Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 159700

June 30, 2005

ROHBERT A. AMBROS, President, Employees Association, in his own behalf and in

representation of his co-employees, numbering two hundred thirty-five, in the National
Tobacco Administration, petitioners
vs.
The COMMISSION ON AUDIT (COA) and the NATIONAL TOBACCO ADMINISTRATION
(NTA), respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for certiorari under Rule 65 of the Rules of Court filed by Rohbert A.
Ambros, in his own behalf and as President of the Employees Association in the National Tobacco
Administration, seeking to nullify Commission on Audit (COA) Decision No. 2002-162 1 dated August
15, 2002. The assailed COA decision disallowed the grant of the Educational Assistance Incentive
Bonus to the employees of the National Tobacco Administration (NTA) who were hired on or after
July 1, 1989, the date when Republic Act (R.A.) No. 6758 or the Salary Standardization Law of
19892 took effect. Likewise sought to be set aside is COA Resolution No. 2003-109 dated July 17,
2003, denying the reconsideration of the assailed decision.
Factual Background of the Case
The present case is an offshoot of National Tobacco Administration v. Commission on Audit, G.R.
No. 1193853and stemmed from the following facts:
Prior to the enactment of R.A. No. 6758, the NTA had been granting mid-year Social Amelioration
Benefit (SAB) to its officials and employees, equivalent to one-and-a-half (1-1/2) month of their basic
salaries, sourced from its corporate funds. From 1989 up to 1993, due to financial or budgetary
constraints, the said benefit was reduced to one month of the basic salary. In May 1993, the SAB
was renamed Educational Assistance Incentive Bonus (EAIB), the avowed purpose of which was to
encourage its beneficiaries to pursue graduate studies and to finance the schooling of their children.
Sometime in February 1994, the Resident Auditor of the COA in the NTA, Dalisay E. Aracan, issued
a Notice of Disallowance of the payment of the EAIB for the calendar year 1993 stating that the NTA
had no statutory authority to grant the incentive. Again, in January 1995, the same Resident Auditor
caused the disallowance of the said benefit paid in 1994 for the same reason. The COA, in its
Decision dated February 7, 1995, affirmed the disallowance of the EAIB.
Consequently, the NTA, then as the petitioner and through its then Administrator Amante Siapno and
other employees, filed with the Court the petition in G.R. No. 119385 which sought to nullify the
February 7, 1995 COA Decision disallowing the EAIB.

On August 5, 1999, the Court rendered the decision in G.R. No. 119385 in favor of the petitioners
therein and lifting the said disallowance. The dispositive portion of the said decision reads:
WHEREFORE, the petition is hereby GRANTED; the assailed COA Decision No. 95-108 is SET
ASIDE, and the disallowance in question is LIFTED. No pronouncement as to costs.
SO ORDERED.
While G.R. No. 119385 was pending resolution, the NTA continued to grant the EAIB to its
employees who were incumbents as of July 1, 1989. The NTA, however, discontinued its payment to
those who were hired on or after the said date.
Thereafter, in another case entitled Irene V. Cruz v. Commission on Audit,4 the issue raised was
whether the COA gravely abused its discretion when it disallowed the payment of the Social
Amelioration Benefit (SAB) to the employees hired by the Sugar Regulatory Administration (SRA)
after October 31, 1989.5 The SRA had granted the SAB to its employees since 1963. After the
enactment of R.A. No. 6758, the COA allowed the continued payment of the SAB to the SRA
employees but only to those hired before October 31, 1989. Ruling on the issue raised in the said
case, the Court held that all the employees of the SRA, regardless of the date of hiring, are entitled
to the SAB granted by the said government-owned and controlled corporation.
Emboldened by the Courts decision in the Cruz case, five employees of the NTA, namely, Primitivo
Abalos, Jr., Anthony Lewis (now separated from service), Rolando Magundayao, Marivic Espolong
and Carmelita Albano, all hired between the period of July 1, 1989 to October 31, 1989, filed their
respective claims for the EAIB, including back pay from date of hiring. The NTA granted these
claims.
On post-audit, however, the NTA Auditor disallowed the payment of the EAIB to the above-named
employees on the ground that they were non-incumbents as of July 1, 1989. The Deputy
Administrator for Support Services of the NTA sought reconsideration of the disallowance on the
following grounds:
1. The payment of the EAIB to the above-named personnel was due to the extension of the
cut-off date from July 1, 1989 to October 31, 1989;
2. The said NTA personnel were employed between the period July 10, 1989 and September
26, 1989 which was within the extended cut-off date of October 31, 1989 and were actually
receiving the said allowance;
3. The NTA allowed the payment of said benefit not only for humanitarian reasons but also in
the belief that said personnel were really entitled to receive said allowance following the
ruling laid down in COA Decision No. 95-074 dated January 27, 1995 which recognized the
extension of the cut-off date of DBM-CCC No. 10, from July 1, 1989 to October 31, 1989;
4. The said employees were similarly situated as the NEA employees who were the subject
of COA Decision No. 95-074; and
5. That Section 5.6 of DBM-CCC No. 10 extending the cut-off date from July 1, 1989 to
October 31, 1989 should be made the basis for entitlement to said benefits. 6

Acting thereon, the NTA Auditor recommended the lifting of the disallowance of the EAIB. However,
the Director, Corporate Audit Office II, reversed the Auditors action and recommended the
disallowance of the said benefit. The Deputy Administrator for Support Services of the NTA then
elevated the matter for review to the COA which, in the assailed COA Decision No. 2002-162 dated
August 15, 2002, affirmed the disallowance of the EAIB to the NTA employees who were nonincumbents as of July 1, 1989.
In so ruling, the COA cited Section 12 of R.A. No. 6758 which reads:
Sec. 12. Consolidation of Allowances and Compensation. All allowances, except for representation
and transportation allowances; clothing and laundry allowances; subsistence allowance of marine
officers and crew on board government vessels and hospital personnel; hazard pay; allowances of
foreign service personnel stationed abroad; and such other additional compensation not, otherwise,
specified herein as may be determined by the DBM, shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being
received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall
continue to be authorized.
Existing additional compensation of any national government official or employee paid from local
funds of a local government unit shall be absorbed into the basic salary of said official or employee
and shall be paid by the National Government.
Relying on the second sentence (first paragraph) of the above-quoted provision, the COA reasoned
that the legislative intent was to limit to the incumbents, as of July 1, 1989, the right to receive such
additional compensation not integrated into the standardized salary rates.
The COA further explained that the NTA employees who were hired between July 1, 1989 to October
31, 1989 could not claim the EAIB because Department of Budget and Management Corporate
Compensation Circular (DBM-CCC) No. 10, the Implementing Rules of R.A. No. 6758, was declared
ineffective by the Court in De Jesus v. Commission on Audit7 due to non-publication thereof in the
Official Gazette or in a newspaper of general circulation as required by law. Necessarily, the
extension of the cut-off date from July 1, 1989 to October 31, 1989 provided in Section 5.6 of the
said circular was, likewise, without force and effect. The COA noted that when DBM-CCC No. 10
was re-issued and subsequently published in the Official Gazette on March 1, 1999, the extended
cut-off date was deleted from Section 5.6 thereof.
The NTA, through its then Administrator Carlitos S. Encarnacion, moved for the reconsideration of
the said COA decision as it prayed for the lifting of the disallowance and the declaration that all NTA
employees, regardless of the date of hiring are entitled to the EAIB. In the assailed COA Resolution
No. 2003-109 dated July 17, 2003, however, the NTAs motion for reconsideration was denied. The
COA cited Government Service Insurance System v. Commission on Audit,8 where this Court stated
that:
The date July 1, 1989 is important only for determining whether an employee is an incumbent and
receiving the allowance prior to the laws effectivity in order to ascertain if such employee is qualified
to its continued grant. 9
According to the COA, it is evident from this statement that July 1, 1989 was indicated as a
qualifying date in order to ascertain whether the non-integrated benefits and allowances as provided
in R.A. No. 6758 shall continue to be granted to incumbent employees prior to the said date.

With the denial of its motion for reconsideration, the NTA issued a Memorandum dated August 28,
2003, directing its employees to settle the disallowed EAIB through payroll deduction. The said
memorandum reads:
Pursuant to the Commission on Audit (COA) Decision No. 2003-109 dated 17 July 2003, affirming
the disallowance on the payment of the Educational Assistance Incentive Bonus (EAIB) to
employees of the National Tobacco Administration (NTA) hired after 01 July 1989 and in view of the
undertaking executed by said claimants to refund the EAIB received in CY 2002 to NTA in the event
that the COA Commission Proper denies NTAs Motion for Reconsideration, you are hereby directed
to settle the disallowance through payroll deduction from October 2003 to September 2004. 10
Aggrieved, petitioner Ambros, President of the Employees Association in the NTA, 11 in his own behalf
and in representation of his co-employees, including the five earlier mentioned employees, filed with
the Court the present petition for certiorari seeking the nullification of the assailed COA decisions.
When required to file its comment on the petition, the NTA filed the Manifestation in Lieu of Comment
dated January 26, 2004, stating that it is joining the petitioners in their cause and that it is not
opposing their petition as it finds the contentions thereof meritorious.12
The Petitioners Case
The petitioners assail the classification made by the COA, i.e., only those incumbents as of July 1,
1989 are entitled to the EAIB and those employees hired on or after the said date are not, as having
no legal basis. They invoke the Courts pronouncement in Cruz that "[t]he date of hiring of an
employee cannot be considered as a substantial distinction. The employees, based on the title or
position they were holding, were exposed to the same type of work, regardless of the date they were
hired. The date of hiring is not among the factors that shall be taken into consideration in fixing
compensation or granting of benefits." The petitioners thus contend that the date of hiring can never
be considered as a substantial difference.
According to the petitioners, the GSIS case cited by the COA is inapplicable to the present case
because what was involved therein was an allowance. On the other hand, the EAIB is not an
allowance but is in the nature of a financial assistance. As such, it belongs to a different genus of
benefits with those contemplated in R.A. No. 6758 and DBM-CCC No. 10. The EAIB is granted to
NTA employees on pure liberality of the government subject, however, to availability of corporate
funds.
It is also pointed out by the petitioners that most of them belong to the younger generation of
employees who are keen on pursuing higher education. The EAIB would enable them to pursue
further their career development and produce more competent, useful and responsible pool of
human resources. They aver that they should not be treated differently from those who were hired
before July 1, 1989 as they invoke the principle of equal pay for substantially equal work.
The petitioners thus pray that COA Decision No. 2002-162 dated August 15, 2002 and COA
Resolution No. 2003-109 dated July 17, 2003 be set aside. Further, they urge the Court to declare
them, who were hired after July 1, 1989, to be similarly entitled to the EAIB as those who were
incumbents as of the said date.
Respondent COAs Counter-Arguments
For its part, the COA, through the Solicitor General, defends the disallowance of the EAIB to the
employees of the NTA who were hired on or after July 1, 1989. It argues that in G.R. No. 119385, the
case earlier mentioned involving the continued grant of the EAIB to NTA employees, the Court ruled

that the said benefit granted prior to the effectivity of R.A. No. 6758 should continue to be authorized
on the basis of the second sentence (first paragraph) of Section 12, 13 in relation to Section
1714 thereof. Accordingly, the COA explains, the Court allowed the EAIB to be paid to the petitioners
in G.R. No. 119385 for the following reasons: "a) the EAIB is distinct and separate from the list
enumerated in the first sentence of Section 12 of R.A. No. 6758, otherwise referred to as the
integrated allowance/benefits. Hence, it is a non-integrated benefit covered by the second sentence
thereof; b) the recipients were incumbents when R.A. No. 6758 took effect on July 1, 1989; c) the
recipients were receiving the EAIB at the time."15
The COA asserts that the ruling of the Court in G.R. No. 119385 is in consonance with Philippine
Ports Authority v. COA,16 Manila International Airport Authority v. COA,17 Philippine International
Trading Corp. v. COA,18 Social Security System v. COA19 and Government Service Insurance System
v. COA,20 where the Court invariably ruled that in view of the enactment of R.A. No. 6758, additional
financial incentives may no longer be granted to government employees. It was, likewise, held in
these cases that incumbent government employees as of July 1, 1989 shall continue to receive the
non-integrated benefits that they have been receiving as of the said date so as not to upset the
legislatures policy on non-diminution of pay and benefits.
The COA posits that since the petitioners in the present case were hired after July 1, 1989 and,
therefore, do not satisfy the requirements of Sections 12 and 17 of R.A. No. 6758, i.e., incumbent
and receiving the EAIB as of July 1, 1989, they are not entitled to receive such benefit enjoyed by
the incumbents as of the said date.
The petitioners reliance on the Cruz case involving the employees of the SRA and their SAB is
allegedly misplaced. The COA contends that the factual milieu of the said case is different from that
obtaining in the present case because in the former, the SRA employees were able to obtain a post
facto approval/ratification of their SAB from the Office of the President in accordance with then
Section 5.521 of DBM-CCC No. 10.
The Issue
The sole substantive issue for the Courts resolution is whether the COA gravely abused its
discretion in disallowing the payment of the EAIB to the employees of the NTA who were nonincumbents of the positions as of July 1, 1989, the date when R.A. No. 6758 took effect.
The Courts Ruling
The COA did not commit any grave abuse of discretion in rendering the assailed decision and
resolution as it properly disallowed the payment of the EAIB to the petitioners in the present case
who were non-incumbents as of July 1, 1989 and were not receiving the same as of the said date.
As held in G.R. No. 119385, the EAIB is
a non-integrated benefit which falls under
the second sentence (first paragraph) of
Section 12 of R.A. No. 6758.
lawphil.net

Preliminarily, it is necessary to refer back to the Courts ruling in G.R. No. 119385. In the said case,
the Court allowed the payment of the EAIB to the petitioners therein to continue on the basis of the
second sentence (first paragraph) of Section 12 of R.A. No. 6758, thus:

 [I]t is safe to hold that subject educational assistance is not one of the fringe benefits within the
contemplation of the first sentence of Section 12 but rather, of the second sentence of Section 12, in
relation to Section 17 of R.A. No. 6758, considering that (1) the recipients were incumbents when
R.A. No. 6758 took effect on July 1, 1989, (2) were, in fact, receiving the same, at the time, and (3)
such additional compensation is distinct and separate from the specific allowances above-listed, as
the former is not integrated into the standardized salary rate. Simply stated, the challenged benefit is
covered by the second sentence of Section 12 of R.A. No. 6758, the application of sub-paragraphs
5.4 and 5.5 of CCC No. 10 being only confined to the first sentence of Section 12, particularly the
last clause thereof which amplifies the "catch-all proviso."22
Again citing the second sentence (first paragraph) of Section 12 of R.A. No. 6758, the Court, in the
said case, took into consideration the intent of Congress to prevent any diminution of the pay and
benefits being received by the incumbents at the time of the enactment of R.A. No. 6758. It,
however, opined that the petitioners therein could not claim that they had acquired a vested right
over the EAIB because the same was always subject to availability of funds. The Court ratiocinated,
thus:
Gleanable from the wordings of the second sentence of Section 12 of R.A. No. 6758 is the intention
of Congress to prevent any diminution of the pay and benefits being received by incumbents at the
time of the enactment of the Salary Standardization Law. Verily, disallowing any such benefit is
against the spirit of the Statute and is inconsistent with the principle of equity which "regards the
spirit and not the letter of the law. Hence, while it cannot be said that the NTA employees have
acquired a vested right over the educational assistance in dispute as it is always subject to
availability of funds, nevertheless, disallowing the same, where funds are available as in the case
under consideration, would be violative of the principle of equity.23
Since the EAIB has been classified by the Court as a non-integrated benefit falling under the second
sentence (first paragraph) of Section 12 of R.A. No. 6758, the issue raised in the present case, i.e.,
whether the employees of the NTA who were non-incumbents of the positions as of July 1, 1989 are
entitled to the same (EAIB), therefore, hinges on the proper interpretation of the said proviso. For
clarity, the proviso is quoted anew below:
Such other additional compensation, whether in cash or in kind, being received by incumbents
only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be
authorized.
The petitioners theorize that this proviso should be construed so as that not only incumbents as of
July 1, 1989 are entitled to the EAIB but also those who were hired thereafter. Regrettably, the
petitioners proffered construction cannot be given effect.
Congress has prescribed July 1, 1989 as the
qualifying date to determine whether
an employee was an incumbent and receiving
the non-integrated benefit, i.e., the EAIB, for
purposes of entitling the employee to its
continued grant.
It is significant to note that the second sentence (first paragraph) of Section 12 of R.A. No. 6758 has
been construed by the Court in not a few cases involving various government-owned and controlled
corporations and government financial institutions. In these cases, which shall be discussed shortly,
the Court has consistently interpreted the proviso to mean that July 1, 1989 was prescribed by the
legislature as the qualifying date to determine whether an employee was

an incumbent and receiving the non-integrated allowance or benefit prior to R.A. No. 6758, for
purposes of entitling the employee to its continued grant.
The seminal case was Philippine Ports Authority v. COA,24 where the issue was whether the officials
of the Philippine Ports Authority (PPA) are still entitled to the rates of their representation and
transportation allowances (RATA) under Letter of Instruction (LOI) No. 97, which were higher than
those authorized by R.A. No. 6758, after July 1, 1989. Ruling in the affirmative, the Court declared
that RATA does not form part of the standardized salary. Rather, it falls under the second sentence
(first paragraph) of Section 12 of R.A. No. 6758 and as such, shall continue to be authorized "only if
they are being received by incumbents as of July 1, 1989." The Court further gave due consideration
to the manifest intent of Congress to limit the benefits, including the RATA, falling under the second
sentence (first paragraph) of Section 12 of R.A. No. 6758 to incumbents only. The pertinent
pronouncement of the Court in the said case is quoted thus:
Under the first sentence, RATA does not form part of the standardized salary.

Now, under the second sentence of Section 12, first paragraph, the RATA enjoyed by these PPA
officials shall continue to be authorized only if they are "being received by incumbents only as of July
1, 1989." RA 6758 has therefore, to this extent, amended LOI No. 97. By limiting the benefit of the
RATA granted by LOI No. 97 toincumbents, Congress has manifested its intent to gradually phase
out this RATA privilege under LOI No. 97 without upsetting its policy of non-diminution of pay.
The legislature has similarly adhered to this policy of non-diminution of pay when it provided for the
transition allowance under Section 17 of RA 6758 which reads:

While Section 12 refers to allowances that are not integrated into the standardized salaries whereas
Section 17 refers to salaries and additional compensation or fringe benefits that are integrated into
the standardized salaries, both sections are intended to protect incumbents who are receiving said
salaries and/or allowances at the time RA 6758 took effect.
An incumbent is a person who is in present possession of an office.
The consequential outcome, under Sections 12 and 17, is that if the incumbent resigns or is
promoted to a higher position, his successor is no longer entitled to his predecessors RATA
privileges under LOI No. 97 or to the transition allowance.25
Still in PPA, the Court explained further the significance of the second sentence (first paragraph) of
Section 12 of R.A. No. 6758 when it addressed the contention of the DBM that starting July 1, 1989,
the RATA is no longer based on 40% of basic salary but on the highest amount of RATA received by
the incumbent as of June 30, 1989. The Court refuted the COAs contention stating that the date July
1, 1989 does not serve as a cut-off date with respect to the amount of RATA. Rather, the said date
becomes crucial only to determine that as of said date, the officer was an incumbent and
was receiving the RATA, for purposes of entitling him to its continued grant. The said explanation is
quoted below, thus:

The respondents, meanwhile, reiterate the position of the Department of Budget and Management
(DBM) that starting July 1, 1989, the RATA is no longer based on 40% of basic salary but on
the highest amount of RATA received by the incumbents as of June 30, 1989.
The resolution of this issue involves the proper interpretation of the second sentence of Section 12,
first paragraph:

The DBM and the respondents construed July 1, 1989 as a cut-off date. According to them
the highest amount the officials are receiving as of July 1, 1989 shall be the amount that shall
continue to be authorized.
We disagree with the foregoing interpretation and rule for the petitioners. The date July 1, 1989 does
not serve as a cut-off date with respect to the amount of RATA. The date July 1, 1989 becomes
crucial only to determine that as of said date, the officer was an incumbent and was receiving the
RATA, for purposes of entitling him to its continued grant. This given date should not be interpreted
as fixing the maximum amount of RATA to be received by the official.26
Similar to that raised in PPA, the issue raised in Manila International Airport Authority v. COA27 was
whether the officials of the Manila International Airport Authority (MIAA) may continue to receive the
RATA at the higher rates prescribed by LOI No. 97 even after July 1, 1989. The Court ruled in the
affirmative as it cited the second sentence (first paragraph) of Section 12 of R.A. No. 6758 and
reiterated its ruling in PPA:
Under the second sentence of the aforementioned provision, such other compensation includes the
RATA. Hence, RATA being received by incumbents as of July 1, 1989 are entitled to continue to
receive the same. Republic Act No. 6758 has, therefore, to this extent, amended LOI No. 97. By
limiting the benefit of the RATA granted by LOI No. 97 to incumbents, Congress has manifested its
intent to gradually phase out this RATA privilege under LOI No. 97 without upsetting its policy of nondiminution of pay.28
The Court in MIAA, likewise, reiterated that the date July 1, 1989 in the second sentence (first
paragraph) of Section 12 of R.A. No. 6758 does not serve as a cut-off date with respect to the
amount of RATA. Rather, the said date becomes crucial only to determine that as of said date, the
officer was an incumbent and was receiving the RATA, for purposes of entitling him to its continued
grant.29
In Philippine International Trading Corp. v. COA,30 the benefit involved was the Car Plan Program
granted by the Philippine International Trading Corp. (PITC) to its officers prior to July 1, 1989. The
COA disallowed the payment of the said benefit after the enactment of R.A. No. 6758. The affected
officials of the PTIC filed the petition with the Court asserting that as incumbent officials they are still
entitled to the said benefit even after July 1, 1989. The Court granted the petition stating that "this
Court has confirmed in Philippine Ports Authority v. Commission on Audit the legislative intent to
protect incumbents who are receiving salaries and/or allowances over and above those authorized
by R.A. No. 6758 to continue to receive them even after the latter law took effect. In reserving the
benefits to incumbents, the legislature has manifested its intent to gradually phase out this privilege
without upsetting the policy of non-diminution of pay and consistent with the rule that laws should
only be applied prospectively in the spirit of fairness and justice." 31 Aside from reiterating the ruling
in PPA, the Court stressed inPTIC that "there was no intention on the part of the legislature to revoke
existing benefits being enjoyed byincumbents of government positions at the time of the passage of
R.A. No. 6758 by virtue of Sections 12 and 17 thereof." 32

In Government Service Insurance System v. COA,33 the Court held that the longevity pay and
childrens allowance granted by the said government financial institution to its employees prior to
July 1, 1989 are non-integrated benefits and likened these benefits to the RATA received by the
employees in PPA, in the sense that: "a) it is also a non-integrated allowance authorized to be
continued for incumbents under Section 12, R.A. No. 6758; and b) the rate thereof did not consist of
a definite amount but was subject to certain factors or stipulations that were nonetheless fixed before
R.A. No. 6758 took effect."34 Applying the ruling in PPA that July 1, 1989 is not determinative of the
highest amount of the non-integrated benefit that an incumbent may receive but that the said date is
important only to determine whether the employee was an incumbent and receiving the benefit prior
to R.A. No. 6758 in order to ascertain if the employee is qualified to its continued grant, the Court
upheld the increase in the amounts of longevity pay and childrens allowance granted by the GSIS
after July 1, 1989 to its employees who were incumbents at the time of the passage of R.A. No.
6758. The Court in GSIS elucidated this point in this wise:
It is thus evident that in adjusting the amount of allowances mentioned above [referring to the
longevity pay and childrens allowance], petitioner GSIS was merely complying with the policy of
non-diminution of pay and benefits enunciated in R.A. No. 6758. This policy does not only pertain
specifically to the amount being received by the incumbent as of July 1,1989, but also to the terms
and conditions attached to these benefits prior to the passage of the statute. Relative to this, it
should be noted that respondent COA did not dispute the fact that these benefits, including the terms
and conditions thereof, are part of a compensation package granted by the GSIS Board to
incumbents even before R.A. No. 6758 took effect. In turn, this compensation package was
incorporated in the 1978 GSIS Revised Compensation System approved by the President, upon
recommendation of the Department of Budget and Management (DBM).
Thus, to peg the amount of these non-integrated allowances at the figure being received by the
incumbent as of July 1, 1989 would vary the terms of the benefits to which the incumbents are
entitled. This could not have been the intendment of the statute, because such interpretation would
effectively impair the incumbents right to these allowances, which have already accrued prior to July
1, 1989. In other words, before R.A. No. 6758 was enacted, incumbent GSIS employees had a fixed
right to these allowances under the terms and conditions then obtaining. They could not therefore be
excluded from its enjoyment under the same terms and conditions without violating basic precepts of
fairness and due process.35
In Social Security System v. COA,36 the Court upheld the COAs disallowance of the contract signing
bonus in the amount of P5,000.00 which the Social Security System (SSS) granted to each of its
employees and officers after the signing of their collective negotiation agreement on July 10, 1996.
The Court pointed out that the provision of law authorizing the Social Security Commission (SSC) to
fix the compensation of its employees had already been modified, if not repealed, by R.A. No. 6758.
Hence, whatever salaries and other financial and non-financial inducements that the SSC was
minded to fix for its employees must comply with the provisions of the latter law. Citing Sections 12
and 17 of R.A. No. 6758, the Court clarified that only the remuneration which was being offered as of
July 1, 1989, and which was then being enjoyed by incumbent SSS employees and officers, could
be availed of exclusively by the same employees and officers separate from and independent of the
prescribed standardized salary rates. Since the contract signing bonus was non-existent as of July 1,
1989 as it accrued only in 1996, the payment of the same to the SSS employees and officers was
properly disallowed by the COA. In so ruling, the Court again referred to its pronouncement
in PPA relating to the import of the date July 1, 1989 as well as enunciated that:
Evidently, while RA 6758 intended to do away with multiple allowances and other incentive packages
and the resulting differences in compensation among government personnel, the statute clearly did
not revoke existing benefits being enjoyed by incumbents of government positions at the time of the

passage of RA 6758 by virtue of Secs. 12 and 17 thereof. In previous rulings of this Court, among
the financial and non-financial incentives which we allowed certain government employees to enjoy
after the effectivity of RA 6758 were car plan benefits and educational funding assistance for
incumbents of existing positions as of 1 July 1989 until such gratuity packages were gradually
phased out.
We have no doubt that RA 6758 modified, if not repealed, Sec. 3. par. (c), of RA 1161 as amended,
at least insofar as it concerned the authority of SSC to fix the compensation of SSS employees and
officers. This means that whatever salaries and other financial and non-financial inducements that
the SSC was minded to fix for them, the compensation must comply with the terms of RA 6758.
Consequently, only the remuneration which was being offered as of 1 July 1989, and which was then
being enjoyed by incumbent SSS employees and officers, could be availed of exclusively by the
same employees and officers separate from and independent of the prescribed standardized salary
rates. Unfortunately, however, the signing bonus in question did not qualify under Secs. 12 and 17 of
RA 6758. It was non-existent as of 1 July 1989 as it accrued only in 1996 when the CNA was
entered into by and between SSC and ACCESS. The signing bonus therefore could not have been
included in the salutary provisions of the statute nor would it be legal to disburse to the intended
recipients.37
It should be mentioned, at this point, that through subsequent laws enacted by the legislature,
several government-owned and controlled corporations and government financial institutions
including the GSIS38 and the SSS39 have been exempted from the coverage of R.A. No. 6758.
Clearly, it can be gleaned from the cases discussed earlier that the Court has been very consistent
in construing the second sentence (first paragraph) of Section 12 of R.A. No. 6758 as prescribing
July 1, 1989 as the qualifying date to determine whether an employee was
an incumbent and receiving the non-integrated remuneration or benefit, for purposes of entitling him
to its continued grant. Put differently, those allowances or fringe benefits (whether RATA or other
benefits) which have not been integrated into the standardized salary are allowed to be continued
only for incumbents of positions as of July 1, 1989 and who were actually receiving said allowances
or fringe benefits as of the said date.
With respect to the EAIB, the Court has categorically classified it in G.R. No. 119385 as a nonintegrated benefit falling under the purview of the second sentence (first paragraph) of Section 12 of
R.A. No. 6758. The Court granted the petition therein because the petitioners in the said case
were incumbent officials and employees of the NTA as of July 1, 1989. Moreover, they were
actually receiving the said benefit as of the said date. The Court made this clear as it stated that the
EAIB is covered by the second sentence (first paragraph) of R.A. No 6758 considering that "(1)
the recipients were incumbents when R.A. No. 6758 took effect on July 1, 1989, (2) were, in fact,
receiving the same, at the time, and (3) such additional compensation is distinct and separate from
the specific allowances above-listed, as the former is not integrated into the standardized salary
rate."40 In other words, the Courts basis for allowing the EAIB to continue to be granted to the
petitioners therein was because they were incumbents and receiving the same as of July 1, 1989.
According to the Court, to rule otherwise would run afoul of the legislatures intent to prevent any
diminution of the pay and benefits being received by them at the time of the enactment of R.A. No.
6758.
In contrast, the petitioners in this case were neither incumbents nor receiving the EAIB as of July 1,
1989 since they were hired only after the said date. The principle of non-diminution of benefits,
which the Court has declared in the cases earlier discussed to be the manifest intent of legislature in
engrafting the second sentence (first paragraph) in Section 12 of R.A. No 6758, thus, finds no

application to them. Accordingly, the COA properly disallowed the payment of the EAIB to the
petitioners in the present case.
The case of Cruz v. COA, relied upon by the
petitioners is not squarely applicable to the
present case.
Reliance by the petitioners on the Cruz case is misplaced. The ruling of the Court in the said case is
not decisive because subsequent thereto, the Court en banc rendered the decision
in SSS, discussed earlier, reiterating the pronouncement in the cases prior to Cruz on the
significance of the date July 1, 1989 in the second sentence (first paragraph) of Section 12 of R.A.
No. 6758. In fact, in SSS, the Court specifically mentioned the educational funding assistance
granted to the NTA employees as among those benefits that the Court allowed to continue "for
incumbents of existing positions as of 1 July 1989 until such gratuity packages were gradually
phased out."
In any case, as correctly pointed out by the Solicitor General, the factual milieu of that case is
different from that attendant in the present case. The most decisive factual distinction is, unlike in the
present case, the SRA employees who were the petitioners in Cruz were able to obtain from the
Office of the President a post factoapproval or ratification of their social amelioration benefit
(SAB).41 This post facto authority granted by the Office of the President covered all employees of the
SRA regardless of the date of hiring. Hence, since such approval by the President did not distinguish
as to the date of hiring with respect to the grant of the SAB to the SRA employees, the Court
properly did not distinguish as well in Cruz. In the present case, the petitioners have not shown that
they have obtained any similar authority from the President with regard to the grant of the EAIB to all
the employees of the NTA regardless of the date of hiring.
The petitioners cannot correctly claim
similar treatment as those who were
incumbents as of July 1, 1989 with respect
to the grant of the EAIB
As the petitioners themselves put it, they are "basing their case solely on the principle of equity, that
they should be provided with equal pay for substantially equal work, which should be the same as
those on board as of July 1, 1989, and the only difference that can be possibly made is to base the
pay upon substantive differences in duties and responsibilities and qualification requirements of the
positions and not the date of hiring."42
The petitioners are, in effect, invoking the principle of equal protection of the law embodied in the
Constitution.43Fairly recently, the Court had the occasion to restate the principle in this wise:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the
laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the
constitutional prohibition against inequality, that every man, woman and child should be affected
alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not require that things which are
different in fact be treated in law as though they were the same. The equal protection clause does
not forbid discrimination as to things that are different. It does not prohibit legislation which is limited
either in the object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law,
as in the other departments of knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A law is not invalid simply
because of simple inequality. The very idea of classification is that of inequality, so that it goes
without saying that the mere fact of inequality in no manner determines the matter of
constitutionality. All that is required of a valid classification is that it be reasonable, which means that
the classification should be based on substantial distinctions which make for real differences, that it
must be germane to the purpose of the law; that it must not be limited to existing conditions only;
and that it must apply equally to each member of the class. This Court has held that the standard is
satisfied if the classification or distinction is based on a reasonable foundation or rational basis and
is not palpably arbitrary.
In the exercise of its power to make classifications for the purpose of enacting laws over matters
within its jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not
necessary that the classification be based on scientific or marked differences of things or in their
relation. Neither is it necessary that the classification be made with mathematical nicety. Hence,
legislative classification may in many cases properly rest on narrow distinctions, for the equal
protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and
legislation is addressed to evils as they may appear.44
The equal protection clause, therefore, does not preclude classification of individuals who may be
accorded different treatment under the law as long as the classification is reasonable and not
arbitrary.45
With respect to R.A. No. 6758, the clear policy thereof is to standardize salary rates among
government personnel and do away with multiple allowances and other incentive packages and the
resulting differences in compensation among them. The different treatment accorded by the second
sentence (first paragraph) of Section 12 of R.A. 6758 to the incumbents as of July 1, 1989, on one
hand, and those employees hired on or after the said date, on the other, with respect to the grant of
the non-integrated benefits lies in the fact that the legislature intended to gradually phase out the
said benefits without, however, upsetting its policy of non-diminution of pay and benefits. As the
Court explained in SSS:
Although it was the clear policy intent of RA 6758 to standardize salary rates among
government personnel, the Legislature under Secs. 12 and 17 of the law nonetheless saw the
need for equity and justice in adopting the policy of non-diminution of pay when it authorized
incumbents as of 1 July 1989 to receive salaries and/or allowances over and above those
authorized by RA 6758. In Philippine Ports Authority v. Commission on Audit,we held that no
financial or non-financial incentive could be awarded to employees of government-owned
and controlled corporations aside from benefits which were being received by incumbent
officials and employees as of 1 July 1989. This Court also observed
The consequential outcome, under Sections 12 and 17 is that if the incumbent resigns or is
promoted to a higher position, his successor is no longer entitled to his predecessors RATA privilege
or to the transition allowance [A]fter July 1, 1989, additional financial incentives such as RATA
may no longer be given by GOCCs with the exception of those which were authorized to be
continued under Section 12 of RA 6758.46
The second sentence (first paragraph) of Section 12 of R.A. No. 6758 does not infringe the equal
protection clause of the Constitution as it is based on reasonable classification intended to protect
the right of the incumbents against diminution of their pay and benefits. The petitioners in the
present case, who are admittedly non-incumbent employees of the NTA as of July 1, 1989, cannot,

therefore, claim similar treatment as the incumbents as of the said date, with respect to the grant of
the EAIB.
WHEREFORE, the petition is DISMISSED. The assailed COA Decision No. 2002-162 dated August
15, 2002 and COA Resolution No. 2003-109 dated July 17, 2003 are AFFIRMED.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Carpio-Morales, Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.
Corona, J., on official leave.

Footnotes
Approved by then Chairman Guillermo N. Carague and Commissioners Raul C. Flores and
Emmanuel M. Dalman.
1

Entitled "An Act Prescribing a Revised Compensation and Position Classification in the
Government and for Other Purposes."
2

311 SCRA 755 (1999).

G.R. No. 134740, 23 October 2001, 368 SCRA 85.

The cut-off date of July 1, 1989 was extended to October 31, 1989 by the Department of
Budget and Management Corporate Compensation Circular (DBM-CCC) No. 10, the
Implementing Rules and Regulations of Rep. Act No. 6758. Section 5.6 of the said circular
originally stated:
5

Payment of other allowances/fringe benefits and all other forms of compensation

granted on top of basic salary, whether in cash or in kind, shall be
discontinued effective November 1, 1989. Payment made for such allowances/fringe
benefits after said date shall be considered illegal disbursement of public funds.
However, in De Jesus v. Commission on Audit (G.R. No. 109023, 12 August 1998,
294 SCRA 152), the Court declared DBM-CCC No. 10 "ineffective" for noncompliance with the requisite publication in the Official Gazette or in a newspaper of
general circulation. It was then re-issued and published in the Official Gazette on
March 1, 1999. The extended cut-off date was deleted from Section 5.6 thereof.
6

Rollo, pp. 41-42.

Supra note 5.

G.R. No. 138381, 16 April 2002, 381 SCRA 101.

10

Id. at 115.
Rollo, p. 26.

In their Manifestation and Motion for Leave to File and Admit Herein Incorporated
Comment to respondent COAs Memorandum dated September 30, 2004, the petitioners
informed the Court that petitioner Ambros term as President of the Employees Association of
the NTA (EANTA) had already ended September 16, 2004. Nonetheless, in a meeting held
on September 21, 2004, the EANTA General Membership passed a resolution granting
petitioner Ambros authority to continue to represent them in the present case.
11

12

Rollo, p. 52.

13

Supra.

14

The provision reads:

Sec. 17. Salaries of Incumbents. Incumbents of positions presently receiving
salaries and additional compensation/fringe benefits including those absorbed from
local government units and other emoluments, the aggregate of which exceeds the
standardized salary rate as herein prescribed, shall continue to receive such excess
compensation, which shall be referred to as transition allowance. The transition
allowance shall be reduced by the amount of salary adjustment that the incumbent
shall receive in the future.
The transition allowance referred to herein shall be treated as part of the basic salary
for purposes of computing retirement pay, year-end bonus and other similar benefits.
As basis for computation of the first across-the-board salary adjustment of
incumbents with transition allowance, no incumbent who is receiving compensation
exceeding the standardized salary rate at the time of the effectivity of this Act, shall
be assigned a salary lower than ninety percent (90%) of his present compensation or
the standardized salary rate, whichever is higher. Subsequent increases shall be
based on the resultant adjusted salary.

15

Rollo, pp. 72-73.

16

G.R. No. 100773, 16 October 1992, 214 SCRA 653.

17

G.R. No. 104217, 5 December 1994, 238 SCRA 714.

18

G.R. No. 132593, 25 June 1999, 309 SCRA 177.

19

G.R. No. 149240, 11 July 2002, 384 SCRA 548.

20

G.R. No. 138381, 16 April 2002, 381 SCRA 101.

21

The provision originally read:

5.5 Other allowances/fringe benefits not likewise integrated into the basic salary and
allowed to be continued only for incumbents as of June 30, 1989 subject to the

condition that the grant of same is with appropriate authorization either from the
DBM, Office of the President or legislative issuances are as follows: 5.5.1 Rice
subsidy; 5.5.2 sugar subsidy; 5.5.3 death benefits other than those granted by the
GSIS; 5.5.4 Medical/dental/optical allowances/benefits; 5.5.5 childrens allowance;
5.5.6 special duty pay/allowance; 5.5.7 meal subsidy; 5.5.8 longevity pay; and 5.5.9
tellers allowance.
As re-issued and published in the Official Gazette on March 1, 1999, Sec. 5.5 of
DBM-CCC No. 10 now reads:
5.5 The following allowances/fringe benefits authorized to GOCCs/GFIs pursuant to
the aforementioned issuances are not likewise to be integrated into the basic salary
and allowed to be continued only for incumbents of positions as of June 30, 1989
who are authorized and actually receiving said allowances/benefits as of said date, at
the same terms and conditions prescribed in said issuances: 5.5.1 Rice subsidy;
5.5.2 sugar subsidy; 5.5.3 death benefits other than those granted by the GSIS; 5.5.4
Medical/dental/optical allowances/benefits; 5.5.5 childrens allowance; 5.5.6 special
duty pay/allowance; 5.5.7 meal subsidy; 5.5.8 longevity pay; and 5.5.9 tellers
allowance.
22

National Tobacco Administration v. COA, supra, pp. 769-770.

23

Id. at 770-771.

24

G.R. No. 100773, 16 October 1992, 214 SCRA 653.

25

Id. at 659-660.

26

Id. at 663-664.

27

G.R. No. 104217, 5 December 1994, 238 SCRA 714.

28

Id. at 720.

29

Id.

30

G.R. No. 132593, 25 June 1999, 309 SCRA 177.

31

Id. at 185.

32

Id. at 186.

33

G.R. No. 138381, 16 April 2002, 381 SCRA 101.

34

Id. at 114-115.

35

Id. at 115-116.

36

G.R. No. 149240, 11 July 2001, 384 SCRA 548.

37

Id. at 556-557.

38

Republic Act No. 8291.

39

Republic Act No. 8282.

40

National Tobacco Administration v. COA, supra, pp. 769-770.

41

Supra note 21.

42

Rollo, p. 122.

43

SECTION 1, ARTICLE III, CONSTITUTION reads:

Sec. 1. No person shall be deprived of life, liberty or property without due process of
law, nor shall any person be denied the equal protection of the laws.

Central Bank (now Bangko Sentral ng Pilipinas) Employees Association, Inc. v. Bangko
Sentral ng Pilipinas and the Executive Secretary, G.R. No. 148208, 15 December 2004, pp.
7-8, citing Victoriano v. Elizalde Rope Workers Union, 59 SCRA 54 (1974).
44

45

Villarea v. Commission on Audit, G.R. Nos. 145383-84, 6 August 2003, 408 SCRA 455.

46

Social Security System v. COA, supra.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 119385

August 5, 1999

NATIONAL TOBACCO ADMINISTRATION represented herein by Administrator

AMANTE SIAPNO, EVANGELISTA A. GARCIA, RICARDO BRIONES, CLARITA B. CASTRO,
CRISTINA LOPEZ, JESUS C. BONDOC and ROSALINA C. CARINO, petitioners,
vs.
COMMISSION ON AUDIT, respondent.
PURISIMA, J.:
At bar is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to review and
set aside the decision of the Commission on Audit1 dated February 7, 1995 in COA Decision No. 95108.2
The National Tobacco Administration (NTA, for short), under Executive Order No. 116, as amended
by Executive Order No. 245,3 is a government-owned and controlled corporation (GOCC, for brevity)
tasked to supervise and improve the viability of the tobacco industry in this country.
On August 9, 1989, Congress passed Republic Act No. 6758,4 entitled "An Act Prescribing a Revised
Compensation and Position Classification in the Government and for Other Purposes." On October
2, 1989, pursuant to Section 23 of said law, the Department of Budget and Management (DBM)
issued Corporate Compensation Circular No. 10 (CCC No. 10) to serve as the Implementing Rules
and Regulations of R.A. No. 6758.
1wphi1.nt

Pertinent records shows that even prior to the effectively of Republic Act. No. 6758, officials and
employees of the NTA have been enjoying Mid-Year Social Amelioration Benefit equivalent to oneand-half (11/2) month of their basic salary. From 1989 to 1993, however, the said benefit was
reduced to one (1) month of the basic salary due to the financial/budgetary constraints. In May,
1993, the nomenclature of subject social amelioration benefit was changed to educational
assistance in order to reflect the rationale behind the same, which is to encourage its beneficiaries to
pursue graduate studies and to finance the schooling of their children.
Sometime in February, 1994, Miss Dalisay E. Aracan, Resident Auditor of NTA, issued a Notice of
Disallowance of the payment of the educational for calendar year 1993, opining that the NTA has no
statutory authority to grant the incentive. In January, 1995, the same Resident Auditor caused the
disallowance of the same benefit paid in 1994, for the same reason.
On April 25, 1994, the petitioner appealed to the Commission on Audit, praying for the lifting of the
disallowance in question, pointing out that: (1) Benefits received by employees as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized, pursuant to Section 12
R.A. 6758; (2) the benefit having been received for so many years, even prior to the effectivity of the

Salary Standardization Law of 1989, has been a vested right, on the part of the recipients and (3)
such allowance regularly granted, forms part of the total compensation package of NTA Officers and
employees, and, therefore, the disallowance thereof amounts to unauthorized diminution of pay.
On February 7, 1995, the Commission on Audit came out with its questioned Decision the pertinent
portion of which, reads:
After a thorough evaluation, this Office believes and so holds that the disallowance of the
Auditor on the payment of the mid-year social amelioration benefits or the educational
assistance benefits is in order. It bears stress that Sec. 5.6 of CCC No. 10 (Implementing
R.A. 6758) is so explicit when it provides that:
Payment of other allowances/fringe benefit and all other forms of compensation
granted on top of basic salary, whether in cash or in kind, not mentioned in SubParagraphs 5.4 and 5.5 above shall bediscontinued effective November 1, 1989.
Payment made for such allowance/fringe benefits after said date shall be considered
as illegal disbursement of public Funds.
Since the educational assistance or the mid-year social amelioration is not among those
allowances mentioned in Sub-pars. 5.4 and 5.5 of CCC No. 10, the same shall be
discontinued effective November 1, 1989 and considering that NTA paid its
official/employees this type of allowance, such payments shall be considered as illegal
disbursement of public funds.
The provision of Sec. 12 second sentence thereof as invoked by the Administrator should be
read in conjunction with the first sentence thus
Consolidation of Allowances and Compensation All allowances except for
representation and transportation allowances; clothing and laundry allowances;
subsistence [sic] allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM shall be deemed included in the
standardized salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized. . . .
xxx

xxx

xxx

Premises considered and for lack of legal basis, the herein request of the Administrator, NTA
for the lifting of the disallowance in question, may not be given due course. 5 [Emphasis;
supplied]
Undaunted, petitioner found their way to this Court via the present Petition for Review on Certiorari,
filed on April 24, 1995, seeking the annulment of the said COA Decision; theorizing that the
respondent Commission on Audit erred:
I.
IN HOLDING THAT THE PAYMENT OF SUBJECT SOCIAL AMELIORATION/EDUCATIONAL
ASSISTANCE BENEFIT A BENEFIT CONTINUOUSLY BEING RECEIVED BY INDIVIDUAL

PETITIONERS AND OTHER NTA EMPLOYEES STARTING WAY BEFORE THE EFFECTIVITY OF
THE SALARY STANDARDIZATION LAW (R.A. 6758) ON 1 JULY 1989 IS NOT AUTHORIZED
UNDER THE SAME LAW (R.A. 6758) OR IS OTHERWISE WITHOUT LEGAL BASIS.
II.
IN FAILING TO REALIZE AND CONSIDER THAT THE DISALLOWANCE OF THE PAYMENT OF
SUBJECT SOCIAL AMELIORATION/EDUCATIONAL ASSISTANCE BENEFIT IS CONSTITUTIVE
OF DIMINUTION OF COMPENSATION PROSCRIBED UNDER EXISTING LAWS AND IN
VIOLATION OF THE GENERAL WELFARE CLAUSE OF THE CONSTITUTION;
III.
IN FAILING TO RECOGNIZE THAT INDIVIDUAL PETITIONERS AND OTHER SIMILARLY
SITUATED NTA EMPLOYEES HAVE ACQUIRED A VESTED RIGHT OVER SAID SOCIAL
AMELIORATION/EDUCATIONAL ASSISTANCE BENEFIT AND COA's DISALLOWANCE THEREOF
IS AN ILLEGAL VIOLATION OF SUCH RIGHT.
Petitioners raise the pivotal issues: (1) whether or not the social amelioration or educational
assistance benefit given to the individual petitioners prior to enactment of R.A. 6758 is authorized
under the law, (2) whether or not the disallowance of the said benefit is tantamount to diminution of
pay, and (3) whether or not the individual petitioners have acquired a vested right thereover.
FIRST ISSUE:
Proper Interpretation of Sections 12 and 17 of R.A. 6758 in Relation to Sub-paragraphs 4.1, 5.4 and
5.5 of Corporate Compensation Circular No. 10, the Implementing Rules and Regulation of R.A.
6758.
A. Sec. 12 and 17 of R.A. 6758, read:
Sec. 12: Consolidation of Allowances and Compensation All allowances, except
for representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed
abroad; and such other additional compensation not otherwise specified herein as
may be determined by the DBM, shall be deemed included in the standardized salary
rates herein prescribed. Such other additional compensation, whether in cash or in
kind, being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee
paid from local funds of a local government unit shall be absorbed into the basic
salary of said official or employee and shall be paid by the National Government.
while
Sec. 17. Salaries of Incumbents Incumbents of positions presently receiving
salaries and additional compensation/fringe benefits including those absorbed from
local government units and other emoluments, the aggregate of which exceeds the
standardized salary rate as herein prescribed, shall continue to receive such excess

compensation, which shall be referred to as transition allowance. The transition

allowance shall be reduced by the amount of salary adjustment that the incumbent
shall received [sic] in the future.
B. Sec. 4.1 of CCC No. 10:
4.0 DEFINITION OF TERMS
4.1. The present salary of an incumbent for purposes of this Circular shall
refer to the sum total of actual basic salary including allowances enumerated
hereunder, being received as of June 30, 1989 and certified and authorized
by the DBM.
4.1.1 Cost-of-Living Allowance (COLA)/Bank Equity Pay (BEP)
equivalent to forty percent (40%) of basic salary or P300.00 per
month, whichever is higher;
4.1.2 Amelioration Allowance equivalent to ten percent (10%) of basic
salary or P150.00 per month, which ever is higher;
4.1.3 COLA granted to GOCCs/GFIs covered by the Compensation
and Position Classification Plan for the regular agencies/offices of the
National Government and to GOCCs/GFIs following the
Compensation and Position Classification Plan under LOImp. No.
104/CCC No. 1 and LOImp. No. 97/CCC No. 2, in the amount of
P550. 00 per month for those whose monthly basic salary is
P1,500.00 and below, and P500.00 for those whose monthly basic
salary is P1,501.00 and above, granted on top of the COLA/BEP
mentioned in Item 4. 1.1 above;
4.1.4 Stabilization Allowance; and
4.1.5 Allowance/fringe benefits converted into "Transition Allowance"
pursuant to Memorandum Order No. 177, as implemented by
Corporate Budget Circular No. 15, both series of 1988.
4.2 Allowances enumerated above are deemed integrated into the basic
salary, for the position effective July 1, 1989.
4.3 Transition allowance, for purposes of this circular shall mean the excess
of the present salary of the incumbent defined in Item 4.1 hereinabove, over
the eighth step of the Salary Grade to which his position is allocated.
C. Sub-Paragraphs 5.4, 5.5 and 5.6 of CCC. No. 10:
5.0 IMPLEMENTING PROCEDURES
xxx

xxx

xxx

5.4 The rates of the following allowances/fringe benefits which are not
integrated into the basic salary and which are allowed to be continued after

June 30, 1989 shall be subject to the condition that the grant of such benefit
is covered by statutory authority.
5.4.1 Representation and Transportation Allowances (RATA) of
incumbent of the position authorized to receive the same at the
highest amount legally authorized as of June 30, 1989 of the level of
his position within the particular GOCC/GFI;
5.4.2 Uniform and Clothing Allowance at a rate as previously
authorized;
5.4.3 Hazard Pay as authorized by law;
5.4.4 Honoraria/additional compensation for employees on detail with
special projects of inter-agency undertakings;
5.4.5 Honoraria for services rendered by researchers, experts and
specialists who are of acknowledged authorities in their field of
specialization;
5.4.6 Honoraria for lecturers and resource persons/speakers;
5.4.7 Overtime Pay in accordance to Memorandum Order No. 228;
5.4.8 Clothing/laundry allowances and subsistence of marine officers
and crew on board GOCCs/GFIs owned vessels and used in their
operations, and of hospital personnel who attend directly to patients
and who by nature of their duties are required to wear uniforms;
5.4.9 Quarters Allowance of officials and employees who are
presently entitled to the same;
5.4.10 Overseas, Living Quarters and other allowances presently
authorized for personnel stationed abroad;
5.4.11 Night Differential of personnel on night duty;
5.4.12 Per Diems of members of governing Boards of GOCCs/GFIs
at the rate as prescribed in their respective Charters;
5.4.13 Flying Pay of personnel undertaking aerial flights;
5.4.14 Per Diems/Allowances of Chairman and Members/Staff of
collegial bodies and Committees; and
5.4.15 Per Diems/Allowances of officials and employees on official
foreign and local travel outside of their official station;
5.5 Other allowances/fringe benefits not likewise Integrated into the basic
salary and allowed to be continued only for incumbents as of June 30, 1989
subject to the condition that the grant of the same is with appropriate

authorization either from the DBM, Office of the President or legislative

issuances are as follows.
5.5.1 Rice Subsidy;
5.5.2 Sugar Subsidy;
5.5.3 Death Benefits other than those granted by the GSIS;
5.5.4 Medical/Dental/Optical Allowances/Benefits;
5.5.5 Children's Allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9 Teller's Allowance.
5.6 Payment of other allowance/fringe benefits and all other forms of
compensation granted on top of basic salary, whether in cash or in kind, not
mentioned in Sub-paragraphs 5.4 and 5.5 above shall be discontinued
effective November 1, 1989. Payment made for such allowance/fringe
benefits after said date shall be considered as illegal disbursement of public
funds.
Petitioners maintain "that since they have been receiving the social amelioration or educational
assistance benefit before July 1, 1989, when R.A No. 6758 took effect, and the benefit was not
integrated into their standardized salary rate, they are entitled to receive it even after the effectivity of
the said Act"6 They base their claim on the second sentence of Section 12 and on Section 17 of the
Salary Standardization Law which, for the sake of thoroughness and clarity of discussion, we deem it
expedient to quote again, to wit:
Second Sentence of Section 12, R.A. 6758 . . . Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized;
xxx

xxx

xxx

Sec. 17: Salaries of Incumbents Incumbents of position presently receiving salaries and
additional compensation/fringe benefits including those absorbed from local government
units and other emoluments, the aggregate of which exceeds the standardized salary rate as
herein prescribed, shall continue to be receive such excess compensation, which shall be
referred as transition allowance. The transition allowance shall be reduced by the amount of
the salary adjustment that the incumbent shall received in the future.
It is the submission of the Commission on Audit that payment of the educational assistance in
question is not authorized not authorized under Republic Act No. 6758, arguing "that the provision of
Sec. 12, second sentence thereof as invoked by the Administrator [representing the petitioner

herein] should be read in conjunction with the first sentence. . . .;"7 and if the entire Section 12 is
further considered in relation to sub-paragraphs 5.4, 5.5 and 5.6 of CCC No. 10, respondent
concluded that the grant of subject educational assistance would have no legal basis at all.
Confusion as to the proper interpretation of Section 12 springs from two seemingly contradictory
provisions. The last clause of the first sentence of Section 12, reads:
[A]nd such other additional compensation not otherwise specified herein as may be
determined by the DBM shall be deemed included in the standardized salary rates herein
prescribed;
while the second sentence of Section 12 is to the following effect:
Such other additional compensation, whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall
continue to be authorized.
Before proceeding to rule on the proper interpretation of the two provisos aforecited, the salient
features of the provision as a whole should first be pondered upon tackled.
Under the first sentence of Section 12, all allowances are integrated into the prescribed salary rates,
except:
(1) representation and transportation allowances (RATA);
(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board government vessels;
(4) subsistence allowance of hospital personnel;
(5) hazard pay;
(6) allowance of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in Section 12 as may be
determined by the DBM.
Analyzing No. 7, which is the last clause of the first sentence of Section 12, in relation to the other
benefits therein enumerated, it can be gleaned unerringly that it is a "catch-all proviso." Further
reflection on the nature of subject fringe benefits indicates that all of them have one thing in common
they belong to one category of privilege called allowances which are usually granted to officials
and employees of the government to defray or reimburse the expenses incurred in the performance
of their official functions. In Philippine Ports Authority vs. Commission on Audit,8 this Court
rationalized that "if these allowances are consolidated with the standardized rate, then the
government official or employee will be compelled to spend his personal funds in attending to his
duties.
1wphi1.nt

The conclusion that the enumerated fringe benefits are in the nature of allowance finds support
in sub-paragraphs 5.4 and 5.5 of CCC No. 10.

Sub-paragraph 5.4 enumerates the allowance/fringe benefits which are not integrated into the basic
salary and which may be continued after June 30, 1989 subject to the condition that the grant of
such benefit is covered by statutory authority, to wit:
(1) RATA;
(2) Uniform and Clothing allowances;
(3) Hazard pay;
(4) Honoraria/additional compensation for employees on detail with special projects or interagency undertakings;
(5) Honoraria for services rendered by researchers, experts and specialists who are of
acknowledged authorities in their fields of specialization;
(6) Honoraria for lectures and resource persons or speakers;
(7) Overtime pay in accordance to Memorandum Order No. 228;
(8) Clothing/laundry allowances and subsistence allowance of marine officers and crew on
board GOCCs/GFIs owned vessels and used in their operations, and of hospital personnel
who attend directly to patients and who by nature of their duties are required to wear
uniforms;
(9) Quarters Allowance of officials and employees who are presently entitled to the same;
(10) Overseas, Living Quarters and other allowances presently authorized for personnel
stationed abroad;
(11) Night differential of personnel on night duty;
(12) Per Diems of members of the governing Boards of GOCCs/GFIs at the rate as
prescribed in their respective Charters;
(13) Flying pay of personnel undertaking aerial flights;
(14) Per Diems/Allowances of Chairman and Members or Staff of collegial bodies and
Committees; and
(15) Per Diems/Allowances of officials and employees on official foreign and local travel
outside of their official station.
In addition, sub-paragraph 5.5 of the same Implementing Rules provides for the other
allowances/fringe benefits not likewise integrated into the basic salary allowed to be continued only
for incumbents as of June 30, 1989 subject to the condition that the grant of the same is with
appropriate authorization either from the DBM, Office of the President or legislative issuance's, as
follows:
(1) Rice Subsidy;

(2) Sugar Subsidy;

(3) Death Benefits other than those granted by the GSIS;
(4) Medical/Dental/Optical Allowances/Benefits;
(5) Children's Allowances;
(6) Special Duty Pay/Allowance;
(7) Meal Subsidy;
(8) Longevity Pay; and
(9) Teller's Allowance.
On the other hand, the challenged financial incentive is awarded by the government in order to
encourage the beneficiaries to pursue further studies and to help them underwrite the expenses for
the education of their children and dependents. In other words, subject benefit is in the nature of
financial assistance and not of an allowance. For the former, reimbursement is not necessary while
for the latter, reimbursement is required. Not only that, the former is basically an incentive wage
which is defined as "a bonus or other payment made to employees in addition to guaranteed hourly
wages"9 while the latter cannot be reckoned with as a bonus or additional income, strictly speaking.
It is indeed decisively clear that the benefits mentioned in the first sentence of Section 12 and subparagraphs 5.4 and 5.5 of CCC No. 10 are entirely different from the benefit in dispute, denominated
as Educational Assistance. The distinction elucidated upon is material in arriving at the correct
interpretation of the two seemingly contradictory provisions of Section 12.
Cardinal is the rule in statutory constriction "that the particular words, clauses and phrases should
not be studied as detached and isolated expressions, but the whole and every part of the statute
must be considered in fixing the meaning of any of its parts and in order to produce a harmonious
whole. A statute must so construed as to harmonize and give effect to all its provisions whenever
possible."10 And the rule that statute must be construed as a whole requires that apparently
conflicting provisions should be reconciled and harmonized, if at all possible. 11 It is likewise a basic
precept in statutory construction that the intent of the legislature is the controlling factor in the
interpretation of the subject statute.12 With this rules and the foregoing distinction elaborated upon, it
is evident that the two seemingly irreconcilable propositions are susceptible to perfect harmony.
Accordingly, the Court concludes that the under the aforesaid "catch-all proviso," the legislative
intent is just to include the fringe benefits which are in the nature of allowances and since the
benefits under controversy is not the same category, it is safe to hold that subject educational
assistance is not one of the fringe benefits within the contemplation of the first sentence of Section
12 but rather, the second sentence of Section 12, in relation to Section 17 of R.A. No. 6758,
considering that (1) the recipients were incumbents when R.A. No. 6758 took effect on July 1, 1989,
(2) were, in fact, receiving the same, at the time, and (3) such additional compensation is distinct
and separate from the specific allowances above-listed, as the former is not integrated into the
standardized salary rate. Simply stated, the challenged benefit is covered by the second sentence of
Section 12 of R.A. No. 6758, the application of sub-paragraphs 5.4 and 5.5 of CCC No. 10 being
only confined to the first sentence of Section 12, particularly the last clause thereof which amplifies
the "catch-all proviso."

Furthermore, the non-inclusion by the Department of Budget and Management of the controverted
educational assistance in Sub-paragraph 5.4 and 5.5 of CCC No. 10 is expected since the term
allowance does not include the questioned benefit which belongs to a different genus. The argument
that the said fringe benefit should be disallowed on the ground that it is not mentioned in the
Implementing Rules of the Statute is consequently fallacious. It is a settled rule of legal
hermeneutics that the implementing rules and regulations (CCC No. 10, in this case) cannot amend
the act of Congress (R.A.. 6758). The second sentence of R.A. No. 6758 expressly provides that
"such additional compensation . . . being received by incumbents . . . not integrated into the
standardized salary rates shall continue to be authorized." To be sure, the said Circular cannot go
beyond the terms and provisions of the statute as to prohibit something permitted and allowed by
law.13 The Circular cannot extend the law or expand its coverage as the power to amend or repeal a
statute is vested in the legislature.14
Conformably, as mandated by the second sentence of Section 12, in relation to Section 17 of the
Republic Act under interpretation, the mid-year educational assistance should continue to be
authorized.
THE SECOND AND THE THIRD ISSUES:
That the Disallowance of the Payment of Subject Educational Assistance Constitutes Diminution of
Compensation; That the NTA Employees Have Already Acquired a Vested Right Over the Same.
Gleanable from the wordings of the second sentence of Section 12 of R.A. No. 6758 is the
intention of Congress to prevent any diminution of the pay and the benefits being received
by incumbents at the time of the enactment of the Salary Standardization Law. Verily,
disallowing any such benefit is against the spirit of the Statute and is inconsistent with the
principle of equity which "regards the spirit and not the letter. . ."15 of the law. Hence, while it
cannot be said that the NTA employees have acquired a vested right over the educational
assistance in dispute as it is always subject to availability of funds,16 nevertheless,
disallowing the same, where funds are available as in the case under consideration, would be
violative of the principle of equity.
WHEREFORE, the petition is hereby GRANTED; the assailed COA Decision, No. 95-108 is SET
ASIDE, and the disallowance in question LIFTED. No pronouncement as to cost.
1wphi1.nt

SO ORDERED.
Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena,
Gonzaga-Reyes and Ynares Santiago, JJ., concur.
Davide, Jr., C.J., in the result.

Footnotes

Composed of Commissioners Celso D. Gangan (Chairman); Rogelio B. Espiritu and

Sofronio B. Ursala as members.
1

Annex "A," Petition; Rollo, 30-32.

Executive Order 245: Implementing the Consolidation of All Agencies and the Creation of
the National Tobacco Administration Prescribing its Charter and for Other Purposes. Date of
Effectivity July 24, 1987.
3

Otherwise known as: Salary Standardization Law which took effect on July 1, 1989.

Rollo, pp. 30-32.

Petition, p. 6; Rollo, 17.

See: COA Decision, p. 2; Rollo, 31.

214 SCRA 653 [1992].

William S. Anderson, Ed., Ballentine's Law Dictionary [1969 Edition].

Ruben Agpalo, Statutory Construction., 1986 Edition, p. 181; citing Aisporma vs. Court of
Appeals, 113 SCRA 459 [1982]; See also: Danilo Paras vs. Commission of Elections, 264
SCRA 49 [1996].
10

Ibid., p. 183; citing Lichauco & Co. vs. Apostol, 44 Phil. 138; See also: Aisporma vs. Court
of Appeals, 113 SCRA 459 [1982].
11

12

Ibid., p. 38.

13

People vs. Lim, 108 Phil. 1091.

Conte vs. Commission on Audit, 264 SCRA 19 [1996]; Cooley's Constitutional Limitations,
7th Ed., pp. 126-131; 157-162.
14

Air Manila vs. Court of Industrial Relations, 83 SCRA 579 (589), citing Bouvier's Law
Dictionary, 3rd Revision, p. 1063.
15

Subjecting the educational assistance to the availability of funds defeats the meaning of
vested right which is defined as "one which is fixed, unalterbale or irrevocable;. . . that it is
absolute, complete and unconditional, to the exercise of which no obstacle exists. . ." (Luque
vs. Villegas, 30 SCRA 409 [417]).
16

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 132593 June 25, 1999

PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

GONZAGA-REYES, J.:
This is a petition for certiorari under Rule 64 of the 1997 Rules of Civil Procedure to annul Decision
No. 2447 dated July 27, 1992 of the Commission on Audit (COA) denying Philippine International
Trading Corporation's (PITC) appeal from the disallowances made by the resident COA auditor on
PITC's car plan benefits; and Decision No. 98-048 dated January 27, 1998 of the COA denying
PITC's motion for reconsideration.
The following facts are undisputed:
The PITC is a government-owned and controlled corporation created under Presidential Decree
(PD) No. 252 on July 21, 1973 1, primarily for the purpose of promoting and developing Philippine trade
in pursuance of national economic development. On October 19, 1988, the PITC Board of Directors
approved a Car Plan Program for qualified PITC officers. 2Under such car plan program, an eligible officer
is entitled to purchase a vehicle, fifty percent (50%) of the value of which shall be shouldered by PITC
while the remaining fifty percent (50%) will be shouldered by the officer through salary deduction over a
period of five (5) years. Maximum value of the vehicle to be purchased ranges from Two Hundred
Thousand Pesos (P200,000.00) to Three Hundred and Fifty Thousand Pesos (P350,000.00), depending
on the position of the officer in the corporation. In addition, PITC will reimburse the officer concerned fifty
percent (50%) of the annual car registration, insurance premiums and costs of registration of the chattel
mortgage over the car for a period of five (5) years from the date the vehicle was purchased. The terms
and conditions of the car plan are embodied in a "Car Loan Agreement". 3 Per PITC's car plan guidelines,
the purpose of the plan is to provide financial assistance to qualified employees in purchasing their own
transportation facilities in the performanced of their work, for representation, and personal use. 4 The plan
is envisioned to facilitate greater mobility during official trips especially within Metro Manila or the
employee's principal place of assignment, without having to rely on PITC vehicles, taxis or cars for hire. 5
On July 1, 1989, Republic Act No. 6758 (RA 6758), entitled "An Act Prescribing a Revised
Compensation and Position Classification System in the Government and For Other Purposes", took
effect. Section 12 of said law provides for the consolidation of allowances and additional
compensation into standardized salary rates save for certain additional compensation such as
representation and transportation allowances which were exempted from consolidation into the
standardized rate. Said section likewise provides that other additional compensation being received

by incumbents as by of July 1, 1989 not integrated into the standardized salary rates shall continue
to be authorized.
Sec. 12, RA 6758, reads
Sec. 12. Consolidation of All Allowances and Compensation. All allowances,
except for representation and transportation allowances; clothing and laundry
allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM, shall be deemed included in the
standardized salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized.
To implement RA 6758, the Department of Budget and Management (DBM) issued Corporate
Compensation Circular No. 10 (DBM-CCC No. 10). Paragraph 5.6 of DBM-CCC No. 10 discontinued
effective November 1, 1989, all allowances and fringe benefits granted on top of basic salary, not
otherwise enumerated under paragraphs 5.4 and 5.5 thereof.
Paragraph 5.6 of DBM-CCC No. 10 provides:
5.6 Payment of other allowances/fringe benefits and all other forms of compensation
granted on top of basic salary, whether in cash or in kind, not mentioned in Subparagraphs 5.4 and 5.5 6 above shall be discontinued effective November 1, 1989.
Payment made for such allowance/fringe benefits after said date shall be considered as
illegal disbursement of public funds.
On post audit, the payment/reimbursement of the above-mentioned expenses (50% of the yearly car
registration and insurance premiums and 50% of the costs of registration of the chattel mortgage
over the car) made after November 1, 1989 was disallowed by the resident COA auditor. The
disallowance was made on the ground that the subject car plan benefits were not one of the fringe
benefits or form of compensation allowed to be continued after said date under the aforequoted
paragraph 5.6 of DBM-CCC No. 10 7, in relation to Paragraphs 5.4 and 5.5 thereof.
PITC, on its behalf, and that of the affected PITC officials, appealed the decision of the resident COA
auditor to the COA. On July 27, 1992, COA denied PITC's appeal and affirmed the disallowance of
the said car plan expenses in the assailed Decision No. 2447 dated July 27, 1992. Relevant portions
of the decision read thus:
Upon circumspect evaluation thereof, this Commission finds the instant appeal to be
devoid of merit. It should be noted that the reimbursement/payment of expenses in
question is based on the Car Plan benefit granted under Board Resolution No. 1088-03 adopted by the PITC Board of Directors on October 19, 1988. The Car Plan is
undeniably a fringe benefit as appearing in PITC's "Compensation Policy under the
heading "3. Other Fringe Benefits", particularly Item No. 3.13 thereof. Inasmuch as
PITC is a government-owned and/or controlled corporation, the grant of the Car Plan
(being a fringe benefit) should be governed by the provisions of Corporate
Compensation Circular No. 10, implementing RA 6758. Under sub-paragraph 5.6 of
said Circular, it explicitly provides:
xxx xxx xxx

Since the Car Plan benefit is not one of those fringe benefits or other forms of
compensation mentioned in Sub-paragraphs 5.4 and 5.5 of CCC No. 10,
consequently the reimbursement of the 50% share of PITC in the yearly registration
and insurance premium of the cars purchased under said Car Plan benefit should not
be allowed. . . . 8
PITC's motion for reconsideration was denied by the COA in its Resolution dated January 27, 1998. 9
Hence, the instant petition on the following grounds:
1. That the legislature did not intend to revoke existing benefits being
received by incumbent government employees as of July 1, 1989
(including subject car plan benefits) when RA 6758 was passed;
2. That the Car Loan Agreements signed between PITC and its
officers pursuant to PITC's Car Plan Program, including the Car Loan
Agreements, duly executed prior to the effectivity of RA 6758,
constitute the law between the parties and as such, protected by
Section 10, Article III of the 1987 Philippine Constitution which
prohibits the impairment of contracts; and
3. Finally, that the provisions of PD 985 do not apply to PITC
inasmuch as under its Revised Charter, PD 1071, as amended by
E.O. 756 and E.O. 1067, PITC is not only expressly exempted from
OCPC rules and regulations but its Board of Directors was expressly
authorized to adopt compensation policies and other related benefits
to its officers/employees without need for further approval thereof by
any government office, agency or authority. 10
The petition is meritorious.
First of all, we must mention that this Court has confirmed in Philippine Post Authority
vs. Commission on Audit 11the legislative intent to protect incumbents who are receiving salaries
and/or allowances over and above those authorized by RA 6758 to continue to receive the same
even after RA 6758 took effect. In reserving the benefit to incumbents, the legislature has
manifested its intent to gradually phase out this privilege without upsetting the policy of nondiminution of pay and consistent with the rule that laws should only be applied prospectively in
the spirit of fairness and justice. 12 Addressing the issue as to whether the petitioners-officials may still
receive their representation and transportation allowance (RATA) at the higher rates provided by Letter of
Implementation (LOI) No. 97 in light of Section 12, RA 6758, this Court said:
Now, under the second sentence of Section 12, first paragraph, the RATA enjoyed by
these PPA officials shall continue to be authorized only if they are "being received by
incumbents only as of July 1, 1989." RA 6758 has therefore, to this extent, amended
LOI No. 97. By limiting the benefit of the RATA granted by LOI No. 97 to incumbents,
Congress has manifested its intent to gradually phase out this privilege without
upsetting its policy of non-diminution of pay.
The legislature has similarly adhered to this policy of non-diminution of pay when it
provided for the transition allowance under Section 17 of RA 6758 which reads:

Sec. 17. Salaries of Incumbents. Incumbents of position presently

receiving salaries and additional compensation/fringe benefits
including those absorbed from local government units and other
emoluments the aggregate of which exceeds the standardized salary
rate as herein prescribed, shall continue to receive such excess
compensation, which shall be referred to as transition allowance. The
transition allowance shall be reduced by the amount of salary
adjustment that the incumbent shall receive in the future.
While Section 12 refers to allowances that are not integrated into the standardized
salaries whereas Section 17 refers to salaries and additional compensation or fringe
benefits, both sections are intended to protect incumbents who are receiving said
salaries and/or allowances at the time RA 6758 took effect. 13 (Emphasis supplied.)
Based on the foregoing pronouncement, petitioner correctly pointed out that there was no intention
on the part of the legislature to revoke existing benefits being enjoyed by incumbents of government
positions at the time of the virtue of Sections 12 and 17 thereof. There is no dispute that the PITC
officials who availed of the subject car plan benefits were incumbents of their positions as of July 1,
1989. Thus, it was legal and proper for them to continue enjoying said benefits within the five year
period from date of purchase of the vehicle allowed by their Car Loan Agreements with PITC.
Further, we see the rationale for the corporation's fifty percent (50%) participation and contribution to
the subject expenses. As to the insurance premium, PITC, at least, up to the extent of 50% of the
value of the vehicle, has an insurable interest in said vehicle in case of loss or damage thereto. As to
the costs of registration of the vehicle in the employee's name and of the chattel mortgage in favor of
PITC, this is to secure PITC of the repayment of the "Car Loan Agreement" and the fulfillment of the
other obligations contained therein by the employee.
Still further, the vehicle being utilized by the officer is actually being used for corporate purposes
because the officer concerned is no longer entitled to utilize company-owned vehicles for official
business once he/she has availed of a car plan. Neither is said officer allowed to reimburse the costs
of other land transportation used within his principal place of assignment (i.e. Metro Manila) as the
vehicle is presumed to be his official vehicle. 14 In the event that the employee resigns, retires or is
separated from the company without cause prior to the completion of the 60-month car plan, the
employee shall be given the privilege to buy the car provided he pays the remaining installments of the
loan and the amount equivalent to that portion of the company's contribution corresponding to the
unexpired period of the car plan. On the other hand, if the employee has been separated from the
company for cause, the company has the other option aside from the foregoing to repossess the car from
the employee, in which case, the company shall pay back to the employee all amortizations already made
by the employee to the company, interest free. 15
Secondly, COA relied on DBM-CCC No. 10 16 as basis for the disallowance of the subject car plan
benefits. DBM-CCC No. 10 which was issued by the DBM pursuant to Section 23 17 of RA 6758
mandating the said agency to issue the necessary guidelines to implement RA 6758 has been declared
by this Court in De Jesus, et al. vs. Commission on Audit,et al. 18 as of no force and effect due to the
absence of publication thereof in the Official Gazette or in a newspaper of general circulation. Salient
portions of said decision read:
On the need publication of subject DBM-CCC No. 10, we rule in the affirmative.
Following the doctrine enunciated in Tanada 19, publication in the Official Gazette or in a
newspaper of general circulation in the Philippines is required since DBM-CCC No. 10 is
in the nature of an administrative circular the purpose of which is to enforce or implement
an existing law. Stated differently, to be effective and enforceable, DBM-CCC No. 10

must go through the requisite publication in the Official Gazette or in a newspaper of

general circulation in the Philippines.

In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which
completely disallows payment of allowances and other additional compensation to
government officials and employees, starting November 1, 1989, is not a mere
interpretative or internal regulation. It is something more than that. And why not,
when it tends to deprive government workers of their allowances and additional
compensation sorely needed to keep body and soul together. At the very least,
before the circular under attack may be permitted to substantially reduce their
income, the government officials and employees concerned should be apprised and
alerted by the publication of said circular in the Official Gazette or in a newspaper or
general circulation in the Philippines to the end that they be given amplest
opportunity to voice out whatever opposition they may have, and to ventilate their
stance on the matter. This approach is more in keeping with democratic precepts and
rudiments of fairness and transparency.
In the case at bar, the disallowance of the subject car plan benefits would hamper the officials in the
performance of their functions to promote and develop trade which requires mobility in the
performance of official business. Indeed, the car plan benefits are supportive of the implementation
of the objectives and mission of the agency relative to the nature of its operation and responsive to
the exigencies of the service.
It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its entirety and submitted
for publication in the Official Gazette per letter to the National Printing Office dated March 9, 1999.
Would the subsequent publication thereof cure the defect and retroact to the time that the abovementioned items were disallowed in audit?
The answer is in the negative, precisely, for the reason that publication is required as a condition
precedent to the effectivity of a law to inform the public of the contents of the law or rules and
regulations before their rights and interests are affected by the same. From the time the COA
disallowed the expenses in audit up to the filing of herein petition the subject circular remained in
legal limbo due to its non-publication. As was stated in Tanada vs.Tuvera, 21, "prior publication of laws
before they become effective cannot be dispensed with, for the reason that such omission would offend
due process insofar as it would deny the public knowledge of the laws that are supposed to govern it.
In view of the nullity of DBM-CCC No. 10 relied upon by the COA as basis for the disallowance of the
subject car plan benefits, we deem it unnecessary to discuss the second issue raised in the instant
petition.
We deem it necessary though to resolve the third issue as to whether PITC is exempt from RA
985 22 as subsequently amended by RA 6758. According to petitioner, PITC's Revised Charter, PD 1071
dated January 25, 1977, as amended by EO 756 dated December 29, 1981, and further amended by EO
1067 dated November 25, 1985, expressly exempted PITC from the Office of the Compensation and
Position Classification (OCPC) rules and regulations. Petitioner cites Section 28 of P.D. 1071 23; Section 6
of EO 756 24; and Section 3 of EO 1067. 25
According to the COA in its Decision No. 98-048 dated January 27, 1998, the exemption granted to
the PITC has been repealed and revoked by the repealing provisions of RA 6758, particularly
Section 16 thereof which provides:

Sec. 16. Repeal of Special Salary Laws and Regulations. All laws, decrees,
executive, orders, corporate charters, and other issuances or parts thereof, that
exempt agencies from the coverage of the System, or that authorize and fix position
classifications, salaries, pay rates or allowances of specified positions, or groups of
officials, and employees or of agencies, which are inconsistent with the System,
including the proviso under Section 2 and Section 16 of PD No. 985 are hereby
repealed.
To this, petitioner argues that RA 6758 which is a law of general application cannot repeal provisions
of the Revised Charter of PITC and its amendatory laws expressly exempting PITC from OCPC
coverage being special laws. Our rules on statutory construction provide that a special law cannot be
repealed, amended or altered by a subsequent general law by mere
implication 26; that a statute, general in character as to its terms and application, is not to be construed as
repealing a special or specific enactment, unless the legislative purpose to do so is manifested 27; that if
repeal of particular or specific law or laws is intended, the proper step is to so express it. 28
In the case at bar, the repeal by Section 16 of RA 6758 of "all corporate charters that exempt
agencies from the coverage of the System" was clear and expressed necessarily to achieve the
purposes for which the law was enacted, that is, the standardization of salaries of all employees in
government owned and/or controlled corporations to achieve "equal pay for substantially equal
work". Henceforth, PITC should now be considered as covered by laws prescribing a compensation
and position classification system in the government including RA 6758. This is without prejudice,
however, as discussed above, to the non-diminution of pay of incumbents as of July 1, 1989 as
provided in Sections 12 and 17 of said law.
WHEREFORE, the Petition is hereby GRANTED, the assailed Decisions of the Commission on Audit
are SET ASIDE.
SO ORDERED.
Davide, Jr., C.J., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Quisumbing, Purisima,
Pardo and Ynares-Santiago, JJ., concur.
Panganiban and Buena, JJ., are on leave.
Footnotes

1 Amended by PD 1071 on January 19, 1977, later by Executive Order (EO) No. 756 on
December 29, 1981, and EO No. 1067 on November 25, 1985.
2 Resolution No. 10-88-03.
3 Rollo, p. 53.
4 Ibid., p. 43.
5 Id.
6 5.4 The rates of the following allowances/fringe benefits which are not integrated into the
basic salary and which are allowed to be continued after June 30, 1989 shall be subject to
the condition that the grant of such benefits is covered by statutory authority:

5.4.1 Representation and Transportation Allowances (RATA) of

incumbent of the position authorized to receive the same at the
highest amount legally authorized as of June 30, 1989 for the level of
his position within the particular GOCC/GFI;.
5.4.2 Uniform and Clothing Allowance at a rate as previously
authorized;
5.4.3 Hazard pay as authorized by law;
5.4.4 Honoraria/additional compensation for employees on detail with
special projects or inter-agency undertakings;
5.4.5 Honoraria for services rendered by researchers, experts and
specialists who are of acknowledged authorities in their fields of
specialization;
5.4.6 Honoraria for lecturers and resource persons/speakers;
5.4.7 Overtime pay in accordance to Memorandum Order No. 228;
5.4.8 Clothing/laundry allowances and subsistence allowance of
marine officers and crew on board GOCCs/GFIs owned vessels and
used in their operations, and of hospital personnel who attend directly
to patients and who by nature of their duties are required to wear
uniforms;
5.4.9 Quarters Allowance of officials and employees who are
presently entitled to the same;
5.4.10 Overseas, Living Quarters and other allowances presently
authorized for personnel stationed abroad;
5.4.11 Night Differential of personnel on night duty;
5.4.12 Per Diems of members of the governing Boards of
GOCCs/GFIs at the rate as prescribed in their respective Charters;
5.4.13 Flying Pay of personnel undertaking serial flights;
5.4.14 Per Diems/Allowances of Chairman and Members/Staff of
collegial bodies and Committee; and,
5.4.15 Per Diems/Allowances of officials and employees on official
foreign and local travel outside of their official station.
5.5 Other allowances/fringe benefits not likewise integrated into the basic salary and allowed
to be continued only for incumbents as of June 30, 1989 subject to the condition that the
grant of same is with appropriate authorization either from the DBM, Office of the President
or legislative issuances areas follows:

5.5.1 Rice Subsidy

5.5.2 Sugar Subsidy
5.5.3 Death Benefits other than those granted by the GSIS;
5.5.4 Medical/dental/optical allowances/benefits;
5.5.5 Children's allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9 Teller's Allowance
7 Rollo, p. 31.
8 Id., pp. 30-31.
9 Id., p. 23.
10 Id., p. 8.
11 214 SCRA 653.
12 Erectors, Inc. vs. National Labor Relations Commission, 256 SCRA 629.
13 See note 11, p. 660.
14 Rollo, p. 39.
15 Ibid., pp. 49-50.
16 Rules and Regulations for the Implementation of the Revised Compensation and Position
Classification System Prescribed Under R.A. No. 6758 for Government Owned And/Or
Controlled Corporations (GOCC's) and Government Financial Institutions (GFIs).
17 Sec. 23. Effectivity. Thin Act shall take effect July 1, 1989. The DBM shall within sixty
(60) days after its approval allocate all positions in their appropriate position titles and salary
grades and prepare and issue the necessary guidelines to implement the same.
18 G.R. No. 109023, August 12, 1998.
19 Referring to Tanada vs. Tuvera, 146 SCRA 453.
20 Supra, at pp. 7-8.

21 supra.
22 "A Decree Revising The Position Classification and Compensation Systems In The
National Government, And Integrating The Same" issued on August 22, 1976, to standardize
the compensation of government officials and employees, including those in governmentowned and/or controlled corporations.
23 Sec. 28. Personnel Recruitment The corporation shall adopt a special recruitment and
employment scheme that is responsive to the commercial nature of its operations. Further,
the corporation is hereby authorized to extend permanent appointment to, or contract the
services of, trained and experienced persons, even without civil eligibility, for its manpower
building as a competing trading firm. In view of the pioneering nature of its operation, the
Corporation shall continue to be exempt from the OCPC rules and regulations.
24 Sec. 6. Exemption from OCPC In recognition of the special nature of its operations, the
Corporation shall continue to be exempt from the application of the rules and regulations of
the Office of the Compensation and Position Classification or any other similar agencies that
may be established hereafter as provided under Presidential Decree 1071. . . .
25 Sec. 3. Compensation Policies. The compensation policies including allowances, merit
increases and other employee benefits for all officers and employees adopted by the Board
of Directors are hereby approved in accordance with P.D. Nos. 1177 and 1597. Any future
changes approved by the Board that may be deemed necessary shall not require any
referral to or approval of any other authority, agency or office.
1wphi1.nt

26 Laguna Lake Development Authority vs. Court of Appeals, 251 SCRA 42.
27 Commissioner of Internal Revenue vs. Court of Appeals, 207 SCRA 487.
28 Agujetas vs. Court of Appeals, 258 SCRA 17.