(Commissioner v. Michel J. Lhuillier Pawnshop Inc., G.R. No.

150947, July 15,

2003)
FIRST DIVISION
[G.R. No. 150947. July 15, 2003.]
COMMISSIONER OF INTERNAL REVENUE, petitioner,
MICHEL J. LHUILLIER PAWNSHOP, INC., respondent.

vs.

The Solicitor General for petitioner.

Senining Belcia & Atup for respondent.
SYNOPSIS
Whether pawnshops were included in the term lending investors for the
purpose of imposing the 5% percentage tax under then Section 116 of the
National Internal Revenue Code (NIRC) of 1977, as amended by Executive
Order No. 273, the Court ruled in the negative. Congress never intended
pawnshops to be treated in the same way as lending investors as they were
subjected to different tax treatments. Section 116 of the NIRC of 1977, as
amended, also subjected to percentage tax only dealers in securities and
lending investors; there was no mention of pawnshops. Hence, several rulings
were made to that effect by the BIR. Finally, Section 116 of the NIRC of 1977
had already been repealed by RA 7716. Consequently, in the case at bar,
Revenue Memorandum Order (RMO) No. 15-91 and Revenue Memorandum
Circular (RMC) No. 43-91, issued pursuant to Section 116 of the NIRC of 1977,
were without force and effect and, therefore, Lhuillier Pawnshop cannot be
made liable to pay the 5% lending investor's tax.
SYLLABUS
1. POLITICAL LAW; ADMINISTRATIVE LAW; ADMINISTRATIVE ISSUANCES OF
THE COMMISSIONER OF INTERNAL REVENUE MUST BE CONSISTENT WITH
THE LAW SOUGHT TO BE APPLIED. RMO No. 15-91 and RMC No. 43-91
were issued in accordance with the power of the CIR to make rulings and

opinions in connection with the implementation of internal revenue laws, which

was bestowed by then Section 245 of the NIRC of 1977, as amended by E.O.
No. 273. Such power of the CIR cannot be controverted. However, the CIR
cannot, in the exercise of such power, issue administrative rulings or circulars
not consistent with the law sought to be applied. Indeed, administrative
issuances must not override, supplant or modify the law, but must remain
consistent with the law they intend to carry out. Only Congress can repeal or
amend the law.
2. TAXATION; WORDS AND PHRASES; LENDING INVESTOR AND PAWNSHOP,
DEFINED. Under Section 157(u) of the NIRC of 1986, as amended, the term
lending investor includes "all persons who make a practice of lending money for
themselves or others at interest." A pawnshop, on the other hand, is defined
under Section 3 of P.D. No. 114 as "a person or entity engaged in the business
of lending money on personal property delivered as security for loans and shall
be synonymous, and may be used interchangeably, with pawnbroker or pawn
brokerage."
3. ID.; NATIONAL INTERNAL REVENUE CODE; PERCENTAGE TAX;
PAWNSHOPS; PAWNSHOP NOT CONSIDERED LENDING INVESTOR FOR THE
PURPOSE OF IMPOSING 5% PERCENTAGE TAXES. While it is true that
pawnshops are engaged in the business of lending money, they are not
considered "lending investors" for the purpose of imposing the 5% percentage
taxes for the following reasons: First. Under Section 192, paragraph 3, subparagraphs (dd) and (ff), of the NIRC of 1977, prior to its amendment by E.O.
No. 273, as well as Section 161, paragraph 2, sub-paragraphs (dd) and (ff), of
the NIRC of 1986, pawnshops and lending investors were subjected to different
tax treatments; . . . Second. Congress never intended pawnshops to be treated
in the same way as lending investors. Section 116 of the NIRC of 1977, as
renumbered and rearranged by E.O. No. 273, was basically lifted from Section
175 of the NIRC of 1986, which treated both tax subjects differently. . . . Third.
Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects to
percentage tax dealers in securities and lending investors only. There is no
mention of pawnshops. Under the maxim expressio unius est exclusio alterius,
the mention of one thing implies the exclusion of another thing not mentioned.
Thus, if a statute enumerates the things upon which it is to operate, everything
else must necessarily and by implication be excluded from its operation and
effect. This rule, as a guide to probable legislative intent, is based upon the
rules of logic and natural workings of the human mind. Fourth. The BIR had
ruled several times prior to the issuance of RMO No. 15-91 and RMC 43-91

that pawnshops were not subject to the 5% percentage tax imposed by Section
116 of the NIRC of 1977, as amended by E.O. No. 273. This was even admitted
by the CIR in RMO No. 15-91 itself. Considering that Section 116 of the NIRC
of 1977, as amended, was practically lifted from Section 175 of the NIRC of
1986, as amended, and there being no change in the law, the interpretation
thereof should not have been altered.
4. POLITICAL LAW; ADMINISTRATIVE LAW; REPEAL OF THE LAW
AUTOMATICALLY REPEALS ADMINISTRATIVE ISSUANCES MADE PURSUANT
THERETO. The approved bill which became R.A. No. 7716 repealed Section
116 of NIRC of 1977, as amended, which was the basis of RMO No. 15-91 and
RMC No. 43-91. . . . Since Section 116 of the NIRC of 1977, which breathed life
on the questioned administrative issuances, had already been repealed, RMO
15-91 and RMC 43-91, which depended upon it, are deemed automatically
repealed. Hence, even granting that pawnshops are included within the term
lending investors, the assessment from 27 May 1994 onward would have no leg
to stand on.
5. ID.; ID.; QUASI-LEGISLATIVE POWERS; ADMINISTRATIVE ISSUANCES
REQUIRE PUBLICATION. Adding to the invalidity of the RMC No. 43-91 and
RMO No. 15-91 is the absence of publication. While the rule-making authority
of the CIR is not doubted, like any other government agency, the CIR may not
disregard legal requirements or applicable principles in the exercise of quasilegislative powers. EADCHS
6. ID.; ID.; ID.; ADMINISTRATIVE ISSUANCES; LEGISLATIVE RULE AND
INTERPRETATIVE RULE, DISTINGUISHED. Let us first distinguish between
two kinds of administrative issuances: the legislative rule and the interpretative
rule. A legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof. An
interpretative rule, on the other hand, is designed to provide guidelines to the
law which the administrative agency is in charge of enforcing. In Misamis
Oriental Association of Coco Traders, Inc. vs. Department of Finance Secretary,
this Tribunal ruled: . . . In the same way that laws must have the benefit of
public hearing, it is generally required that before a legislative rule is adopted
there must be hearing. In this connection, the Administrative Code of 1987
provides: Public Participation. If not otherwise required by law, an agency
shall, as far as practicable, publish or circulate notices of proposed rules and
afford interested parties the opportunity to submit their views prior to the
adoption of any rule. (2) In the fixing of rates, no rule or final order shall be

valid unless the proposed rates shall have been published in a newspaper of
general circulation at least two weeks before the first hearing thereon. (3) In
case of opposition, the rules on contested cases shall be observed. In addition,
such rule must be published. When an administrative rule is merely
interpretative in nature, its applicability needs nothing further than its bare
issuance, for it gives no real consequence more than what the law itself has
already prescribed. When, on the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but 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 that new issuance is given the force and effect of law.
7. ID.; ID.; ID.; ID.; CASE AT BAR. RMO No. 15-91 and RMC No. 43-91
cannot be viewed simply as implementing rules or corrective measures revoking
in the process the previous rulings of past Commissioners. Specifically, they
would have been amendatory provisions applicable to pawnshops. Without
these disputed CIR issuances, pawnshops would not be liable to pay the 5%
percentage tax, considering that they were not specifically included in Section
116 of the NIRC of 1977, as amended. In so doing, the CIR did not simply
interpret the law. The due observance of the requirements of notice, hearing,
and publication should not have been ignored.
8. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENTS; RULING OF THE
COURT OF APPEALS NOT BINDING UPON THE SUPREME COURT. There is
no need for us to discuss the ruling in CA-G.R. SP No. 59282 entitled
Commissioner of Internal Revenue v. Agencia Exquisite of Bohol Inc., which
upheld the validity of RMO No. 15-91 and RMC No. 43-91. Suffice it to say that
the judgment in that case cannot be binding upon the Supreme Court because
it is only a decision of the Court of Appeals. The Supreme Court, by tradition
and in our system of judicial administration, has the last word on what the law
is; it is the final arbiter of any justifiable controversy. There is only one
Supreme Court from whose decisions all other courts should take their
bearings.

DECISION

DAVIDE, JR., C.J p:

Are pawnshops included in the term lending investors for the purpose of
imposing the 5% percentage tax under then Section 116 of the National
Internal Revenue Code (NIRC) of 1977, as amended by Executive Order No.
273?
Petitioner Commissioner of Internal Revenue (CIR) filed the instant petition for
review to set aside the decision 1 of 20 November 2001 of the Court of Appeals
in CA G.R. SP No. 62463, which affirmed the decision of 13 December 2000 of
the Court of Tax Appeals (CTA) in CTA Case No. 5690 cancelling the
assessment issued against respondent Michel J. Lhuillier Pawnshop, Inc.
(hereafter Lhuillier) in the amount of P3,360,335.11 as deficiency percentage
tax for 1994, inclusive of interest and surcharges.
The facts are as follows:
On 11 March 1991, CIR Jose U. Ong issued Revenue Memorandum Order
(RMO) No. 15-91 imposing a 5% lending investor's tax on pawnshops; thus:

A restudy of P.D. [No.] 114 shows that the principal activity of

pawnshops is lending money at interest and incidentally
accepting a "pawn" of personal property delivered by the pawner
to the pawnee as security for the loan.(Sec. 3, Ibid). Clearly, this
makes pawnshop business akin to lending investor's business
activity which is broad enough to encompass the business of
lending money at interest by any person whether natural or
juridical. Such being the case, pawnshops shall be subject to the
5% lending investor's tax based on their gross income pursuant
to Section 116 of the Tax Code, as amended.
This RMO was clarified by Revenue Memorandum Circular (RMC) No. 43-91 on
27 May 1991, which reads:
1. RM[O] 15-91 dated March 11, 1991.
This Circular subjects to the 5% lending investor's tax the gross
income of pawnshops pursuant to Section 116 of the Tax Code,
and it thus revokes BIR Ruling No[ ]. 6-90, and VAT Ruling Nos.
22-90 and 67-90. In order to have a uniform cut-off date, avoid
unfairness on the part of taxpayers if they are required to pay the

tax on past transactions, and so as to give meaning to the

express provisions of Section 246 of the Tax Code, pawnshop
owners or operators shall become liable to the lending investor's
tax on their gross income beginning January 1, 1991. Since the
deadline for the filing of percentage tax return (BIR Form No.
2529A-0) and the payment of the tax on lending investors
covering the first calendar quarter of 1991 has already lapsed,
taxpayers are given up to June 30, 1991 within which to pay the
said tax without penalty. If the tax is paid after June 30, 1991,
the corresponding penalties shall be assessed and computed
from April 21, 1991.
Since pawnshops are considered as lending investors effective
January 1, 1991, they also become subject to documentary
stamp taxes prescribed in Title VII of the Tax Code. BIR Ruling
No. 325-88 dated July 13, 1988 is hereby revoked.
On 11 September 1997, pursuant to these issuances, the Bureau of Internal
Revenue (BIR) issued Assessment Notice No. 81-PT-13-94-97-9-118 against
Lhuillier demanding payment of deficiency percentage tax in the sum of
P3,360,335.11 for 1994 inclusive of interest and surcharges.
On 3 October 1997, Lhuillier filed an administrative protest with the Office of
the Revenue Regional Director contending that (1) neither the Tax Code nor the
VAT Law expressly imposes 5% percentage tax on the gross income of
pawnshops; (2) pawnshops are different from lending investors, which are
subject to the 5% percentage tax under the specific provision of the Tax Code;
(3) RMO No. 15-91 is not implementing any provision of the Internal Revenue
laws but is a new and additional tax measure on pawnshops, which only
Congress could enact; (4) RMO No. 15-91 impliedly amends the Tax Code and
is therefore taxation by implication, which is proscribed by law; and (5) RMO
No. 15-91 is a "class legislation" because it singles out pawnshops among other
lending and financial operations.
On 12 October 1998, Deputy BIR Commissioner Romeo S. Panganiban issued
Warrant of Distraint and/or Levy No. 81-043-98 against Lhuillier's property for
the enforcement and payment of the assessed percentage tax.
Its protest having been unacted upon, Lhuillier, in a letter dated 3 March 1998,
elevated the matter to the CIR. Still, the protest was not acted upon by the CIR.
Thus, on 11 November 1998, Lhuillier filed a "Notice and Memorandum on

Appeal" with the Court of Tax Appeals invoking Section 228 of Republic Act No.
8424, otherwise known as the Tax Reform Act of 1997, which provides:
Section 228. Protesting of Assessment. . . .
If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of
documents, the taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of the said decision, or from the lapse of the
one hundred eighty (180)-day period; otherwise, the decision
shall become final, executory and demandable.
The case was docketed as CTA Case No. 5690.
On 19 November 1998, the CIR filed with the CTA a motion to dismiss
Lhuillier's petition on the ground that it did not state a cause of action, as
there was no action yet on the protest. DcaECT
Lhuillier opposed the motion to dismiss and moved for the issuance of a writ of
preliminary injunction praying that the BIR be enjoined from enforcing the
warrant of distraint and levy.
For Lhuillier's failure to appear on the scheduled date of hearing, the CTA
denied the motion for the issuance of a writ of preliminary injunction. However,
on Lhuillier's motion for reconsideration, said denial was set aside and a
hearing on the motion for the issuance of a writ of preliminary injunction was
set.
On 30 June 1999, after due hearing, the CTA denied the CIR's motion to
dismiss and granted Lhuillier's motion for the issuance of a writ of preliminary
injunction.
On 13 December 2000, the CTA rendered a decision declaring (1) RMO No. 1591 and RMC No. 43-91 null and void insofar as they classify pawnshops as
lending investors subject to 5% percentage tax; and (2) Assessment Notice No.
81-PT-13-94-97-9-118 as cancelled, withdrawn, and with no force and effect. 2
Dissatisfied, the CIR filed a petition for review with the Court of Appeals
praying that the aforesaid decision be reversed and set aside and another one

be rendered ordering Lhuillier to pay the 5% lending investor's tax for 1994
with interests and surcharges.
Upon due consideration of the issues presented by the parties in their
respective memoranda, the Court of Appeals affirmed the CTA decision on 20
November 2001.
The CIR is now before this Court via this petition for review on certiorari,
alleging that the Court of Appeals erred in holding that pawnshops are not
subject to the 5% lending investor's tax. He invokes then Section 116 of the Tax
Code, which imposed a 5% percentage tax on lending investors. He argues that
the legal definition of lending investors provided in Section 157 (u) of the Tax
Code is broad enough to include pawnshop operators. Section 3 of Presidential
Decree No. 114 states that the principal business activity of a pawnshop is
lending money; thus, a pawnshop easily falls under the legal definition of
lending investors. RMO No. 15-91 and RMC No. 43-91, which subject
pawnshops to the 5% lending investor's tax based on their gross income, are
valid. Being mere interpretations of the NIRC, they need not be published.
Lastly, the CIR invokes the case of Commissioner of Internal Revenue vs.
Agencia Exquisite of Bohol, Inc., 3 where the Court of Appeals' Special
Fourteenth Division ruled that a pawnshop is subject to the 5% lending
investor's tax. 4
Lhuillier, on the other hand, maintains that before and after the amendment of
the Tax Code by E.O. No. 273, which took effect on 1 January 1988,
pawnshops and lending investors were subjected to different tax treatments.
Pawnshops were required to pay an annual fixed tax of only P1,000, while
lending investors were subject to a 5% percentage tax on their gross income in
addition to their fixed annual taxes. Accordingly, during the period from April
1982 up to December 1990, the CIR consistently ruled that a pawnshop is not
a lending investor and should not therefore be required to pay percentage tax
on its gross income.
Lhuillier likewise asserts that RMO No. 15-91 and RMC No. 43-91 are not
implementing rules but are new and additional tax measures, which only
Congress is empowered to enact. Besides, they are invalid because they have
never been published in the Official Gazette or any newspaper of general
circulation.

Lhuillier further points out that pawnshops are strictly regulated by the
Central Bank pursuant to P.D. No. 114, otherwise known as The Pawnshop
Regulation Act. On the other hand, there is no special law governing lending
investors. Due to the wide differences between the two, pawnshops had never
been considered as lending investors for tax purposes. In fact, in 1994,
Congress passed House Bill No. 11197, 5 which attempted to amend Section
116 of the NIRC, as amended, to include owners of pawnshops as among those
subject to percentage tax. However, the Senate Bill and the subsequent
Bicameral Committee version, which eventually became the E-VAT Law, did not
incorporate such proposed amendment.
Lastly, Lhuillier argues that following the maxim in statutory construction
"expressio unius est exclusio alterius," it was not the intention of the Legislature
to impose percentage taxes on pawnshops because if it were so, pawnshops
would have been included as among the businesses subject to the said tax.
Inasmuch as revenue laws impose special burdens upon taxpayers, the
enforcement of such laws should not be extended by implication beyond the
clear import of the language used.
We are therefore called upon to resolve the issue of whether pawnshops are
subject to the 5% lending investor's tax. Corollary to this issue are the
following questions: (1) Are RMO No. 15-91 and RMC No. 43-91 valid? (2) Were
they issued to implement Section 116 of the NIRC of 1977, as amended? (3) Are
pawnshops considered "lending investors" for the purpose of the imposition of
the lending investor's tax? (4) Is publication necessary for the validity of RMO
No. 15-91 and RMC No. 43-91.
RMO No. 15-91 and RMC No. 43-91 were issued in accordance with the power
of the CIR to make rulings and opinions in connection with the implementation
of internal revenue laws, which was bestowed by then Section 245 of the NIRC
of 1977, as amended by E.O. No. 273. 6 Such power of the CIR cannot be
controverted. However, the CIR cannot, in the exercise of such power, issue
administrative rulings or circulars not consistent with the law sought to be
applied. Indeed, administrative issuances must not override, supplant or
modify the law, but must remain consistent with the law they intend to carry
out. Only Congress can repeal or amend the law. 7

The CIR argues that both issuances are mere rules and regulations
implementing then Section 116 of the NIRC, as amended, which provided:
SEC. 116. Percentage tax on dealers in securities; lending
investors. Dealers in securities and lending investors shall pay
a tax equivalent to six (6) per centum of their gross income.
Lending investors shall pay a tax equivalent to five (5%) percent of
their gross income.
It is clear from the aforequoted provision that pawnshops are not specifically
included. Thus, the question is whether pawnshops are considered lending
investors for the purpose of imposing percentage tax.
We rule in the negative.
Incidentally, we observe that both parties, as well as the Court of Tax Appeals
and the Court of Appeals, refer to the National Internal Revenue Code as the
Tax Code. They did not specify whether the provisions they cited were taken
from the NIRC of 1977, as amended, or the NIRC of 1986, as amended. For
clarity, it must be pointed out that the NIRC of 1977 as renumbered and
rearranged by E.O. No. 273 is a later law than the NIRC of 1986, as amended
by P.D. Nos. 1991, 1994, 2006 and 2031. The citation of the specific Code is
important for us to determine the intent of the law.
Under Section 157(u) of the NIRC of 1986, as amended, the term lending
investor includes "all persons who make a practice of lending money for
themselves or others at interest." A pawnshop, on the other hand, is defined
under Section 3 of P.D. No. 114 as "a person or entity engaged in the business
of lending money on personal property delivered as security for loans and shall
be synonymous, and may be used interchangeably, with pawnbroker or pawn
brokerage."
While it is true that pawnshops are engaged in the business of lending money,
they are not considered "lending investors" for the purpose of imposing the 5%
percentage taxes for the following reasons:
First. Under Section 192, paragraph 3, sub-paragraphs (dd) and (ff), of the
NIRC of 1977, prior to its amendment by E.O. No. 273, as well as Section 161,
paragraph 2, sub-paragraphs (dd) and (ff), of the NIRC of 1986, pawnshops
and lending investors were subjected to different tax treatments; thus:

(3) Other Fixed Taxes. The following fixed taxes shall be

collected as follows, the amount stated being for the whole year,
when not otherwise specified:
xxx xxx xxx
(dd) Lending investors
1. In chartered cities and first class municipalities, one
thousand pesos;
2. In second and third class municipalities, five hundred
pesos;
3. In fourth and fifth class municipalities and municipal
districts, two hundred fifty pesos: Provided, That
lending investors who do business as such in more
than one province shall pay a tax of one thousand
pesos.
xxx xxx xxx
(ff) Pawnshops, one thousand pesos (italics ours)
Second. Congress never intended pawnshops to be treated in the same way as
lending investors. Section 116 of the NIRC of 1977, as renumbered and
rearranged by E.O. No. 273, was basically lifted from Section 175 8 of the NIRC
of 1986, which treated both tax subjects differently. Section 175 of the latter
Code read as follows:
Sec. 175. Percentage tax on dealers in securities, lending investors.
Dealers in securities shall pay a tax equivalent to six (6%)
percent of their gross income. Lending investors shall pay a tax
equivalent to five (5%) percent of their gross income. (As amended
by P.D. No. 1739, P.D. No. 1959 and P.D. No. 1994).
We note that the definition of lending investors found in Section 157 (u) of the
NIRC of 1986 is not found in the NIRC of 1977, as amended by E.O. No. 273,
where Section 116 invoked by the CIR is found. However, as emphasized earlier,
both the NIRC of 1986 and the NIRC of 1977 dealt with pawnshops and lending
investors differently. Verily then, it was the intent of Congress to deal with both

subjects differently. Hence, we must likewise interpret the statute to conform

with such legislative intent.
Third. Section 116 of the NIRC of 1977, as amended by E.O. No. 273, subjects
to percentage tax dealers in securities and lending investors only. There is no
mention of pawnshops. Under the maxim expressio unius est exclusio alterius,
the mention of one thing implies the exclusion of another thing not mentioned.
Thus, if a statute enumerates the things upon which it is to operate, everything
else must necessarily and by implication be excluded from its operation and
effect. 9 This rule, as a guide to probable legislative intent, is based upon the
rules of logic and natural workings of the human mind. 10 aIcTCS
Fourth. The BIR had ruled several times prior to the issuance of RMO No. 1591 and RMC 43-91 that pawnshops were not subject to the 5% percentage tax
imposed by Section 116 of the NIRC of 1977, as amended by E.O. No. 273. This
was even admitted by the CIR in RMO No. 15-91 itself. Considering that
Section 116 of the NIRC of 1977, as amended, was practically lifted from
Section 175 of the NIRC of 1986, as amended, and there being no change in
the law, the interpretation thereof should not have been altered.
It may not be amiss to state that, as pointed out by the respondent, pawnshops
was sought to be included as among those subject to 5% percentage tax by
House Bill No. 11197 in 1994. Section 13 thereof reads:
Section 13. Section 116 of the National Internal Revenue Code, as
amended, is hereby further amended to read as follows:
"SEC. 116. Percentage tax on dealers in securities; lending
investors; OWNERS OF PAWNSHOPS; FOREIGN CURRENCY
DEALERS AND/OR MONEY CHANGERS. Dealers in
securities shall pay a tax equivalent to Six (6%) per centum
of their gross income. Lending investors, OWNERS OF
PAWNSHOPS AND FOREIGN CURRENCY DEALERS
AND/OR MONEY CHANGERS shall pay a tax equivalent to
Five (5%) percent of their gross income."
If pawnshops were covered within the term lending investor, there would have
been no need to introduce such amendment to include owners of pawnshops.
At any rate, such proposed amendment was not adopted. Instead, the approved

bill which became R.A. No. 7716 11 repealed Section 116 of NIRC of 1977, as
amended, which was the basis of RMO No. 15-91 and RMC No. 43-91; thus:
SEC. 20. Repealing Clauses. The provisions of any special law
relative to the rate of franchise taxes are hereby expressly
repealed. Sections 113, 114 and 116 of the National Internal
Revenue Code are hereby repealed.
Section 21 of the same law provides that the law shall take effect fifteen (15)
days after its complete publication in the Official Gazette or in at least two (2)
national newspapers of general circulation whichever comes earlier. R.A. No.
7716 was published in the Official Gazette on 1 August 1994 12 ; in the
Journal and Malaya newspapers, on 12 May 1994; and in the Manila Bulletin,
on 5 June 1994. Thus, R.A. No. 7716 is deemed effective on 27 May 1994.
Since Section 116 of the NIRC of 1977, which breathed life on the questioned
administrative issuances, had already been repealed, RMO 15-91 and RMC 4391, which depended upon it, are deemed automatically repealed. Hence, even
granting that pawnshops are included within the term lending investors, the
assessment from 27 May 1994 onward would have no leg to stand on.
Adding to the invalidity of the RMC No. 43-91 and RMO No. 15-91 is the
absence of publication. While the rule-making authority of the CIR is not
doubted, like any other government agency, the CIR may not disregard legal
requirements or applicable principles in the exercise of quasi-legislative powers.
Let us first distinguish between two kinds of administrative issuances: the
legislative rule and the interpretative rule. A legislative rule is in the nature of
subordinate legislation, designed to implement a primary legislation by
providing the details thereof. An interpretative rule, on the other hand, is
designed to provide guidelines to the law which the administrative agency is in
charge of enforcing. 13
In Misamis Oriental Association of Coco Traders, Inc. vs. Department of Finance
Secretary, 14 this Tribunal ruled:
. . . In the same way that laws must have the benefit of public
hearing, it is generally required that before a legislative rule is
adopted there must be hearing. In this connection, the
Administrative Code of 1987 provides:

Public Participation. If not otherwise required by law, an agency

shall, as far as practicable, publish or circulate notices of
proposed rules and afford interested parties the opportunity to
submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid
unless the proposed rates shall have been published
in a newspaper of general circulation at least two
weeks before the first hearing thereon.
(3) In case of opposition, the rules on contested cases shall
be observed.
In addition, such rule must be published.
When an administrative rule is merely interpretative in nature, its applicability
needs nothing further than its bare issuance, for it gives no real consequence
more than what the law itself has already prescribed. When, on the other hand,
the administrative rule goes beyond merely providing for the means that can
facilitate or render least cumbersome the implementation of the law but
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 that new issuance is given the force and effect of law.
15
RMO No. 15-91 and RMC No. 43-91 cannot be viewed simply as implementing
rules or corrective measures revoking in the process the previous rulings of
past Commissioners. Specifically, they would have been amendatory provisions
applicable to pawnshops. Without these disputed CIR issuances, pawnshops
would not be liable to pay the 5% percentage tax, considering that they were
not specifically included in Section 116 of the NIRC of 1977, as amended. In so
doing, the CIR did not simply interpret the law. The due observance of the
requirements of notice, hearing, and publication should not have been ignored.

There is no need for us to discuss the ruling in CA-G.R. SP No. 59282 entitled
Commissioner of Internal Revenue v. Agencia Exquisite of Bohol Inc., which
upheld the validity of RMO No. 15-91 and RMC No. 43-91. Suffice it to say that
the judgment in that case cannot be binding upon the Supreme Court because
it is only a decision of the Court of Appeals. The Supreme Court, by tradition

and in our system of judicial administration, has the last word on what the law
is; it is the final arbiter of any justifiable controversy. There is only one
Supreme Court from whose decisions all other courts should take their
bearings. 16
In view of the foregoing, RMO No. 15-91 and RMC No. 43-91 are hereby
declared null and void. Consequently, Lhuillier is not liable to pay the 5%
lending investor's tax.
WHEREFORE, the petition is hereby DISMISSED for lack of merit. The
decision of the Court of Appeals of 20 November 2001 in CA-G.R. SP No. 62463
is AFFIRMED.
SO ORDERED.
Vitug, Ynares-Santiago, Carpio, and Azcuna, JJ ., concur.