Friday, February 24, 2012

Pepsi-Cola Bottling Co., vs. City of Butuan [August 28, 1968, L-22814]

Facts: Plaintiff, Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation with offices and principal place of business in Quezon City. Plaintiff's warehouse in the City of Butuan serves as storage for its products the "Pepsi-Cola" soft drinks for sale to customers in the City of Butuan and all the municipalities in the Province of Agusan. These "Pepsi-Cola" soft drinks are bottled in Cebu City and shipped to the Butuan City warehouse of plaintiff for distribution and sale in the City of Butuan and all municipalities of Agusan. 

On August 16, 1960, the City of Butuan enacted Ordinance No. 110 which was subsequently amended by Ordinance No. 122 and effective November 28, 1960. Ordinance No. 110 as amended, imposes a tax on any person, association, etc., of P0.10 per case of 24 bottles of Pepsi-Cola. The plaintiff paid under protest the amount of P4.926.63 from August 16 to December 31, 1960 and the amount of P9,250.40 from January 1 to July 30, 1961. 

The plaintiff filed a complaint for the recovery of the total amount of P14,177.03 paid under protest, on the ground that Ordinance No. 110 as amended of the City of Butuan is illegal, that the tax imposed is excessive and that it is unconstitutional. The Court of First Instance ruled in favor of the defendant. 

Issue: Whether or not the disputed ordinance is void because it is highly unjust and discriminatory 

Held: Yes. Even if the burden in question were regarded as a tax on the sale of said beverages, it would still be invalid, as discriminatory, and hence, violative of the uniformity required by the Constitution and the law, since only sales by "agents or consignees" of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales, and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the City of Butuan, would be exempt from the disputed tax. 

It is true that the uniformity essential to the valid exercise of the power of taxation does not require identity or equality under all circumstances, or negate the authority to classify the objects of taxation. The classification made in the exercise of this authority, to be valid, must, however, be reasonable and this requirement is not deemed satisfied unless: (1) it is based upon substantial distinctions which make real differences; (2) these are germane to the purpose of the legislation or ordinance; (3) the classification applies, not only to present conditions, but, also, to future conditions substantially identical to those of the present; and (4) the classification applies equally to all those who belong to the same class. 

These conditions are not fully met by the ordinance in question. Indeed, if its purpose was merely to levy a burden upon the sale of soft drinks or carbonated beverages, there is no reason why sales thereof by dealers other than agents or consignees of producers or merchants established outside the City of Butuan should be exempt from the tax. 

Hence, decision appealed from is reversed. City of Butuan is sentenced to refund plaintiff and is restrained and prohibited permanently from enforcing said Ordinance, as amended. 

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