042 - Republic v. ICC

REPUBLIC v.
INTERNATIONAL COMMUNICATIONS
CORP
July 17, 2006 | Garcia., J. | Power to set fees and other charges
Digester: Yee, Jenine
SUMMARY: Respondent ICC, holder of a legislative franchise to
operate domestic telecommunications, filed with the NTC an
application for a CPCN to install and operate an international
telecommunications leased circuit service between the Philippines
and other countries. The NTC approved the application on the
condition that ICC shall first pay a permit fee. ICC objected to the
payment. The Court held that while NTC had the authority to
impose fees for regulatory purposes, it may not collect from ICC
because of RA 7925, which provides that the tax paid by a grantee
of a franchise shall be in lieu of all fees of any kind.
DOCTRINE: Section 40(g) of the Public Service Act is not a tax
measure but a simple regulatory provision for the collection of fees
imposed pursuant to the exercise of the States police power. A tax
is imposed under the taxing power of government principally for
the purpose of raising revenues.
FACTS:
Respondent ICC, holder of a legislative franchise under
Republic Act (RA) No. 7633 to operate domestic
telecommunications, filed with the NTC an application for a
CPCN to install, operate, and maintain an international
telecommunications leased circuit service between the
Philippines and other countries, and to charge rates therefor,
with provisional authority for the purpose.
NTC: APPROVED the application for a provisional authority
subject, among others, to the condition that the applicant [ICC]
shall pay a permit fee in the amount of P1,190,750.00, in
accordance with section 40(g) of the Public Service Act, as
amended;
On MR, NTC: DENIED.
CA: DENIED. The permit fee is a condition for the grant of a
provisional authority to operate an international circuit service.
On MR, CA: GRANTED. The permit fee is NOT a condition for
the grant of provisional authority.
Hence, the petition.
RULING: AFFIRMED
Whether the permit fee is a taxNO.
Whether the NTC exercised the power to taxNO.

CA: NTC had arrogated upon itself the power to tax an entity,
which it is not authorized to do.
PETITIONER: The fee in question is not in the nature of a tax,
but is merely a regulatory measure.
COURT: Section 40(g) of the Public Service Act1 is not a tax
measure but a simple regulatory provision for the collection of
fees imposed pursuant to the exercise of the States police
power. A tax is imposed under the taxing power of
government principally for the purpose of raising
revenues.
o The law in question, however, merely authorizes and
requires the collection of fees for the reimbursement
of the Commission's expenses in the authorization,
supervision and/or regulation of public services.
o There can be no doubt then that petitioner NTC is
authorized to collect such fees. However, the
amount thereof must be reasonably related to
the cost of such supervision and/or regulation.
Whether ICC can be made to pay the subject feeNO.
Independent of the above, there is one basic consideration
for the dismissal of this petition, about which petitioner NTC
did not bother to comment at all.
ICC is entitled to the benefits of the so-called parity
clause embodied in Section 23 of R.A. No. 7925, to wit:
Section 23. Equality of Treatment in the Telecommunications
Industry. - Any advantage, favor, privilege, exemption, or
immunity granted under existing franchises, or may
hereafter be granted, shall ipso facto become part of
previously granted telecommunications franchises and
shall be accorded immediately and unconditionally to the
grantees of such franchises x x x.
1 Section 40(g) of the Public Service Act provides: Sec. 40. The
Commission is authorized and ordered to charge and collect from any
public service or applicant, as the case may be, the following fees
as reimbursement of its expenses in the authorization, supervision
and/or regulation of the public services:g) For each permit,
authorizing the increase in equipment, the installation of new units or
authorizing the increase of capacity, or the extension of means or general
extensions in the services, twenty centavos for each one hundred pesos or
fraction of the additional capital necessary to carry out the permit.
In this connection, it is significant to note that

the subsequent congressional franchise granted to the
Domestic Satellite Corporation under Presidential Decree No.
947, states:
Section 6. In consideration of the franchise and rights
hereby granted, the grantee shall pay to the Republic of
the Philippines during the life of this franchise a tax of
one-half percent of gross earnings derived by the grantee from
its operation under this franchise and which originate from the
Philippines. Such tax shall be due and payable annually within
ten days after the audit and approval of the accounts by the
Commission on Audit as prescribed in Section 11 hereof
and shall be in lieu of all taxes, assessments, charges,
fees, or levies of any kind, nature, or description levied,
established or collected by any municipal, provincial, or
national authority x x x (Emphasis supplied)
o The above-quoted provision is, by law, considered
as ipso facto part of ICC's franchise due to the parity
clause embodied in Section 23 of R.A. No. 7925.
Accordingly, respondent ICC cannot be made
subject to the payment of the subject fees
because its payment of the franchise tax is in
lieu of all other taxes and fees.
Whether Section 40(g) has been amended by Section 5(g) of

RA 7925, thereby removing the power of the NTC to impose
fees for authorization purposesNO.
CA: The omission by Section 5(g) of R.A. No. 79212 of the word
authorization found in Section 40(g) of the Public Service Act,
as amended, meant that the fees which NTC may impose are
only for reimbursement of its expenses for regulation and
supervision but no longer for authorization purposes.
2 Sec. 5. Responsibilities of the National Telecommunications

Commission. - The National Telecommunications Commission
(Commission) shall be the principal administrator of this Act and as such
shall take the necessary measures to implement the policies and
objectives set forth in this Act. Accordingly, in addition to its existing
functions, the Commission shall be responsible for the following: g)
In the exercise of its regulatory powers, continue to impose such fees
and charges as may be necessary to cover reasonable costs and
expenses for the regulation and supervision of the operations of
telecommunications entities.
PETITIONER: There is no showing of legislative intent to

repeal, even impliedly, Section 40(g), supra, of the Public
Service Act, as amended.
COURT: Agrees with petitioner.
An implied repeal is predicated on a substantial conflict
between the new and prior laws. In the absence of an express
repeal, a subsequent law cannot be construed as repealing a
prior one unless an irreconcilable inconsistency and
repugnancy exist in the terms of the new and old laws. The two
laws must be absolutely incompatible such that they cannot be
made to stand together.
RATIONALE: the will of the legislature cannot be overturned
by the judicial function of construction and interpretation.
Courts cannot take the place of Congress in repealing statutes.
Their function is to try to harmonize, as much as possible,
seeming conflicts in the laws and resolve doubts in favor of
their validity and co-existence.
o Here, there does not even appear to be a conflict
between Section 40(g) of the Public Service Act, as
amended, and Section 5(g) of R.A. 7925.
o In fact, the latter provision directs petitioner NTC
to continue to impose such fees and charges as
may be necessary to cover reasonable costs and
expenses for the regulation and supervision of
telecommunications entities.
o The absence alone of the word authorization in
Section 5(g) of R.A. No. 7921 cannot be construed to
mean that petitioner NTC had thus been deprived of
the power to collect such fees. As pointed out by the
petitioner, the words authorization, supervision
and/or regulation used in Section 40(g) of the
Public Service Act are not distinct and
completely separable concepts which may be
taken singly or piecemeal. Taken in their entirety,
they are the quintessence of the Commission's
regulatory functions, and must go hand-in-hand with
one another. In petitioner's own words, [t]he
Commission authorizes, supervises and regulates
telecommunications entities and these functions...
cannot be considered singly without destroying the
whole concept of the Commission's regulatory
functions.
Whether the imposed fee (P1,190,750.50) is exorbitant

YES.
CA: The fee is exorbitant and in complete disregard of the
basic limitation that the fee should be at least approximately
commensurate to the expense.
PETITIONER: Imposed the maximum amount possible under
the Public Service Act, as amended.
COURT: It is difficult to comprehend how the cost of licensing,

regulating, and surveillance could amount to P1,190,750.50.
The CA was correct in finding the amount imposed as permit
fee exorbitant. That is hardly taking into consideration the
actual costs of fulfilling its regulatory and
supervisory functions.

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REPUBLIC v.

Whether the NTC exercised the power to taxNO.

In this connection, it is significant to note that

Whether Section 40(g) has been amended by Section 5(g) of

2 Sec. 5. Responsibilities of the National Telecommunications

PETITIONER: There is no showing of legislative intent to

Whether the imposed fee (P1,190,750.50) is exorbitant

COURT: It is difficult to comprehend how the cost of licensing,

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