Case Digest (G.R. No. 163583) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In British American Tobacco, petitioner, challenged Section 145 of the National Internal Revenue Code (NIRC), as recodified by Republic Act (RA) 8424 of 1997 and further amended by RA 9334 effective January 1, 2005, together with Revenue Regulations (RR) Nos. 1-97, 9-2003, 22-2003 and Revenue Memorandum Order (RMO) No. 6-2003. These provisions establish a four-tiered excise tax on machine-packed cigarettes based on *net retail price* and freeze a brand’s tax classification until revised by Congress. Annex “D” lists pre-1997 brands classified on prices surveyed as of October 1, 1996; new brands are to be surveyed three months after launch to fix their classification. In 2001, petitioner introduced Lucky Strike cigarettes at a suggested retail price of ₱9.90, initially taxed at ₱8.96 per pack. A BIR survey in 2003 revealed Lucky Strike’s *current net retail price* exceeded ₱10.00, warranting a ₱13.44 per-pack tax. Petitioner sought a TRO and preliminary injunction in the RTC of Ma Case Digest (G.R. No. 163583) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and challenged measures
- Petitioner: British American Tobacco (BAT).
- Respondents: Secretary of Finance (Camacho) and BIR Commissioner (Parayno).
- Intervenors: Philip Morris Philippines Manufacturing, Fortune Tobacco Corp., Mighty Corp., JT International, S.A.
- Measures assailed:
- Section 145 of the NIRC as recodified by RA 8424 and amended by RA 9334;
- Revenue Regulations (RR) Nos. 1-97, 9-2003, 22-2003;
- Revenue Memorandum Order (RMO) No. 6-2003.
- Legislative framework
- RA 8240 (Tax Reform Act of 1997), effective Jan 1, 1997:
- Recodified NIRC Section 142→Section 145; four-tier specific excise tax on machine-packed cigarettes based on net retail price per pack as of October 1, 1996 (Annex D);
- New brands taxed at “current” net retail price determined by 3-month survey; variant taxed at highest rate; classifications frozen until Congress revision.
- RR 1-97 (Dec 1996): defined existing vs. new brands; set 3-month survey rule.
- RR 9-2003 (Feb 2003) & RMO 6-2003 (Mar 2003): introduced periodic review every two years or earlier, directing BIR surveys and reclassification of new brands.
- RR 22-2003 (Aug 2003): applied revised classifications including Lucky Strike.
- Lucky Strike litigation
- June 2001: BAT launched Lucky Strike brands at a suggested retail price (SRP) of ₱9.90 → initially taxed ₱8.96 per pack (second tier).
- 2003 survey: current net retail prices ~₱21–₱23 → premium tier tax of ₱13.44.
- BAT filed for TRO and preliminary injunction in RTC Makati (Civil Case No. 03-1032) challenging discrimination against new brands; TRO denied, preliminary injunction granted, then lifted.
- RTC decision (May 12, 2004): upheld constitutionality of Section 145, RRs, and RMO; lifted injunction.
- BAT elevated to SC on pure question of law.
- RA 9334 (effective Jan 1, 2005)
- Increased excise tax rates in all tiers; mandated new brands’ initial SRP classification, validated at 3 and 18 months; froze classification of brands introduced Jan 2, 1997–Dec 31, 2003, and maintained Annex D brands until Congress revision.
- Impact: assessed BAT’s importation of 911,000 packs at ₱25.00 per pack (₱22,775,000).
- Intervention and jurisdictional issues
- Intervenors moved to protect their Annex D brands.
- Respondent-Solicitor General raised CTA vs. RTC jurisdiction.
Issues:
- Does Section 145 of the NIRC (as amended by RA 9334) and its implementing RRs/RMO violate the equal protection and uniformity clauses?
- Did RR 1-97 (as amended by RR 9-2003), RR 22-2003, and RMO 6-2003 exceed BIR’s authority by allowing periodic reclassification of new brands?
- Do the assailed provisions conflict with GATT Article III:2 on internal taxes?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)