[ G.R. No. 26762. August 29, 1975 ] 160 Phil. 1011; 72 OG 2142 (March, 1976)
EN BANC
[ G.R. No. 26762. August 29, 1975 ]
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, PETITIONER, VS. THE PUBLIC SERVICE COMMISSION, RESPONDENT, MANILA ELECTRIC COMPANY, PETITIONER, VS. THE PUBLIC SERVICE COMMISSION, RESPONDENT. [G.R. NO. L-26765. AUGUST 29, 1975] MANILA ELECTRIC COMPANY, PETITIONER, VS. THE PUBLIC SERVICE COMMISSION, RESPONDENT. R E S O L U T I O N
MAKALINTAL, C.J.:
In its decision dated August 31, 1970, this Court affirmed with modification the position of the Public Service Commission (now the Specialized Regulatory Boards or “SRB”) on the interpretation and application of Section 40, paragraph (e), of the Public Service Act (146), as amended by Section 5 of Republic Act 3792. The said section as amended reads as follows:
“Section forty of the same Act, as amended by Commonwealth Act numbered Four Hundred Fifty-Four, is hereby further amended to read as follows: `Section 40. The Commission is authorized and ordered to charge and collect from any public service or applicant, as the case may be, the following fees as reimbursement of its expenses in the authorization, supervision and/or regulation of public services.’ (e) For annual reimbursement of the expenses incurred by the Commission in the supervision of other public services and/or in the regulation or fixing of their rates, twenty centavos for each one hundred pesos or fraction thereof, of the capital stock subscribed or paid, or if no shares have been issued, of the capital invested, or of the property and equipment, whichever is higher.”
As construed by the Public Service Commission, the foregoing provision lays down as basis for computing the amount of supervision and/or regulation fees payable by a public utility organized as a stock corporation either the capital stock or the property and equipment, whichever is higher; and if the public utility is an entity without shares of stock, the basis for computation is either the capital invested or the property and equipment, whichever is higher. The modification introduced by this Court in its decision of August 31, 1970 is that the property and equipment shall be net of depreciation. In other words, as thus decided, the alternative basis added by the amendatory Act (3792), namely, the property and equipment, is made applicable to all public utilities, whether they have or have not issued shares of stock. Before this Court for resolution is the second motion for reconsideration and supplemental second motion for reconsideration filed by the petitioners Philippine, Long Distance Telephone Company and Manila Electric Company. They contend that the amendment introduced by Section 5 of Republic Act 3792 did not change the basis for computing the supervision and/or regulation fees due from stock corporations; that such basis is still only the capital stock subscribed or paid and not such capital stock or the property and equipment, whichever is higher; that the amendment altered the basis only with respect to public utilities not organized as stock corporations, as to which it is now the capital invested or the property and equipment, whichever is higher. In the decision which is now sought to be reconsidered this Court relied heavily on the theory that Section 5 of Republic Act 3792 is a tax measure intended to raise revenue and therefore the amounts collected as supervision and/or regulation fees thereunder need have no reasonable relation to the cost of such supervision and/or regulation. Reference was made in the briefs for the petitioners to the “confiscatory and unreasonable” character of the fees, if considered as taxes and computed on the basis of “the property and equipment.” Inasmuch as the case was tried before the Public Service Commission “on the theory that such fees were purely regulatory in character, so that the parties have no adequate opportunity to submit evidence on their being confiscatory and unreasonable,” this Court, by resolution of August 30, 1971; remanded the case to the Public Service Commission for reception of evidence on such alleged confiscatory and unreasonable character of the fees prescribed by Section 40(e) of the Public Service Act as amended, if interpreted so as to make the alternative basis of computation (property and equipment) applicable to public utilities organized as stock corporations. In October 1972 the Public Service Commission was abolished and its powers and functions were transferred to another entity called the Specialized Regulatory Boards (SRB). The petitioners and the SRB thereafter entered into a Stipulation of Facts, which they submitted to this Court on January 16, 1975. Subsequently they filed their respective memoranda. In its memorandum the SRB repudiates the previous position of the Public Service Commission and in effect makes common cause with the petitioners, stating that Section 5 of Republic Act 3792 was not intended as a tax measure and that “it is not only material in this incident to rule on said issue but likewise in the public interest that the Honorable Court in passing upon this issue, make a categorical pronouncement that the same is a simple regulatory legislation.” It is important to recall at this juncture, in view of the submission of the SRB on this point, that previous decisions of this Court construing the provision of Section 40 of the Public Service Act before its amendment by R.A. 3792 held that the fees being collected thereunder were not in the nature of taxes but were fees for purposes of the regulatory functions of the Public Service Commission. Manila Electric Co. vs. Public Service Commission, 4 SCRA 1200; Manila Electric Co. vs. Auditor General, et al., 40 O.G. No. 13, p. 2629. In this latter case this Court said:
“x x x x x x x x x
“Debe notarse que el articulo citado se refiere a ‘derechos’, los derechos que la Comision de Servicios Publicos esta autorizada a cobrar para resarcirse de los gastos en que ella o’ sus agentes incurren por el trabajo que supone el ejercicio por la misma de su poder de supervision y reglamentacion de las operaciones y actividades que en el referido articulo se enumeran; y debe notarse tambien que hace uso de dicho vocable ‘derechos’, por lo menos tres veces, indudablemente, con el fin de que no pueda haber dudas de que permite y quiere que la Comision cobre por supervision y reglamentacion no impuestos, sino derechos. . . .”
We are of the opinion that neither the amendment introduced by Section 5 of Republic Act 3792 to Section 40(e) of the Public Service Act nor the automatic appropriation clause added to the last paragraph thereof altered the nature of the fees in question as held by this Court in those decisions. The stipulation of the parties bring out a number of significant facts. At the rate of P0.20 for every P100.00 or fraction thereof of the gross value of the respective properties and equipment in service of the petitioners, the SRB has computed the fees which they would have paid every year from 1964 to 1974, inclusive, as follows:
YEAR
PROPERTY EQUIPMENT IN SERVICE
BILL
1964
P107,176,764.00
214,353.60
1965
172,345,729.00
344,691.60
1966
240,809,709.00
418,619.60
P
1967
268,357,379.00
536,714.80
L
1968
427,254,070.00
854,508.20
D
1969
523,076,219.00
1,046,152.60
T
1970
624,204,203.00
1,248,408.60
1971
1,100,768,321.00
2,201,536.80
1972
1,220,149,965.00
2,440,300.00
1973
1,451,945,532.00
2,903,891.20
1974
1,506,101,070.00
3,012,202.20
P15,284,379.20
1964
363,762,931.00
727,526.00
M
1965
413,462,327.00
826,924.80
E
1966
632,619,666.00
1,265,239.40
R
1967
709,020,839.00
1,418,041.80
A
1968
818,130,654.00
1,636,261.40
L
1969
990,687,198.00
1,981,374.40
C
1970
1,336,644,914.00
2,673,290.00
O
1971
2,119,221,085.00
4,238,442.20
1972
2,348,189,689.00
4,696,379.40
1973
2,840.609,818.00
5,681,219.80
1974
2,945,650,790.00
5,891,301.60
P31,036,000.80
/BLOCKQUOTE> Actually, however, the fees were collected not on the basis of the gross value of their properties and equipment in service but on the respective outstanding capital stock; and the amounts of the collections were as follows:
YEAR
OUTSTANDING CAPITAL STOCK
AMOUNT PAID
O.R. NO.
DATE
1964
P21,717,300.00
43,434.60
F-7956614
Sept. 23 ‘64
1965
21,192,110.00
42,384.40
F-3875980
Sept. 29 ‘65
1966
32,477,730.00
64,955.46
G-3713477
Sept. 28 ‘66
1967
55,213,000.00
110,426.00
H-1509656
Sept. 23 ‘67
P
1968
55,414,120.00
110,823.24
H-9569483
Sept. 27 ‘68
L
1969
46,957,860.00
93,915.72
I-5273602
Sept. 24 ‘69
D
1970
54,554,310.00
109,108.80
2888344 K
Sept. 28 ‘70
T
1971
54,309,340.00
108,618.68
9175075
Sept. 28 ‘71
1972
54,629,570.00
109,259.14
6993568 M
Sept. 29 ‘72
1973
55,556,330.00
111,112.66
2368444
Sept. 25 ‘73
1974
110,242,750.00
220,485.50
8874583
Sept. 25 ’74
P1,124,529.20
YEAR
OUTSTANDING CAPITAL STOCK
AMOUNT PAID
O.R. NO.
DATE
1964
75,150,000.00
150,300.00
7956880
Sept. 30 ‘64
1965
77,771,000.00
155,542.00
7427760
Sept. 30 ‘65
1966
77,771,000.00
155,542.00
3714333
Sept. 30 ‘66
M
1967
78,861,880.00
157,723.76
2515473
Sept. 29 ‘67
E
1968
79,410,260.00
158,820.60
9570258
Sept. 30 ‘68
R
1969
80,897,960.00
161,796.00
6048254
Oct. 21 ‘69
A
1970
85,616,630.00
171,233.40
2888663-K
Sept. 30 ‘70
L
1971
87,282,050.00
174,564.20
9176488-L
Sept. 29 ‘71
C
1972
91,845,020.00
183,690.20
6988431
Sept. 15 ‘72
O
1973
341,749,070.00
683,498.20
2369885-O
Sept. 26 ‘73
1974
341,796,130.00
683,592.20
9294134-P
Sept. 30 ’74
P2,836,302.58
The stipulation of the parties also projects the amounts of the fees which would have been collected on the basis of the value of the properties and equipment in service minus depreciation. The Philippine Long Distance Telephone Company would have paid during the years 1964-1974, inclusive, the total amount of P9,832,145.65; and the Meralco the total amount of P21,223,640.60. There are altogether 14,637 public utility operators and/or companies in the Philippines under different categories, as follows:
a.land transportation
—
13,924
b.telephone service
—
74
c. electric service
—
493
d.shipping, ferryboat & waterboat service
—
99
e. radio-communications
—
25
f. waterworks & canal service
—
22
14,637
The total collections in the form of supervision and/or regulation fees from these public utilities from 1964-1974, inclusive, amounted to P26,964,845.37. It will be noted that of this total, almost 4 million pesos, or approximately 15%, came from just the two petitioners herein, out of the more than 14,000 public utilities in the entire Philippines. This proportion is undoubtedly more than the proportionate supervision and/or regulation services the two petitioners have been receiving. Another significant fact which is pointed out in the stipulation is that out of all the collections under Section 40 of the Public Service Act, the Public Service Commission, now the SRB, had accumulated as of June 30, 1974 a total savings of P28,007,408.09, which amount may be disbursed by the SRB for the purposes enumerated in said section, specifically “additional needed personnel services, maintenance and operating expenses, acquisition of urgently needed vehicles, furniture and equipment, maintenance of an adequate reference library, acquisition of a lot and building for the [Board] and other expenses necessary for efficient administration and effective supervision and regulation of public services.” Upon considerations of fairness and equity, We find the common plea of both the petitioners and the respondent SRB fully justified. But the respondent has called our attention to an even more compelling, because practical, consideration in this case, which is, that to interpret the supervision and/or regulation fees in question as taxes under the theory that the intention is to raise revenue would entail self-defeating consequences which, in the ultimate analysis, would be contrary to public interest. The franchise of each of these two petitioners contains the so-called “in lieu of” provision. In the case of the Meralco the franchise tax paid by it “shall be in lieu of all taxes and assessments of whatsoever nature and by whatsoever authority upon the privileges, earnings, income, franchises, x x x of the grantee, from which taxes and assessments the grantee is hereby expressly exempted.” (Par. 9, Part II of Act 484 as adopted in R.A. Nos. 150 and 4159) In the case of the PLDT, it pays a percentage tax on all gross receipts . . . transacted under its franchise, and “the said percentage shall be in lieu of all taxes on this franchise or earnings thereof.” (Act No. 3436, as amended by C.A. 407 and R.A. 6146). In an opinion dated August 8, 1974, the Department of Justice ruled that a provision in a legislative franchise which ordains that the franchise tax prescribed therein should be “in lieu of all taxes” is equivalent to a “complete foreclosure against the imposition of any other tax or decree of the tax therein vested by any of the state’s taxing authorities.” The ruling was reiterated in another opinion of the same office rendered on October 14, 1974 and in a similar opinion of the Secretary of Finance dated March 19, 1975. These opinions are not in question here and are binding upon the respondent SRB, which is an agency under the Executive Department. To insist therefore that Section 40(e) of the Public Service Act as amended is not only for the purpose of regulation and/or supervision but is a tax measure would preclude the collection of the fees thereunder. Respondent SRB adverts to a number of cogent circumstances in support of its position. We quote from its memorandum:
“x x x x x x x x x
“Indeed, Respondent is unable to comprehend the law in question as a tax measure, for the following reasons: First, the law in question, Section 40(e) of the Public Service Act, as amended by Republic Act No. 3792 is found in Chapter VI of the said law under the heading of ‘FEES’. Second, a — ’tax’ is imposed under the taxing power of government principally for the purpose of raising revenues. (Tabacos de Filipinas vs. City of Manila, G.R. No. L-1669, June 29, 1963, 8 SCRA 367). The law in question, however, merely authorizes and requires the collection of ‘fees’ as reimbursement of its (SRB’s) expenses in the AUTHORIZATION, SUPERVISION AND/OR REGULATION of public services. (Sec. 40(e), opening paragraph). By its own express provision, therefore, the aforesaid law can be construed as no more than a regulatory measure related to the supervision and regulation of public utilities that are subject to the jurisdiction of the SRB, and not as a legislative instrument mainly for the purpose of raising revenues. Third, the last paragraph of Section 40(e) provides that:
‘Aside from the appropriations for the Commission under the Annual General Appropriations Act, any unexpended balance of the fees collected by the Commission under this section shall be constituted receipts automatically appropriated each year, and together with any surplus in the standardizing meter laboratory revolving fund under Commonwealth Act numbered Three Hundred Forty Nine, shall be disbursed by the Public Service Commissioner in accordance with special budget to be approved by the Department of Justice, the Budget Commission and the Office of the President of the Philippines for additional needed personal services, maintenance and operating expenses, acquisition of urgently needed vehicles, furniture and equipment, maintenance of an adequate reference library, acquisition of a lot and building for the Commission, and other expenses necessary for efficient administration and effective supervision and regulation of public services.’ (Italics supplied).
It is, therefore, clear from the aforequoted paragraph that the funding of the projects enumerated therein is merely a secondary objective of the law in question to attain the primary purpose of regulation and supervision of all utilities falling under respondent’s jurisdiction. The language of the aforequoted paragraph is plain that the regulatory fees required to be collected are not primarily intended to fund said projects but that only the ‘unexpended balance of the fees collected by the Commission under this Section’ if any, shall be utilized for said projects. In other words, it is not the collection themselves that Congress had addressed to the funding of the said projects but only ’the unexpended balance thereof’ when any such excess is realized. Fourth, this Honorable Court itself in the case of Meralco vs. PSC, 4 SCRA 1,200, held that Section 40 of the Public Service Act is not a tax measure but a simple regulatory provision for the collection of fees. This judicial finding could not have been affected or in any manner modified by the enactment of R.A. 3792 since the said Act as stated in its own Explanatory Note, was simply intended to double the then applicable rate of collectible supervision fees from the public services in the Philippines. Respondent reproduces hereunder the said explanatory note in full, as follows:
‘3. Increase in the supervisory and regulation fees and other fees collectible by the Commission and making them receipts automatically appropriated. The Supreme Court has taken judicial notice that legal fees fixed before the war can no longer finance the administration of justice. This was expressed in its resolution doubling the legal fees from 1960. The fees collected by the Commission serve a similar purpose as fees collectible, under the Rules of Court. Therefore, we propose a similar increase in the fees provided in the Public Act (fixed in 1936) to insure better service and make the Commission a self-supporting Agency. We also propose that adequate funds be appropriated so that the Commission can take care of its needs and achieve its purposes. It is prudent to have a ready reserve of funds rather than wait for an appropriation, because delays can be costly. These funds shall be used for the appointment of needed personnel, acquisition and maintenance of a reference library and of a lot and permanent building, and for other necessary expenses. The use of these funds shall be regulated by special budgets to be approved by the Department of Justice, the Budget Commission, and the Office of the President.’ (Italics supplied).
The intention of Congress in the passage of R.A. 3792, therefore, was not to invest upon the fees in question the character or attributes of a ’tax’, but rather and simply to double or revise upwards the then existing rate of the said fees. Fifth, Republic Act No. 3792 originated from the Committee on Transportation of the House of Representatives of the then Philippine Congress (Par. XV, Stipulation of Facts). If it was the legislature’s intent or purpose to enact the same as a tax measure, rules obliged that the origin and sponsorship thereof should be by the House’s Committee On Ways and Means.” Other significant facts that respondent SRB brings to our attention are:
“First: Up to last year, respondent has been collecting the questioned supervision fees from corporate utilities like the petitioners herein on the basis of their subscribed capital stock (Stipulation of Facts, Par. II). For this it accumulated a total savings of P28,007,408.09 as of June 30, 1974 which is available for the projects listed in the last paragraph of the subject statute. (Idem., par. XIII). It is clear therefore, that even on the basis of such subscribed capital stock, the purposes for which R.A. 3792 was enacted would still be amply served. Second: Respondent, has noted that our interpretation of the law in question so as to collect supervision fees on the basis of ‘property and equipment in service, net of depreciation,’ has self-defeating consequences which in the ultimate analysis is not conducive to public interest and welfare. Rather than encourage the improvement and expansion of their existing facilities, public utilities either defer or delay such projects because of anxiety over a marked increase in assessable supervision fees that such an expansion or increase of equipment would entail. Third: An assessment of the fees in question on the basis of ‘property and equipment in service, net of depreciation,’ will mean a liability therefor of at least P2,058,378.41 and P3,976,510.80 for PLDT and MERALCO, respectively, for the year 1974 alone. (Par. III). In all candor, these amounts are rather difficult to reconcile with respondent’s contention that the said collections are merely in the nature of regulatory fees.”
It is quite clear, for the reasons above stated, that the supervision and/or regulation fees imposed by Section 40(e) of the Public Service Act, as amended by R.A. 3792, are not taxes but are exactly what the provision says, and therefore the nature and amount of such fees must be reasonably related to the cost of such supervision and/or regulation. It is equally clear that to base the computation of the fees on the value of the properties and equipment of the petitioners, with or without depreciation, would be to ignore altogether the requirement of such reasonable relation. The intention of Congress in enacting the law in question is explicitly stated in the provision itself, namely: “For annual reimbursement of expenses incurred by the Commission in the supervision of other public services and/or in the regulation or fixing of their rates, x x x ,” (Italics supplied). As pointed out by respondent SRB (supra) the explanatory note of House Bill 4613, which became R.A. 3792, states that the purpose of the amendment to Section 40 was merely to double the fees collected by the Public Service Commission in the same way that the Supreme Court doubled the fees collectible under the Rules of Court.* The stipulation of facts submitted by the parties shows that if the collection is based on the value of the property and equipment in service minus depreciation it would not only double the amounts collected prior to the amendment but make them almost 10 times more insofar as the two petitioners are concerned. Such a result could not have been in the mind of the lawmaking body, considering especially the explanatory note which accompanied the bill when it was filed. Moreover, it would be violative of the principle that there must be a reasonable relation between the amounts collected as regulatory and/or supervision fees and the cost of such regulation and/or supervision. It may be noted that the term “property and equipment” carries no qualification. It does not specify whether it means the original cost of acquisition, the original cost minus depreciation (although in the decision sought to be reconsidered this interpretation was adopted), the market value, or the cost of construction and/or acquisition minus the amount of loan obligations incurred for that purpose and still outstanding. In the resolution of this Court of May 8, 1975 the parties were required to submit their views on whether this last alternative would be justifiable under Section 40(e) of the Public Service Act. Both parties have rejected this basis of computation on the grounds that it is not warranted by the language of the provision in question; that it would pose considerable administrative and accounting problems and generate disputes and disagreements in the manner of collection; and that it would not furnish a stable basis at all because the amount of unpaid financing (a great part of it from foreign sources) for the construction and/or acquisition of property and equipment varies from time to time, depending not only on the periodic payments made by the petitioners but also on fluctuating values of foreign currencies vis-a-vis the Philippine peso. Premises considered, this Court hereby reconsiders its decision of August 31, 1970; declares that the assessments under Section 40(e) of the Public Service Act, as amended by Republic Act No. 3792, are not taxes but regulation and supervision fees imposed pursuant to the exercise of police power; and rules that the basis for the computation thereof insofar as petitioners are concerned is and remains “the capital stock subscribed or paid” and not, alternatively, the property and equipment. Fernando, Teehankee, Esguerra, Muñoz Palma, Aquino, Concepcion, Jr., and Martin, JJ., concur. Castro and Barredo, JJ., concur in a separate opinions. Makasiar, J., votes to maintain the decision of August 31, 1970 for the reasons therein stated. Antonio, J., on official trip abroad.* * Prior to the amendment the rate was “ten centavos for each one hundred pesos or fraction therreof, of the capital stock, etc.” The amendment increased the rate to twenty centavos. * I hereby certify that Justice Felix Q. Antonio concurs in the foregoing resolution, as shown by his written authorization attached to the record. - Makalintal, C.J.