Title
Supreme Court
City of Manila vs. Colet
Case
G.R. No. 120051
Decision Date
Dec 10, 2014
Manila Revenue Code's Section 21(B), imposing a 3% tax on transportation contractors, was declared unconstitutional by the Supreme Court, violating LGC limits on LGU taxing powers.

Case Summary (G.R. No. L-17588)

Procedural History

  • RTC-Branch 43 (1995): In MAS’s case, declared Section 21(B) invalid, granted consignation, and ordered issuance of permit without business tax.
  • RTC-Branch 32 (1995): In consolidated shipping cases, issued TROs and preliminary injunctions, then ultimately held Section 21(B) valid under the Local Government Code’s general taxing grant.
  • Court of Appeals (1996): Affirmed RTC-32 in one referral.
  • Various motions: Petitions for certiorari, petitions for review on certiorari or certiorari under Rule 65, motions for reconsideration, challenges to jurisdictional referrals, motions to withdraw, and show-cause orders concerning counsel failures.
  • Supreme Court (2014): Consolidated all ten petitions for en banc resolution.

Issue

Whether Section 21(B) of the Manila Revenue Code, as amended, is constitutional and valid under the 1987 Constitution and the Local Government Code of 1991, in light of the specific prohibition against taxing the gross receipts of transport contractors and common carriers (Section 133[j] of the LGC) versus the general business-taxing grant (Section 143[h]).

Arguments for Validity

Respondents (City of Manila and officials) contended that:

  1. The 1987 Constitution and LGC expressly empower LGUs to levy taxes, subject to guidelines and limitations in LGC Book II.
  2. Section 133(j) contains an “unless otherwise provided herein” clause, which invokes Section 143(h) as the specific provision allowing municipalities and cities to tax businesses subject to NIRC excise, VAT, or percentage tax, capped at 2% gross receipts.
  3. Section 21(B) complied with LGC requirements: rate below 2%, prior public hearing, consistency with local autonomy, non-confiscatory character, and uniform application.
  4. Section 21(B) enjoys presumption of constitutionality; any ambiguity must be resolved in favor of the taxing power.

Arguments for Invalidity

Petitioners (MAS, shipping, and transport companies) countered that:

  1. LGUs possess no inherent taxing power; all such power is delegated by Congress and must be strictly construed.
  2. Section 133(j) is a specific prohibition—“no taxes on the gross receipts of transport contractors and common carriers”—which prevails over the general business-taxing grant in Section 143(h) (generalia specialibus non derogant).
  3. Section 21(B) functions as a percentage or sales tax, impermissibly duplicative on top of national taxes, and is unjust, confiscatory, and restrains trade.
  4. Tax exemptions and limitations must be liberally construed in favor of taxpayers, and any doubt is resolved against the LGU.
  5. Legislative intent in the LGC (and its predecessor, Local Tax Code of 1973) and subsequent E-VAT Law (RA 7716, sec. 115) confirms that common-carrier gross receipts are exempt from local taxation.

Supreme Court Ruling and Analysis

  1. The power to tax local businesses is not inherent but delegated by the 1987 Constitution (Art. X, sec. 5) and the LGC.
  2. Section 133(j) of the LGC specifically prohibits LGUs from taxing gross receipts of transport contractors and common carriers. Section 143(h) is a general grant to tax businesses not otherwise specified. Under established rules of statutory construction, the specific prohibition in Section 133(j) overrides the general grant in Section 143(h).
  3. Interpretation must give effect to both provisions without rendering Section 133(j) inoperative; Section 143(h) remains operative for numerous other NIRC-taxed businesses (e.g., hotels, caterers, banks, insurance agents) but not common-carriers.
  4. Under LGC sec. 5(b), tax ordinances are strictly construed against the LGU and liberally in favor of taxpayers.
  5. Consistent legislative history and subsequent amendments (e-VAT Law, LGC debates) show intent to prevent duplication of the common-carrier tax.

Resolution of Incidents

  • The motion to withdraw G.R. No. 120051 was denied because the Coca-Cola cases did not decide the validity of Section 21(B). Counsel’s compliance with show-cause order was accepted with caution against future lapses.
  • Maersk’s motion for reconsideration of dismissal for fee deficiency was granted under the doctrine of Segovia v. Barrios (1946) and subsequent rulings relaxing strict fee payment rules in exceptional cases; its petition was reinstated, and RTC-32 was deleted from the caption as not a necessary party.
  • Sulpicio Lines’s motion to reconsider refer
    • ...continue reading

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