Facts:

The case involves the Secretary of Finance, Cesar B. Purisima, and the Commissioner of Internal Revenue, Kim S. Jacinto-Ahenares, as petitioners against Representative Carmelo F. Lazatin and Ecozone Plastic Enterprises Corporation (EPEC) as respondents. The events leading to this case began with the issuance of Revenue Regulation (RR) No. 2-2012 on February 17, 2012, by the Secretary of Finance, aimed at addressing issues of smuggling and ensuring proper tax collection on petroleum products imported into the Philippines, including those entering Freeport and Economic Zones (FEZs). The regulation mandated the payment of value-added tax (VAT) and excise tax on all petroleum products imported directly from abroad, with provisions for tax credits or refunds if the products were sold to registered FEZ locators for their registered activities.

On March 7, 2012, Representative Lazatin filed a petition for prohibition and injunction against the petitioners, arguing that RR 2-2012 c...

Facts:

Background of the Case
The case involves a petition for review on certiorari filed by the Secretary of Finance, Cesar V. Purisima, and the Commissioner of Internal Revenue, Kim S. Jacinto-Henares, against Representative Carmelo F. Lazatin and Ecozone Plastic Enterprises Corporation (EPEC). The petitioners sought to reverse the November 8, 2013 decision of the Regional Trial Court (RTC) of Angeles City, which declared Revenue Regulation (RR) No. 2-2012 unconstitutional.

Issuance of RR No. 2-2012
To address smuggling of petroleum and ensure correct tax collection, the Secretary of Finance issued RR No. 2-2012 on February 17, 2012, requiring the payment of value-added tax (VAT) and excise tax on the importation of petroleum products, including those brought into Freeport and Economic Zones (FEZs). The regulation allowed for a refund or credit if the taxpayer proved the petroleum was used for the registered activity of a FEZ locator.

Petition by Lazatin and EPEC
On March 7, 2012, Rep. Lazatin filed a petition for prohibition and injunction to annul RR No. 2-2012, arguing that it contravened Republic Act (RA) No. 9400, which treats the Clark Special Economic Zone as a separate customs territory with tax-free importations. EPEC, as a Clark FEZ locator, intervened, claiming it would suffer from the regulation’s implementation.

RTC Proceedings
The RTC issued a temporary restraining order and later a writ of preliminary injunction against RR No. 2-2012. The petitioners challenged the injunction before the Court of Appeals (CA), which granted their petition. However, the RTC eventually ruled in favor of Lazatin and EPEC, declaring RR No. 2-2012 unconstitutional for violating RA 9400 and encroaching on Congress’s legislative powers.

Issue:

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Ruling:

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Ratio:

1. Legal Standing
   • Lazatin has standing as a legislator to protect Congress’s exclusive power to enact, amend, or repeal laws. EPEC has standing as a Clark FEZ locator directly impacted by RR No. 2-2012.
2. Invalidity of RR No. 2-2012
   • RR No. 2-2012 imposes VAT and excise tax on FEZ enterprises, which are tax-exempt under RA 9400. The regulation’s refund mechanism does not equate to a tax exemption but instead burdens FEZ enterprises with payments they should be immune to.
   • RR No. 2-2012 effectively amends RA 9400, a power reserved exclusively to Congress, violating the principle of separation of powers.

Conclusion:

RR No. 2-2012 is null and void as it contravenes RA 9400 and usurps legislative authority. The RTC’s decision is affirmed.