G.R. No. 197151 ; October 22, 2012
SM LAND, INC. (Formerly Shoemart, Inc.) and WATSONS PERSONAL CARE STORES, PHILS., INC., Petitioners, vs. CITY OF MANILA, LIBERTY TOLEDO, in her official capacity as the City Treasurer of Manila and JOSEPH SANTIAGO, in his official capacity as the Chief of License Division of the City of Manila, Respondents.

FACTS

The City of Manila assessed petitioners and their sister companies increased business taxes for 2003 and the first three quarters of 2004 based on Tax Ordinance Nos. 7988 and 8011, which amended the Manila Revenue Code. Petitioners paid the additional taxes under protest and subsequently filed a claim for a refund or tax credit with the City Treasurer, which was denied. They then filed a Complaint for Refund with the Regional Trial Court (RTC) of Pasay City.
The RTC granted the complaint via summary judgment, ordering a refund. It ruled that the tax ordinances had been declared null and void by the Supreme Court in Coca-Cola Bottlers Philippines, Inc. v. City of Manila, and thus could not be used to impose additional taxes. On appeal, the Court of Tax Appeals (CTA) Second Division partially granted the petition, affirming the nullity of the ordinances but denying the refund to petitioners SM Land, Inc. and Watsons. The CTA En Banc affirmed this decision.

ISSUE

Whether the CTA correctly denied the claim for tax refund of petitioners SM Land, Inc. and Watsons.

RULING

No. The Supreme Court reversed the CTA and ordered the refund. The legal logic is anchored on procedural correctness and substantive law. Procedurally, the CTA erred in dismissing the claims of SM Land and Watsons based on a perceived defect in the verification and certification of non-forum shopping attached to their petition for review. The Court clarified that the requirement for a certification against forum shopping applies to initiatory pleadings like complaints or petitions, not to responsive pleadings such as a Comment. Since the petitioners were respondents in the CTA appeal filed by the City, their filing of a Comment was not an initiatory pleading requiring such certification. The defect was not fatal.
Substantively, the core issue was governed by stare decisis. The Court had already definitively ruled in Coca-Cola and later in City of Manila v. Coca-Cola Bottlers Philippines, Inc. that Ordinance Nos. 7988 and 8011 were null and void for failing to comply with the publication requirement under the Local Government Code. This nullity meant the assessments and collections made under these ordinances were illegal. Consequently, petitioners, having paid the taxes under protest, were entitled to a refund as a matter of right. The CTA’s denial based on a procedural technicality, while upholding the refund for other claimants under the same void laws, created an unjust and inconsistent result. The Court rectified this by ordering the City of Manila to refund the erroneously collected taxes to petitioners.