G.R. No. L-26862 March 30, 1970
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE RABBIT BUS LINES, INC., defendant-appellee.

FACTS

The Republic of the Philippines filed a complaint seeking to invalidate the payment made by Philippine Rabbit Bus Lines, Inc. for the registration fees of its 238 motor vehicles in the sum of P78,636.17. The defendant paid this amount not in cash but by tendering negotiable backpay certificates of indebtedness, of which it was an assignee and not the original holder. The complaint alleged this mode of payment was null and void and sought payment of the amount in cash with surcharges and interest. The defendant contended its payment was lawful, noting that the National Treasurer and the Auditor General had approved the acceptance of such certificates for payment of registration fees, and official receipts were issued. The lower court dismissed the complaint, upholding the validity of the payment.

ISSUE

Whether the negotiable backpay certificates of indebtedness can be validly used by an assignee to pay motor vehicle registration fees, which are imposed under the police power, as opposed to a tax liability.

RULING

No. The Supreme Court reversed the lower court’s decision. The Court held that motor vehicle registration fees are not taxes but are exactions imposed under the state’s police power for regulatory purposes. The Back Pay Law ( Republic Act No. 304 , as amended) only allows the use of such certificates for the payment of “taxes.” Since registration fees are not taxes, the privilege under the Back Pay Law does not apply. Consequently, the defendant’s payment using the certificates was invalid. The Court also held that the government is not estopped by the mistaken interpretation or actions of its agents, such as the National Treasurer and Auditor General in approving the payment. Defendant-appellee was ordered to pay the sum of P78,636.17.