Case Digest (G.R. No. 119761)
Facts:
The case arose from Fortune Tobacco Corporation's challenge to Revenue Memorandum Circular No. 37-93 issued by the Commissioner of Internal Revenue on July 1, 1993, which reclassified the brands "Hope," "More" and "Champion" as locally manufactured cigarettes bearing a foreign brand and subjected them to a 55% ad valorem tax under Section 142(c)(1) of the National Internal Revenue Code as amended by RA 7654 (effective July 3, 1993). Fortune Tobacco received a copy of RMC 37-93, sought reconsideration which was denied, was assessed P9,598,334.00 in deficiency taxes, and filed a petition with the Court of Tax Appeals; the CTA canceled the assessment and enjoined collection, and the Court of Appeals affirmed.
Issues:
- Was RMC 37-93 merely an interpretative rule or an adjudicatory/quasi‑legislative act requiring prior notice and hearing?
- Did RMC 37-93 violate the constitutional requirement of uniformity of taxation or otherwise discriminate against Fortune Tobacco?
Ruling:
The Court affirmed the decisions of the Court of Appeals and the Court of Tax Appeals. It held RMC 37-93 defective, invalid and unenforceable for having been issued without the required notice and hearing and for singling out the petitioner’s brands, and it sustained cancellation of the P9,598,334.00 deficiency assessment and the injunction against its collection.
Ratio:
The Court distinguished interpretative rules from legislative or adjudicatory acts and found that RMC 37-93 did more than construe the statute: it made factual findings, applied the law to specific brands and effectively altered taxpayers’ burdens by subjecting those brands to the new tax rate before the law’s effectivity. Such action therefore exercised quasi‑judicial/quasi‑legislative power and required prior notice, hearing and appropriate promulgation procedures (as reflected in the Bureau's own RMC 10‑86 and principles of due process). The Court further noted that the circular’s selective application raised serious uniformity concerns under Article VI, Section 28, 1987 Constitution.
Doctrine:
- Interpretative rule: a rule that merely construes a statute need not be published or preceded by hearing.
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