G.R. No. 158881 ; April 16, 2008
Petron Corporation, petitioner, vs. Mayor Tobias M. Tiangco, and Municipal Treasurer Manuel T. Enriquez of the Municipality of Navotas, Metro Manila, respondents.

FACTS

Petron Corporation maintains a depot in Navotas from which it sells diesel fuel to commercial fishing vessels. In 2002, the Municipality of Navotas assessed Petron for deficiency local business taxes covering 1997 to 2001, based on its gross sales and under the Navotas Revenue Code. Petron protested, citing an exemption under Article 232(h) of the Implementing Rules and Regulations (IRR) of the Local Government Code (LGC), which states that businesses engaged in the sale of petroleum products are not subject to local business taxes. The protest was denied, and Navotas issued a final demand for payment, threatening to close Petron’s operations. Petron filed a complaint before the Regional Trial Court (RTC) of Malabon, which dismissed the complaint and ordered Petron to pay the assessed tax. The RTC declared Article 232(h) of the IRR void, ruling that the LGC itself contains no such prohibition. Petron elevated the case directly to the Supreme Court via a petition for review on certiorari, raising pure questions of law.

ISSUE

Whether a local government unit is empowered under the Local Government Code to impose local business taxes on persons or entities engaged in the sale of petroleum products.

RULING

No. The Supreme Court ruled that local government units are prohibited from imposing business taxes on the sale of petroleum products. The Court clarified the interplay between Section 133(h) and Section 143 of the LGC. Section 133(h) establishes a common limitation, prohibiting LGUs from levying “taxes, fees or charges on petroleum products.” While Section 143 grants municipalities broad authority to impose business taxes on various enterprises, this general grant is expressly limited by Section 133(h). The prohibition in Section 133(h) is comprehensive and covers all forms of local impositions—including business taxes—on petroleum products themselves. The Court upheld the validity of Article 232(h) of the IRR, finding it to be a consistent and logical implementation of the statutory prohibition. The IRR provision does not create a new exemption but merely operationalizes the limitation already embedded in Section 133(h) of the LGC. Therefore, Navotas’s assessment and the RTC’s decision ordering payment were invalid. The Court emphasized that the clear intent of the law is to insulate petroleum products from local taxation to ensure stability and uniformity in their pricing nationwide.