G.R. No. 127410 Case Digest

G.R. No. 127410 January 20, 1999

Conrado Tiu, Juan Montelibano Jr. and Isagani Jungco, petitioners

vs Court of Appeals, etc., respondents

Ponente: Panganiban

Facts:

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the CA's decision upholding the constitutionality and validity of EO No. 97-A granting the tax and duty incentives authorized under RA No. 7227 were limited to the business enterprises and residents within the fenced-in area of the Subic Special Economic Zone.

The assailed resolution has denied the motion for reconsideration of the petitioners.

March 13, 1992, Congress with the approval of the President passed RA 7227 creating Bases Conversion and Development Authority for the purpose of providing funds therefor and for other purposes in SSEZ. On June 10, 1993, President Ramos issued EO No. 97 clarifying the tax and duty incentives thus:

Sec. 1. On Import Taxes and Duties. — Tax and duty-free importations shall apply only to raw materials, capital goods and equipment brought in by business enterprises into the SSEZ. Except for these items, importations of other goods into the SSEZ, whether by business enterprises or resident individuals, are subject to taxes and duties under relevant Philippine laws.

The exportation or removal of tax and duty-free goods from the territory of the SSEZ to other parts of the Philippine territory shall be subject to duties and taxes under relevant Philippine laws.

Sec. 2. On All Other Taxes. — In lieu of all local and national taxes (except import taxes and duties), all business enterprises in the SSEZ shall be required to pay the tax specified in Section 12(c) of R.A. No. 7227.

9 days after, President Ramos issued EO 97-A specifying the area within which the tax and duty free privilege was operative. Then petitioners challenged the EO 97-A for being violative of the right to equal protection of the laws.

Ruling of CA: Respondent Court held that "there is no substantial difference between the provisions of EO 97-A and Section 12 of RA 7227. In both, the 'Secured Area' is precise and well-defined as '. . . the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended . . .'" The appellate court concluded that such being the case, petitioners could not claim that EO 97-A is unconstitutional, while at the same time maintaining the validity of RA 7227.

The Court of Appeals further justified the limited application of the tax incentives as being within the prerogative of the legislature, pursuant to its "avowed purpose [of serving] some public benefit or interest." It ruled that "EO 97-A merely implements the legislative purpose of [RA 7227]."

Issue: Whether the E0 97-A is violative of the equal protection clause of the Constitution?

Held:

The constitutional rights to equal protection of the law is not violated by an executive order, issued pursuant to law, granting tax and duty incentives only to the business and residents within the "secured area" of the Subic Special Economic Zone and denying them to those who live within the Zone but outside such "fenced-in" territory. The Constitution does not require absolute equality among residents. It is enough that all persons under like circumstances or conditions are given the same privileges and required to follow the same obligations. In short, a classification based on valid and reasonable standards does not violate the equal protection clause.

We rule in favor of the constitutionality and validity of the assailed EO. Said Order is not violative of the equal protection clause; neither is it discriminatory. Rather, than we find real and substantive distinctions between the circumstances obtaining inside and those outside the Subic Naval Base, thereby justifying a valid and reasonable classification.

The fundamental right of equal protection of the laws is not absolute, but is subject to reasonable classification. If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated differently from another. 6 The classification must also be germane to the purpose of the law and must apply to all those belonging to the same class.

Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class.

Purpose of Law: to accelerate the conversion of military reservations into productive uses.

Substantial Distinctions: We believe it was reasonable for the President to have delimited the application of some incentives to the confines of the former Subic military base. It is well-settled that the equal-protection guarantee does not require territorial uniformity of laws. As long as there are actual and material differences between territories, there is no violation of the constitutional clause.

Existing Conditions: We believe that the classification set forth by the executive issuance does not apply merely to existing conditions. As laid down in RA 7227, the objective is to establish a "self-sustaining, industrial, commercial, financial and investment center" in the area. There will, therefore, be a long-term difference between such investment center and the areas outside it.

Apply Equally: the classification applies equally to all the resident individuals and businesses within the "secured area." The residents, being in like circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. Instead, they are all similarly treated, both in privileges granted and in obligations required.