Case Summary (G.R. No. 204429)
Petitioner
Smart Communications, Inc.
Respondent
Municipality of Malvar, Batangas
Key Dates
• July 30, 2003 – Enactment of Ordinance No. 18 regulating special projects (including cell‐site structures).
• August 24, 2004 – Municipality issued assessment letter demanding ₱389,950 for fees covering 2001–2004.
• December 2, 2008 – Regional Trial Court (RTC), Branch 6: declared assessments for 2001–July 2003 void; upheld assessment from October 1, 2003.
• May 21, 2009 – RTC denied motion for reconsideration.
• December 17, 2010 – CTA First Division: affirmed RTC decision.
• April 7, 2011 – CTA First Division denied motion for reconsideration.
• June 26, 2012 – CTA En Banc: dismissed Smart’s petition for review for lack of jurisdiction.
• November 13, 2012 – CTA En Banc denied motion for reconsideration.
• October 27, 2014 – Supreme Court decision applying the 1987 Constitution.
Applicable Law
• 1987 Constitution, Article X, Section 5 (local autonomy and taxing power).
• Local Government Code of 1991 (R.A. 7160), especially Sections 131 (definitions), 142 (municipal taxing power), 143 (business taxes), 147 (fees and charges), 166 (accrual of local levies), 186 (power to levy other charges), 187 (procedural requirements).
• R.A. 1125 as amended by R.A. 9282 (creation and jurisdiction of CTA).
Background and Assessment
Smart built a telecommunications tower within Malvar’s jurisdiction. In August 2004, the Municipality assessed fees under Ordinance No. 18, computed as a percentage of project cost plus surcharges, covering years 2001 to 2004. A closure notice was posted when Smart did not pay. Smart protested for lack of due process and challenged the ordinance’s validity.
Procedural History through CTA En Banc
Smart appealed to the RTC contesting the assessment period and the ordinance’s legality. The RTC held the assessment for 2001–July 2003 void (ordinance effective July 30, 2003) and permitted assessment only from October 1, 2003. The RTC denied reconsideration. Smart’s petition to the CTA First Division was denied; reconsideration was likewise denied. Smart’s CTA En Banc petition was dismissed for lack of jurisdiction, and its motion for reconsideration was denied, prompting the Supreme Court review.
CTA En Banc’s Jurisdictional Ruling
The CTA En Banc held it could not entertain constitutional challenges to municipal ordinances. Under R.A. 9282, Section 7(a)(3), its appellate jurisdiction extends only to decisions on local tax cases but excludes adjudication of a law’s constitutionality.
Issues Before the Supreme Court
- Whether the CTA erred in dismissing for lack of jurisdiction by not declaring Ordinance No. 18 illegal.
- Whether exhaustion of administrative remedies doctrine applies.
- Whether the Municipality had authority to impose the assessed fees under a void ordinance.
Analysis on Jurisdiction and Nature of the Impositions
• Constitutional and statutory jurisdiction of the CTA is limited to “local tax cases.”
• 1987 Constitution, Art. X, Sec. 5 empowers LGUs to levy “taxes, fees, and charges.” LGC distinguishes “taxes” (revenue‐raising) from “fees” (regulatory).
• Ordinance No. 18’s stated purpose is to regulate installation, repair, maintenance and removal of “special projects” such as cell sites—classic exercise of police power. Its fees serve to enforce standards, with revenue incidental.
• Jurisprudence (Progressive Development Corp. v. Quezon City; Victorias Milling v. Victorias) indicates that an impostion primarily for regulation is a fee, not a tax.
• Because the RTC adjudicated a regulatory fee case, the CTA lacked appellate jurisdiction over Smart’s constitutional challenge.
Authority of the Municipality under the LGC
• Sections 142 and 147 grant LGUs power to impose taxes and regulatory fees.
• Section 186 allows LGUs to levy additional fees not enumerated, so long as they are not “unjust, excessive, oppressive, confiscatory or contrary to declared national policy” and after public hearing.
• Ordinance No. 18 complied with Section 186’s requirements, including prior public hearing.
• No conflict with NTC’s regulatory fees under R.A. 7925, as Ordinance No. 18 regulates physical structures, not technical or operational aspects of telecommunications services.
• HLURB’s own guidelines recognize LGU power to collect locational clearance fees, subject to Executive Order
Case Syllabus (G.R. No. 204429)
Procedural History
- Smart Communications, Inc. (“Smart”) filed a petition for review under Rule 45 of the Rules of Court challenging:
- The 26 June 2012 Decision and 13 November 2012 Resolution of the Court of Tax Appeals (CTA) En Banc.
- These CTA En Banc issuances had affirmed the CTA First Division’s 17 December 2010 Decision and 7 April 2011 Resolution.
- The CTA First Division in turn affirmed the Regional Trial Court (RTC) of Tanauan City, Batangas, Branch 6: its 2 December 2008 Decision and 21 May 2009 Order.
- The RTC had declared void the assessment imposed by the Municipality of Malvar for the period 2001 to July 2003 and directed assessment only from 1 October 2003.
- Smart’s motion for reconsideration was denied at each level, culminating in its appeal to the Supreme Court.
Facts
- Smart, a domestic corporation providing telecommunications services, constructed a cellular communications tower in Malvar, Batangas.
- On 30 July 2003, the Municipality enacted Ordinance No. 18, series 2003, “An Ordinance Regulating the Establishment of Special Projects.”
- On 24 August 2004, Smart received an assessment letter demanding ₱389,950.00 covering:
- Years 2001–2003: 1% of project cost (₱110 000.00) less reduction, plus surcharges, multiplied by three years.
- Year 2004: 1% of project cost (₱110 000.00) plus 37% surcharge.
- The Municipality posted a closure notice on Smart’s tower for alleged nonpayment.
- On 9 September 2004, Smart protested, claiming lack of due process and challenging the validity of Ordinance No. 18.
- The Municipality denied the protest; Smart then filed an Appeal/Petition in RTC Branch 6.
Issues
- Whether the CTA En Banc erred in dismissing Smart’s petition for lack of jurisdiction