Thursday, February 23, 2012

Golden Ribbon Lumber Co., Inc. vs. City of Butuan, [No. L-18534. December 24, 1964]

Facts: This case is an appeal taken by the City of Butuan and Francisco Magno, as City Treasurer of the City of Butuan, from the decision of the Court of First Instance of Agusan declaring void Ordinance No. 5, as amended, of said City, and ordering them to refund to appellee, Golden Ribbon Lumber Company, Inc., the sum of P1,190.92 paid by the latter as tax. 

Appellee, a duly organized domestic corporation, operated a lumber mill and lumber yard in Butuan City. Pursuant to the provisions of Section 1 of Ordinance No. 5, as amended, appellee paid to appellants the taxes provided for therein amounting to the total sum of P2,069.26. Appellee contends that the questioned ordinance imposes a tax, not on lumber mills and lumber yards, but on the sawn-manufactured and/or produced lumber, which are forest products and not found among the taxable items enumerated in paragraph p, section 15, Article III of RA No. 523, thus rendering said ordinance null and void. 

Upon the other hand, appellants maintain that the tax in question is a license or a privilege tax on the business of lumber mills or lumber yards imposed by appellant city in the exercise of its police power under section 15 of its Charter. 

The lower court rendered the appealed judgment holding (a) that the tax imposed by said Ordinance No. 5, as amended, is a sales tax on the sawn, manufactured or produced lumber, which are forest products, and further ruled (b) that said ordinance was ultra vires and therefore, null and void. 

Hence, this appeal. 

Issue: Whether or not Ordinance No.5, as amended, is valid and legal 

Held: The intent of Ordinance No.5 to tax the sale of lumber is clear and unmistakable. The subsequent ordinances Nos. 9, 10, 47 and 49, being all amendatory, naturally did not alter the essence or spirit of the basic ordinance. The tax thus levied is virtually one on “forest products” since manufactured or sawn lumber is so considered under the provisions of Section 263, NIRC, which is embraced in Chapter V thereof entitled “Charges on Forest Products”. Municipal corporations are prohibited from imposing charges or taxes on forest products. 

Appellant's claim that the questioned tax is one on business or a privilege tax for the operation of a lumber mill or a lumber yard is without merit. Neither the original ordinance in question nor the amendatory ones show that the tax provided for therein is imposed by the reason of the enjoyment of the privilege to engage in a particular trade or business. Neither do they provide that payment thereof is a condition precedent to the enjoyment of such privilege or that its non-payment would result in the cancellation of any previous license granted. The only consequence of its non-payment appears to be the imposition of a surcharge or liability to suffer the penal sanctions prescribed in Section 3 of the original ordinance. These circumstances lead to the conclusion that the questioned tax cannot be considered as one imposed upon the party for engaging in the business of operating a lumber mill or a lumber yard. 

Ordinance No. 5, as amended, is ultra vires and, therefore, null and void. 

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