Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=28732:g-r-no-l-41383-august-15,-1988-philippine-airlines,-inc-v-romeo-f-edu&catid=1240&Itemid=566
Timestamp: 2019-04-25 00:24:44+00:00

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PHILIPPINE AIRLINES, INC., Plaintiff-Appellant, v. ROMEO F. EDU, in his capacity as Land Transportation Commissioner, and UBALDO CARBONELL, in his capacity as National Treasurer, Defendants-Appellants.
Ricardo V . Puno, Jr. and Conrado A. Boro, for Plaintiff-Appellant.
1.	STATUTORY CONSTRUCTION; TERM "FEES" IN REGISTRATION OF VEHICLES AS REGULATORY TAX; EXPLAINED. — It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the Land Transportation and Traffic Code that the legislative intent and purpose behind the law requiring owners of vehicles to pay for their registration is mainly to raise funds for the construction and maintenance of highways and to a much lesser degree, pay for the operating expenses of the administering agency. On the other hand, the Philippine Rabbit case mentions a presumption arising from the use of the term "fees" which appears to have been favored by the legislature to distinguish fees from other taxes such as those mentioned in Section 13 of Rep. Act 4136 referring to taxes other than those imposed on the registration, operation or ownership of a motor vehicle (Sec. 89, b, Rep. Act 4136, as amended). Fees may be properly regarded as taxes even though they also serve as an instrument of regulation.
2.	TAXATION; MOTOR VEHICLE REGISTRATION FEES; IF THE PURPOSE IS PRIMARILY REVENUE; THEN THE EXACTION IS PROPERLY CALLED A TAX. — Taxation may be made the implement of the state’s police power (Lutz v. Araneta, 98 Phil. 148). 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. Such is the case of motor vehicle registration fees. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs’ license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of Sec. 61.
3.	ID.; ID.; NATURE AND PURPOSE. — We rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.
4.	ID.; ID.; UNDER THE AMENDED FRANCHISE, PHILIPPINE AIRLINES IS NOT EXEMPTED FROM THE PAYMENT OF ANY TAX, FEE, OR OTHER CHARGES ON THE REGISTRATION AND LICENSING OF MOTOR VEHICLES. — The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding 1968 and April 9, 1979, were correctly imposed because the tax exemption in the franchise of PAL was repealed during that period. However, an amended franchise was given to PAL in 1979. PAL’s current franchise is clear and specific. It has removed the ambiguity found in the earlier law. Under Section 13 of Presidential Decree No. 1590, PAL is not exempt from the payment of any tax, fee, or other charge on the registration and licensing of motor vehicles. Such payments are already included in the basic tax or franchise tax provided in Subsections (a) and (b) of Section 13, P.D. 1590 and may no longer be exacted. Hence, the prayer for refund of registration fees paid in 1991 is DENIED.
What is the nature of motor vehicle registration fees? Are they taxes or regulatory fees?
This question has been brought before this Court in the past. The parties are, in effect, asking for a re-examination of the latest decision on this issue.
The disputed registration fees were imposed by the appellee, Commissioner Romeo F. Edu, pursuant to Section 8, Republic Act No. 4136, otherwise known as the Land Transportation and Traffic Code.
On the strength of an opinion of the Secretary of Justice (Op. No. 307, series of 1956) PAL has, since 1956, not been paying motor vehicle registration fees.
Sometime in 1971, however, appellee Commissioner Romeo F. Edu, issued a regulation requiring all tax exempt entities, among them PAL to pay motor vehicle registration fees.
After paying under protest, PAL through counsel, wrote a letter dated May 19, 1971, to Commissioner Edu demanding a refund of the amounts paid, invoking the ruling in Calalang v. Lorenzo (97 Phil. 212 ) where it was held that motor vehicle registration fees are in reality taxes from the payment of which PAL is exempt by virtue of its legislative franchise.
Appellee Edu denied the request for refund basing his action on the decision in Republic v. Philippine Rabbit Bus Lines, Inc., (32 SCRA 211, March 30, 1970) to the effect that motor vehicle registration fees are regulatory exactions and not revenue measures and, therefore, do not come within the exemption granted to PAL under its franchise. Hence, PAL filed the complaint against Land Transportation Commissioner Romeo F. Edu and National Treasurer Ubaldo Carbonell with the Court of First Instance of Rizal, Branch 18 where it was docketed as Civil Case No. Q-15862.
Appellee Romeo F. Edu, in his capacity as LTC Commissioner, and Ubaldo Carbonell, in his capacity as National Treasurer, filed a motion to dismiss alleging that the complaint states no cause of action. In support of the motion to dismiss, defendants reiterated the ruling in Republic v. Philippine Rabbit Bus Lines, Inc., (supra) that registration fees of motor vehicles are not taxes, but regulatory fees imposed as an incident of the exercise of the police power of the state. They contended that while Act 4271 exempts PAL from the payment of any tax except two per cent on its gross revenue or earnings, it does not exempt the plaintiff from paying regulatory fees, such as motor vehicle registration fees. The resolution of the motion to dismiss was deferred by the Court until after trial on the merits.
On April 24, 1973, the trial court rendered a decision dismissing the appellant’s complaint "guided by the later ruling laid down by the Supreme Court in the case of Republic v. Philippine Rabbit Bus Lines, Inc. (supra)." From this judgment, PAL appealed to the Court of Appeals which certified the case to us.
Calalang v. Lorenzo (supra) and Republic v. Philippine Rabbit Bus Lines, Inc. (supra) cited by PAL and Commissioner Romeo F. Edu respectively, discuss the main points of contention in the case at bar.
"The registration fee which defendant-appellee had to pay was imposed by Section 8 of the Revised Motor Vehicle Law (Republic Act No. 587 ). Its heading speaks of registration fees.’ The term is repeated four times in the body thereof. Equally so, mention is made of the ‘fee for registration.’ (Ibid., Subsection G) A subsection starts with a categorical statement No fees shall be charged.’ (Ibid., Subsection H) The conclusion is difficult to resist therefore that the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power. Hence the inapplicability of the section relied upon by defendant-appellee under the Back Pay Law. It is not held liable for a tax but for a registration fee. It therefore cannot make use of a backpay certificate to meet such an obligation.
Today, the matter is governed by Rep. Act 4136  otherwise known as the Land Transportation Code, (as amended by Rep. Acts Nos. 5715 and 6374, P.D. Nos. 382, 843, 896, 1057 and BP Blg. 43, 74 and 398).
"It is possible for an exaction to be both tax and regulation. License fees are often looked to as a source of revenue as well as a means of regulation. (Sonzinsky v. U.S., 300 U.S. 506) This is true, for example, of automobile license fees. In such case, the fees may properly be regarded as taxes even though they also serve as an instrument of regulation. 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. (1955 CCH Fed. Tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo, 97 Phil. 212; Lutz v. Araneta, 98 Phil. 198.) These exactions are sometimes called regulatory taxes. (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.)" (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).
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 (Umali, id.) Such is the case of motor vehicle registration fees. The conclusions become inescapable in view of Section 70(b) of Rep. Act 587 quoted in the Calalang case. The same provision appears as Section 59(b) in the Land Transportation Code. It is patent therefrom that the legislators had in mind a regulatory tax as the law refers to the imposition on the registration, operation or ownership of a motor vehicle as a "tax or fee." Though nowhere in Rep. Act 4136 does the law specifically state that the imposition is a tax, Section 59(b) speaks of "taxes or fees . . . for the registration or operation or on the ownership of any motor vehicle, or for the exercise of the profession of chauffeur . . ." making the intent to impose a tax more apparent. Thus, even Rep. Act 5448 cited by the respondents, speak of an "additional tax," where the law could have referred to an original tax and not one in addition to the tax already imposed on the registration, operation, or ownership of a motor vehicle under Rep. Act 4136. Simply put, if the exaction under Rep. Act 4136 were merely a regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136 also speaks of other "fees" such as the special permit fees for certain types of motor vehicles (Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and chauffeurs’ license fee. Such fees are to go into the expenditures of the Land Transportation Commission as provided for in the last proviso of sec. 61, aforequoted.
May the respondent administrative agency be required to refund the amounts stated in the complaint of PAL?
The claim for refund is made for payments given in 1971. It is not clear from the records as to what payments were made in succeeding years. We have ruled that Section 24 of Rep. Act No. 5431, dated June 27, 1968, repealed all earlier tax exemptions of corporate taxpayers found in legislative franchises similar to that invoked by PAL in this case.
"‘(b)	A franchise tax of two per cent (2%) of the gross revenues derived by the grantees from all sources, without distinction as to transport or nontransport corporations; provided that with respect to international airtransport service, only the gross passengers, mail, and freight revenues from its outgoing flights shall be subject to this law.
"(5)	All taxes, fees and other charges on the registration, licensing, acquisition, and transfer of aircraft, equipment, motor vehicles, and all other personal or real property of the grantee." (Pres. Decree 1590, 75 OG No. 15, 3259, April 9, 1979).
WHEREFORE, the petition is hereby partially GRANTED.
The prayed for refund of registration fees paid in 1971 is DENIED. The Land Transportation Franchising and Regulatory Board (LTFRB) is enjoined from collecting any tax, fee, or other charge on the registration and licensing of the petitioner’s motor vehicles from April 9, 1979 as provided in Presidential Decree No. 1590.
Fernan C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Griño-Aquino and Medialdea, JJ., concur.

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