G.R. No. L-31156 February 27, 1976PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC.,plaintiff-appellant,vs.MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL.,defendant appellees.Sabido, Sabido & Associates for appellant.Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for appellees.MARTIN,J.:This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case No. 3294, which was certified to Us by the Court of Appeals on October 6, 1969, as involving only pure questions of law, challenging the power of taxation delegated to municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the Philippines, Inc., commenced a complaint with preliminary injunction before the Court of First Instance of Leyte for that court to declare Section 2 of Republic Act No. 2264.1otherwise known as the Local Autonomy Act, unconstitutional as an undue delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the municipality of Tanauan, Leyte, null and void.On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of which state that,first, both Ordinances Nos. 23 and 27 embrace or cover the same subject matter and the production tax rates imposed therein are practically the same, and second, that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality, sought to enforce compliance by the latter of the provisions of said Ordinance No. 27, series of 1962.Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25, 1962, levies and collects "from soft drinks producers and manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of soft drink corked."2For the purpose of computing the taxes due, the person, firm, company or corporation producing soft drinks shall submit to the Municipal Treasurer a monthly report, of the total number of bottles produced and corked during the month.3On the other hand, Municipal Ordinance No. 27, which was approved on October 28, 1962, levies and collects "on soft drinks produced or manufactured within the territorial jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity."4For the purpose of computing the taxes due, the person, fun company, partnership, corporation or plant producing soft drinks shall submit to the Municipal Treasurer a monthly report of the total number of gallons produced or manufactured during the month.5The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal production tax.'On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing the complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay the taxes due under the oft the said Ordinances; and to pay the costs."From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary Act of 1948, as amended.There are three capital questions raised in this appeal:1. Is Section 2, Republic Act No. 2264 an undue delegation of power, confiscatory and oppressive?2. Do Ordinances Nos. 23 and 27 constitute double taxation and impose percentage or specific taxes?3. Are Ordinances Nos. 23 and 27 unjust and unfair?1. The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people.6It is a power that is purely legislative and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. The exception, however, lies in the case of municipal corporations, to which, said theory does not apply. Legislative powers may be delegated to local governments in respect of matters of local concern.7This is sanctioned by immemorial practice.8By necessary implication, the legislative power to create political corporations for purposes of local self-government carries with it the power to confer on such local governmental agencies the power to tax.9Under the New Constitution, local governments are granted the autonomous authority to create their own sources of revenue and to levy taxes. Section 5, Article XI provides: "Each local government unit shall have the power to create its sources of revenue and to levy taxes, subject to such limitations as may be provided by law." Withal, it cannot be said that Section 2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power to enact and vest in local governments the power of local taxation.The plenary nature of the taxing power thus delegated, contrary to plaintiff-appellant's pretense, would not suffice to invalidate the said law as confiscatory and oppressive. In delegating the authority, the State is not limited 6 the exact measure of that which is exercised by itself. When it is said that the taxing power may be delegated to municipalities and the like, it is meant that there may be delegated such measure of power to impose and collect taxes as the legislature may deem expedient. Thus, municipalities may be permitted to tax subjects which for reasons of public policy the State has not deemed wise to tax for more general purposes.10This is not to say though that the constitutional injunction against deprivation of property without due process of law may be passed over under the guise of the taxing power, except when the taking of the property is in the lawful exercise of the taxing power, as when (1) the tax is for a public purpose; (2) the rule on uniformity of taxation is observed; (3) either the person or property taxed is within the jurisdiction of the government levying the tax; and (4) in the assessment and collection of certain kinds of taxes notice and opportunity for hearing are provided.11Due process is usually violated where the tax imposed is for a private as distinguished from a public purpose; a tax is imposed on property outside the State, i.e., extraterritorial taxation; and arbitrary or oppressive methods are used in assessing and collecting taxes. But, a tax does not violate the due process clause, as applied to a particular taxpayer, although the purpose of the tax will result in an injury rather than a benefit to such taxpayer. Due process does not require that the property subject to the tax or the amount of tax to be raised should be determined by judicial inquiry, and a notice and hearing as to the amount of the tax and the manner in which it shall be apportioned are generally not necessary to due process of law.12There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised.13The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some states of the Union.14Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity15or by the same jurisdiction for the same purpose,16but not in a case where one tax is imposed by the State and the other by the city or municipality.172. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute double taxation, because these two ordinances cover the same subject matter and impose practically the same tax rate. The thesis proceeds from its assumption that both ordinances are valid and legally enforceable. This is not so. As earlier quoted, Ordinance No. 23, which was approved on September 25, 1962, levies or collects from soft drinks producers or manufacturers a tax of one-sixteen (1/16) of a centavo for .every bottle corked, irrespective of the volume contents of the bottle used. When it was discovered that the producer or manufacturer could increase the volume contents of the bottle and still pay the same tax rate, the Municipality of Tanauan enacted Ordinance No. 27, approved on October 28, 1962, imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The difference between the two ordinances clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity. The intention of the Municipal Council of Tanauan in enacting Ordinance No. 27 is thus clear: it was intended as a plain substitute for the prior Ordinance No. 23, and operates as a repeal of the latter, even without words to that effect.18Plaintiff-appellant in its brief admitted that defendants-appellees are only seeking to enforce Ordinance No. 27, series of 1962. Even the stipulation of facts confirms the fact that the Acting Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by the plaintiff-appellant of the provisions of said Ordinance No. 27, series of 1962. The aforementioned admission shows that only Ordinance No. 27, series of 1962 is being enforced by defendants-appellees. Even the Provincial Fiscal, counsel for defendants-appellees admits in his brief "that Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance No. 23 as the provisions of the latter are inconsistent with the provisions of the former."That brings Us to the question of whether the remaining Ordinance No. 27 imposes a percentage or a specific tax. Undoubtedly, the taxing authority conferred on local governments under Section 2, Republic Act No. 2264, is broad enough as to extend to almost "everything, accepting those which are mentioned therein." As long as the text levied under the authority of a city or municipal ordinance is not within the exceptions and limitations in the law, the same comes within the ambit of the general rule, pursuant to the rules ofexclucion attehusandexceptio firmat regulum in cabisus non excepti19The limitation applies, particularly, to the prohibition against municipalities and municipal districts to impose "any percentage tax or other taxes in any formbased thereonnor impose taxes on articles subject tospecific taxexcept gasoline, under the provisions of the National Internal Revenue Code." For purposes of this particular limitation, a municipal ordinance which prescribes a set ratio between the amount of the tax and the volume of sale of the taxpayer imposes a sales tax and is null and void for being outside the power of the municipality to enact.20But, the imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity" on all soft drinks produced or manufactured under Ordinance No. 27 does not partake of the nature of a percentage tax on sales, or other taxes in any form based thereon. The tax is levied on the produce (whether sold or not) and not on the sales. The volume capacity of the taxpayer's production of soft drinks is considered solely for purposes of determining the tax rate on the products, but there is not set ratio between the volume of sales and the amount of the tax.21Nor can the tax levied be treated as a specific tax. Specific taxes are those imposed on specified articles, such as distilled spirits, wines, fermented liquors, products of tobacco other than cigars and cigarettes, matches firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic films, playing cards, saccharine, opium and other habit-forming drugs.22Soft drink is not one of those specified.3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume capacity on all softdrinks, produced or manufactured, or an equivalent of 1- centavos per case,23cannot be considered unjust and unfair. 24 an increase in the tax alone would not support the claim that the tax is oppressive, unjust and confiscatory. Municipal corporations are allowed much discretion in determining the reates of imposable taxes. 25 This is in line with the constutional policy of according the widest possible autonomy to local governments in matters of local taxation, an aspect that is given expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless the amount is so excessive as to be prohibitive, courts will go slow in writing off an ordinance as unreasonable. 27 Reluctance should not deter compliance with an ordinance such as Ordinance No. 27 if the purpose of the law to further strengthen local autonomy were to be realized. 28Finally, the municipal license tax of P1,000.00 per corking machine with five but not more than ten crowners or P2,000.00 with ten but not more than twenty crowners imposed on manufacturers, producers, importers and dealers of soft drinks and/or mineral waters under Ordinance No. 54, series of 1964, as amended by Ordinance No. 41, series of 1968, of defendant Municipality,29appears not to affect the resolution of the validity of Ordinance No. 27. Municipalities are empowered to impose, not only municipal license taxes upon persons engaged in any business or occupation but also to levy for public purposes, just and uniform taxes. The ordinance in question (Ordinance No. 27) comes within the second power of a municipality.ACCORDINGLY, the constitutionality of Section 2 of Republic Act No. 2264, otherwise known as the Local Autonomy Act, as amended, is hereby upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan, Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series, is hereby declared of valid and legal effect. Costs against petitioner-appellant.SO ORDERED.HON. EXECUTIVE SECRETARY,et al. v. SOUTHWING HEAVY INDUSTRIES, INC.,et al.The instant consolidated petitions seek to annul and set aside the Decisions of the Regional Trial Court ofOlongapoCity, Branch 72, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04, both dated May 24, 2004; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP. No. 83284, which declared Article 2, Section 3.1 of Executive Order No. 156 (EO 156) unconstitutional.Said executive issuance prohibits the importation into the country, inclusive of the Special Economic and Freeport Zone or theSubicBay Freeport (SBF or Freeport), of used motor vehicles, subject to a few exceptions.The undisputed facts show that onDecember 12, 2002, President GloriaMacapagal-Arroyo, through Executive Secretary Alberto G.Romulo, issued EO 156, entitledPROVIDING FOR A COMPREHENSIVE INDUSTRIAL POLICY AND DIRECTIONS FOR THE MOTOR VEHICLE DEVELOPMENT PROGRAM AND ITS IMPLEMENTING GUIDELINES.The challenged provision states:3.1The importation into the country, inclusive of theFreeport, of all types of used motor vehicles is prohibited, except for the following:3.1.1A vehicle that is owned and for the personal use of a returning resident or immigrant and covered by an authority to import issued under the No-dollar Importation Program.Such vehicles cannot be resold for at least three (3) years;3.1.2A vehicle for the use of an official of the Diplomatic Corps and authorized to be imported by the Department of Foreign Affairs;3.1.3Trucks excluding pickup trucks;1.with GVW of 2.5-6.0 tons covered by an authority to import issued by the DTI.2.With GVW above 6.0 tons.3.1.4Buses:1.with GVW of 6-12 tons covered by an authority to import issued by DTI;2.with GVW above 12 tons.3.1.5Special purpose vehicles:1.fire trucks2.ambulances3.funeral hearse/coaches4.crane lorries5.tractor heads and truck tractors6.boom trucks7.tanker trucks8.tank lorries with high pressure spray gun9.reefers or refrigerated trucks10.mobile drilling derricks11.transit/concrete mixers12.mobile radiological units13.wreckers or tow trucks14.concrete pump trucks15.aerial/bucket flat-form trucks16.street sweepers17.vacuum trucks18.garbage compactors19.self loader trucks20.man lift trucks21.lighting trucks22.trucks mounted with special purpose equipment23.all other types of vehicle designed for a specific use.The issuance of EO 156 spawned three separate actions for declaratory relief before Branch 72 of theRegionalTrialCourtofOlongapoCity, all seeking the declaration of the unconstitutionality of Article 2, Section 3.1 of said executive order.The cases were filed by herein respondent entities, who or whose members, are classified asSubicBay Freeport Enterprises and engaged in the business of, among others, importing and/or trading used motor vehicles.G.R. No. 164171:On January 16, 2004, respondentsSouthwingHeavy Industries, Inc., (SOUTHWING) United Auctioneers, Inc. (UNITED AUCTIONEERS), andMicrovan, Inc. (MICROVAN), instituted a declaratory relief case docketed as Civil Case No. 20-0-04,[1]against the Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs, Assistant Secretary and Head of the Land Transportation Office,SubicBay Metropolitan Authority (SBMA), Collector of Customs for the Port atSubicBay Freeport Zone, and the Chief of the Land Transportation Office atSubicBay Freeport Zone.SOUTHWING,UNITED AUCTIONEERSandMICROVANprayed that judgment be rendered (1) declaring Article 2, Section 3.1 of EO 156 unconstitutional and illegal; (2) directing the Secretary of Finance, Commissioner of Customs, Collector of Customs and the Chairman of the SBMA to allow the importation of used motor vehicles; (2) ordering the Land Transportation Office and its subordinates inside theSubicSpecial Economic Zone to process the registration of the imported used motor vehicles; and (3) in general, to allow the unimpeded entry and importation of used motor vehicles subject only to the payment of the required customs duties.Upon filing of petitioners answer/comment, respondentsSOUTHWINGandMICROVANfiled a motion for summary judgment which was granted by the trial court.OnMay 24, 2004, a summary judgment was rendered declaring that Article 2, Section 3.1 of EO 156 constitutes an unlawful usurpation of legislative power vested by the Constitution with Congress.The trial court further held that the proviso is contrary to the mandate of Republic Act No. 7227 (RA 7227) or the Bases Conversion and Development Act of 1992 which allows the free flow of goods and capital within theFreeport.The dispositive portion of the said decision reads:WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chiefof the Land Transportation Office and its subordinates inside theSubicSpecial Economic Zone or SBMA to process the registration of imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.SO ORDERED.[2]From the foregoing decision, petitioners sought relief before this Courtviaa petition for review on certiorari, docketed as G.R. No. 164171.G.R. No. 164172:OnJanuary 20, 2004, respondentSubicIntegrated Macro Ventures Corporation (MACRO VENTURES) filed with the same trial court, a similar action for declaratory relief docketed as Civil Case No. 22-0-04,[3]with the same prayer and against the same parties[4]as those in Civil Case No. 20-0-04.In this case, the trial court likewise rendered a summary judgment onMay 24, 2004, holding that Article 2, Section 3.1 of EO 156, is repugnant to the constitution.[5]Elevated to this Courtviaa petition for review on certiorari, Civil Case No. 22-0-04 was docketed asG.R. No. 164172.G.R. No. 168741On January 22, 2003, respondent Motor Vehicle Importers Association ofSubicBay Freeport, Inc. (ASSOCIATION), filed another action for declaratory relief with essentially the same prayer as those in Civil Case No. 22-0-04 and Civil Case No. 20-0-04, against the Executive Secretary, Secretary of Finance, Chief of the Land Transportation Office, Commissioner of Customs, Collector of Customs at SBMA and the Chairman of SBMA.This was docketed as Civil Case No. 30-0-2003,[6]before the same trial court.In a decision datedMarch 10, 2004, the courta quogranted theASSOCIATIONsprayer and declared the assailed proviso as contrary to the Constitution, to wit:WHEREFORE, judgment is hereby rendered in favor of petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for being unconstitutional and illegal; directing respondents Collector of Customs based at SBMA to allow the importation and entry of used motor vehicles pursuant to the mandate of RA 7227; directing respondent Chief of the Land Transportation Office and its subordinates inside theSubicSpecial Economic Zone or SBMA to process the registration of imported used motor vehicles; directing the respondent Chairman of the SBMA to allow the entry into theSubicSpecial Economic Zone or SBMA imported used motor vehicle; and in general, to allow unimpeded entry and importation of used motor vehicles to the Philippines subject only to the payment of the required customs duties.SO ORDERED.[7]Aggrieved, the petitioners in Civil Case No. 30-0-2003, filed a petition for certiorari[8]with the Court of Appeals (CA-G.R. SP. No. 83284) which denied the petition onFebruary 14, 2005and sustained the finding of the trial court that Article 2, Section 3.1 of EO 156, is void for being repugnant to the constitution.The dispositive portion thereof, reads:WHEREFORE, the instant petition for certiorari is hereby DENIED.The assailed decision of the Regional Trial Court, Third Judicial Region, Branch 72,OlongapoCity, in Civil Case No. 30-0-2003, accordingly, STANDS.SO ORDERED.[9]Theaforequoteddecision of the Court of Appeals was elevated to this Court and docketed as G.R. No. 168741.In a Resolution datedOctober 4, 2005,[10]said case was consolidated with G.R. No. 164171 and G.R. No. 164172.Petitioners are now before this Court contending that Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country, including theFreeeport.In support of their arguments, they raise procedural and substantive issues bearing on the constitutionality of the assailed proviso.Theprocedural issuesare: the lack of respondentslocusstandito question the validity of EO 156, the propriety of challenging EO 156 in a declaratory relief proceeding and the applicability of a judgment on the pleadings in this case.Petitioners argue that respondents will not be affected by the importation ban considering that their certificate of registration and tax exemption do not authorize them to engage in the importation and/or trading ofused cars.They also aver that the actions filed by respondents do not qualify as declaratory relief cases.Section 1, Rule 63 of the Rules of Court provides that a petition for declaratory relief may be filed before there is a breach or violation of rights.Petitioners claim that there was already a breach of respondents supposed right because the cases were filed more than a year after the issuance of EO 156.In fact, in Civil Case No. 30-0-2003, numerous warrants of seizure and detention were issued against imported used motor vehicles belonging to respondentASSOCIATIONsmembers.Petitioners arguments lack merit.The established rule that the constitutionality of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement[11]has been satisfied in the instant case.The broad subject of the prohibited importation isall types of used motor vehicles.Respondents would definitely suffer a direct injury from the implementation of EO 156 because their certificate of registration and tax exemption authorize them to trade and/or import newand usedmotor vehicles and spare parts, except used cars.[12]Other types of motor vehicles imported and/or traded by respondents and not falling within the category ofused carswould thus be subjected to the ban to the prejudice of their business. Undoubtedly, respondents have the legal standing to assail the validity of EO 156.As to the propriety of declaratory relief as a vehicle for assailing the executive issuance, suffice it to state that any breach of the rights of respondents will not affect the case.InCommission on Audit of the Province ofCebuv. Province ofCebu,[13]the Court entertained a suit for declaratory relief to finally settle the doubt as to the proper interpretation of the conflicting laws involved, notwithstanding a violation of the right of the party affected.We find no reason to deviate from said ruling mindful of the significance of the present case to the national economy.So also, summary judgments were properly rendered by the trial court because the issues involved in the instant case were pure questions of law.A motion forsummary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact.It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action in which the pleadings raise only a legal issue, not a genuine issue as to any material fact.[14]At any rate, even assuming the procedural flaws raised by petitioners truly exist, the Court is not precluded from brushing aside these technicalities and taking cognizance of the action filed by respondents considering its importance to the public and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution.[15]We now come to thesubstantive issues, which are: (1) whether there is statutory basis for the issuance of EO 156; and (2) if the answer is in the affirmative, whether the application of Article 2, Section 3.1 of EO 156, reasonable and within the scope provided by law.The main thrust of the petition is that EO 156 is constitutional because it was issued pursuant to EO226, the Omnibus Investment Code of the Philippines and that its application should be extended to the Freeport because the guarantee of RA 7227 on the free flow of goods into the said zone is merely an exemption from customs duties and taxes on items brought into the Freeport and not an open floodgate for all kinds of goods and materials without restriction.In G.R. No. 168741, the Court of Appeals invalidated Article 2, Section 3.1 of EO 156, on the ground of lack of any statutory basis for the President to issue the same.It held that the prohibition on the importation of used motor vehicles is an exercise of police power vested on the legislature and absent any enabling law, the exercise thereof by the President through an executive issuance, is void.Police power isinherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society.It is lodged primarily with the legislature.By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies on all municipal levels, including thebarangay.[16]Such delegation confers upon the Presidentquasi-legislative powerwhich may be defined as the authority delegated by the law-making body to the administrative body to adopt rules and regulations intended to carry out the provisions of the law and implement legislative policy.[17]To be valid, an administrative issuance, such as an executive order, must comply with the following requisites:(1)Its promulgation must be authorized by the legislature;(2)It must be promulgated in accordance with the prescribed procedure;(3)It must be within the scope of the authority given by the legislature; and(4)It must be reasonable.[18]Contrary to the conclusion of the Court of Appeals, EO 156 actually satisfied thefirst requisiteof a valid administrative order.It has both constitutional and statutory bases.Delegation of legislative powers to the President is permitted in Section 28(2) of Article VI of the Constitution.It provides:(2)The Congress may, bylaw, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage andwharfagedues, and other duties or imposts within the framework of the national development program of the Government.[19](Emphasis supplied)The relevant statutes to execute this provision are:1)TheTariff and Customs Codewhich authorizes the President, in the interest of national economy, general welfare and/or national security, to,interalia, prohibit the importation of any commodity.Section 401 thereof, reads:Sec. 401. Flexible Clause.a.In the interest of national economy, general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon recommendation of the National Economic and Development Authority (hereinafter referred to as NEDA), is hereby empowered:xxx(2)to establish import quota or to ban imports of any commodity, as may be necessary;xxxProvided, That upon periodic investigations by the Tariff Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection levels granted in Section One hundred and four of this Code, including those subsequently granted pursuant to this section.(Emphasis supplied)2)Executive Order No. 226, the Omnibus Investment Code of the Philippines which was issued on July 16, 1987, by then President Corazon C.Aquino, in the exercise of legislative power under the Provisional Freedom Constitution,[20]empowers the President to approve or reject the prohibition on the importation of any equipment or raw materials or finished products.Pertinent provisions thereof, read:ART. 4. Composition of the board.The Board of Investments shall be composed of seven (7) governors: The Secretary of Trade and Industry, three (3) Undersecretaries of Trade and Industry to be chosen by the President; and three (3) representatives from the government agencies and the private sector xxx.ART. 7.Powers and duties of the Board.xxxx(12)Formulate and implement rationalization programs for certain industries whose operation may result in dislocation, overcrowding or inefficient use of resources, thus impeding economic growth.For this purpose, the Board may formulate guidelines for progressive manufacturing programs, local content programs, mandatory sourcing requirements and dispersal of industries.In appropriate cases and upon approval of the President, the Board may restrict, either totally or partially, the importation of any equipment or raw materials or finished products involved in the rationalization program;(Emphasis supplied)3)Republic Act No. 8800, otherwise known as the Safeguard Measures Act (SMA), and entitled An Act Protecting Local Industries By Providing Safeguard Measures To Be Undertaken In Response To Increased Imports And Providing Penalties For Violation Thereof,[21]designated the Secretaries[22]of the Department of Trade and Industry (DTI) and the Department of Agriculture, in their capacity asalter egosof the President, as the implementing authorities of the safeguard measures, which include,interalia, modification or imposition of any quantitative restriction on the importation of a product into the Philippines.The purpose of the SMA is stated in the declaration of policy, thus:SEC. 2. Declaration of Policy. The State shall promote competitiveness of domestic industries and producers based on sound industrial and agricultural development policies, and efficient use of human, natural and technical resources. In pursuit of this goal and in the public interest, the State shall provide safeguard measures to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers.There are thus explicit constitutional and statutory permission authorizing the President to ban or regulate importation of articles and commodities into the country.Anent thesecond requisite, that is, that the order must be issued or promulgated in accordance with the prescribed procedure, it is necessary that the nature of the administrative issuance is properly determined.As in the enactment of laws, the general rule is that, the promulgation of administrative issuances requires previous notice and hearing, the only exception being where the legislature itself requires it and mandates that the regulation shall be based on certain facts as determined at an appropriate investigation.[23]This exception pertains to the issuance oflegislative rulesas distinguished frominterpretative ruleswhich give no real consequence more than what the law itself has already prescribed;[24]and are designed merely to provide guidelines to the law which the administrative agency is in charge of enforcing.[25]Alegislative rule, on the other hand, is in the nature of subordinate legislation, crafted to implement a primary legislation.InCommissioner of Internal Revenue v. Court of Appeals,[26]andCommissioner of Internal Revenuev. Michel J.LhuillierPawnshop, Inc.,[27]the Court enunciated the doctrinethat when an administrative rulegoes beyond merely providing for the means that can facilitate or render less cumbersome the implementation of the law and substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard and, thereafter, to be duly informed, before the issuance is given the force and effect of law.In the instant case, EO 156 is obviously a legislative rule as it seeks to implement or execute primary legislative enactments intended to protect the domestic industry by imposing a ban on the importation of a specified product not previously subject to such prohibition.The due process requirements in the issuance thereof are embodied in Section401[28]of the Tariff and Customs Code and Sections 5 and 9 of the SMA[29]which essentially mandate the conduct of investigation and public hearings before the regulatory measure or importation ban may be issued.In the present case, respondents neither questioned before this Court nor with the courts below the procedure that paved the way for the issuance of EO 156.What they challenged in their petitions before the trial court was the absence of substantive due process in the issuance of the EO.[30]Their main contention before the courta quois that the importation ban is illogical and unfair because it unreasonably drives them out of business to the prejudice of the national economy.Considering the settled principle that in the absence of strong evidence to the contrary, acts of the other branches of the government are presumed to be valid,[31]and there being no objection from the respondents as to the procedure in the promulgation of EO 156, the presumption is that said executive issuance duly complied with the procedures and limitations imposed by law.To determine whether EO 156 has complied with the third and fourth requisites of a valid administrative issuance, to wit, that it was issued within the scope of authority given by the legislature and that it is reasonable, an examination of the nature of a Freeport under RA 7227 and the primordial purpose of the importation ban under the questioned EO is necessary.RA 7227 was enacted providing for, among other things, the sound and balanced conversion of the Clark andSubicmilitary reservations and their extensions into alternative productive uses in the form of Special Economic and Freeport Zone, or theSubicBay Freeport, in order to promote the economic and social development of Central Luzon in particular and the country in general.The Rules and Regulations Implementing RA 7227 specifically defines the territory comprising theSubicBay Freeport, referred to as the Special Economic and Freeport Zone in Section 12 of RA 7227 as "a separate customs territory consisting of the City ofOlongapoand the Municipality ofSubic, Province ofZambales, the lands occupied by theSubicNaval Base and its contiguous extensions as embraced, covered and defined by the 1947 Philippine-U.S. Military Base Agreement as amended and within the territorial jurisdiction ofMorongandHermosa, Province ofBataan, the metes and bounds of which shall be delineated by the President of the Philippines; provided further that pending establishment of secure perimeters around the entire SBF, the SBF shall refer to the area demarcated by the SBMA pursuant to Section 13[32]hereof."Among the salient provisions of RA 7227 are as follows:SECTION 12. SubicSpecial Economic Zone. xxxxThe abovementioned zone shall be subject to the following policies:xxxx(a)Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of the Local Government Code, theSubicSpecial Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments;(b)TheSubicSpecial Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of theSubicSpecial Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of theSubicSpecial Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of thePhilippines;TheFreeportwas designed to ensure free flow or movement of goods and capital within a portion of the Philippine territory in order to attract investors to invest their capital in a business climate with the least governmental intervention.The concept of this zone was explained by SenatorGuingonain this wise:SenatorGuingona.Mr. President, the special economic zone is successful in many places, particularlyHong Kong, which is a free port.The difference between a special economic zone and an industrial estate is simply expansive in the sense that the commercial activities, including the establishment of banks, services, financial institutions, agro-industrial activities, maybe agriculture to a certain extent.This delineates the activities that would have the least of government intervention, and the running of the affairs of the special economic zone would be run principally by the investors themselves, similar to a housing subdivision, where the subdivision owners elect their representatives to run the affairs of the subdivision, to set the policies, to set the guidelines.We would like to seeSubicarea converted into a littleHong Kong, Mr. President, where there is a hub of free port and free entry, free duties and activities to a maximum spur generation of investment and jobs.While the investor is reluctant to come in thePhilippines, as a rule, because of red tape and perceived delays, we envision this special economic zone to be an area where there will be minimum government interference.The initial outlay may not only come from the Government or the Authority as envisioned here, but from them themselves, because they would be encouraged to invest not only for the land but also for the buildings and factories.As long as they are convinced that in such an area they can do business and reap reasonable profits, then many from other parts, both local and foreign, would invest, Mr. President.[33](Emphasis, added)With minimum interference from the government, investors can, in general, engage in any kind of business as well as import and export any article into and out of theFreeport.These are among the rights accorded toSubicBay Freeport Enterprises under Section 39 of the Rules and Regulations Implementing RA 7227, thusSEC. 39.Rights and Obligations.- SBF Enterprises shall have the following rights and obligations:a.To freely engage in any business, trade, manufacturing, financial or service activity, and to import and export freely all types of goods into and out of the SBF, subject to the provisions of the Act, these Rules and other regulations that may be promulgated by the SBMA;Citing,interalia, the interpellations of SenatorEnrile, petitioners claim that the free flow or movement of goods and capital only means that goods and material brought within theFreeportshall not be subject to customs duties and other taxes and should not be construed as an open floodgate for entry of all kinds of goods.They thus surmise that the importation ban on motor vehicles is applicable within theFreeport.Pertinent interpellations of SenatorEnrileon the concept ofFreeportis as follows:SenatorEnrile: Mr. President, I think we are talking here of sovereign concepts, not territorial concepts.The concept that we are supposed to craft here is to carve out a portion of our terrestrial domain as well as our adjacent waters and say to the world: Well, you can set up your factories in this area that we are circumscribing, and bringing your equipment and bringing your goods, you are not subject to any taxes and duties because you are not within the customs jurisdiction of the Republic of the Philippines, whether you store the goods or only for purposes of transshipment or whether you make them into finished products again to bereexportedto other lands.xxxxMy understanding of a free port is, we are in effect carving out a part of our territory and make it as if it were foreign territory for purposes of our customs laws, and that people can come, bring their goods, store them there and bring them out again, as long as they do not come into the domestic commerce of the Republic.We do not really care whether these goods are stored here.The only thing that we care is for our people to have an employment because of the entry of these goods that are being discharged, warehoused and reloaded into the ships so that they can be exported.That will generate employment for us.For as long as that is done, we are saying, in effect, that we have the least contact with our tariff and customs laws and our tax laws.Therefore, we consider these goods as outside of the customs jurisdiction of the Republic of thePhilippinesas yet, until we draw them from this territory and bring them inside our domestic commerce.In which case, they have to pass through our customs gate.I thought we are carving out this entire area and convert it into this kind of concept.[34]However, contrary to the claim of petitioners, there is nothing in the foregoing excerpts which absolutely limits the incentive toFreeportinvestors only to exemption from customs duties and taxes.Mindful of the legislative intent to attract investors, enhance investment and boost the economy, the legislature could not have limited the enticement only to exemption from taxes.The minimum interference policy of the government on theFreeportextends to the kind of business that investors may embark on and the articles which they may import or export into and out of the zone.A contrary interpretation would defeat the very purpose of theFreeportand drive away investors.It does not mean, however, that the right ofFreeportenterprises to import all types of goods and article is absolute.Such right is of course subject to the limitation that articles absolutely prohibited by law cannot be imported into theFreeport.[35]Nevertheless, in determining whether the prohibition would apply to theFreeport, resort to the purpose of the prohibition is necessary.In issuing EO 156, particularly the prohibition on importation under Article 2, Section 3.1, the President envisioned to rationalize the importation of used motor vehicles and to enhance the capabilities of the Philippine motor manufacturing firms to be globally competitive producers of completely build-up units and their parts and components for the local and export markets.[36]In justifying the issuance of EO 156, petitioners alleged that there has been a decline in the sales of new vehicles and a remarkable growth of the sales of imported used motor vehicles.To address the same, the President issued the questioned EO to prevent further erosion of the already depressed market base of the local motor vehicle industry and to curtail the harmful effects of the increase in the importation of used motor vehicles.[37]Taking our bearings from the foregoing discussions, we hold that the importation ban runs afoul thethird requisitefor a valid administrative order.To be valid, an administrative issuance must not beultraviresor beyond the limits of the authority conferred. It must not supplant or modify the Constitution, its enabling statute and other existing laws, for such is the sole function of the legislature which the other branches of the government cannot usurp.As held inUnited BF Homeowners Association v. BF Homes, Inc.:[38]The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by Congress or the Constitution or to enlarge its power beyond the scope intended.Constitutional and statutory provisions control what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it.It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute.In the instant case, the subject matter of the laws authorizing the President to regulate or forbid importation of used motor vehicles, is thedomestic industry.EO 156, however, exceeded the scope of its application by extending the prohibition on the importation of used cars to theFreeport, which RA 7227, considers to some extent, a foreign territory. Thedomesticindustrywhich the EO seeks to protect is actually thecustoms territorywhich is defined under the Rules and Regulations Implementing RA 7227, as follows:the portion of the Philippines outside theSubicBay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect.[39]The proscription in the importation of used motor vehicles should be operative only outside theFreeportand the inclusion of said zone within the ambit of the prohibition is an invalid modification of RA 7227.Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for beingultravires, but also for being unreasonable.This brings us to thefourth requisite.It is an axiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations.To be valid, such rules and regulations must be reasonable and fairly adapted to secure the end in view.If shown to bear no reasonable relation to the purposes for which they were authorized to be issued, then they must be held to be invalid.[40]There is no doubt that the issuance of the ban to protect thedomestic industryis a reasonable exercise of police power.The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President.In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles.Thus, inTaxicab Operators of Metro Manila, Inc. v. Board of Transportation,[41]the Court held that a regulation phasing out taxi cabs more than six years old is a valid exercise of police power.The regulation was sustained as reasonable holding that the purpose thereof was to promote the convenience and comfort and protect the safety of the passengers.The problem, however, lies with respect to the application of the importation ban to theFreeport.The Court finds no logic in the all encompassing application of the assailed provision to theFreeportwhich is outside the customs territory.As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise.The application of the law should be consistent with the purpose of and reason for the law.Rationecessatlex, etcessatlex.When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life.[42]To apply the proscription to theFreeportwould not serve the purpose of the EO.Instead of improving the general economy of the country, the application of the importation ban in theFreeportwould subvert the avowed purpose of RA 7227 which is to create a market that would draw investors and ultimately boost the national economy.In similar cases, we also declared void the administrative issuance or ordinances concerned for being unreasonable.To illustrate, inDe la Cruz v.Paras,[43]the Court held as unreasonable and unconstitutional an ordinance characterized byoverbreadth. In that case, theMunicipalityofBocaue,Bulacan, prohibited the operation of all night clubs, cabarets and dance halls within its jurisdiction for the protection of public morals. As explained by the Court:xxxIt cannot be said that such a sweeping exercise of a lawmaking power byBocauecould qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized byoverbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute prohibition. The admonition inSalaveriashould be heeded: The Judiciary should not lightly set aside legislative action when there is not a clear invasion of personal or property rights under the guise of police regulation. It is clear that in the guise of a police regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by those therein employed.Lupangcov. Court of Appeals,[44]is a case involving a resolution issued by the Professional Regulation Commission which prohibited examinees from attending review classes and receiving handout materials, tips, and the like three days before the date of examination in order to preserve the integrity and purity of the licensure examinations in accountancy. Besides being unreasonable on its face andviolativeof academic freedom, the measure was found to be more sweeping than what was necessary,viz:Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself would be like uprooting the tree to get rid of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. xxxInLucenaGrand Central Terminal, Inc. v. JAC Liner, Inc.,[45]the Courtlikewise struck down as unreasonable andoverbreadtha city ordinance granting an exclusive franchise for 25 years, renewable for another 25 years, to one entity for the construction and operation of one common bus andjeepneyterminal facility inLucenaCity.While professedly aimed towards alleviating the traffic congestion alleged to have been caused by the existence of various bus andjeepneyterminals within the city, the ordinance was held to be beyond what is reasonably necessary to solve the traffic problem in the city.By parity of reasoning, the importation ban in this case should also be declared void for its too sweeping and unnecessary application to theFreeportwhich has no bearing on the objective of the prohibition.If the aim of the EO is to prevent the entry of used motor vehicles from theFreeportto the customs territory, the solution is not to forbid entry of these vehicles into theFreeport, but to intensify governmental campaign and measures to thwart illegal ingress of used motor vehicles into the customs territory.At this juncture, it must be mentioned that on June 19, 1993, President Fidel V. Ramos issued Executive Order No. 97-A, Further Clarifying The Tax And Duty-Free Privilege Within TheSubicSpecial Economic And Free Port Zone, Section 1 of which provides:SECTION 1.The following guidelines shall govern the tax and duty-free privilege within theSecured Areaof theSubicSpecial Economic and Free Port Zone:1.1.TheSecured Areaconsisting of the presently fenced-in formerSubicNaval Base shall be the only completely tax and duty-free area in the SSEFPZ.Business enterprises and individuals (Filipinos and foreigners) residing within theSecured Areaare free to import raw materials, capital goods, equipment, and consumer items tax anddutry-free.Consumption items, however, must be consumed within theSecured Area.Removal of raw materials, capital goods, equipment and consumer items out of theSecured Areafor sale to non-SSEFPZ registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein.InTiuv. Court of Appeals[46]as reiterated inCoconut Oil Refiners Association, Inc. v. Torres,[47]this provision limiting the special privileges on tax and duty-free importation in the presently fenced-in formerSubicNaval Base has been declared valid and constitutional and in accordance with RA 7227.Consistent with these rulings and for easier management and monitoring of activities and to prevent fraudulent importation of merchandise and smuggling, the free flow and importation of used motor vehicles shall be operative only within the secured area.In sum, the Court finds that Article 2, Section 3.1 of EO 156 is void insofar as it is made applicable to the presently secured fenced-in formerSubicNaval Base area as stated in Section 1.1 of EO 97-A.Pursuant to theseparabilityclause[48]of EO 156, Section 3.1 is declared valid insofar as it applies to the customs territory or the Philippine territory outside the presently secured fenced-in formerSubicNaval Base area as stated in Section 1.1 of EO 97-A.Hence, used motor vehicles that come into the Philippine territoryviathe secured fenced-in formerSubicNaval Base area may be stored, used or traded therein, or exported out of the Philippine territory, but they cannot be imported into the Philippine territory outside of the secured fenced-in formerSubicNaval Base area.WHEREFORE, the petitions arePARTIALLY GRANTEDand the May 24, 2004 Decisions of Branch 72, Regional Trial Court ofOlongapoCity, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04; and the February 14, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 63284, areMODIFIEDinsofar as they declared Article 2, Section 3.1 of Executive Order No. 156, void in its entirety.Said provision is declaredVALIDinsofar as it applies to the Philippine territory outside the presently fenced-in formerSubicNaval BaseareaandVOIDwith respect to its application to the secured fenced-in formerSubicNaval Base area.SO ORDERED.

G.R. No. L-4043 May 26, 1952CENON S. CERVANTES,petitioner,vs.THE AUDITOR GENERAL,respondent.Cenon Cervantes in his own behalf.Office of the Solicitor General Pompeyo Diaz and Solicitor Felix V. Makasiar for respondent.REYES,J.:This is a petition to review a decision of the Auditor General denying petitioner's claim for quarters allowance as manager of the National Abaca and Other Fibers Corporation, otherwise known as the NAFCO.It appears that petitioner was in 1949 the manager of the NAFCO with a salary of P15,000 a year. By a resolution of the Board of Directors of this corporation approved on January 19 of that year, he was granted quarters allowance of not exceeding P400 a month effective the first of that month. Submitted the Control Committee of the Government Enterprises Council for approval, the said resolution was on August 3, 1949, disapproved by the said Committee on strenght of the recommendation of the NAFCO auditor, concurred in by the Auditor General, (1) that quarters allowance constituted additional compensation prohibited by the charter of the NAFCO, which fixes the salary of the general manager thereof at the sum not to exceed P15,000 a year, and (2) that the precarious financial condition of the corporation did not warrant the granting of such allowance.On March 16, 1949, the petitioner asked the Control Committee to reconsider its action and approve his claim for allowance for January to June 15, 1949, amounting to P1,650. The claim was again referred by the Control Committee to the auditor General for comment. The latter, in turn referred it to the NAFCO auditor, who reaffirmed his previous recommendation and emphasized that the fact that the corporation's finances had not improved. In view of this, the auditor General also reiterated his previous opinion against the granting of the petitioner's claim and so informed both the Control Committee and the petitioner. But as the petitioner insisted on his claim the Auditor General Informed him on June 19, 1950, of his refusal to modify his decision. Hence this petition for review.The NAFCO was created by the Commonwealth Act No. 332, approved on June 18, 1939, with a capital stock of P20,000,000, 51 per cent of which was to be able to be subscribed by the National Government and the remainder to be offered to provincial, municipal, and the city governments and to the general public. The management the corporation was vested in a board of directors of not more than 5 members appointed by the president of the Philippines with the consent of the Commission on Appointments. But the corporation was made subject to the provisions of the corporation law in so far as they were compatible with the provisions of its charter and the purposes of which it was created and was to enjoy the general powers mentioned in the corporation law in addition to those granted in its charter. The members of the board were to receive each aper diemof not to exceed P30 for each day of meeting actually attended, except the chairman of the board, who was to be at the same time the general manager of the corporation and to receive a salary not to exceed P15,000 per annum.On October 4, 1946, Republic Act No. 51 was approved authorizing the President of the Philippines, among other things, to effect such reforms and changes in government owned and controlled corporations for the purpose of promoting simplicity, economy and efficiency in their operation Pursuant to this authority, the President on October 4, 1947, promulgated Executive Order No. 93 creating the Government Enterprises Council to be composed of the President of the Philippines as chairman, the Secretary of Commerce and Industry as vice-chairman, the chairman of the board of directors and managing heads of all such corporations as ex-officio members, and such additional members as the President might appoint from time to time with the consent of the Commission on Appointments. The council was to advise the President in the excercise of his power of supervision and control over these corporations and to formulate and adopt such policy and measures as might be necessary to coordinate their functions and activities. The Executive Order also provided that the council was to have a Control Committee composed of the Secretary of Commerce and Industry as chairman, a member to be designated by the President from among the members of the council as vice-chairman and the secretary asex-officiomember, and with the power, among others (1) To supervise, for and under the direction of the President, all the corporations owned or controlled by the Government for the purpose of insuring efficiency and economy in their operations;(2) To pass upon the program of activities and the yearly budget of expenditures approved by the respective Boards of Directors of the said corporations; and(3) To carry out the policies and measures formulated by the Government Enterprises Council with the approval of the President. (Sec. 3, Executive Order No. 93.)With its controlling stock owned by the Government and the power of appointing its directors vested in the President of the Philippines, there can be no question that the NAFCO is Government controlled corporation subject to the provisions of Republic Act No. 51 and the executive order (No. 93) promulgated in accordance therewith. Consequently, it was also subject to the powers of the Control Committee created in said executive order, among which is the power of supervision for the purpose of insuring efficiency and economy in the operations of the corporation and also the power to pass upon the program of activities and the yearly budget of expenditures approved by the board of directors. It can hardly be questioned that under these powers the Control Committee had the right to pass upon, and consequently to approve or disapprove, the resolution of the NAFCO board of directors granting quarters allowance to the petitioners as such allowance necessarily constitute an item of expenditure in the corporation's budget. That the Control Committee had good grounds for disapproving the resolution is also clear, for, as pointed out by the Auditor General and the NAFCO auditor, the granting of the allowance amounted to an illegal increase of petitioner's salary beyond the limit fixed in the corporate charter and was furthermore not justified by the precarious financial condition of the corporation.It is argued, however, that Executive Order No. 93 is null and void, not only because it is based on a law that is unconstitutional as an illegal delegation of legislature power to executive, but also because it was promulgated beyond the period of one year limited in said law.The second ground ignores the rule that in the computation of the time for doing an act, the first day is excluded and the last day included (Section 13 Rev. Ad. Code.) As the act was approved on October 4, 1946, and the President was given a period of one year within which to promulgate his executive order and that the order was in fact promulgated on October 4, 1947, it is obvious that under the above rule the said executive order was promulgated within the period given.As to the first ground, the rule is that so long as the Legislature "lays down a policy and a standard is established by the statute" there is no undue delegation. (11 Am. Jur. 957). Republic Act No. 51 in authorizing the President of the Philippines, among others, to make reforms and changes in government-controlled corporations, lays down a standard and policy that the purpose shall be to meet the exigencies attendant upon the establishment of the free and independent government of the Philippines and to promote simplicity, economy and efficiency in their operations. The standard was set and the policy fixed. The President had to carry the mandate. This he did by promulgating the executive order in question which, tested by the rule above cited, does not constitute an undue delegation of legislative power.It is also contended that the quarters allowance is not compensation and so the granting of it to the petitioner by the NAFCO board of directors does not contravene the provisions of the NAFCO charter that the salary of the chairman of said board who is also to be general manager shall not exceed P15,000 per anum. But regardless of whether quarters allowance should be considered as compensation or not, the resolution of the board of the directors authorizing payment thereof to the petitioner cannot be given effect since it was disapproved by the Control Committee in the exercise of powers granted to it by Executive Order No. 93. And in any event, petitioner's contention that quarters allowance is not compensation, a proposition on which American authorities appear divided, cannot be insisted on behalf of officers and employees working for the Government of the Philippines and its Instrumentalities, including, naturally, government-controlled corporations. This is so because Executive Order No. 332 of 1941, which prohibits the payment of additional compensation to those working for the Government and its Instrumentalities, including government-controlled corporations, was in 1945 amended by Executive Order No. 77 by expressly exempting from the prohibition the payment of quarters allowance "in favor of local government officials and employees entitled to this under existing law." The amendment is a clear indication that quarters allowance was meant to be included in the term "additional compensation", for otherwise the amendment would not have expressly excepted it from the prohibition. This being so, we hold that, for the purpose of the executive order just mentioned, quarters allowance is considered additional compensation and, therefore, prohibited.In view of the foregoing, the petition for review is dismissed, with costs.G.R. No. 88291 June 8, 1993ERNESTO M. MACEDA,petitioner,vs.HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President, HON. VICENTE JAYME, ETC., ET AL.,respondents.Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.Siguion Reyna, Montecillo & Ongsiako for Caltex.NOCON,J.:Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of the private respondent National Power Corporation (NPC) is brought to this Court a second time. Unfazed by the Decision We promulgated on May 31, 19911petitioner Ernesto Maceda asks this Court to reconsider said Decision. Lest We be criticized for denying due process to the petitioner. We have decided to take a second look at the issues. In the process, a hearing was held on July 9, 1992 where all parties presented their respective arguments. Etched in this Court's mind are the paradoxical claims by both petitioner and private respondents that their respective positions are for the benefit of the Filipino people.IA Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at the risk of being repetitious is, therefore, in order.On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in the Philippines.2The sum of P250,000.00 was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting its preliminary work.3The main source of funds for the NPC was the flotation of bonds in the capital markets4and these bonds. . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be stated upon the face of said bonds. . . . .5On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial operations of the NPC and reiterating the provision of the flotation of bonds as soon as the first construction of any hydraulic power project was to be decided by the NPC Board.6The provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's principal and interest in "gold coins" but adding that payment could be made in United States dollars.7The provision on tax exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee, absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans.8He was also authorized to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC loans for the accomplishment of NPC's corporate objectives9and for the reconstruction and development of the economy of the country.10It was expressly stated that:Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.11On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types of indebtedness, aside from indebtedness incurred by flotation of bonds.12As to the pertinent tax exemption provision, the law stated as follows:To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.13On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the President of the Philippines was authorized to negotiate, contract and guarantee loans with the Export-Import Bank of of Washigton, D.C., U.S.A., or any other international financial institution.14The tax provision for repayment of these loans, as stated in R.A. No. 357, was not amended.On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. As enacted, the law states as follows:To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, except real property tax, and from all duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities, and municipalities.15On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the increased indebtedness16should bear the National Economic Council's stamp of approval. The tax exemption provision related to the payment of this total indebtedness was not amended nor deleted.On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357.17The tax provision related to the repayment of these loans was not amended nor deleted.On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000.18All laws or provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly repealed.19On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a par value of P100.00 each, with said capital stock wholly subscribed to by the Government.20No tax exemption was incorporated in said Act.On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to P250,000,000.00 with the increase to be wholly subscribed by the Government.21No tax provision was incorporated in said Act.On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300,000,000.00, the increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act.22On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended. Declared as primary objectives of the nation were:Declaration of Policy. Congress hereby declares that (1) the comprehensive development, utilization and conservation of Philippine water resources for all beneficial uses, including power generation, and (2) the total electrification of the Philippines through the development of power from all sources to meet the needs of industrial development and dispersal and the needs of rural electrification are primary objectives of the nation which shall be pursued coordinately and supported by all instrumentalities and agencies of the government, including the financial institutions.23Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:The bonds issued under the authority of this subsection shall be exempt from the payment of all taxes by the Republic of the Philippines, or by any authority, branch, division or political subdivision thereof which facts shall be stated upon the face of said bonds. . . .24As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows:The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the Corporation, paid from the proceeds of any loan, credit or indebtedeness incurred under this Act, shall also be exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of the Philippines, or any of its agencies and political subdivisions.25A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-profit character and tax exemptions of NPC as follows:The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation is hereby declared exempt:(a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its provinces, cities, and municipalities and other government agencies and instrumentalities;(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies and instrumentalities;(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign goods required for its operations and projects; and(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of electric power.26On November 7, 1972, Presidential Decree No. 40 was issued declaring that the electrification of the entire country was one of the primary concerns of the country. And in connection with this, it was specifically stated that:The setting up of transmission line grids and the construction of associated generation facilities in Luzon, Mindanao and major islands of the country, including the Visayas, shall be the responsibility of the National Power Corporation (NPC) as the authorized implementing agency of the State.27xxx xxx xxxIt is the ultimate objective of the State for the NPC to own and operate as a single integrated system all generating facilities supplying electric power to the entire area embraced by any grid set up by the NPC.28On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00,29its total domestic indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time,30and the NPC was authorized to borrow a total of US$1,000,000,000.0031in foreign loans.The relevant tax exemption provision for these foreign loans states as follows:The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also beexempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions.32(Emphasis supplied)Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows:(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities including the taxes, duties, fees, imposts and other charges provided for under the Tariff and Customs Code of the Philippines, Republic Act Numbered Nineteen Hundred Thirty-Seven, as amended, and as further amended by Presidential Decree No. 34 dated October 27, 1972, and Presidential Decree No. 69, dated November 24, 1972, and costs and service fees in any court or administrative proceedings in which it may be a party;xxx xxx xxx(d) From all taxes, duties, fees, imposts, and all other charges imposeddirectly or indirectlyby the Republic of the Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation, transmission, utilization and sale of electric power.33(Emphasis supplied)On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity to its different customers.34No tax exemption provision was amended, deleted or added.On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually to cover the unpaid subscription of the Government in the NPC authorized capital stock, which amount would be taken from taxes accruing to the General Funds of the Government, proceeds from loans, issuance of bonds, treasury bills or notes to be issued by the Secretary of Finance for this particular purpose.35On May 27, 1976 P.D. No. 938 was issued(I)n view of the accelerated expansion programs for generation and transmission facilities which includes nuclear power generation, the present capitalization of National Power Corporation (NPC) and the ceilings for domestic and foreign borrowings are deemed insufficient;36xxx xxx xxx(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit character of NPC has not been fully utilized because of restrictive interpretation of the taxing agencies of the government on said provisions;37xxx xxx xxx(I)n order to effect the accelerated expansion program and attain the declared objective of total electrification of the country, further amendments of certain sections of Republic Act No. 6395, as amended by Presidential Decrees Nos. 380, 395 and 758, have become imperative;38Thus NPC's capital stock was raised to P8,000,000,000.00,39the total domestic indebtedness ceiling was increased to P12,000,000,000.00,40the total foreign loan ceiling was raised to US$4,000,000,000.0041and Section 13 of R.A. No. 6395, was amended to read as follows:The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess revenues from its operation, for expansion. To enable the Corporation to pay to its indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings.42IIOn the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and Executive Order No. 93 (S'86).On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports as follows:WHEREAS, importations by certain government agencies, including government-owned or controlled corporation, are exempt from the payment of customs duties and compensating tax; andWHEREAS, in order to reduce foreign exchange spending and to protect domestic industries, it is necessary to restrict and regulate such tax-free importations.NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, and do hereby decree and order the following:Sec. 1. All importations of any government agency, including government-owned or controlled corporations which are exempt from the payment of customs duties and internal revenue taxes, shall be subject to the prior approval of an Inter-Agency Committee which shall insure compliance with the following conditions:(a) That no such article of local manufacture are available in sufficient quantity and comparable quality at reasonable prices;(b) That the articles to be imported are directly and actually needed and will be used exclusively by the grantee of the exemption for its operations and projects or in the conduct of its functions; and(c) The shipping documents covering the importation are in the name of the grantee to whom the goods shall be delivered directly by customs authorities.xxx xxx xxxSec. 3. The Committee shall have the power to regulate and control the tax-free importation of government agencies in accordance with the conditions set forth in Section 1 hereof and the regulations to be promulgated to implement the provisions of this Decree. Provided, however, That any government agency or government-owned or controlled corporation, or any local manufacturer or business firm adversely affected by any decision or ruling of the Inter-Agency Committee may file an appeal with the Office of the President within ten days from the date of notice thereof. . . . .xxx xxx xxxSec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all general and special laws and decrees are hereby amended accordingly.xxx xxx xxxOn July 30, 1977, P.D. 1177 was issued as it was. . . declared the policy of the State to formulate and implement a National Budget that is an instrument of national development, reflective of national objectives, strategies and plans. The budget shall be supportive of and consistent with the socio-economic development plan and shall be oriented towards the achievement of explicit objectives and expected results, to ensure that funds are utilized and operations are conducted effectively, economically and efficiently. The national budget shall be formulated within a context of a regionalized government structure and of the totality of revenues and other receipts, expenditures and borrowings of all levels of government-owned or controlled corporations. The budget shall likewise be prepared within the context of the national long-term plan and of a long-term budget program.43In line with such policy, the law decreed thatAll units of government, including government-owned or controlled corporations, shall pay income taxes, customs duties and other taxes and fees are imposed under revenues laws: provided, that organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due: provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund.44The law also declared that [A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are inconsistent with the provisions of the Decree are hereby repealed and/or modified accordingly.45On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino assassination, P.D. No. 1931 was issued to reiterate that:WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any government-owned or controlled corporation and all other units of government;46and since there was a. . . need for government-owned or controlled corporations and all other units of government enjoying tax privileges to share in the requirements of development, fiscal or otherwise, by paying the duties, taxes and other charges due from them.47it was decreed that:Sec. 1. The provisions of special on general law to the contrary notwithstanding, all exemptions from the payment of duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled corporations including their subsidiaries, are hereby withdrawn.Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal Incentives Review Board created under Presidential Decree No. 776, is hereby empowered to restore, partially or totally, the exemptions withdrawn by Section 1 above, any applicable tax and duty, taking into account, among others, any or all of the following:1) The effect on the relative price levels;2) The relative contribution of the corporation to the revenue generation effort;3) The nature of the activity in which the corporation is engaged in; or4) In general the greater national interest to be served.xxx xxx xxxSec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees, executive orders, administrative orders, rules, regulations or parts thereof which are inconsistent with this Decree are hereby repealed, amended or modified accordingly.On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or grant of tax exemption to other government and private entities without benefit of review by the Fiscal Incentives Review Board, to wit:WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and October 14, 1984, respectively, withdrew the tax and duty exemption privileges, including the preferential tax treatment, of government and private entities with certain exceptions, in order that the requirements of national economic development, in terms of fiscals and other resources, may be met more adequately;xxx xxx xxxWHEREAS, in addition to those tax and duty exemption privileges were restored by the Fiscal Incentives Review Board (FIRB), a number of affected entities, government and private, had their tax and duty exemption privileges restored or granted by Presidential action without benefit or review by the Fiscal Incentives Review Board (FIRB);xxx xxx xxxSince it was decided that:[A]ssistance to government and private entities may be better provided where necessary by explicit subsidy and budgetary support rather than tax and duty exemption privileges if only to improve the fiscal monitoring aspects of government operations.It was thus ordered that:Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives granted to government and private entities are hereby withdrawn, except:a) those covered by the non-impairment clause of the Constitution;b) those conferred by effective internation agreement to which the Government of the Republic of the Philippines is a signatory;c) those enjoyed by enterprises registered with:(i) the Board of Investment pursuant to Presidential Decree No. 1789, as amended;(ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66 as amended;(iii) the Philippine Veterans Investment Development Corporation Industrial Authority pursuant to Presidential Decree No. 538, was amended.d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instructions No. 1416;e) those conferred under the four basic codes namely:(i) the Tariff and Customs Code, as amended;(ii) the National Internal Revenue Code, as amended;(iii) the Local Tax Code, as amended;(iv) the Real Property Tax Code, as amended;f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board.Sec. 2. The Fiscal Incentives Review Board created under Presiden