BRITISH AMERICAN TOBACCO v.

CAMACHO

G.R. No. 163583, 20 AUGUST 2008

FACTS
 This petition for review assails the validity of: (1) Section 145 of the National Internal

Revenue Code (NIRC), as recodified by Republic Act (RA) 8424; (2) RA 9334, which

further amended Section 145 of the NIRC on January 1, 2005; (3) Revenue

Regulations Nos. 1-97, 9-2003, and 22- 2003; and (4) Revenue Memorandum Order

No. 6-2003.

 Petitioner argues that the said provisions are:

(1) violative of the equal protection and uniformity of taxation clauses of the

Constitution;

(2) contravene Section 19,[1] Article XII of the Constitution on unfair competition; and

(3) infringe the constitutional provisions on regressive and inequitable taxation.

 Lucky Strike further argues the classification freeze provision violates the equal

protection and uniformity of taxation clauses because older brands are taxed-based on

their 1996 net retail prices while new brands are taxed based on their present-day net

retail prices.

ISSUE RULING
(1) Whether petitioner is estopped from The petition is PARTIALLY GRANTED.
assailing the authority of the Commissioner of

Internal Revenue. 1. We find that petitioner was not guilty of

estoppel. When it made the undertaking to

comply with all issuances of the BIR, which

at that time it considered as valid, petitioner

did not commit any false misrepresentation or

misleading act. Indeed, petitioner cannot be

faulted for initially undertaking to comply

with, and subjecting itself to the operation of

Section 145(C), and only later on filing the

subject case praying for the declaration of its

unconstitutionality when the circumstances

change and the law results in what it

perceives to be unlawful discrimination. The

mere fact that a law has been relied upon in

the past and all that time has not been

attacked as unconstitutional is not a ground

for considering petitioner estopped from

assailing its validity. For courts will pass

upon a constitutional question only when

presented before it in bona fide cases for

determination, and the fact that the question

has not been raised before is not a valid

later.

(2) Whether or not the classification freeze 2. The classification is considered valid and

provision violates the equal protection and reasonable provided that: (1) it rests on

uniformity of taxation clauses of the substantial distinctions; (2) it is germane to

Constitution. the purpose of the law; (3) it applies, all

things being equal, to both present and future

conditions; and (4) it applies equally to all

those belonging to the same class.

The first, third and fourth requisites are

satisfied. The classification freeze provision

was inserted in the law for reasons of

practicality and expediency and could hardly

be considered arbitrary, or motivated by a

hostile or oppressive attitude to unduly favor

older brands over newer brands.

All in all, the classification freeze provision

addressed Congress’s administrative concerns

in the simplification of tax administration of

sin products, elimination of potential areas for

abuse and corruption in tax collection,

ease of projection of revenues. Consequently,

there can be no denial of the equal protection

of the laws since the rational-basis test is

amply satisfied.

(3) Whether Revenue Regulations are invalid 3. There is merit to this contention. It is clear

insofar as they empower the BIR to reclassify that from the portions of Revenue Regulations

or update the classification of new brands of No. 1-97, as amended by Section 2 of

cigarettes based on their current net retail Revenue Regulations 9-2003, and Revenue

prices every two years or earlier. Memorandum Order No. 6-2003 unjustifiably

emasculate the operation of Section 145 of the

NIRC because they authorize the

Commissioner of Internal Revenue to update

the tax classification of new brands every two

years or earlier subject only to its issuance of

the appropriate Revenue Regulations, when

nowhere in Section 145 is such authority

granted to the Bureau. Unless expressly

granted to the BIR, the power to reclassify

cigarette brands remains a prerogative of the

legislature which cannot be usurped by the

former.
In sum, Section 4(B)(e)(c), 2nd paragraph of

Revenue Regulations No. 1-97, as amended

by Section 2 of Revenue Regulations 9-2003,

and Sections II(1)(b), II(4)(b), II(6), II(7), III

(Large Tax Payers Assistance Division II)

II(b) of Revenue Memorandum Order No. 6-

2003, as pertinent to cigarettes packed by

machine, are invalid insofar as they grant the

BIR the power to reclassify or update the

classification of new brands every two years

or earlier.