SECOND DIVISION
G.R. No. 210251, April 17, 2017
SECRETARY OF FINANCE CESAR V. PURISIMA AND COMMISSIONER OF INTERNAL REVENUE KIM S. JACINTO-HENARES, Petitioners, v. PHILIPPINE TOBACCO INSTITUTE, INC., Respondent.
D E C I S I O N
CARPIO, J.:
This is a petition for review on certiorari1 assailing the Decision2 dated 7 October 2013 of the Regional Trial Court (RTC) of Las Piñas City, Branch 253 in SCA Case No. 13-0003. The RTC declared null and void certain portions of Revenue Regulations No. 17-20123 (RR 17-2012) and Revenue Memorandum Circular No. 90-20124 (RMC 90-2012) and ordered petitioners to cease and desist from implementing Section 11 of RR 17-2012 and RMC 90-2012 which refer to cigarettes packed by machine.
SEC. 5. Section 145 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, is hereby further amended to read as follows:On 21 December 2012, the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue (CIR), issued RR 17-2012. Section 11 of RR 17-2012 imposes an excise tax on individual cigarette pouches of 5's and 10's even if they are bundled or packed in packaging combinations not exceeding 20 cigarettes. The provision states:SEC. 145. Cigars and Cigarettes. - x x x x
(C) Cigarettes Packed by Machine. - There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
Effective on January 1, 2013(1) If the net retail price (excluding the excise tax and the value-added tax) is Eleven pesos and fifty centavos (P11.50) and below per pack, the tax shall be Twelve pesos (P12.00) per pack; and(2) If the net retail price (excluding the excise tax and the value-added tax) is more than Eleven pesos and fifty centavos (P11.50) per pack, the tax shall be Twenty-five pesos (P25.00) per pack.
Effective on January 1, 2014(1) If the net retail price (excluding the excise tax and the value-added tax) is Eleven pesos and fifty centavos (P11.50) and below per pack, the tax shall be Seventeen pesos (P17.00) per pack; and(2) If the net retail price (excluding the excise tax and the value-added tax) is more than Eleven pesos and fifty centavos (P11.50) per pack, the tax shall be Twenty-seven pesos (P27.00) per pack.
Effective on January 1, 2015(1) If the net retail price (excluding the excise tax and the value-added tax) is Eleven pesos and fifty centavos (P11.50) and below per pack, the tax shall be Twenty-one pesos (P21.00) per pack; and(2) If the net retail price (excluding the excise tax and the value-added tax) is more than Eleven pesos and fifty centavos (P11.50) per pack, the tax shall be Twenty-eight pesos (P28.00) per pack.
Effective on January 1, 2016(1) If the net retail price (excluding the excise tax and the value-added tax) is Eleven pesos and fifty centavos (P11.50) and below per pack, the tax shall be Twenty-five pesos (P25.00) per pack; and(2) If the net retail price (excluding the excise tax and the value-added tax) is more than Eleven pesos and fifty centavos (P11.50) per pack, the tax shall be Twenty-nine pesos (P29.00) per pack.
Effective on January 1, 2017, the tax on all cigarettes packed by machine shall be Thirty pesos (P30.00) per pack.
The rates of tax imposed under this subsection shall be increased by four percent (4%) every year thereafter effective on January 1, 2018, through revenue regulations issued by the Secretary of Finance.
Duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty.
x x x x
SEC. 11. Revised Provisions for the Manner of Packaging of Cigarettes. - All Cigarettes whether packed by hand or packed by machine shall only be packed in twenties (20s), and through other packaging combinations which shall result to not more than twenty sticks of cigarettes: Provided, That, in case of cigarettes packed in not more than twenty sticks, whether in 5 sticks, 10 sticks and other packaging combinations below 20 sticks, the net retail price of each individual package of 5s, 10s, etc. shall be the basis of imposing the tax rate prescribed under the Act.Pursuant to Section 11 of RR 17-2012, the CIR issued RMC 90-2012 dated 27 December 2012. Annex "D-1" of RMC 90-2012 provides for the initial classifications in tabular form, effective 1 January 2013, of locally-manufactured cigarette brands packed by machine according to the tax rates prescribed under RA 10351 based on the (1) 2010 Bureau of Internal Revenue (BIR) price survey of these products, and (2) suggested net retail price declared in the latest sworn statement filed by the local manufacturer or importer. Some relevant portions provide:
* NRP is converted into individual package of 5s or 10s pursuant to Section 11 of RR No. 17-2012Annex "D-1"LIST OF LOCALLY MANUFACTURED CIGARETTE BRANDS AS OF DECEMBER 2012
1. List of brands Based on 2010 BIR Price Survey
BRAND NAMES Content/Unit (pack) Net Retail Price (Based on 2010 BIR Price Survey) Applicable Excise Tax Rates Effective Jan. 1, 2013 under R.A. No. 10351A. Cigarettes Packed by Machine A. 1. Net Retail Price (NRP) is Php 11.50 per Pack and below 1. Astro Filter King 20 sticks/pack 10.92 12.00x x x x 22. Fortune Int'l Extra Filter King 20 sticks/pack 10.84 12.0023. Fortune Int'l Extra Filter King (10's)* 10 sticks/pack 6.58 12.00x x x x 44. Marlboro Filter (2x10's) Flip Top* 10 sticks/pack 8.27 12.0045. Marlboro Filter KS (5's)* 5 sticks/pouch 4.11 12.00x x x x 61. Miller Filter Silver KS SP 20 sticks/pack 10.27 12.00x x x x 63. Miller Filter Silver-(5's) KS Pouch* 5 sticks/pouch 2.88 12.00x x x x 76. Philip Morris Menthol KS FTB-(10's)* 10 sticks/pack 6.25 12.0077. Philip Morris Menthol-(5's) 100's Pouch* 5 sticks/pouch 3.84 12.00x x x x
WHEREFORE, premised on the foregoing, the Petition for Declaratory Relief is GRANTED. The assailed portions of Revenue Regulation 17-2012 and Revenue Memorandum Circular 90-2012 are declared NULL AND VOID and OF NO FORCE AND EFFECT. Respondents are to immediately cease and desist from implementing Sec. 11 of Revenue Regulation 17-2012 and Revenue Memorandum Circular 90-2012 insofar as the cigarettes packed by machine are concerned.Hence, the instant petition filed by the Secretary of Finance and the CIR through the Office of the Solicitor General.
The tax rates imposed by RA No. 10351 should be imposed on the whole packaging combination of 20's, regardless of whether they are packed by pouches of 2 x 10's or 4 x 5's, etc.
SO ORDERED.8
NOW, THEREFORE, effective immediately and continuing until further orders from this Court, You, the respondent, the RTC, Br. 253, Las Piñas City, their representatives, agents or other persons acting on their behalf are hereby RESTRAINED from enforcing the assailed Decision dated 7 October 2013 of the RTC, Br. 253, Las Piñas City in SCA Case No. 13-0003.
x x x x9
SEC. 5. Section 145 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, is hereby further amended to read as follows:Section 145(C) of the NIRC is clear that the excise tax on cigarettes packed by machine is imposed per pack. "Per pack" was not given a clear definition by the NIRC. However, a "pack" would normally refer to a number of individual components packaged as a unit.10 Under the same provision, cigarette manufacturers are permitted to bundle cigarettes packed by machine in the maximum number of 20 sticks and aside from 20's, the law also allows packaging combinations of not more than 20's - it can be 4 pouches of 5 cigarette sticks in a pack (4 x 5's), 2 pouches of 10 cigarette sticks in a pack (2 x 10's), etc.SEC. 145. Cigars and Cigarettes. -
x x x x
(C) Cigarettes Packed by Machine. — There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:
Effective on January 1, 2013(1) If the net retail price (excluding the excise tax and the value-added tax) is Eleven pesos and fifty centavos (P11.50) and below per pack, the tax shall be Twelve pesos (P12.00) per pack; and(2) If the net retail price (excluding the excise tax and the value-added tax) is more than Eleven pesos and fifty centavos (P11.50) per pack, the tax shall be Twenty-five pesos (P25.00) per pack.
x x x x
Duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty.
x x x x (Emphasis supplied)
SEC. 11. Revised Provisions for the Manner of Packaging of Cigarettes. - All Cigarettes whether packed by hand or packed by machine shall only be packed in twenties (20s), and through other packaging combinations which shall result to not more than twenty sticks of cigarettes: Provided, That, in case of cigarettes packed in not more than twenty sticks, whether in 5 sticks, 10 sticks and other packaging combinations below 20 slicks, the net retail price of each individual package of 5s, 10s, etc. shall be the basis of imposing the tax rate prescribed under the Act. (Emphasis supplied)The BIR also released RMC 90-2012, specifically Annex "D-1" on Cigarettes Packed by Machine, in accordance with RA 10351 and RR 17-2012, showing in tabular form the different brands of locally-manufactured cigarettes packed by machine with the brand names, content/unit (pack), net retail price, and the applicable excise tax rates effective 1 January 2013. The net retail price of some brand names was converted into individual packages of 5's or 10's pursuant to Section 11 of RR 17-2012.
Rep. Villafuerte: Just a point of clarification. The Senate says, 'twenties.' Okay, that's very reasonable. But can two packs put together in tens, is that prohibited? Because in rural areas, they don't necessarily have to sell.From the above discussion, it can be gleaned that the lawmakers intended to impose the excise tax on every pack of cigarettes that come in 20 sticks. Individual pouches or packaging combinations of 5's and 10's for retail purposes are allowed and will be subjected to the same excise tax rate as long as they are bundled together by not more than 20 sticks. Thus, by issuing Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012, the BIR went beyond the express provisions of RA 10351.
The Chairman (Sen. Drilon): Can we ask our resource person, Congressman?
Ms. Jacinto-Henares: No, sir, as long as they take the two ten packs together or four, five packs together, that is considered twenty.
Rep. Villafuerte: Okay. As long as the twenty packs is paid even if they are separable in packaging for retail purposes, that's allowed. Because I got the impression from some people that that is being prohibited that's why I sought to clarify.
The Chairman (Sen. Drilon): On record, yes.
x x x x
Sen. Recto: But you could have five, five, five, five and put a tape.
Ms. Jacinto-Henares: Yeah. But it should be taped together.
Sen. Recto: Okay.
Sen. P. Cayetano: Can I ask a question about that? When you say that you can have numbers divisible, I guess, by five, so you have five, 10, 15, 20, right? So you can have two or four packaged together for tax purposes. And then for retail purposes, you can divide that up. Is that, what we're saying?
x x x x
Ms. Jacinto-Henares: Yes.
x x x x
Sen. A. Cayetano: Mr. Chair. Mr. Chair. The point is, we're taxing by pack. If they sell less than 20, that's advantageous to the government. So, if they want to pack it by 10 but not combine it, we will tax them twice. So, it's good for the government. But if you allow combinations without limiting it to 20, they will pack three of 10s together and you will be taxing 30s and the government will be getting less. So it's an irony that our problem now with the sin tax is our sin tax.
So, can I propose this wording, 'In twenties and other packaging combinations not more than 20 or not more than 20 or not more than 20 sticks.
Ms. Jacinto-Henares: Yes, sir.13
Endnotes:
1 Under Rule 45 of the 1997 Revised Rules of Civil Procedure.
2Rollo, pp. 35-45. Penned by Presiding Judge Salvador V. Timbang, Jr.
3 Prescribing the Implementing Guidelines on the Revised Tax Rates on Alcohol and Tobacco Products Pursuant to the Provisions of Republic Act No. 10351 and to Clarity Certain Provisions of Existing Revenue Regulations. Issued on 21 December 2012 by the Secretary of Finance.
4 Revised Tax Rates of Alcohol and Tobacco Products under Republic Act No. 10351, "An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424, otherwise known as The National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, and for Other Purposes."
Issued on 27 December 2012 bv the Commissioner of Internal Revenue.
5 An Act Restructuring the Excise Tax on Alcohol and Tobacco Products by Amending Sections 141, 142, 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended by Republic Act No. 9334, and for Other Purposes. Approved on 19 December 2012 and took effect on 21 December 2012.
6 An Act Amending the National internal Revenue Code, as Amended, and for Other Purposes. Cited as The Tax Reform Act of 1997, signed on 11 December 1997, and took effect on 1 January 1998.
7 Docketed as SCA Case No. 13-0003.
8Rollo, pp. 44-45.
9 Id. at 200.
10 Merriam Webster Dictionary <https://www.merriam-webster.com/dictionary/pack> (visited on 12 April 2017).
11 An Act Amending Sections 138, 140 & 142 of the National Internal Revenue Code, as amended, and for Other Purposes. Took effect on 1 January 1997.
12 An Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco Products, Amending for the Purpose Sections 131, 141, 142, 143, 144, 145 and 288 of the National Internal Revenue Code of 1997, as amended. Took effect on 1 January 2005.
13Rollo, pp. 260-261.
14 491 Phil. 317, 347 (2005).