promulgated on 29 March 1977 COA Circular No. 7755. Since the COA is responsible for the enforcement of the rules and regulations, it goes without
saying that failure to comply with them is a ground for disapproving the payment of the proposed
expenditure. As observed by one of the Commissioners of the 1986 Constitutional Commission,
Fr. Joaquin G. Bernas: 37
It should be noted, however, that whereas under Article XI, Section 2, of
the 1935 Constitution the Auditor General could not correct "irregular,
unnecessary, excessive or extravagant" expenditures of public funds but
could only "bring [the matter] to the attention of the proper administrative
officer," under the 1987 Constitution, as also under the 1973 Constitution,
the Commission on Audit can "promulgate accounting and auditing rules
and regulations including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant, or unconscionable
expenditures or uses of government funds and properties." Hence, since
the Commission on Audit must ultimately be responsible for the
enforcement of these rules and regulations, the failure to comply with
these regulations can be a ground for disapproving the payment of a
proposed expenditure.
Indeed, when the framers of the last two (2) Constitutions conferred upon the COA a more active
role and invested it with broader and more extensive powers, they did not intend merely to make

the COA a toothless tiger, but rather envisioned a dynamic, effective, efficient and independent
watchdog of the Government.
The issue of the financing charges boils down to the validity of Department of Finance Circular
No. 1-87, Department of Finance Circular No. 4-88 and the implementing circulars of the OEA,
issued pursuant to Section 8, P.D. No. 1956, as amended by E.O. No. 137, authorizing it to
determine "other factors" which may result in cost underrecovery and a consequent
reimbursement from the OPSF.
The Solicitor General maintains that, following the doctrine of ejusdem generis, financing
charges are not included in "cost underrecovery" and, therefore, cannot be considered as one of
the "other factors." Section 8 of P.D. No. 1956, as amended by E.O. No. 137, does not explicitly
define what "cost underrecovery" is. It merely states what it includes. Thus:
. . . "Cost underrecovery" shall include the following:
i. Reduction in oil company takes as directed by the Board of Energy
without the corresponding reduction in the landed cost of oil inventories in
the possession of the oil companies at the time of the price change;
ii. Reduction in internal ad valorem taxes as a result of foregoing
government mandated price reductions;
iii. Other factors as may be determined by the Ministry of Finance to result
in cost underrecovery.
These "other factors" can include only those which are of the same class or nature as the two
specifically enumerated in subparagraphs (i) and (ii). A common characteristic of both is that
they are in the nature of government mandated price reductions. Hence, any other factor which
seeks to be a part of the enumeration, or which could qualify as a cost underrecovery, must be of
the same class or nature as those specifically enumerated.
Petitioner, however, suggests that E.O. No. 137 intended to grant the Department of Finance
broad and unrestricted authority to determine or define "other factors."
Both views are unacceptable to this Court.
The rule of ejusdem generis states that "[w]here general words follow an enumeration of persons
or things, by words of a particular and specific meaning, such general words are not to be
construed in their widest extent, but are held to be as applying only to persons or things of the
same kind or class as those specifically mentioned. 38 A reading of subparagraphs (i) and (ii)
easily discloses that they do not have a common characteristic. The first relates to price reduction
as directed by the Board of Energy while the second refers to reduction in internal ad valorem
taxes. Therefore, subparagraph (iii) cannot be limited by the enumeration in these subparagraphs.
What should be considered for purposes of determining the "other factors" in subparagraph (iii)

is the first sentence of paragraph (2) of the Section which explicitly allows cost underrecovery
only if such were incurred as a result of the reduction of domestic prices of petroleum products.
Although petitioner's financing losses, if indeed incurred, may constitute cost underrecovery in
the sense that such were incurred as a result of the inability to fully offset financing expenses
from yields in money market placements, they do not, however, fall under the foregoing
provision of P.D. No. 1956, as amended, because the same did not result from the reduction of
the domestic price of petroleum products. Until paragraph (2), Section 8 of the decree, as
amended, is further amended by Congress, this Court can do nothing. The duty of this Court is
not to legislate, but to apply or interpret the law. Be that as it may, this Court wishes to
emphasize that as the facts in this case have shown, it was at the behest of the Government that
petitioner refinanced its oil import payments from the normal 30-day trade credit to a maximum
of 360 days. Petitioner could be correct in its assertion that owing to the extended period for
payment, the financial institution which refinanced said payments charged a higher interest,
thereby resulting in higher financing expenses for the petitioner. It would appear then that equity
considerations dictate that petitioner should somehow be allowed to recover its financing losses,
if any, which may have been sustained because it accommodated the request of the Government.
Although under Section 29 of the National Internal Revenue Code such losses may be deducted
from gross income, the effect of that loss would be merely to reduce its taxable income, but not
to actually wipe out such losses. The Government then may consider some positive measures to
help petitioner and others similarly situated to obtain substantial relief. An amendment, as
aforestated, may then be in order.
Upon the other hand, to accept petitioner's theory of "unrestricted authority" on the part of the
Department of Finance to determine or define "other factors" is to uphold an undue delegation of
legislative power, it clearly appearing that the subject provision does not provide any standard
for the exercise of the authority. It is a fundamental rule that delegation of legislative power may
be sustained only upon the ground that some standard for its exercise is provided and that the
legislature, in making the delegation, has prescribed the manner of the exercise of the delegated
authority. 39
Finally, whether petitioner gained or lost by reason of the extensive credit is rendered irrelevant
by reason of the foregoing disquisitions. It may nevertheless be stated that petitioner failed to
disprove COA's claim that it had in fact gained in the process. Otherwise stated, petitioner failed
to sufficiently show that it incurred a loss. Such being the case, how can petitioner claim for
reimbursement? It cannot have its cake and eat it too.
II. Anent the claims arising from sales to the National Power Corporation, We find for the
petitioner. The respondents themselves admit in their Comment that underrecovery arising from
sales to NPC are reimbursable because NPC was granted full exemption from the payment of
taxes; to prove this, respondents trace the laws providing for such exemption. 40 The last law
cited is the Fiscal Incentives Regulatory Board's Resolution No. 17-87 of 24 June 1987 which
provides, in part, "that the tax and duty exemption privileges of the National Power Corporation,
including those pertaining to its domestic purchases of petroleum and petroleum products . . . are
restored effective March 10, 1987." In a Memorandum issued on 5 October 1987 by the Office
of the President, NPC's tax exemption was confirmed and approved.

Furthermore, as pointed out by respondents, the intention to exempt sales of petroleum products
to the NPC is evident in the recently passed Republic Act No. 6952 establishing the Petroleum
Price Standby Fund to support the OPSF. 41 The pertinent part of Section 2, Republic Act No.
6952 provides:
Sec. 2. Application of the Fund shall be subject to the following
conditions:
(1) That the Fund shall be used to reimburse the oil
companies for (a) cost increases of imported crude oil and
finished petroleum products resulting from foreign
exchange rate adjustments and/or increases in world market
prices of crude oil; (b) cost underrecovery incurred as a
result of fuel oil sales to the National Power Corporation
(NPC); and (c) other cost underrecoveries incurred as may
be finally decided by the Supreme
Court; . . .
Hence, petitioner can recover its claim arising from sales of petroleum products to the National
Power Corporation.
III. With respect to its claim for reimbursement on sales to ATLAS and MARCOPPER,
petitioner relies on Letter of Instruction (LOI) 1416, dated 17 July 1984, which ordered the
suspension of payments of all taxes, duties, fees and other charges, whether direct or indirect,
due and payable by the copper mining companies in distress to the national government.
Pursuant to this LOI, then Minister of Energy, Hon. Geronimo Velasco, issued Memorandum
Circular No. 84-11-22 advising the oil companies that Atlas Consolidated Mining Corporation
and Marcopper Mining Corporation are among those declared to be in distress.
In denying the claims arising from sales to ATLAS and MARCOPPER, the COA, in its 18
August 1989 letter to Executive Director Wenceslao R. de la Paz, states that "it is our opinion
that LOI 1416 which implements the exemption from payment of OPSF imposts as effected by
OEA has no legal basis;" 42 in its Decision No. 1171, it ruled that "the CPI (CALTEX) (Caltex)
has no authority to claim reimbursement for this uncollected impost because LOI 1416 dated
July 17, 1984, . . . was issued when OPSF was not yet in existence and could not have
contemplated OPSF imposts at the time of its formulation." 43 It is further stated that: "Moreover,
it is evident that OPSF was not created to aid distressed mining companies but rather to help the
domestic oil industry by stabilizing oil prices."
In sustaining COA's stand, respondents vigorously maintain that LOI 1416 could not have
intended to exempt said distressed mining companies from the payment of OPSF dues for the
following reasons:
a. LOI 1416 granting the alleged exemption was issued on July 17, 1984.
P.D. 1956 creating the OPSF was promulgated on October 10, 1984, while
E.O. 137, amending P.D. 1956, was issued on February 25, 1987.

b. LOI 1416 was issued in 1984 to assist distressed copper mining

companies in line with the government's effort to prevent the collapse of
the copper industry. P.D No. 1956, as amended, was issued for the
purpose of minimizing frequent price changes brought about by exchange
rate adjustments and/or changes in world market prices of crude oil and
imported petroleum product's; and
c. LOI 1416 caused the "suspension of all taxes, duties, fees, imposts and
other charges, whether direct or indirect, due and payable by the copper
mining companies in distress to the Notional and Local Governments . . ."
On the other hand, OPSF dues are not payable by (sic) distressed copper
companies but by oil companies. It is to be noted that the copper mining
companies do not pay OPSF dues. Rather, such imposts are built in or
already incorporated in the prices of oil products. 44
Lastly, respondents allege that while LOI 1416 suspends the payment of taxes by distressed
mining companies, it does not accord petitioner the same privilege with respect to its obligation
to pay OPSF dues.
We concur with the disquisitions of the respondents. Aside from such reasons, however, it is
apparent that LOI 1416 was never published in the Official Gazette 45 as required by Article 2 of
the Civil Code, which reads:
Laws shall take effect after fifteen days following the completion of their
publication in the Official Gazette, unless it is otherwise provided. . . .
In applying said provision, this Court ruled in the case of Taada vs. Tuvera: 46
WHEREFORE, the Court hereby orders respondents to publish in the
Official Gazette all unpublished presidential issuances which are of
general application, and unless so published they shall have no binding
force and effect.
Resolving the motion for reconsideration of said decision, this Court, in its Resolution
promulgated on 29 December 1986, 47 ruled:
We hold therefore that all statutes, including those of local application and
private laws, shall be published as a condition for their effectivity, which
shall begin fifteen days after publication unless a different effectivity date
is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders
promulgated by the President in the exercise of legislative powers
whenever the same are validly delegated by the legislature or, at present,
directly conferred by the Constitution. Administrative rules and

regulations must also be published if their purpose is to enforce or

implement existing laws pursuant also to a valid delegation.
xxx xxx xxx
WHEREFORE, it is hereby declared that all laws as above defined shall
immediately upon their approval, or as soon thereafter as possible, be
published in full in the Official Gazette, to become effective only after
fifteen days from their publication, or on another date specified by the
legislature, in accordance with Article 2 of the Civil Code.
LOI 1416 has, therefore, no binding force or effect as it was never published in the Official
Gazette after its issuance or at any time after the decision in the abovementioned cases.
Article 2 of the Civil Code was, however, later amended by Executive Order No. 200, issued on
18 June 1987. As amended, the said provision now reads:
Laws shall take effect after fifteen days following the completion of their
publication either in the Official Gazette or in a newspaper of general
circulation in the Philippines, unless it is otherwise provided.
We are not aware of the publication of LOI 1416 in any newspaper of general circulation
pursuant to Executive Order No. 200.
Furthermore, even granting arguendo that LOI 1416 has force and effect, petitioner's claim must
still fail. Tax exemptions as a general rule are construed strictly against the grantee and liberally
in favor of the taxing authority. 48 The burden of proof rests upon the party claiming exemption
to prove that it is in fact covered by the exemption so claimed. The party claiming exemption
must therefore be expressly mentioned in the exempting law or at least be within its purview by
clear legislative intent.
In the case at bar, petitioner failed to prove that it is entitled, as a consequence of its sales to
ATLAS and MARCOPPER, to claim reimbursement from the OPSF under LOI 1416. Though
LOI 1416 may suspend the payment of taxes by copper mining companies, it does not give
petitioner the same privilege with respect to the payment of OPSF dues.
IV. As to COA's disallowance of the amount of P130,420,235.00, petitioner maintains that the
Department of Finance has still to issue a final and definitive ruling thereon; accordingly, it was
premature for COA to disallow it. By doing so, the latter acted beyond its jurisdiction. 49
Respondents, on the other hand, contend that said amount was already disallowed by the OEA
for failure to substantiate it. 50 In fact, when OEA submitted the claims of petitioner for preaudit, the abovementioned amount was already excluded.
An examination of the records of this case shows that petitioner failed to prove or substantiate its
contention that the amount of P130,420,235.00 is still pending before the OEA and the DOF.
Additionally, We find no reason to doubt the submission of respondents that said amount has

already been passed upon by the OEA. Hence, the ruling of respondent COA disapproving said
claim must be upheld.
V. The last issue to be resolved in this case is whether or not the amounts due to the OPSF from
petitioner may be offset against petitioner's outstanding claims from said fund. Petitioner
contends that it should be allowed to offset its claims from the OPSF against its contributions to
the fund as this has been allowed in the past, particularly in the years 1987 and 1988. 51
Furthermore, petitioner cites, as bases for offsetting, the provisions of the New Civil Code on
compensation and Section 21, Book V, Title I-B of the Revised Administrative Code which
provides for "Retention of Money for Satisfaction of Indebtedness to Government." 52 Petitioner
also mentions communications from the Board of Energy and the Department of Finance that
supposedly authorize compensation.
Respondents, on the other hand, citing Francia vs. IAC and Fernandez, 53 contend that there can
be no offsetting of taxes against the claims that a taxpayer may have against the government, as
taxes do not arise from contracts or depend upon the will of the taxpayer, but are imposed by
law. Respondents also allege that petitioner's reliance on Section 21, Book V, Title I-B of the
Revised Administrative Code, is misplaced because "while this provision empowers the COA to
withhold payment of a government indebtedness to a person who is also indebted to the
government and apply the government indebtedness to the satisfaction of the obligation of the
person to the government, like authority or right to make compensation is not given to the private
person." 54 The reason for this, as stated in Commissioner of Internal Revenue vs. Algue, Inc., 55
is that money due the government, either in the form of taxes or other dues, is its lifeblood and
should be collected without hindrance. Thus, instead of giving petitioner a reason for
compensation or set-off, the Revised Administrative Code makes it the respondents' duty to
collect petitioner's indebtedness to the OPSF.
Refuting respondents' contention, petitioner claims that the amounts due from it do not arise as a
result of taxation because "P.D. 1956, amended, did not create a source of taxation; it instead
established a special fund . . .," 56 and that the OPSF contributions do not go to the general fund
of the state and are not used for public purpose, i.e., not for the support of the government, the
administration of law, or the payment of public expenses. This alleged lack of a public purpose
behind OPSF exactions distinguishes such from a tax. Hence, the ruling in the Francia case is
inapplicable.
Lastly, petitioner cites R.A. No. 6952 creating the Petroleum Price Standby Fund to support the
OPSF; the said law provides in part that:
Sec. 2. Application of the fund shall be subject to the following
conditions:
xxx xxx xxx
(3) That no amount of the Petroleum Price Standby Fund
shall be used to pay any oil company which has an

outstanding obligation to the Government without said

obligation being offset first, subject to the requirements of
compensation or offset under the Civil Code.
We find no merit in petitioner's contention that the OPSF contributions are not for a public
purpose because they go to a special fund of the government. Taxation is no longer envisioned as
a measure merely to raise revenue to support the existence of the government; taxes may be
levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as to be within the police power of the
state. 57 There can be no doubt that the oil industry is greatly imbued with public interest as it
vitally affects the general welfare. Any unregulated increase in oil prices could hurt the lives of a
majority of the people and cause economic crisis of untold proportions. It would have a chain
reaction in terms of, among others, demands for wage increases and upward spiralling of the cost
of basic commodities. The stabilization then of oil prices is of prime concern which the state, via
its police power, may properly address.
Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that the source of OPSF is
taxation. No amount of semantical juggleries could dim this fact.
It is settled that a taxpayer may not offset taxes due from the claims that he may have against the
government. 58 Taxes cannot be the subject of compensation because the government and
taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a
debt, demand, contract or judgment as is allowed to be set-off. 59
We may even further state that technically, in respect to the taxes for the OPSF, the oil
companies merely act as agents for the Government in the latter's collection since the taxes are,
in reality, passed unto the end-users the consuming public. In that capacity, the petitioner, as
one of such companies, has the primary obligation to account for and remit the taxes collected to
the administrator of the OPSF. This duty stems from the fiduciary relationship between the two;
petitioner certainly cannot be considered merely as a debtor. In respect, therefore, to its
collection for the OPSF vis-a-vis its claims for reimbursement, no compensation is likewise
legally feasible. Firstly, the Government and the petitioner cannot be said to be mutually debtors
and creditors of each other. Secondly, there is no proof that petitioner's claim is already due and
liquidated. Under Article 1279 of the Civil Code, in order that compensation may be proper, it is
necessary that:
(1) each one of the obligors be bound principally, and that he be at the
same time a principal creditor of the other;
(2) both debts consist in a sum of :money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the
latter has been stated;
(3) the two (2) debts be due;
(4) they be liquidated and demandable;

(5) over neither of them there be any retention or controversy, commenced

by third persons and communicated in due time to the debtor.
That compensation had been the practice in the past can set no valid precedent. Such a practice
has no legal basis. Lastly, R.A. No. 6952 does not authorize oil companies to offset their claims
against their OPSF contributions. Instead, it prohibits the government from paying any amount
from the Petroleum Price Standby Fund to oil companies which have outstanding obligations
with the government, without said obligation being offset first subject to the rules on
compensation in the Civil Code.
WHEREFORE, in view of the foregoing, judgment is hereby rendered AFFIRMING the
challenged decision of the Commission on Audit, except that portion thereof disallowing
petitioner's claim for reimbursement of underrecovery arising from sales to the National Power
Corporation, which is hereby allowed.
With costs against petitioner.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Grio-Aquino,
Medialdea, Regalado, Romero and Nocon, JJ., concur.
Footnotes
1 Petitioner explicitly states in the opening paragraph of the petition that
its petition is for review under Section 1, Rule 44 of the Rules of Court.
2 Sec. 7, Subdivision A, Article IX; see also Section 35, Chapter 5,
Subtitle B, Title I, Book V, Administrative Code of 1987.
3 The Civil Service Commission, the Commission on Elections and the
Commission on Audit.
4 Land Bank of the Philippines vs. COA, 190 SCRA 154 [1990].
5 Rollo, 6-7.
6 Rollo, 65.
7 Id., 66.
8 Rollo, 67-68.
9 Id., 76.
10 Id., 77.

11 Rollo, 58-59.
12 Rollo, 60-62.
13 Rollo, 78-89.
14 Id., 89-90.
15 Rollo, 53-56. Commissioner Fernandez is of the opinion that petitioner
should allowed to recover financing charges stating:
I find merit in claimants (sic) reliance on and invocation of Department of
Finance Circular No. 1-87, dated February 18, 1987, in support of such
claims. To my mind, the authority embodied in such circular coupled with
the justification therefor as set forth by the Secretary of Finance in his
letter of even date to the then Deputy Secretary for Energy Affairs as well
as the Memorandum for the President dated November 6, 1989 from the
Acting Secretary of Finance, alluded to and subjoined herein, cannot but
deserve full faith and credit. I perceive no compelling reason for this
Commission to overturn or disturb these pronouncements which treat of a
policy matter the resolution which (sic) appropriately pertains to the
executive agency concerned, the Department of Finance in this case.
16 Rollo, 8-9.
17 Caltex Philippines, Inc., petitioner herein.
18 Op. cit., 124.
19 Rollo, 143-185.
20 Id., 188.
21 Id., 191.
22 Rollo, 23.
23 Rollo, 24-25.
24 Id., 25.
25 Rollo, 25-26.
26 Id., 26.

27 Citing Ramos vs. CIR, 21 SCRA 1282 [1967]; Sagun vs. PHHC, 162
SCRA 411 [1988]; Hijo Plantation, Inc. vs. Central Bank, 164 SCRA 192
[1988]; Beautifont, Inc. vs. Court of Appeals, 157 SCRA 481 [1988].
28 Citing Section 11, Book V. Administrative Code of 1987; Guevara vs.
Gimenez, 6 SCRA 807 [1962].
29 Rollo, 155-164.
30 Sec. 1, Subdivision A, Article IX.
31 Paragraph 1, Section 2, Subdivision D, Article XII.
32 Supra.
33 39 SCRA 641 [1971].
34 P.D. No. 1445.
35 Sec. 11, Chapter 4, Subtitle B, Book V.
36 The 1987 Constitution adds one (1) more category of such expenditure
on use unconscionable.
37 BERNAS, J., The Constitution of the Republic of the Philippines: A
Commentary, vol. II, 1988 ed., 372.
38 Smith Bell and Co., Ltd. vs. Register of Deeds of Davao, 96 Phil. 53
[1954], citing BLACK on Interpretation of Law. 2nd ed., 203; see also
Republic vs. Migrino, 189 SCRA 289 [1990].
39 Philippine Communications Satellite Corp. vs. Alcuaz, et al., 180
SCRA 218 [1989].
40 Rollo, 176-177.
41 Id., 184.
42 Rollo, 62; Annex "C," 3.
43 Id., 56; Annex "A."
44 Rollo, 174-176.
45 As verified from the National Printing Office. A certification to this
effect, dated 19 November 1991, signed by Heriberto Bacalla, Chief,

Official Gazette Publication, of the National Printing Office, is attached to

the rollo.
46 136 SCRA 27 [1985].
47 146 SCRA 446 [1986].
48 CIR vs. Mitsubishi Corp., 181 SCRA 214 [1990]; CIR vs. P.J. Kiener
Co., Ltd., 65 SCRA 142 [1975].
49 Rollo, 49.
50 Id., 173.
51 Rollo, 42-47.
52 Id., 48-49.
53 162 SCRA 753 [1988].
54 Op. cit., 171.
55 158 SCRA 9 [1988].
56 Petitioner's Memorandum, 8.
57 Lutz vs. Araneta, 98 Phil. 148 [1955]; Gaston vs. Republic Planters
Bank, 158 SCRA 626 [1988].
58 Francia vs. IAC, supra.; Republic vs. Mambulao Lumber Co., 4 SCRA
622 [1962].
59 Cordero vs. Gonda, 18 SCRA 331 [1966].

The Lawphil Project - Arellano Law Foundation