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ADMINISTRATION LAW
ATTY. ERNESTO SALAO
September 23, 2013
Case Digests
11 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF
APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO
CORPORATION, respondents.
G.R. No. 119761 August 29, 1996

Facts:
Fortune Tobacco Corporation is engaged in the manufacture of different brands
of cigarettes. Philippine Patent Office issued to the corporation separate
certificates of trademark registration over "Champion," "Hope," and "More"
cigarettes. The initial position of the Commission was to classify 'Champion,'
'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco
Directory as belonging to foreign companies. However, Fortune Tobacco
changed the names of 'Hope' to 'Hope Luxury' and 'More' to 'Premium More,'
thereby removing the said brands from the foreign brand category
Proof was also submitted to the Bureau that 'Champion' was an original Fortune
Tobacco Corporation register and therefore a local brand." Ad Valorem taxes
were imposed on these brands
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the
BIR:
Imposition of the 55% ad valorem tax on cigarettes is that the locally
manufactured cigarettes bear a foreign brand regardless of whether or
not the right to use or title to the foreign brand was sold or transferred by
its owner to the local manufacturer.
Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-
93. Its request was denied. The CIR assessed Fortune Tobacco for ad
valorem tax deficiency amounting to P9,598,334.00.
Argument: Petitioner opines that RMC 37-93 is merely an interpretative ruling
of the BIR which can thus become effective without any prior need for notice
and hearing, nor publication, and that its issuance is not discriminatory since it
would apply under similar circumstances to all locally manufactured cigarettes.
Issue: WON RMC 37-93 is a valid and effective administrative issuance.
Held: The Court is convinced that the hastily promulgated RMC 37-93 has
fallen short of a valid and effective administrative issuance.
First, distinguish between two kinds of administrative issuances a legislative
rule and an interpretative rule.
It should be understandable that 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, upon 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 adds to or
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.
The circular cannot be viewed simply as a corrective measure (revoking in the
process the previous holdings of past Commissioners) or merely as construing
Section 142(c)(1) of the NIRC, as amended, but has, in fact and most
importantly, been made in order to place "Hope Luxury," "Premium More" and
"Champion" within the classification of locally manufactured cigarettes bearing
foreign brands and to thereby have them covered by RA 7654. Specifically, the
new law would have its amendatory provisions applied to locally manufactured
cigarettes which at the time of its effectivity were not so classified as bearing
foreign brands.
Hope Luxury," "Premium More," and "Champion" cigarettes were in the
category of locally manufactured cigarettes not bearing foreign brand subject to
45% ad valoremtax. Hence, without RMC 37-93, the enactment of RA 7654,
would have had no new tax rate consequence on private respondent's products.
Evidently, in order to place "Hope Luxury," "Premium More," and "Champion"
cigarettes within the scope of the amendatory law and subject them to an
increased tax rate, the now disputed RMC 37-93 had to be issued.
The BIR not simply intrepreted the law; verily, it legislated under its
quasi-legislative authority. The due observance of the requirements of
notice, of hearing, and of publication should not have been then ignored.
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12 COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE
PORT OF SUBIC, Petitioners, vs HYPERMIX FEEDS CORPORATION,
Respondent.
G.R. No. 179579 February 1, 2012
Facts:
Petitioner Commissioner of Customs issued CMO 27-2003. Under the
Memorandum, for tariff purposes, wheat was classified according to the
following: (1) importer or consignee; (2) country of origin; and (3) port of
discharge. Depending on these factors, wheat would be classified either as food
grade or feed grade. The corresponding tariff for food grade wheat was 3%, for
feed grade, 7%.
Respondent filed a Petition for Declaratory Relief with the Regional Trial Court
(RTC) of Las Pias City. It anticipated the implementation of the regulation on
its imported and perishable Chinese milling wheat in transit from China
Arguments: Respondent contended that CMO 27-2003 was issued without
following the mandate of the Revised Administrative Code on public
participation, prior notice, and publication or registration with the University of
the Philippines Law Center.
The regulation summarily adjudged it to be a feed grade
supplier without the benefit of prior assessment and
examination; thus, despite having imported food grade wheat,
it would be subjected to the 7% tariff upon the arrival of the
shipment, forcing them to pay 133% more than was proper.
Petitioner: CMO 27-2003 was an internal administrative rule and not legislative
in nature
The claims of respondent were speculative and premature,
because the Bureau of Customs (BOC) had yet to examine
respondents products.
Issue: WON CMO 27-2003 is a valid administrative issuance.
Held: Considering that the questioned regulation would affect the
substantive rights of respondent as explained above, it therefore follows
that petitioners should have applied the pertinent provisions of Book VII,
Chapter 2 of the Revised Administrative Code
Filing. (1) Every agency shall file with the University
of the Philippines Law Center three (3) certified copies of
every rule adopted by it. Rules in force on the date of effectivity
of this Code which are not filed within three (3) months from
that date shall not thereafter be the bases of any sanction
against any party of persons.
Public Participation. - (1) 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 (2) weeks before
the first hearing thereon.
(3) In case of opposition, the rules on contested cases
shall be observed.

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
2. Petitioner Commissioner of Customs also went beyond his powers when
the regulation limited the customs officers duties mandated by Section
1403 of the Tariff and Customs Law
The provision mandates that the customs officer must first assess and
determine the classification of the imported article before tariff may be
imposed. Unfortunately, CMO 23-2007 has already classified the article even
before the customs officer had the chance to examine it. In effect, petitioner
Commissioner of Customs diminished the powers granted by the Tariff and
Customs Code with regard to wheat importation when it no longer required the
customs officers prior examination and assessment of the proper classification
of the wheat.
It is well-settled that rules and regulations, which are the product of a
delegated power to create new and additional legal provisions that have the
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effect of law, should be within the scope of the statutory authority granted by
the legislature to the administrative agency.

It is required that the regulation be germane to the objects and purposes of the
law; and that it be not in contradiction to, but in conformity with, the standards
prescribed by law.
13 VICTORIAS MILLING COMPANY, INC., petitioner-appellant, vs. SOCIAL
SECURITY COMMISSION, respondent-appellee.
G.R. No. L-16704 March 17, 1962

Facts:
Social Security Commission issued its Circular No. 22
Effective November 1, 1958, all Employers in computing the premiums
due the System, will take into consideration and include in the
Employee's remuneration all bonuses and overtime pay, as well as the
cash value of other media of remuneration. All these will comprise the
Employee's remuneration or earnings, upon which the 3-1/2% and 2-
1/2% contributions will be based, up to a maximum of P500 for any
one month.
Petitioner Victorias Milling Company, Inc. wrote the Social Security Commission
in effect protesting against the circular as contradictory to a previous Circular
No. 7 excluding overtime pay and bonus in the computation of the employers'
and employees' respective monthly premium contributions, and submitting,
1. "In order to assist your System in arriving at a
proper interpretation of the term 'compensation' for the
purposes of" such computation, their observations on
Republic Act 1161 and its amendment and on the general
interpretation of the words "compensation",
"remuneration" and "wages".
2. validity of the circular for lack of authority on the part of
the Social Security Commission to promulgate it without
the approval of the President and for lack of publication in
the Official Gazette.
Social Security Commission ruled that Circular No. 22 is not a rule or regulation
that needed the approval of the President and publication in the Official Gazette
to be effective, but a mere administrative interpretation of the statute, a mere
statement of general policy or opinion as to how the law should be construed.
Issue: WON Circular No. 22 is a rule or regulation
Held: Circular No. 22 purports merely to advise employers-members of the
System of what, in the light of the amendment of the law, they should include in
determining the monthly compensation of their employees upon which the
social security contributions should be based, and that such circular did not
require presidential approval and publication in the Official Gazette for its
effectivity.
Circular No. 22 in question was issued by the Social Security Commission, in
view of the amendment of the provisions of the Social Security Law defining the
term "compensation" contained in Section 8 (f) of Republic Act No. 1161
(f) Compensation All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except (1) that part of
the remuneration in excess of P500 received during the month; (2) bonuses,
allowances or overtime pay; and (3) dismissal and all other payments which the
employer may make, although not legally required to do so.
Republic Act No. 1792 changed the definition of "compensation" to:
(f) Compensation All remuneration for employment include the cash value of
any remuneration paid in any medium other than cash except that part of the
remuneration in excess of P500.00 received during the month.
It will thus be seen that whereas prior to the amendment, bonuses, allowances,
and overtime pay given in addition to the regular or base pay were expressly
excluded, or exempted from the definition of the term "compensation", such
exemption or exclusion was deleted by the amendatory law. It thus became
necessary for the Social Security Commission to interpret the effect of such
deletion or elimination. Circular No. 22 was, therefore, issued to apprise those
concerned of the interpretation or understanding of the Commission, of the law
as amended, which it was its duty to enforce. It did not add any duty or detail
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that was not already in the law as amended. It merely stated and circularized
the opinion of the Commission as to how the law should be construed.
14 NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his
capacity as Regional Director, NFA Regional Office No. 1, San Juan, La
Union,petitioners, vs. MASADA SECURITY AGENCY, INC., represented by its
Acting President & General Manager, COL. EDWIN S. ESPEJO
(RET.),respondents.
G.R. No. 163448. March 08, 2005

Facts:
Respondent MASADA Security Agency, Inc., entered into a one year contract to
provide security services to the various offices, warehouses and installations of
NFA within the scope of the NFA Region I.
The Regional Tripartite Wages and Productivity Board issued several wage
orders mandating increases in the daily wage rate. Accordingly, respondent
requested NFA for a corresponding upward adjustment in the monthly contract
rate consisting of the increases in the daily minimum wage of the security
guards as well as the corresponding raise in their overtime pay, holiday pay,
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month pay, holiday and rest day pay.
NFA, however, granted the request only with respect to the increase in the daily
wage by multiplying the amount of the mandated increase by 30 days and
denied the same with respect to the adjustments in the other benefits and
remunerations computed on the basis of the daily wage. NFA maintained its
stance that it is not liable to pay the corresponding adjustments in the wage
related benefits of respondents security guards.
Respondent filed with the Regional Trial Court of Quezon, City a case for
recovery of sum of money against NFA. the complaint sought reimbursement. It
also prayed for damages and litigation expenses.
NFA claims that its additional liability under the aforecited provision is limited
only to the payment of the increment in the statutory minimum wage rate, i.e.,
the rate for a regular eight (8) hour work day.
Issue: WON the liability of principals in service contracts under Section 6 of RA
6727 and the wage orders issued by the Regional Tripartite Wages and
Productivity Board is limited only to the increment in the minimum wage.
Held:
The term wage as used in Section 6 of RA 6727 pertains to no other than the
statutory minimum wage which is defined under the Rules Implementing RA
6727 as the lowest wage rate fixed by law that an employer can pay his worker
The basis thereof under Section 7 of the same Rules is the normal working
hours, which shall not exceed eight hours a day. Hence, the prescribed
increases or the additional liability to be borne by the principal under Section 6
of RA 6727 is the increment or amount added to the remuneration of an
employee for an 8-hour work.
Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly
limited to certain matters, it may not, by interpretation or construction, be
extended to others
Since the increase in wage referred to in Section 6 pertains to the statutory
minimum wage as defined herein, principals in service contracts cannot be
made to pay the corresponding wage increase in the overtime pay, night shift
differential, holiday and rest day pay, premium pay and other benefits granted
to workers. While basis of said remuneration and benefits is the statutory
minimum wage, the law cannot be unduly expanded as to include those not
stated in the subject provision.
The presumption therefore is that lawmakers are well aware that the word
wage as used in Section 6 means the statutory minimum wage. If their
intention was to extend the obligation of principals in service contracts to the
payment of the increment in the other benefits and remuneration of workers, it
would have so expressly specified. In not so doing, the only logical conclusion
is that the legislature intended to limit the additional obligation imposed on
principals in service contracts to the payment of the increment in the statutory
minimum wage.
Based on the foregoing interpretation of Section 6 of RA 6727, the parties may
enter into stipulations increasing the liability of the principal. So long as the
minimum obligation of the principal, i.e., payment of the increased statutory
minimum wage is complied with, the Wage Rationalization Act is not violated.
15 SGMC REALTY CORPORATION, petitioner, vs.
OFFICE OF THE PRESIDENT (OP), RIDGEVIEW REALTY CORPORATION, SM
INVESTMENTS CORPORATION, MULTI-REALTY DEVELOPMENT CORP.,
HENRY SY SR., HENRY SY JR., HANS T. SY, MARY UY TY and VICTOR
LIM, respondents.
Facts:
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Petitioner filed before the Housing and Land Use Regulatory Board (HLURB) a
complaint for breach of contract, violation of property rights and damages
against private respondents. After the parties filed their pleadings and
supporting documents, the arbiter rendered a decision dismissing petitioner's
complaint as well as private respondents' counterclaim.
Petitioner then filed a petition for review with the Board of Commissioners of
the HLURB which, however, dismissed said petition.
On October 23, 1995, petitioner received a copy of said decision of the Board of
Commissioners. On November 20, 1995, petitioner filed an appeal with public
respondent. Public respondent, without delving into the merits of the case,
DISMISSED for being filed out of time.
Argument: Petitioner contends that the period of appeal from the
HLURB to the Office of the President is thirty (30) days from receipt by
the aggrieved party of the decision appealed from in accordance with
Section 27 of the 1994 Rules of Procedure of HLURB and Section 1 of
Administrative Order No. 18
Issue: WON committed grave abuse of discretion in ruling that the
reglementary period within which to appeal the decision of HLURB to public
respondent is fifteen days
Held: No. We find petitioner's contention bereft of merit, because of its reliance
on a literal reading of cited rules without correlating them to current laws as
well as presidential decrees on the matter.
As pointed out by public respondent, the aforecited administrative order allows
aggrieved party to file its appeal with the Office of the President within thirty
(30) days from receipt of the decision complained of. Nonetheless, such thirty-
day period is subject to the qualification that there are no other statutory
periods of appeal applicable. If there are special laws governing particular cases
which provide for a shorter or longer reglementary period, the same shall
prevail over the thirty-day period provided for in the administrative order.
There are special laws that mandate a shorter period of fifteen (15) days within
which to appeal a case to public respondent. First, Section 15 of Presidential
Decree No. 957 provides that the decisions of the National Housing Authority
(NHA) shall become final and executory after the lapse of fifteen (15) days from
the date of receipt of the decision. Second, Section 2 of Presidential Decree No.
1344 states that decisions of the National Housing Authority shall become final
and executory after the lapse of fifteen (15) days from the date of its receipt.
The latter decree provides that the decisions of NHA is appealable only to the
Office of the President.
Further, we note that the regulatory functions of NHA relating to housing and
land development has been transferred to Human Settlements Regulatory
Commission, now known as HLURB. Thus, said presidential issuances providing
for a reglementary period of appeal of fifteen days apply in this case.
Accordingly, the period of appeal of thirty (30) days set forth in Section 27 of
HLURB 1994 Rules of Procedure no longer holds true for being in conflict with
the provisions of aforesaid presidential decrees.
For it is axiomatic that administrative rules derive their validity from the statute
that they are intended to implement. Any rule which is not consistent with
statute itself is null and void.

16 COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs AZUCENA T.
REYES
G.R. No. 159694

Doctrine: Taxpayers must be informed in writing of the law and the facts upon
which a tax assessment is based; otherwise, the assessment is
void. Being invalid, the assessment cannot in turn be used as a basis for
the perfection of a tax compromise.

Facts:
Maria C. Tancinco died, leaving a residential lot and an old house at
Dasmarias Village, Makati City. Revenue District Office conducted an
investigation on the decedents estate. Without the required preliminary
findings being submitted, it issued Letter of Authority No. 132963 for the
regular investigation of the estate tax case. Azucena T. Reyes, one of the
decedents heirs, received the Letter of Authority on March 14, 1997
The Chief, Assessment Division, Bureau of Internal Revenue issued a
preliminary assessment notice against the estate in the amount
of P14,580,618.67. On May 10, 1998, the heirs of the decedent received a final
estate tax assessment notice and a demand letter, both dated April 22, 1998, for
the amount of P14,912,205.47, inclusive of surcharge and interest.
Commissioner of Internal Revenue issued a preliminary collection letter to
Reyes, followed by a Final Notice Before Seizure
A Warrant of Distraint and/or Levy was served upon the estate, followed
on February 11, 1999 by Notices of Levy on Real Property and Tax Lien against
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it.As the estate failed to pay its tax liability within the April 15, 2000 deadline,
the Chief, Collection Enforcement Division, BIR, notified Reyes on June 6, 2000
that the subject property would be sold at public auction on August 8, 2000
Argument: Reyes asserted that x x x the assessment, letter of demand[,] and the
whole tax proceedings against the estate are void ab initio.
Without acting on Reyes protest and offer, [the CIR] instructed the Collection
Enforcement Division to proceed with the August 8, 2000 auction sale
Reyes filed a Petition for Review with the Court of Tax Appeals (or CTA),
docketed as CTA Case No. 6124.
During the pendency of the [P]etition for [R]eview with the CTA, however, the
BIR issued Revenue Regulation (or RR) No. 6-2000 and Revenue Memorandum
Order (or RMO) No. 42-2000 offering certain taxpayers with delinquent
accounts and disputed assessments an opportunity to compromise their tax
liability
Reyes filed an application with the BIR for the compromise settlement of the
assessment against the estate
Issue: Whether respondent can validly argue that she, as well as the other heirs,
was not aware of the facts and the law on which the assessment in question is
based, after she had opted to propose several compromises on the estate tax
due, and even prematurely acting on such proposal by paying 20% of the basic
estate tax due
Held: The second paragraph of Section 228 of the Tax Code
[
is clear and
mandatory
The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made: otherwise, the assessment shall be void.
In the present case, Reyes was not informed in writing of the law and the facts
on which the assessment of estate taxes had been made. She was merely
notified of the findings by the CIR, who had simply relied upon the provisions of
former Section 229
[13]
prior to its amendment by Republic Act (RA) No. 8424,
otherwise known as the Tax Reform Act of 1997.
First, RA 8424 has already amended the provision of Section 229 on protesting
an assessment. The old requirement of merely notifying the taxpayer of
theCIRs findings was changed in 1998 to informing the taxpayer of not only the
law, but also of the facts on which an assessment would be made; otherwise, the
assessment itself would be invalid.
It was on February 12, 1998, that a preliminary assessment notice was issued
against the estate. On April 22, 1998, the final estate tax assessment notice, as
well as demand letter, was also issued. During those dates, RA 8424 was
already in effect. The notice required under the old law was no longer sufficient
under the new law
To be simply informed in writing of the investigation being conducted and of
the recommendation for the assessment of the estate taxes due is nothing but a
perfunctory discharge of the tax function of correctly assessing a taxpayer. The
act cannot be taken to mean that Reyes already knew the law and the facts on
which the assessment was based. It does not at all conform to the compulsory
requirement under Section 228. Moreover, the Letter of Authority received by
respondent on March 14, 1997 was for the sheer purpose of investigation and
was not even the requisite notice under the law.
Second, the non-retroactive application of Revenue Regulation (RR) No. 12-99 is
of no moment, considering that it merely implements the law.
A tax regulation is promulgated by the finance secretary to implement the
provisions of the Tax Code.
[15]
While it is desirable for the government
authority or administrative agency to have one immediately issued after a law is
passed, the absence of the regulation does not automatically mean that the law
itself would become inoperative.
At the time the pre-assessment notice was issued to Reyes, RA 8424 already
stated that the taxpayer must be informed of both the law and facts on which
the assessment was based. Thus, the CIR should have required the assessment
officers of the Bureau of Internal Revenue (BIR) to follow the clear mandate of
the new law. The old regulation governing the issuance of estate tax assessment
notices ran afoul of the rule that tax regulations -- old as they were -- should be
in harmony with, and not supplant or modify, the law.
[16]


It may be argued that the Tax Code provisions are not self-executory. It
would be too wide a stretch of the imagination, though, to still issue a regulation
that would simply require tax officials to inform the taxpayer, in any manner, of
the law and the facts on which an assessment was based. That requirement is
neither difficult to make nor its desired results hard to achieve.

Moreover, an administrative rule interpretive of a statute, and not
declarative of certain rights and corresponding obligations, is given retroactive
effect as of the date of the effectivity of the statute.
[17]
RR 12-99 is one such
rule. Being interpretive of the provisions of the Tax Code, even if it was issued
only onSeptember 6, 1999, this regulation was to retroact to January 1, 1998 -- a
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date prior to the issuance of the preliminary assessment notice and demand
letter.
Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the Tax
Code.

No doubt, Section 228 has replaced Section 229. The provision on
protesting an assessment has been amended. Furthermore, in case of
discrepancy between the law as amended and its implementing but old
regulation, the former necessarily prevails.
[18]
Thus, between Section 228 of the
Tax Code and the pertinent provisions of RR 12-85, the latter cannot stand
because it cannot go beyond the provision of the law. The law must still be
followed, even though the existing tax regulation at that time provided for a
different procedure. The regulation then simply provided that notice be sent to
the respondent in the form prescribed, and that no consequence would ensue
for failure to comply with that form.
Fourth, petitioner violated the cardinal rule in administrative law that the
taxpayer be accorded due process. Not only was the law here disregarded, but
no valid notice was sent, either. A void assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To proceed
heedlessly with tax collection without first establishing a valid assessment is
evidently violative of the cardinal principle in administrative investigations:
that taxpayers should be able to present their case and adduce supporting
evidence.
[19]
In the instant case, respondent has not been informed of the basis
of the estate tax liability. Without complying with the unequivocal mandate of
first informing the taxpayer of the governments claim, there can be no
deprivation of property, because no effective protest can be made.
[20]
The
haphazard shot at slapping an assessment, supposedly based on estate
taxations general provisions that are expected to be known by the taxpayer, is
utter chicanery.

17 ROSARIO L. DADULO, Petitioner, vs.
THE HON. COURT OF APPEALS, OFFICE OF THE OMBUDSMAN, HON.
FELICIANO BELMONTE, JR., in his capacity as City Mayor of Quezon City
and GLORIA PATANGUI, Respondents.
Facts:
Petitioner insists that the decision of the Office of the Ombudsman which found
her guilty of conduct prejudicial to the best interest of the service and imposed
upon her the penalty of suspension for six months, affirmed by the Court of
Appeals, was not supported by substantial evidence and that the
implementation of the suspension Order is premature.
Respondent Gloria Patangui testified that on September 22, 2002, the
construction materials were taken from her house and were brought to the
barangay outpost. Patangui was informed by a BSDO that petitioner ordered the
seizure.
Issue: WON the implementation of the suspension order is premature.
Petitioner argues that her appeal has the effect of staying the
execution of the decision of the Ombudsman hence, the
immediate implementation of the suspension order before it
has become final and executory, was premature
Held: Contrary to petitioners claim, there is substantial evidence on record
sufficient to hold her administratively liable and as to the alleged premature
implementation of the suspension order, the same is likewise bereft of merit.
As correctly observed by the Solicitor General, at the time the Lapid and Laxina
cases were decided, Section 7, Rule III of the Rules of Procedure of the Office of
the Ombudsman was silent as to the execution of its decisions pending appeal.
This was later amended by Administrative Order No. 17 and Administrative
Order No. 14-A as implemented by Memorandum Circular No. 1 s. 2006. Hence,
as amended, Section 7 of Rule III now reads:
Section 7. Finality and execution of decision. Where the respondent is absolved
of the charge, and in case of conviction where the penalty imposed is public
censure or reprimand, suspension of not more than one month, or a fine
equivalent to one month salary, the decision shall be final, executory and
unappealable. In all other cases, the decision may be appealed to the Court of
Appeals on a verified petition for review under the requirements and conditions
set forth in Rule 43 of the Rules of Court, within fifteen (15) days from receipt of
the written Notice of the Decision or Order denying the Motion for
Reconsideration.1wphi1
An appeal shall not stop the decision from being executory. In case the
penalty is suspension or removal and the respondent wins such appeal, he
shall be considered as having been under preventive suspension and shall
be paid the salary and such other emoluments that he did not receive by
reason of the suspension or removal.
A decision of the Office of the Ombudsman in administrative cases shall be
executed as a matter of course.The Office of the Ombudsman shall ensure that
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the decision shall be strictly enforced and properly implemented. The refusal or
failure by any officer without just cause to comply with an order of the Office of
the Ombudsman to remove, suspend, demote, fine, or censure shall be a ground
for disciplinary action against said officer.
Finally, the appeal of the decision of the Ombudsman to the Court of Appeals is
through a Petition for Review under Rule 43 of the Rules of Court, Section 12 of
which categorically provides that the appeal shall not stay the award, judgment,
final order or resolution sought to be reviewed unless the Court of Appeals shall
direct otherwise upon such terms as it may deem just.
18 REPUBLIC OF THE PHILIPPINES, represented by NATIONAL
TELECOMMUNICATIONS COMMISSION, petitioner, vs.
EXPRESS TELECOMMUNICATION CO., INC. and BAYAN
TELECOMMUNICATIONS CO., INC.,respondents.
G.R. No. 147096 January 15, 2002

Facts:
On December 29, 1992, International Communications Corporation (now Bayan
Telecommunications, Inc. or Bayantel) filed an application with the National
Telecommunications Commission (NTC) for a Certificate of Public Convenience
or Necessity (CPCN) to install, operate and maintain a digital Cellular Mobile
Telephone System/Service (CMTS) with prayer for a Provisional Authority (PA).
On May 6, 1993, and prior to the issuance of any notice of hearing by the NTC
with respect to Bayantel's original application, Bayantel filed an urgent ex-
parte motion to admit an amended application. The NTC issued an Order closing
out all available frequencies for the service being applied for by herein applicant
and in order that this case may not remain pending for an indefinite period of
time, AS PRAYED FOR, let this case be, as it is, hereby ordered ARCHIVED
without prejudice to its reinstatement if and when the requisite frequency
becomes available.
The NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5)
megahertz (MHz) of the radio frequency spectrum for the expansion of CMTS
networks. Also, Memorandum Circular No. 3-3-99 was issued by the NTC re-
allocating an additional five (5) MHz frequencies for CMTS service
Bayantel filed an Ex-Parte Motion to Revive Case,
7
citing the availability of new
frequency bands for CMTS operators, as provided for under Memorandum
Circular No. 3-3-99. The NTC granted BayanTel's motion to revive the latter's
application and set the case for hearings.
Respondent Express Telecommunication Co., Inc. (Extelcom) filed in NTC Case
No. 92-486 an Opposition (With Motion to Dismiss) praying for the dismissal of
Bayantel's application. Extelcom argued that Bayantel's motion sought the
revival of an archived application filed almost eight (8) years ago. Thus, the
documentary evidence and the allegations of respondent Bayantel in this
application are all outdated and should no longer be used as basis of the
necessity for the proposed CMTS service.
Moreover, Extelcom alleged that there was no public need for the service
applied for by Bayantel as the present five CMTS operators --- Extelcom, Globe
Telecom, Inc., Smart Communication, Inc., Pilipino Telephone Corporation, and
Isla Communication Corporation, Inc. --- more than adequately addressed the
market demand, and all are in the process of enhancing and expanding their
respective networks based on recent technological developments.
Extelcom likewise contended that there were no available radio frequencies
that could accommodate a new CMTS operator as the frequency bands allocated
in NTC Memorandum Circular No. 3-3-99 were intended for and had in fact
been applied for by the existing CMTS operators
Bayantel filed a Consolidated Reply/Comment,
10
stating that the opposition was
actually a motion seeking a reconsideration of the NTC Order reviving the
instant application, and thus cannot dwell on the material allegations or the
merits of the case. Furthermore, Extelcom cannot claim that frequencies were
not available inasmuch as the allocation and assignment thereof rest solely on
the discretion of the NTC.
NTC issued an Order granting in favor of Bayantel a provisional authority to
operate CMTS service to ensure effective competition in the CMTS market
considering the operational merger of some of the CMTS operators, new CMTS
operators must be allowed to provide the service.
Issue: Whether or not the Order of the petitioner granting respondent Bayantel
a provisional authority to operate a CMTS is in substantial compliance with NTC
Rules of Practice and Procedure and Memorandum Circular No. 9-14-90
Respondent Extelcom contends that the NTC should have
applied the Revised Rules which were filed with the Office of
the National Administrative Register on February 3, 1993.
These Revised Rules deleted the phrase "on its own initiative;"
accordingly, a provisional authority may be issued only upon
filing of the proper motion before the Commission

9

Held: There was sufficient showing that the NTC acted well within its
jurisdiction and in pursuance of its avowed duties when it allowed the revival of
Bayantel's application
In granting Bayantel the provisional authority to operate a CMTS, the NTC
applied Rule 15, Section 3 of its 1978 Rules of Practice and Procedure, which
provides:
Sec. 3. Provisional Relief. --- Upon the filing of an application, complaint or
petition or at any stage thereafter, the Board may grant on motion of the
pleader or on its own initiative, the relief prayed for, based on the pleading,
together with the affidavits and supporting documents attached thereto,
without prejudice to a final decision after completion of the hearing which shall
be called within thirty (30) days from grant of authority asked for.
(underscoring ours)
The NTC, through the Secretary of the Commission, issued a certification to the
effect that inasmuch as the 1993 Revised Rules have not been published in a
newspaper of general circulation, the NTC has been applying the 1978 Rules.
The absence of publication, coupled with the certification by the Commissioner
of the NTC stating that the NTC was still governed by the 1978 Rules, clearly
indicate that the 1993 Revised Rules have not taken effect at the time of the
grant of the provisional authority to Bayantel. The fact that the 1993 Revised
Rules were filed with the UP Law Center on February 3, 1993 is of no moment.
There is nothing in the Administrative Code of 1987 which implies that the
filing of the rules with the UP Law Center is the operative act that gives the rules
force and effect.
The National Administrative Register is merely a bulletin of codified rules and it
is furnished only to the Office of the President, Congress, all appellate courts, the
National Library, other public offices or agencies as the Congress may select,
and to other persons at a price sufficient to cover publication and mailing or
distribution costs.
In any event, regardless of whether the 1978 Rules or the 1993 Revised Rules
should apply, the records show that the amended application filed by Bayantel
in fact included a motion for the issuance of a provisional authority. Hence, it
cannot be said that the NTC granted the provisional authority motu proprio. The
Court of Appeals, therefore, erred when it found that the NTC issued its Order of
May 3, 2000 on its own initiative. This much is acknowledged in the Decision of
the Court of Appeals:
As prayer, ICC asked for the immediate grant of provisional authority to
construct, install, maintain and operate the subject service and to charge the
proposed rates and after due notice and hearing, approve the instant
application and grant the corresponding certificate of public convenience and
necessity.
The Court of Appeals also erred when it declared that the NTC's Order archiving
Bayantel's application was null and void. The archiving of cases is a widely
accepted measure designed to shelve cases in which no immediate action is
expected but where no grounds exist for their outright dismissal, albeit without
prejudice. It saves the petitioner or applicant from the added trouble and
expense of re-filing a dismissed case. Under this scheme, an inactive case is kept
alive but held in abeyance until the situation obtains wherein action thereon can
be taken.
The NTC is clothed with sufficient discretion to act on matters solely within its
competence. Clearly, the need for a healthy competitive environment in
telecommunications is sufficient impetus for the NTC to consider all those
applicants who are willing to offer competition, develop the market and provide
the environment necessary for greater public service. This was the intention
that came to light with the issuance of Memorandum Circular 9-3-2000,
allocating new frequency bands for use of CMTS.
Extelcom violated the rule on exhaustion of administrative remedies when it
went directly to the Court of Appeals on a petition for certiorari and prohibition
from the Order of the NTC dated May 3, 2000, without first filing a motion for
reconsideration. It is well-settled that the filing of a motion for reconsideration
is a prerequisite to the filing of a special civil action for certiorari.
Extelcom does not enjoy the grant of any vested interest on the right to render a
public service. The Constitution is quite emphatic that the operation of a public
utility shall not be exclusive. Even in the provisional authority granted to
Extelcom, it is expressly stated that such authority is not exclusive. Thus, the
Court of Appeals erred when it gave due course to Extelcom's petition and ruled
that it constitutes an exception to the rule on exhaustion of administrative
remedies.
The Court of Appeals erred in annulling the Order of the NTC dated May 3, 2000,
granting Bayantel a provisional authority to install, operate and maintain CMTS.
The general rule is that purely administrative and discretionary functions may
not be interfered with by the courts
The established exception to the rule is where the issuing authority has gone
beyond its statutory authority, exercised unconstitutional powers or clearly
10

acted arbitrarily and without regard to his duty or with grave abuse of
discretion.

None of these obtains in the case at bar.
In the case at bar, we find no reason to disturb the factual findings of the NTC
which formed the basis for awarding the provisional authority to Bayantel. As
found by the NTC, Bayantel has been granted several provisional and
permanent authorities before to operate various telecommunications
services.
51
Indeed, it was established that Bayantel was the first company to
comply with its obligation to install local exchange lines pursuant to E.O. 109
and R.A. 7925. In recognition of the same, the provisional authority awarded in
favor of Bayantel to operate Local Exchange Services in Quezon City, Malabon,
Valenzuela and the entire Bicol region was made permanent and a CPCN for the
said service was granted in its favor. Prima facie evidence was likewise found
showing Bayantel's legal, financial and technical capacity to undertake the
proposed cellular mobile telephone service.
19 SAN MIGUEL CORPORATION (CAGAYAN COCA-COLA
PLANT), petitioner, vs. Hon. AMADO G. INCIONG, Deputy Minister of Labor
and CAGAYAN COCA-COLA FREE WORKERS UNION, respondents.
G.R. No. L-49774 February 24, 1981
Facts:
Cagayan Coca-Cola Free Workers Union, private respondent, filed a complaint
against San Miguel Corporation alleging failure or refusal of the latter to include
in the computation of 13th- month pay such items as sick, vacation or maternity
leaves, premium for work done on rest days and special holidays, including pay
for regular holidays and night differentials
An Order was issued by Regional Office No. X where the complaint was filed
requiring herein petitioner San Miguel Corporation "to pay the difference of
whatever earnings and the amount actually received as 13th month pay
excluding overtime premium and emergency cost of living allowance. "
Herein petitioner appealed from that Order to the Minister of Labor in whose
behalf the Deputy Minister of Labor Amado G. Inciong issued an Order dated
June 7, 1978 affirming the Order of Regional Office No. X and dismissing the
appeal for lack of merit.
Issue: Whether or not in the computation of the 13th-month pay under
Presidential Decree 851, payments for sick, vacation or maternity leaves,
premium for work done on rest days and special holidays, including pay for
regular holidays and night differentials should be considered.
Petitioner contends that Presidential Decree 851 speaks only
of basic salary as basis for the determination of the 13th-month
pay; submits that payments for sick, vacation, or maternity
leaves, night differential pay, as well as premium paid for work
performed on rest days, special and regular holidays do not
form part of the basic salary
Held: The Court finds petitioner's contention meritorious.
Under Presidential Decree 851 and its implementing rules, the basic salary of an
employee is used as the basis in the determination of his 13th-month pay. Any
compensations or remunerations which are deemed not part of the basic pay is
excluded as basis in the computation of the mandatory bonus.
Under a later set of Supplementary Rules and Regulations Implementing
Presidential Decree 851 issued by the then Labor Secretary Blas Ople, overtime
pay, earnings and other remunerations are excluded as part of the basic salary
and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and
Letter of Instructions No. 174, and profit sharing payments indicate the
intention to strip basic salary of other payments which are properly considered
as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances
and monetary benefits which are not considered or integrated as part of the
basic salary" shows also the intention to strip basic salary of any and all
additions which may be in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential
Decree 851 is even more emphatic in declaring that earnings and other
remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations
Implementing Presidential Decree 851 which defines basic salary to include all
remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and
Regulations which categorically, exclude from the definition of basic salary
earnings and other remunerations paid by employer to an employee. A cursory
perusal of the two sets of Rules indicates that what has hitherto been the
subject of a broad inclusion is now a subject of broad exclusion. The
Supplementary rules and Regulations cure the seeming tendency of the former
rules to include all remunerations and earnings within the definition of basic
salary.
11

This conclusion finds strong support under the Labor Code of the Philippines.
To cite a few provisions:
Art. 87. overtime work. Work may be performed beyond
eight hours a day provided what the employee is paid for the
overtime work, additional compensation equivalent to his
regular wage plus at least twenty-five (25%) percent thereof.
It is clear that overtime pay is an additional compensation other than and added
to the regular wage or basic salary, for reason of which such is categorically
excluded from the definition of basic salary under the Supplementary Rules and
Regulations Implementing Presidential Decree 851.
20 ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF
CUSTOMS and COURT OF TAX APPEALS, respondents
G.R. No. L-19337 September 30, 1969
Facts:
Asturias Sugar Central, Inc. is engaged in the production and milling of
centrifugal sugar for exert, the sugar so produced being placed in containers
known as jute bags.
It made two importations of jute bags. The first shipment consisting of 44,800
jute bags and declared under entry 48 on January 8, 1967, entered free of
customs duties and special import tax upon the petitioner's filing of Re-
exportation and Special Import Tax Bond no. 1 conditioned upon the
exportation of the jute bags within one year from the date of importation. The
second shipment consisting of 75,200 jute bags and declared under entry 243
on February 8, 1957, likewise entered free of customs duties and special import
tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond
no. 6 with the same conditions as stated in bond no. 1. Of the total number of
imported jute bags only 33,647 bags were exported within one year after
their importation. The remaining 86,353 bags were exported after the
expiration of the one-year period but within three years from their
importation.
Petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the
Commissioner of Customs for a week's extension of Re-exportation and Special
Import Tax Bond no. 6 which was to expire the following day, giving the
following as the reasons for its failure to export the remaining jute bags within
the period of one year: (a) typhoons and severe floods; (b) picketing of the
Central railroad line from November 6 to December 21, 1957 by certain union
elements in the employ of the Philippine Railway Company, which hampered
normal operations; and (c) delay in the arrival of the vessel aboard which the
petitioner was to ship its sugar which was then ready for loading. This request
was denied by the Commissioner.
The Collector of Customs of Iloilo required it to pay the amount of P28,629.42
representing the customs duties and special import tax due thereon, which
amount the petitioner paid under protest.The petitioner demanded the refund
of the amount it had paid, on the ground that its request for extension of the
period of one year was filed on time, and that its failure to export the jute bags
within the required one-year period was due to delay in the arrival of the vessel
on which they were to be loaded and to the picketing of the Central railroad
line.
Collector of Customs of Iloilo rendered judgment denying the claim for refund.
Appeal was taken to the Commissioner of Customs who upheld the decision of
the Collector. Upon a petition for review the Court of Tax Appeals affirmed the
decision of the Commissioner of Customs.
Issue: Whether the Commissioner of Customs is vested, under the Philippine
Tariff Act of 1909, the then applicable law, with discretion to extend the period
of one year provided for in section 23 of the Act
Held: In the light of the foregoing, it is our considered view that the one-year
period prescribed in section 23 of the Philippine Tariff Act of 1909 is non-
extendible and compliance therewith is mandatory.
1. It will be noted that section 23 of the Philippine Tariff Act of 1909 and
the superseding sec. 105(x) of the Tariff and Customs Code, while
fixing at one year the period within which the containers therein
mentioned must be exported, are silent as to whether the said period
may be extended. It was surely by reason of this silence that the
Bureau of Customs issued Administrative Orders 389 and 66, already
adverted to, to eliminate confusion and provide a guide as to how it
shall apply the law,
2
and, more specifically, to make officially known its
policy to consider the one-year period mentioned in the law as non-
extendible.
a. Then the application of the doctrine of "judicial respect for
administrative construction,"

would, initially, be in order.
Only where the court of last resort has not previously
interpreted the statute is the rule applicable that courts will
give consideration to construction by administrative or
executive departments of the state
12

b. The administrative orders in question appear to be in
consonance with the intention of the legislature to limit the
period within which to export imported containers to one
year, without extension, from the date of importation.
Otherwise, in enacting the Tariff and Customs Code to
supersede the Philippine Tariff Act of 1909, Congress would
have amended section 23 of the latter law so as to overrule the
long-standing view of the Commissioner of Customs that the
one-year period therein mentioned is not extendible.
c. Implied legislative approval by failure to change a long-
standing administrative construction is not essential to
judicial respect for the construction but is an element which
greatly increases the weight given such construction
d. If it is further considered that exemptions from taxation are
not favored,
9
and that tax statutes are to be construed
in strictissimi juris against the taxpayer and liberally in favor of
the taxing authority,
10
then we are hard put to sustain the
petitioner's stand that it was entitled to an extension of time
within which to export the jute bags and, consequently, to a
refund of the amount it had paid as customs duties.
2. Nowhere in the record does the petitioner convincingly show that the
so-called fortuitous events or force majeure referred to by it precluded
the timely exportation of the jute bags. In the second place,
assuming, arguendo, that the one-year period is extendible, the jute
bags were not actually exported within the one-week extension the
petitioner sought. The record shows that although of the remaining
86,353 jute bags 21,944 were exported within the period of one week
after the request for extension was filed, the rest of the bags,
amounting to a total of 64,409, were actually exported only during the
period from February 16 to May 24, 1958, long after the expiration of
the one-week extension sought by the petitioner. Finally, it is clear
from the record that the typhoons and floods which, according to the
petitioner, helped render impossible the fulfillment of its obligation to
export within the one-year period, assuming that they may be placed
in the category of fortuitous events or force majeure, all occurred prior
to the execution of the bonds in question, or prior to the
commencement of the one-year period within which the petitioner
was in law required to export the jute bags.
3. The next argument of the petitioner is that granting that Customs
Administrative Order 389 is valid and binding, yet "jute bags" cannot
be included in the phrase "cylinders and other containers" mentioned
therein. It will be noted, however, that the Philippine Tariff Act of 1909
and the Tariff and Customs Code, which Administrative Order 389
seeks to implement, speak of "containers" in general. The enumeration
following the word "containers" in the said statutes serves merely to
give examples of containers and not to specify the particular kinds
thereof. Thus, sec. 23 of the Philippine Tariff Act states, "containers
such as casks large metals, glass or other receptacles," and sec. 105 (x)
of the Tariff and Customs Code mentions "large containers," giving as
examples "demijohn cylinders, drums, casks and other similar
receptacles of metal, glass or other materials." (emphasis supplied)
There is, therefore, no reason to suppose that the customs authorities
had intended, in Customs Administrative Order 389 to circumscribe
the scope of the word "container," any more than the statures sought
to be implemented actually intended to do.
4. The provisions invoked by the petitioner (to sustain his claim for
refund) offer two options to an importer. The first, under sec. 105 (x),
gives him the privilege of importing, free from import duties, the
containers mentioned therein as long as he exports them within one
year from the date of acceptance of the import entry, which period as
shown above, is not extendible. The second, presented by sec. 106 (b),
contemplates a case where import duties are first paid, subject to
refund to the extent of 99% of the amount paid, provided the articles
mentioned therein are exported within three years from importation.
a. A construction of a statute which creates an inconsistency
should be avoided when a reasonable interpretation can be
adopted which will not do violence to the plain words of the
act and will carry out the intention of Congress.