G.R. No. L-16619 - Compania General de Tabacos de Felipinas vs. City of Manila

Compania General de Tabacos de Filipinas (referred to as Tabacalera), a duly licensed first-class wholesale and retail liquor dealer, filed an action against the City of Manila and its Treasurer (defendants-appellants) to recover P15,208.00 allegedly overpaid as taxes.
The payment in question concerns taxes on Tabacalera’s wholesale and retail sales of liquor from the third quarter of 1954 to the second quarter of 1957 under Manila City Ordinances Nos. 3634, 3301, and 3816.
Tabacalera had paid fixed license fees for the sale of liquor under Ordinance No. 3358 for the years 1954 to 1957 and also paid sales taxes on general merchandise under Ordinances Nos. 3634, 3301, and 3816, which included liquor sales in its declarations.

Tabacalera contended it should only pay the license fees under Ordinance No. 3358 for liquor sales and not the municipal sales taxes under the other three ordinances.
It argued that the sales taxes paid on liquor sales amounted to an overpayment made by mistake and should therefore be refunded.
The City of Manila countered that:

The liquor dealer must pay both license fees and sales taxes as these are distinct charges under the city ordinances.
The P15,208.00 paid was voluntary and without protest.
Any mistake was one of law and due to plaintiff’s neglect.
The amount had been passed on to consumers through selling prices.
The money had already been spent by the City for public improvements benefiting the plaintiff.

Ordinance No. 3358 imposed fixed annual license fees for the privilege to sell liquor, enacted under the City’s police power for regulatory purposes.
Ordinances Nos. 3634, 3301, and 3816 imposed taxes on sales of general merchandise for revenue purposes.
"General merchandise" under these ordinances clearly included liquor based on classification in the National Internal Revenue Code and City Treasurer’s issued regulations.
Initially, Tabacalera included liquor sales in its declarations and paid corresponding taxes. After learning of a 1954 letter from the City Treasurer suggesting liquor dealers licensed under Ordinance No. 3358 were exempt from the sales taxes, Tabacalera stopped including liquor sales in declarations and eventually demanded a refund.
The City rejected the refund claim, prompting the litigation.

Whether Tabacalera was subject to both the fixed license fees for liquor sales under Ordinance No. 3358 and the sales taxes under Ordinances Nos. 3634, 3301, and 3816.
Whether the payment of P15,208.00 in sales taxes by Tabacalera constituted an overpayment made by mistake and was refundible.
Whether the City could refuse refund on grounds that the payment was voluntary, mistaken in law, passed on to consumers, or already expended for public benefit.