2. REPUBLIC OF THE PHILIPPINES vs. CENTRAL AZUCARERA DEL DANAO, G.R. No.

L-19842, December
26, 1969

Doctrine:

The protection of a large industry constituting one of the great sources of the state's wealth and
therefore directly or indirectly affecting the welfare of so great a portion of the population of the State is
affected to such an extent by public interests as to be within the police power of the sovereign.

FACTS:

On September 3, 1951, the Philippine Sugar Institute, known as the PHILSUGIN, acquired the Insular
Sugar Refinery for a consideration payable in 5 installments from the proceeds of the sugar tax to be
collected under Republic Act 632. The evidence further discloses that the operation of the Insular Sugar
Refinery for the years 1954, 1955, 1956 and 1957 was disastrous in the sense that PHILSUGIN incurred
tremendous losses. During those years, Central Azucarera del Danao made a payment of P48,879.73 but
left an unpaid balance of P48,059.77.

Defendant contend that the purchase of the Insular Sugar Refinery with money from the Philsugin Fund
was not authorized by Rep. Act 632 and that the continued operation of the said refinery was inimical to
their interests so they refused to continue with their contributions to the said fund.

ISSUE: Whether the defendants are liable to pay the balance.

RULING:

This Court can take judicial notice of the fact that sugar production is one of the great industries of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of the
important sources of foreign exchange needed by our government, and is thus pivotal in the plans of a
regime committed to a policy of currency stability. Its promotion, protection and advancement,
therefore redounds greatly to the general welfare. It follows therefore, that the Legislature may
determine within reasonable bounds what is necessary for its protection and expedient for its
promotion.

6. PLANTERS PRODUCTS, INC. vs. FERTIPHIL CORPORATION G.R. No. 166006, March 14, 2008

Doctrine: The power to tax exists for the general welfare; hence, implicit in its power is the limitation
that it should be used only for a public purpose. It would be a robbery for the State to tax its citizens and
use the funds generated for a private purpose.

Jurisprudence states that "public purpose" should be given a broad interpretation. It does not only
pertain to those purposes which are traditionally viewed as essentially government functions, such as
building roads and delivery of basic services, but also includes those purposes designed to promote
social justice.
Public purpose is the heart of a tax law. When a tax law is only a mask to exact funds from the public
when its true intent is to give undue benefit and advantage to a private enterprise, that law will not
satisfy the requirement of "public purpose."

FACTS:

Petitioner PPI and private respondent Fertiphil are private corporations engaged in importation and
distribution of fertilizers, pesticides, and agricultural chemicals. Ferdinand Marcos issued LOI No. 1465
which expressly provides that Fertilizer and Pesticide Authority (FPA) will collect P10 per bag of fertilizer
as a capital contribution until adequate capital is raised to make PPI viable. Fertiphil paid ₱6,689,144
pursuant to the law. FPA then remits money to Far East Bank and Trust Company, a depositary bank of
PPI.

After the Edsa Revolution, FPA stopped collecting with return of democracy. Fertiphil demanded a
refund but was denied. They later filed a complaint questioning the constitutionality of the LOI No. 1465
because it favoured a privately owned company and not for public purpose. The RTC and CA ruled the
LOI as unconstitutional.

ISSUE: Whether LOI No. 1465 is for public purpose.

RULING:

No, it is not for public purpose therefore, unconstitutional.

Taxes are exacted only for a public purpose. The ₱10 levy is unconstitutional because it was not for a
public purpose. The levy was imposed to give undue benefit to PPI because: (1) he LOI expressly
provided that the levy be imposed to benefit PPI, a private company. There is no way to treat the self-
interest of a favored entity, like PPI, as identical with the general interest of the country’s farmers or
even the Filipino people in general; (2) the LOI provides that the imposition of the ₱10 levy was
conditional and dependent upon PPI becoming financially "viable." This suggests that the levy was
actually imposed to benefit PPI; (3) the LOI were directly remitted and deposited by FPA to Far East Bank
and Trust Company, the depositary bank of PPI; and (4) the levy was used to pay the corporate debts of
PPI as evidenced by the Letter of Understanding presented at the case.

All told, the RTC and the CA did not err in holding that the levy imposed under LOI No. 1465 was not for
a public purpose. LOI No. 1465 failed to comply with the public purpose requirement for tax laws.

10. COMMISSIONER OF INTERNAL REVENUE vs. MICHEL J. LHUILLIER PAWNSHOP, INC. G.R. No.
150947, July 15, 2003

Doctrine:

Two kinds of administrative issuances: the legislative rule and the interpretative rule. A legislative rule is
in the nature of subordinate legislation, designed to implement a primary legislation by providing the
details thereof. An interpretative rule, on the other hand, is designed to provide guidelines to the law
which the administrative agency is in charge of enforcing.

When an administrative rule is merely interpretative in nature, its applicability needs nothing further
than its bare issuance, for it gives no real consequence more than what the law itself has already
prescribed. When, on the other hand, the administrative rule is legislative in nature by substantially
increasing the burden of those governed, the agency must at least accord those directly affected a
chance to be heard, and be duly informed, before that new issuance is given the force and effect of law.

FACTS:

CIR issued RMO No. 15-91 imposing a 5% lending investors tax on pawnshops since their principal
activity is lending money at interest and accepting personal property. BIR then issued assessment notice
against Lhuillier demanding payment amounting to P3,360,335.11 on which the latter protested. BIR
denied the protest and issued warrant of distraint against Lhuillier. The issue was not acted upon by the
CIR hence, an appeal was made to CTA.

Lhuillier contends that pawnshops and lending investors are subject to different tax and that RMO were
implementing new and additional tax that needs to be published. The CIR contends that pawnshops are
included in the definition of lending investors hence liable to 5% lending investors tax and that RMO is
valid even if not published.

ISSUE: Whether or not the RMO needs publication.

RULING:

Yes, the RMO needs publication to be valid.

RMO did not simply interpret a law because of the following reasons: (1) the law specifically mentioned
lending investors and excluded pawnshops; (2) the law expressly provides a different tax treatment on
both pawnshops and lending investors which shows that the congress never intend to treat pawnshops
and lending investors the same way; (3) the pawnshop and lending investors were separately defined by
the law; and (4) Lhuillier should not have been liable to percentage tax if not because of the RMO.
Therefore, the due observance of the requirements of notice, hearing, and publication should not have
been ignored.