460 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of

Tanauan, Leyte

*
No. L-31156. February 27, 1976.

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,

INC., plaintiff-appellant, vs. MUNICIPALITY OF TANAUAN,
LEYTE, THE MUNICIPAL MAYOR, ET AL., defendants-
appellees.

Taxation; Delegation of Powers; Power of taxation may be delegated

to local governments on matters of local concern.—The power of taxation
x x x may be delegated to local governments in respect of matters of local
concern. This is sanctioned by immoral practice. By necessary implication,
the legislative power to create political corporations for purposes of local
self-government carries with it the power to confer on such local
governmental agencies the power to tax. x x x The plenary nature of the
taxing power thus delegated, contrary to plaintiff-appellant’s pretense,
would not suffice to invalidate the said law as confiscatory and oppressive.
In delegating the authority, the State is not limited to the exact meassure of
that which is exercised by itself. When it is said that the taxing power may
be delegated to municipalities and the like, it is meant taxes there may be
delegated such measure of power to impose and collect taxes as the
legislature may deem expedient. Thus, municipalities may be permitted to
tax subjects which for reasons of public policy the State has not deemed
wise to tax for more general purposes.
Same; Due process; Taking of property without due process of law
may not be passed over under the guise of taxing power, except when the
latter is exercised lawfully.—This is not to say though that the
constitutional injunction against deprivation of property without due
process of law may be passed over under the guise of the taxing power,
except when the taking of the property is in the lawful exercise of the
taxing power, as when (1) the tax is for a public purpose; (2) the rule on
uniformity of taxation is observed; (3) either the person or property taxed
is within the jurisdiction of the government levying the tax; and (4) in the
assessment and collection of certain kinds of taxes notice and opportunity
for hearing are provided.

______________

* EN BANC.

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Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of

Tanauan, Leyte

Same; Same; Delegation of powers; Delegation of taxing power to

local governments may not be assailed on the ground of double taxation.—
There is no validity to the assertion that the delegated authority can be
declared unconstitutional on the theory of double taxation. It must be
observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be exercised. x x x
Moreover, double taxation, in general, is not forbidden by our fundamental
law, since We have not adopted as part thereof the injunction against
double taxation found in the Constitution of the United States and some
states of the Union. Double taxation becomes obnoxious only where the
taxpayer is taxed twice for the benefit of the same governmental entity or
by the same jurisdiction for the same purpose, but not in a case where one
tax is imposed by the State and the other by the city of municipality.
Taxation; A municipal ordinance which imposes a tax of P0.01 for
every gallon of soft drinks produced in the municipality does not partake of
a percentage tax.—The imposition of “a tax of one centavo (P0.01) on
each gallon (128 flued ounces, U.S.) of volume capacity” on all soft drinks
produced or manufactured under Ordinance No. 27 does not partake of the
nature of a percentage tax on sales, or other taxes in any form based
thereon. The tax is levied on the produce (whether sold or not) and not on
the sales. The volume capacity of the taxpayer’s production of soft drinks
is considered solely for purposes of determining the tax rate on the
products, but there is no set ratio between the volume of sales and the
amount of the tax.
Same; A municipal tax on soft drinks is not a specific tax.—Nor can
the tax levied be treated as a specific tax. Specific taxes are those imposed
on specified articles, such as distilled spirits, wines, x x x cigars and
cigarettes, matches, x x x bunker fuel oil, diesel fuel oil, cinematographic
films, playing cards, saccharine, opium and other habit-forming drugs. Soft
drinks is not one of those specified.
Same; A municipal tax of P0.01 on each gallon of soft drinks
produced is not unfair or oppressive.—The tax of one centavo (P0.01) on
each gallon (128 fluid ounces, U.S.) of volume capacity on all soft drinks,
produced or manufactured, or an equivalent of 1½ centavos per case,
cannot be considered unjust and unfair. An increase in the tax alone would
not support the claim that the tax is oppressive, unjust and confiscatory.
Municipal corporations are allowed much discretion in determining the
rates of imposable taxes. This is in line with the constitutional policy of
according the widest possible autonomy to local governments in matters of
local taxation, an aspect that is given expression in the Local Tax Code
(PD No. 231, July 1,

462

462 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of

Tanauan, Leyte

1973). Unless the amount is so excessive as to be prohibitive, courts will

go slow in writing off an ordinance as unreasonable.
Same; Licenses; Municipalities are empowered to impose not only
municipal license but just and uniform taxes for public purposes.—The
municipal license tax of P1,000.00 per corking machine with five but not
more than ten crowners x x x imposed on manufacturers, producers,
importers and dealers of soft drinks and/or mineral waters x x x appears
not to affect the resolution of the validity of Ordinance No. 27.
Municipalities are empowered to impose, not only municipal license taxes
upon persons engaged in any business or occupation but also to levy for
public purposes, just and uniform taxes. The ordinance in question
(Ordinance No. 27) comes within the second power of a municipality.
APPEAL from a decision of the Court of First Instance of Leyte.
Garlitos, J.

The facts are stated in the opinion of the Court.

     Sabido, Sabido & Associates for appellant.
          Provincial Fiscal Zoila M. Redoña & Assistant Provincial
Fiscal Bonifacio B. Matol and Assistant Solicitor General Conrado
T. Limcaoco & Solicitor Enrique M. Reyes for appellees.

MARTIN, J.:

This is an appeal from the decision of the Court of First Instance of

Leyte in its Civil Case No. 3294, which was certified to Us by the
Court of Appeals on October 6, 1969, as involving only pure
questions of law, challenging the power of taxation delegated to
municipalities under the Local Autonomy Act (Republic Act No.
2264, as amended, June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola
Bottling Company of the Philippines, Inc., commenced a complaint
with preliminary injunction before the Court of First Instance of1
Leyte for that court to declare Section 2 of Republic Act No. 2264,
otherwise known as the Local Autonomy Act,

_______________

1 “Sec. 2. Taxation.—Any provision of law to the contrary notwithstanding, all

chartered cities, municipalities and municipal districts shall have authority to impose
municipal license taxes or fees upon persons engaged in any occupation or business,
or exercising privileges in chartered cities, municipalities and municipal districts by
requiring them to secure licenses at rates fixed by the municipal

463

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Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of
Tanauan, Leyte

unconstitutional as an undue delegation of taxing authority as well

as to declare Ordinances Nos. 23 and 27, series of 1962, of the
Municipality of Tanauan, Leyte, null and void.
 On July 23, 1963, the parties entered into a Stipulation of Facts,
the material portions of which state that, first, both

_______________

board or city council of the city, the municipal council of the municipality, or the
municipal district council of the municipal district; to collect fees and charges for
service rendered by the city, municipality or municipal district; to regulate and
impose reasonable fees for services rendered in connection with any business,
profession or occupation being conducted within the city, municipality or municipal
district and otherwise to levy for public purposes, just and uniform taxes, licenses or
fees: Provided, That municipalities and municipal districts shall, in no case, impose
any percentage tax on sales or other taxes in any form based thereon nor impose
taxes on articles subject to specific tax, except gasoline, under the provisions of the
National Internal Revenue Code: Provided, however, That no city, municipality or
municipal district may levy or impose any of the following:

(a) Residence tax;

(b) Documentary stamp tax;
(c) Taxes on the business of any newspaper engaged in the printing and
publication of any newspaper, magazine, review or bulletin appearing at
regular intervals and having fixed prices for subscription and sale, and
which is not published primarily for the purpose of publishing
advertisements;
(d) Taxes on persons operating waterworks, irrigation and other public utilities
except electric light, heat and power;
(e) Taxes on forest products and forest concessions;
(f) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis
causa;
(g) Taxes on income of any kind whatsoever;
(h) Taxes or fees for the registration of motor vehicles and for the issuance of
all kinds of licenses or permits for the driving thereof;
(i) Customs duties registration, wharfage on wharves owned by the national
government, tonnage and all other kinds of customs fees, charges and dues;
(j) Taxes of any kind on banks, insurance companies, and persons paying
franchise tax;
(k) Taxes on premiums paid by owners of property who obtain insurance
directly with foreign insurance companies; and
(l) Taxes, fees or levies, of any kind, which in effect impose a burden on
exports of Philippine finished, manufactured or processed products and
 products of Philippine cottage industries.

464

464 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of
Tanauan, Leyte

Ordinances Nos. 23 and 27 embrace or cover the same subject

matter and the production tax rates imposed therein are practically
the same, and second, that on January 17, 1963, the acting
Municipal Treasurer of Tanauan, Leyte, as per his letter addressed
to the Manager of the Pepsi-Cola Bottling Plant in said
municipality, sought to enforce compliance by the latter of the
provisions of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was
approved on September 25, 1962, levies and collects “from soft
drinks producers and manufacturers a tax of one-sixteenth (1/16) of
2
a centavo for every bottle of soft drink corked.” For the purpose of
computing the taxes due, the person, firm, company or corporation
producing soft drinks shall submit to the Municipal Treasurer a
monthly report of3 the total number of bottles produced and corked
during the month.
On the other hand, Municipal Ordinance No. 27, which was
approved on October 28, 1962, levies and collects “on soft drinks
produced or manufactured within the territorial jurisdiction of this
municipality a tax of ONE CENTAVO (P0.01) on each gallon (128
4
fluid ounces, U.S.) of volume capacity.” For the purpose of
computing the taxes due, the person, firm, company, partnership,
corporation or plant producing soft drinks shall submit to the
Municipal Treasurer a monthly report of the total number of gallons
5
produced or manufactured during the month.
The tax imposed in both Ordinances Nos. 23 and 27 is
denominated as “municipal production tax.”
On October 7, 1963, the Court of First Instance of Leyte
rendered judgment “dismissing the complaint and upholding the
constitutionality of [Section 2, Republic Act No. 2264]; declaring
Ordinances Nos. 23 and 27 valid, legal and constitutional; ordering
the plaintiff to pay the taxes due under the oft-said Ordinances; and
to pay the costs.”
 From this judgment, the plaintiff Pepsi-Cola Bottling Company
appealed to the Court of Appeals, which, in turn, elevated the case
to Us pursuant to Section 31 of the Judiciary Act of 1948, as
amended.

_______________

2 Section 2.
3 Section 3.
4 Section 2.
5 Section 3.

465

VOL. 69, FEBRUARY 27, 1976 465

Pepsi-Cola Bottling Co. of the Philippines, Inc, vs. Municipality of
Tanauan, Leyte

There are three capital questions raised in this appeal;

1.— Is Section 2, Republic Act No. 2264 an undue delegation

of power, confiscatory and oppressive?
2.— Do Ordinances Nos. 23 and 27 constitute double taxation
and impose percentage or specific taxes?
3.— Are Ordinances Nos. 23 and 27 unjust and unfair?

1. The power of taxation is an essential and inherent attribute of

sovereignty, belonging as a matter of right to every independent
6
government, without being expressly conferred by the people. It is
a power that is purely legislative and which the central legislative
body cannot delegate either to the executive or judicial department
of the government without infringing upon the theory of separation
of powers. The exception, however, lies in the case of municipal
corporations, to which, said theory does not apply. Legislative
powers may be delegated to local governments in respect of matters
7 8
of local concern. This is sanctioned by immemorial practice. By
necessary implication, the legislative power to create political
corporations for purposes of local self-government carries with it
the power to confer on such local governmental agencies the power
9
to tax. Under the New Constitution, local governments are granted
the autonomous authority to create their own sources of revenue
and to levy taxes. Section 5, Article XI provides: “Each local
government unit shall have the power to create its sources of
revenue and to levy taxes, subject to such limitations as may be
provided by law.” Withal, it cannot be said that Section 2 of
Republic Act No. 2264 emanated from beyond the sphere of the
legislative power to enact and vest in local governments the power
of local taxation.
The plenary nature of the taxing power thus delegated, contrary
to plaintiff-appellant’s pretense, would not suffice to invalidate the
said law as confiscatory and oppressive. In delegating the authority,
the State is not limited to the exact measure of that which is
exercised by itself. When it is said that the taxing power may be
delegated to municipalities and the like, it is meant that there may
be delegated such measure of

_______________

6 Cooley, The Law of Taxation, Vol. 1, Fourth Edition, 149-150.

7 Pepsi-Cola Bottling Co. of the Phil, Inc. vs. City of Butuan, L-22814, August
28, 1968, 24 SCRA 793-96.
8 Rubi v. Prov. Brd. of Mindoro, 39 Phil. 702 (1919).
9 Cooley, ante, at 190.

466

466 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc, vs. Municipality of
Tanauan, Leyte

power to impose and collect taxes as the legislature may deem

expedient. Thus, municipalities may be permitted to tax subjects
which for reasons of public policy the State has not deemed wise to
10
tax for more general purposes. This is not to say though that the
constitutional injunction against deprivation of property without
due process of law may be passed over under the guise of the
taxing power, except when the taking of the property is in the
lawful exercise of the taxing power, as when (1) the tax is for a
public purpose; (2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of
the government levying the tax; and (4) in the assessment and
collection of certain kinds of taxes notice and opportunity for
11
hearing are provided. Due process is usually violated where the
tax imposed is for a private as distinguished from a public purpose;
a tax is imposed on property outside the State, i.e., extra-territorial
taxation; and arbitrary or oppressive methods are used in assessing
and collecting taxes. But, a tax does not violate the due process
clause, as applied to a particular taxpayer, although the purpose of
the tax will result in an injury rather than a benefit to such taxpayer.
Due process does not require that the property subject to the tax or
the amount of tax to be raised should be determined by judicial
inquiry, and a notice and hearing as to the amount of the tax and the
manner in which it shall be apportioned are generally not necessary
12
to due process of law.
There is no validity to the assertion that the delegated authority
can be declared unconstitutional on the theory of double taxation. It
must be observed that the delegating authority specifies the
limitations and enumerates the taxes over which local taxation may
13
not be exercised. The reason is that the State has exclusively
reserved the same for its own prerogative. Moreover, double
taxation, in general, is not forbidden by our fundamental law, since
We have not adopted as part thereof the injunction against double
taxation found in the14 Constitution of the United States and some
states of the Union. Double taxation becomes obnoxious only
where the

_______________

10 Idem, at 198-200.
11 Malcolm, Philippine Constitutional Law, 513-14.
12 Cooley, ante, at 334.
13 See footnote 1.
14 Pepsi-Cola Bottling Co. of the Phil. Inc. vs. City of Butuan, L-22814. August
28, 1968, 24 SCRA 793-96. See Sec, 22, Art. VI, 1935

467

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taxpayer is taxed twice for the benefit of the same governmental
15 16
entity or by the same jurisdiction for the same purpose, but not
in a case where one tax is imposed by the State and the other by the
17
city or municipality.
2. The plaintiff-appellant submits that Ordinance Nos. 23 and 27
constitute double taxation, because these two ordinances cover the
same subject matter and impose practically the same tax rate. The
thesis proceeds from its assumption that both ordinances are valid
and legally enforceable. This is not so. As earlier quoted,
Ordinance No. 23, which was approved on September 25, 1962,
levies or collects from soft drinks producers or manufacturers a tax
of one-sixteen (1/16) of a centavo for every bottle corked,
irrespective of the volume contents of the bottle used. When it was
discovered that the producer or manufacturer could increase the
volume contents of the bottle and still pay the same tax rate, the
Municipality of Tanauan enacted Ordinance No. 27, approved on
October 28, 1962, imposing a tax of one centavo (P0.01) on each
gallon (128 fluid ounces, U.S.) of volume capacity. The difference
between the two ordinances clearly lies in the tax rate of the soft
drinks produced: in Ordinance No. 23, it was 1/16 of a centavo for
every bottle corked; in Ordinance No. 27, it is one centavo (P0.01)
on each gallon (128 fluid ounces, U.S.) of volume capacity. The
intention of the Municipal Council of Tanauan in enacting
Ordinance No. 27 is thus clear: it was intended as a plain substitute
for the prior Ordinance No. 23, and operates as a repeal of the
18
latter, even without words to that effect, Plaintiff-appellant in its
brief admitted that defendants-appellees are only seeking to enforce
Ordinance No. 27, series of 1962. Even the stipulation of facts
confirms the fact that the Acting Municipal Treasurer of Tanauan,
Leyte sought to compel compliance by the plaintiff-appellant of the
provisions of said Ordinance No. 27, series of 1962. The
aforementioned admission shows that only Ordinance No. 27,
series of 1962 is being enforced by defendants-appellees. Even the
Provincial Fiscal. Constitution and Sec. 17 (1), Art. VIII, 1973
Constitution.

_______________

15 Commissioner of Internal Revenue v. Lednicky, L-18169, July 31, 1964, 11

SCRA 609.
16 SMB, Inc. v. City of Cebu, L-20312, February 26, 1972, 43 SCRA 280.
 17 Punzalan v. Mun. Bd. of City of Manila, 50 O.G. 2485; Manufacturers Life
Ins. Co. v. Meer, 89 Phil. 351 (1951).
18 McQuillin, Municipal Corporations, 3rd. Ed., Vol. 6, at 206-210.

468

468 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of
Tanauan, Leyte

counsel for defendants-appellees admits in his brief “that Section

“7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance
No. 23 as the provisions of the latter are inconsistent with the
provisions of the former.”
That brings Us to the question of whether the remaining
Ordinance No. 27 imposes a percentage or a specific tax.
Undoubtedly, the taxing authority conferred on local governments
under Section 2, Republic Act No. 2264, is broad enough as to
extend to almost “everything, excepting those which are mentioned
therein.” As long as the tax levied under the authority of a city or
municipal ordinance is not within the exceptions and limitations in
the law, the same comes within the ambit of the general rule,
pursuant to the rules of expresio unius est exclucio alterius, and
19
exceptio firmat regulum in casibus non excepti. The limitation
applies, particularly, to the prohibition against municipalities and
municipal districts to impose “any percentage tax on sales or other
taxes in any form based thereon nor impose taxes on articles
subject to specific tax, except gasoline, under the provisions of the
National Internal Revenue Code.” For purposes of this particular
limitation, a municipal ordinance which prescribes a set ratio
between the amount of the tax and the volume of sale of the
taxpayer imposes a sales tax and is null20and void for being outside
the power of the municipality to enact. But, the imposition of “a
tax of one centavo (P0.01) on each gallon (128 fluid ounces, U.S.)
of volume capacity” on all soft drinks produced or manufactured
under Ordinance No. 27 does not partake of the nature of a
percentage tax on sales, or other taxes in any form based thereon.
The tax is levied on the produce (whether sold or not) and not on
the sales. The volume capacity of the taxpayer’s production of soft
drinks is considered solely for purposes of determining the tax rate
on the products, but there is not
21
set ratio between the volume of
sales and the amount of the tax.
Nor can the tax levied be treated as a specific tax. Specific taxes
are those imposed on specified articles, such as distilled

_______________

19 Villanueva v. City of Iloilo, L-26521, December 28, 1968, 26 SCRA 585-86;

Nin Bay Mining Co. v. Mun. of Roxas, Palawan, L-20125, July 20, 1965, 14 SCRA
663-64.
20 Arabay, Inc. v. CFI of Zamboanga del Norte, et al., L-27684, September 10,
1975.
21 SMB, Inc. v. City of Cebu, ante, Footnote 16.

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spirits, wines, fermented liquors, products of tobacco other than

cigars and cigarettes, matches, firecrackers, manufactured oils and
other fuels, coal, bunker fuel oil, diesel fuel oil, cinematographic
films, 22playing cards, saccharine, opium and other habit-forming
drugs. Soft drink is not one of those specified.
3. The tax of one centavo (P0.01) on each gallon (128 fluid
ounces, U.S.) of volume capacity on all soft drinks, produced23
or
manufactured, or an equivalent of 241-1/2 centavos per case, cannot
be considered unjust and unfair. An increase in the tax alone
would not support the claim that the tax is oppressive, unjust and
confiscatory. Municipal corporations are allowed25
much discretion
in determining the rates of imposable taxes. This is in line with
the constitutional policy of according the widest possible autonomy
to local governments in matters of local taxation, an aspect that is
given 26expression in the Local Tax Code (PD No. 231, July 1,
1973). Unless the amount is so excessive as to be prohibitive, 27
courts will go slow in writing off an ordinance as unreasonable,
Reluctance should not deter compliance with an ordinance such as
Ordinance No. 27 if the purpose of 28
the law to further strengthen
local autonomy were to be realized.
 Finally, the municipal license tax of P1,000.00 per corking
machine with five but not more than ten crowners or P2,000.00
with ten but not more than twenty crowners imposed on
manufacturers, producers, importers and dealers of soft drinks

_______________

22 Shell Co., of P.I. Ltd. v. Vaño, 94 Phil. 394-95 (1954); Sections 123-148,
NIRC; RA No. 953, Narcotic Drugs Law, June 20, 1953.
23 Brief, defendants-appellees, at 14. A regular bottle of Pepsi-Cola soft drinks
contains 8 oz., or 192 oz. per case of 24 bottles; a family-size contains 26 oz., or 312
oz. per case of 12 bottles.
24 See Pepsi-Cola Bottling Co. of the Phil., Inc. v. City of Butuan, ante, Footnote
14, where tax rate is P.10 per case of 24 bottles; City of Bacolod v. Gruet, L-18290,
January 31, 1983, 7 SCRA 168-69, where the tax is P.03 on every case of bottled
Coca-Cola.
25 Northern Philippines Tobacco Corp. v. Mun. of Agoo, La Union, L-26447,
January 30, 1971, 31 SCRA 308.
26 William Lines, Inc. v. City of Ozamis, L-35048, April 23, 1974, 56 SCRA 593,
Second Division, per Fernando, J.
27 Victorias Milling Co. v. Mun. of Victorias, L-21183, September 27, 1968, 25
SCRA 205.
28 Procter & Gamble Trading Co. v. Mun. of Medina, Misamis Oriental, L-
29125, January 31, 1973, 43 SCRA 133-34.

470

470 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of
Tanauan, Leyte

and/or mineral waters under Ordinance No. 54, series of 1964, as

amended by 29Ordinance No. 41, series of 1968, of defendant
Municipality, appears not to affect the resolution of the validity of
Ordinance No. 27. Municipalities are empowered to impose, not
only municipal license taxes upon persons engaged in any business
or occupation but also to levy for public purposes, just and uniform
taxes. The ordinance in question (Ordinance No. 27) comes within
the second power of a municipality.
 ACCORDINGLY, the constitutionality of Section 2 of Republic
Act No. 2264, otherwise known as the Local Autonomy Act, as
amended, is hereby upheld and Municipal Ordinance No. 27 of the
Municipality of Tanauan, Leyte, series of 1962, repealing
Municipal Ordinance No. 23, same series, is hereby declared of
valid and legal effect. Costs against petitioner-appellant.
SO ORDERED.

          Castro, C.J., Teehankee, Barredo, Makasiar, Antonio,

Esguerra, Muñoz Palma, Aquino and Conception Jr., JJ., concur.
     Fernando, J., concurs in a separate opinion.

FERNANDO, J., concurring:

The opinion of the Court penned by Justice Martin is impressed

with a scholarly and comprehensive character. Insofar as it shows
adherence to tried and tested concepts of the law of municipal
taxation, I am certainly in agreement. If I limit myself to
concurrence in the result, it is primarily because with the article on
Local Autonomy found in the present Constitution, I feel a sense of
reluctance in restating doctrines that arose from a different basic
premise as to the scope of such power in accordance with the 1935
Charter. Nonetheless, it is well-nigh unavoidable that I do so as I
am unable to share fully what for me are the nuances and
implications that could arise from the approach taken by my
brethren. Likewise as to the constitutional aspect of the thorny
question of double taxation, I would limit myself to what has been
set forth in City of Baguio

_______________

29 Subject of plaintiff-appellant’s Motion for Admission and Consideration of

Essential Newly Discovered Evidence, dated April 30, 1969.

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1
v. De Leon.
 1. The present Constitution is quite explicit as to the power of
taxation vested in local and municipal corporations. It is therein
specifically provided: “Each local government unit shall have the
power to create its own sources of revenue and to levy taxes,
2
subject to such limitations as may be provided by law” That was
not the case under the 1935 Charter, The only limitation then on the
authority, plenary in character of the national government, was that
while the President of the Philippines was vested with the power of
control over all executive departments, bureaus, or offices, he could
only “exercise general supervision over all local governments as
3
may be provided by law * * *.” As far as legislative power over
local government was concerned, no restriction whatsoever was
placed on the Congress of the Philippines. It would appear
therefore that the extent of the taxing power was solely for the
legislative body to decide. It is true that in 1989, there was
4
a statute
that enlarged the scope of the municipal taxing power. Thereafter,
in 1959 such competence was further expanded in the Local
5
Autonomy Act. Nevertheless, as late as December of 1964, five
years after its enactment of the Local Autonomy Act, this Court,
through6 Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, reaffirmed the traditional concept in these words; “The
rule is well-settled that municipal corporations, unlike sovereign
states, are clothed with no power of taxation; that its charter or a
statute must clearly show an intent to confer that power or the
municipal corporation cannot assume and exercise it, and that any
such power granted must be construed strictly, any doubt or
ambiguity arising 7from the terms of the grant to be resolved against
the municipality.”

______________

1 L-24756, October 31, 1968, 25 SCRA 938.

2 Article XI, Section 5 of the present Constitution.
3 Article VII, Section 10 of the 1935 Constitution.
4 Commonwealth Act 472 entitled: “An Act Revising the General Authority of
Municipal Councils and Municipal District Councils to Levy Taxes, Subject to
Certain Limitations.”
5 Republic Act No. 2264.
6 L-18534, December 24, 1964, 12 SCRA 611.
7 Ibid, 619. Cf. Cuunjieng v. Patstone, 42 Phil. 818 (1922); De Linan v.
Municipal Council of Daet, 44 Phil. 792 (1923); Arquiza Luta v. Municipality of
Zamboanga, 50 Phil. 748 (1927; Hercules Lumber Co. v. Zamboanga, 55 Phil. 653
(1931); Yeo Loby v. Zamboanga, 55

472

472 SUPREME COURT REPORTS ANNOTATED

Pepsi-Cola Bottling Co. of the Philippines, Inc, vs. Municipality of
Tanauan, Leyte

Taxation, according to Justice

8
Paredes in the earlier case of Tan v.
Municipality of Pagbilao, “is an attribute9
of sovereignty which
municipal corporations do not enjoy.” That case left no doubt
either as to weakness of a claim “based merely by inferences,
implications and deductions, [as they] have no place in10 the
interpretation of the power to tax of a municipal corporation.” As
the conclusion reached by the Court finds support in such grant of
the municipal taxing power, I concur in the result.
2. As to any possible infirmity based on an alleged double
taxation, I would prefer to rely on the11doctrine announced by this
Court in City of Baguio v. De Leon. Thus: “As to why double
taxation is not violative of due process, Justice Holmes made clear
in this language: ‘The objection to the taxation as double may be
laid down on one side. * * * The 14th Amendment [the due process
clause] no more forbids double taxation than it does doubling the
amount of a tax, short of confiscation or proceedings
unconstitutional on other grounds.’ With that decision rendered at a
time when American sovereignty in the Philippines was
recognized, it possesses more than just a persuasive effect. To
some, it delivered the coup de grace to the bogey of double
taxation as a constitutional bar to the exercise of the taxing power.
It would seem though that in the United States, as with us, its ghost,
as noted by an eminent critic, still stalks the juridical stage. In a
1947 decision, however, we quoted with approval this excerpt from
a leading American decision: ‘Where, as here, Congress has clearly
expressed its intention, the
12
statute must be sustained even though
double taxation results.’ ”

_______________
 Phil. 656 (1931); People v. Carreon, 65 Phil. 588 (1939); Yap Tak Wing v.
Municipal Board, 68 Phil. 511 (1939); Eastern Theatrical Co. v. Alfonso, 83 Phil.
852 (1949); De la Rosa v. City of Baguio, 91 Phil 720 (1052); Medina v. City of
Baguio, 91 Phil. 854 (1952); Standard-Vacuum Oil Co. v. Antigua, 96 Phil. 909
(1955); Municipal Government of Pagsanjan v. Reyes, 98 Phil. 654 (1956); We Wa
Yu v. City of Lipa, 99 Phil. 975 (1956); Municipality of Cotabato v. Santos, 105
Phil. 963 (1959).
8 L-14264, April 30, 1963, 7 SCRA 887.
9 Ibid, 892.
10 Ibid.
11 L-24756, October 31, 1968, 25 SCRA 938.
12 Ibid, 943-944.

473

VOL. 69, FEBRUARY 27, 1976 473

Pepsi-Cola Bottling Co. of the Philippines, Inc. vs. Municipality of
Tanauan, Leyte

So I would view the issues in this suit and accordingly concur in

the result.

Notes.—A municipal ordinance imposing a tax “for the selling

and distribution of refined and manufactured oils” based on the
monthly allocation of the taxpayer is a sales tax ordinance. (Arabay
vs. Court of First Instance of Zamboanga, 66 SCRA 617).
Pursuant to a proviso to Section 2 of R.A. 2264, municipalities
“shall, in no case, impose any percentage tax on sales or other taxes
on articles subject to specific tax, except gasoline, under the
provisions of the National Internal Revenue Code.” Under the
foregoing proviso, two courses of action in the exercise of their
taxing powers are denied to municipalities, to wit, (1) to levy any
sales tax in whatever form; and (2) to levy any tax on articles
subject to specific tax under the National Internal Revenue Code. It
is not difficult to see that these two prohibitions overlap in the
sense that while the first clause of the said proviso forbids the
levying of sales taxes of whatever form or guise, the second clause
of the same proviso forbids the levying of “taxes” without any
distinction as to the kind of tax, i.e., ‘whether percentage tax, sales
tax, specific tax or license tax, although this latter prohibition
applies only to a limited class of articles, viz, those subject to the
 specific tax under the Tax Code, Such overlap would probably
carry or connote no legal significance but for the exclusion of
gasoline from the prohibition contained in the second clause of the
mentioned proviso. A reasonable and practical interpretation of the
terms of the proviso in question results in the conclusion that
Congress, in excluding gasoline from the general disability
imposed on municipalities to exact any kind of taxes on articles
subject to specific tax under the Tax Code, deliberately and
intentionally meant to put it within, the power of such local
governments to impose whatever type or form of taxes the latter
may deem proper to levy on gasoline, including a sales tax or one
in that form. (Arabay, Inc. vs. Court of First Instance of
Zamboanga, 66 SCRA 623).
Where a municipality which enacted a tax ordinance beyond its
power is converted to a city, the city becomes obligated to refund
the tax illegally imposed by its predecessor, (San Miguel
Corporation vs. The Municipal Council of Mandaue, Cebu, 52
SCRA 43; Laoag Producers’ Coop. Mktg. Ass’n, vs. Municipality

474

474 SUPREME COURT REPORTS ANNOTATED

People vs. Reyes

of Laoag, Ilocos Norte, 37 SCRA 594; City of Naga vs. Court of

Appeals, 24 SCRA 594).

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