Planters Products Inc vs Fertiphil CorpG.R. No. 166006 March 14, 2008

FACTS: Petitioner PPI and respondent Fertiphil are private corporations incorporated under Philippine laws, both engaged in the importation and distribution of fertilizers, pesticides and agricultural chemicals.Marcos issued Letter of Instruction (LOI) 1465, imposing a capital recovery component of Php10.00 per bag of fertilizer. The levy was to continue until adequate capital was raised to make PPI financially viable. Fertiphil remitted to the Fertilizer and Pesticide Authority (FPA), which was then remitted the depository bank of PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986. After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted, however PPI refused. Fertiphil filed a complaint for collection and damages, questioning the constitutionality of LOI 1465, claiming that it was unjust, unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process. PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465 because it does not have a "personal and substantial interest in the case or will sustain direct injury as a result of its enforcement." It asserts that Fertiphil did not suffer any damage from the imposition because "incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller fertilizer company.

ISSUE: Whether or not Fertiphil has locus standi to question the constitutionality of LOI No. 1465. What is the power of taxation?

RULING: Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere procedural technicality which may be waived.The imposition of the levy was an exercise of the taxation power of the state. While it is true that the power to tax can be used as an implement of police power, the primary purpose of the levy was revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax. Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different tests for validity. Police power is the power of the State to enact legislation that may interfere with personal liberty or property in order to promote the general welfare, while the power of taxation is the power to levy taxes to be used for public purpose. The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The "lawful subjects" and "lawful means" tests are used to determine the validity of a law enacted under the police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.

ABAKADA v Ermita (Taxation)

Facts:On May 24, 2005, the President signed into law Republic Act 9337 or the VAT Reform Act. Before the law took effect on July 1, 2005, the Court issued a TRO enjoining government from implementing the law in response to a slew of petitions for certiorari andprohibitionquestioning theconstitutionalityof the new law.

The challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6: That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to 12%, after any of the following conditions has been satisfied:

(i) Value-added tax collection as a percentage of GrossDomesticProduct (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);

or (ii)National governmentdeficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%)

Petitioners allege that the grant of stand-by authority to the President to increase the VAT rate is an abdication byCongressof its exclusive power to tax because such delegation is not covered by Section 28 (2), Article VI Consti. They argue that VAT is a tax levied on the sale or exchange of goods andserviceswhich cant be included within the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on imported/exportedgoods. They also said that the President has powers to cause, influence or create the conditions provided by law to bring about the conditions precedent. Moreover, they allege that no guiding standards are made by law as to how the Secretary of Finance will make the recommendation.

Issue:Whether or not the RA 9337's stand-by authority to the Executive to increase the VAT rate, especially on account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of legislative power? NO

Held:The powers whichCongressis prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative power which can never be delegated is the authority to make a complete law- complete as to the time when it shall take effect and as to whom it shall be applicable, and to determine the expediency of its enactment. It is the nature of the power and not the liability of its use or the manner of its exercise which determines the validity of its delegation.

The exceptions are:

(a) delegation of tariff powers to President under Constitution(b) delegation of emergency powers to President under Constitution(c) delegation to the people at large(d) delegation to local governments(e) delegation to administrative bodies

For the delegation to be valid, it must be complete and it must fix a standard. A sufficient standard is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the publicagency to apply it.

In this case, it is not a delegation of legislative power BUT a delegation of ascertainment of facts upon which enforcement and administration of the increased rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the word SHALL is used in the common proviso. The use of the word SHALL connotes a mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.

Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified byCongress. This is a duty, which cannot be evaded by the President. It is a clear directive to impose the 12% VAT rate when the specified conditions are present.

Congressjust granted the Secretary of Finance the authority to ascertain the existence of a fact--- whether by December 31, 2005, the VAT collection as a percentage of GDP of the previous year exceeds 2 4/5 % or thenational governmentdeficit as a percentage of GDP of the previous year exceeds one and 1%. If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President.

In making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented.

Congressdoes not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward.

There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This isconstitutionallypermissible.Congressdid not delegate the power to tax but the mere implementation of the law.

RA 9337 is constitutional. Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased emoluments for health workers, and wider coverage for full value-added tax benefits ... these are the reasons why Republic Act No. 9337 (R.A. No. 9337) was enacted. Reasons, the wisdom of which, the Court even with its extensive constitutional power of review, cannot probe.

It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes.