GR No.

L-47368 August 25, 1941

MANILA ELECTRIC COMPANY, appellant,
vs.
THE GENERAL AUDITOR AND THE COMMISSION OF PUBLIC SERVICES, appealed.
Messrs. Ross, Lawrence, Selph and Carrascoso on behalf of the appellant.
The Acting Attorney General Mr. Ibañez and The Assistant Attorney General Mr.
Amparo on behalf of those appealed.

DIAZ, J.:
Clarified by resolution of February 11, 1941, that the appeal filed by the appellant against the decision
of the Auditor General, that I deny her request for reimbursement of the amount of P11,557.24 who
said she had paid under protest, for having demanded the Public Services Commission in 1939 to pay
it, implying that it was for rights corresponding to that year, under the provisions of Commonwealth
Law No. 454, it was actually filed within 30 days allowed by Commonwealth Law No. 327, excluding
the last day for having coincided with a holiday, (Thursday of Holy Week), followed by three others
that were also holidays, (Friday and Saturday of the same week and Sunday) , it is now necessary to
resolve the issues that the appellant raises in its allegation through the eight errors indicated therein,
expressed in these terms:

I. The Auditor-General erred in not holding that the "regulation" fees provided for in sect ion 40
of the Public Service Act, as amended, are excise taxes.
II. The Auditor-General erred in not holding that the titles of the Public Service Act and of
Commonwealth Act No. 454 do not include the subject matter of taxes, and that said Acts, in
respect of the taxes, violate section 12 (1) of the Constitution and are null and void.
III. The Auditor-General erred in not holding that the assessment of fees under section 40 of
the Public Service Act, as amended, in respect of petitioner's operations under Ordinance No.
44 of the City of Manila, was null and void.
IV. The Auditor-General erred in not holding that section 40 of the Public Service Act, as
amended, impairs the obligation of the contract contained in Ordinance No. 44 of the City of
Manila.
V. The Auditor-General erred in not holding that Ordinance No. 44 of the City of Manila, for the
purposes of Commonwealth Act No. 454, is a legislative franchise.
SAW. The Auditor-General erred in not holding that section 40 of the Public Service Act, as
amended, denies the equal protection of the laws to public service operators who are not
grantees of legislative franchises with tax exemption clauses, and hence is null and void.
VII. The Auditor-General erred in not holding that the fees provided for in Commonwealth Act
No. 454 are assessable beginning only with the year 1940.
VIII. The Auditor-General erred in not ordering the refund of the "regulation" fees paid by
petitioner under protest to the Public Service Commission on June 30, 1939.

The Public Services Commission, based on the provisions of article 40 of Law No. 146, as amended
by Law No. 454, both of the Commonwealth, required the appellant to pay, and the same payment on
June 30, 1939, under protest, for supervisory rights and regulation of its electric light service that It is
a business that had been engaged in that year for several years before, under the franchise that was
granted through Ordinance No. 44 of the City of Manila, and under Law No. 2647 of the Philippine
Legislature , and of the Law No. 667 of the Commission of the Philippines, and for rights of supervision
and regulation of its tram service in the City of Manila, this business was also being dedicated under
the franchise that was granted through the aforementioned Order za No. 44 of the City of Manila, the
amount of P8,967.24; and required him to pay also, and the same payment equally, under port, on the
same date, June 30, 1939, for inspection and supervision rights of his truck service, authorized by Law
No. 3108 of the Philippine Legislature , the amount of P2,590.

The pertinent parts of the cited article of Commonwealth Law No. 146, as amended as already stated,
are of this wording:

ART. 40. The Commission is empowered and ordered to collect and collect from any public
service company, the following rights:
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(d) In reimbursement of expenses incurred by the Commission, for the supervision and
regulation of the operations of a motor vehicle service:
(1) For each car or motor truck, with less than one net ton of carrying capacity, five pesos.
(2) For each motor truck of one ton or more, but less than two net tons, carrying capacity, ten
pesos.
(3) For each motor truck of two tons or more, but less than three net tons, carrying capacity,
twenty pesos.
(4) For each motor truck of three tons or more, but less than four net tons, carrying capacity,
thirty pesos.
(5) Motor trucks or buses of four tons or more of net capacity will pay at the rate of ten pesos
per net ton or fraction thereof.
The rights indicated in this article must be paid on June 30 of each year or earlier, imposing a
fifty percent surcharge in case of late payment; Understanding, however, That motor vehicles
registered with the Public Works Office after June 30, will be exempt from payment for such
year.
(e) In reimbursement of expenses incurred by the Commission in the supervision of other
public service companies, ten cents per one hundred pesos, or fraction thereof, of the
subscribed or paid share capital, or of the invested capital, if not shares of capital have been
released.
(f) Due to the increase in share capital, ten cents per one hundred pesos, or fraction thereof,
of increase in capital.
(g) For each permit authorizing the increase of equipment, the installation of new units or the
increase of capacity, or the extension of means or other general extensions in the services,
ten cents per one hundred pesos or fraction of the additional capital necessary to the Effects
of the permit.
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The rights collected in accordance with the provisions of this article shall be paid to the Treasury of
the Philippines. This article will not be applicable to the Commonwealth of the Philippines or its
dependencies, nor to companies that have a legislative franchise, for whose enjoyment the law
specifies the payment of a percentage of its profits, instead of all taxes, license fees and others.

It should be noted that the aforementioned article refers to "rights", the rights that the Public Services
Commission is authorized to charge to compensate for the expenses that she or her agents incur for
the work involved in the exercise of their power of supervision and regulation of the operations and
activities that in the referred article are listed; and it should also be noted that it makes use of said
"rights", at least three times, undoubtedly, so that there can be no doubt that it allows and wants the
Commission to charge for supervision and regulation not imposed, but rights. These two terms "rights"
and "taxes" do not imply the same concept, because Taxes or Taxes are, according to all known
authorities, "an enforced contribution of money or other property assessed in accordance with some
reasonable rule of apportionment by authority of a sovereign state, on persons or property within its
jurisdiction, for the purpose of defraying the public expenses "(26 RCL, par. 2, page 13); or "a rate or
sum of money assessed on the person or property of a citizen by government for the use of the nation
or state; burdens or charges imposed by the legislative power upon persons or property to raise money
for public purposes" (61 CJ , 65); and Rights or Fees, are on the other hand, "a reward or
compensation allowed by law to an officer for specific services performed by him in the discharge of
his official duties; a sum certain given for a particular service; the sum prescribed by law as charge for
services rendered by public officers "(25 CJ, 1009). The purpose of taxes or taxes is clearly to raise
funds for public purposes or for the needs of the State; and the concept in which the rights orare
charged fees, is, as mentioned in article 40 of Commonwealth Law No. 146, in the "reimbursement of
expenses incurred by the Commission for the supervision and regulation of operations "Public service
of the appellant, concession is made in the legitimate exercise of police power.

It does not deprive of its character of rights those that the appellant is asking to be reimbursed, the
fact that they have not been computed based on the expenses in fact incurred by the Commission for
the supervision and regulation of its referred light services and transport by trams and trucks, because
there is no need to do so. The legislature has the power and even freedom to set the amount of said
rights; and, those that have been fixed, in the case of the appellant, cannot be considered excessive,
because, given the volume of her transport business and her other activities, it is large and the work
that requires her inspection, regulation and supervision is not easy .
Expresses the true difference between a tax and a right for inspection and regulation, the following
visible comment on folios 20 to 22 of Volume 26 of the Ruling Case Law:

6. Tax distinguished from Inspection Fee. - There is another form of pecuniary charge which is not a
tax but an incident of the power of regulation, but which, unlike the imposts discussed in the previous
paragraphs, may be imposed upon the performance of an act which the legislature can neither tax not
hamper by any other pecuniary burden of a revenue producing character. When an occupation or an
act is of such a character that a reasonable amount of inspection or supervision by public officials is
necessary for the public health, morals, or safety the legislature may provide that such inspection or
supervision shall be performed at the expense of the persons engaging in the occupation or performing
the act, and that no one shall engage in the occupation or perform that act until a fee or charge
sufficient to cover the cost of the inspection or supervision has been paid. Similarly when an
occupation is of such a character that lack of skill and proficiency on the part of those who engaged in
it will be a menace to the public health or safety, an examination may be required of those who seek
to engage in it, and the cost of such examination may be met by fees imposed upon those who take
it. The money thus raised, though paid into the treasury, is appropriated in advance to the use provided
by the statute, and does not go to the general support of the government. A statute imposing such a
charge, is not the levy of a tax, but a regulation, and the fee is a mere incident of the regulation, and
in levying it the legislature is not subject to the limitations which surround the taxing power. Even when
the levy of an occupation tax is expressly forbidden by the constitution of the state, an inspection fee
may be imposed. In some instances the actual cost of inspection is assessed on the parties inspected,
as where the expenses of a gas commission are apportioned among the gas companies, or the
expenses of a railroad commission among the railroad companies. In the ordinary case however such
an arrangement would be impracticable, and the cost of the inspection has to be met by a fee of a
fixed amount, payable in advance. In all such cases the fee must be no more than sufficient to cover
the actual cost of inspection or examination, as nearly as the same can be estimated. If it were possible
to prove in advance the exact cost, that would be the limit of the tax. In the nature of things, that,
however, is ordinarily impossible; and so the legislature is at liberty to make the charge large enough
to cover any reasonable anticipated expenses. It is authorized to fix such charge in advance, and need
not wait until the end of the period for which the license is granted. It may not act arbitrarily or
unreasonably, but the risk may rightfully be cast upon the license, and the charge cannot be avoided
because it subsequently appears that it was somewhat in excess of the actual expense of the
supervision, nor can the licensee then recover the difference between the amount of the license and
such cost.
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If revenue is the primary purpose and regulation is merely incidental the imposition is a tax, while if
regulation is the primary purpose the mere fact that incidentally a revenue is also obtained does not
make the imposition a tax. (4 Cooley on Taxation, 4th ed., 3513.)

Neither do they deprive of their character of rights those that the Commission of Public Services charge
of the appellant, the fact that after collections they have gone to be part of the general funds of the
Government ; and the fact that they can be taken from there directly to be destined for other purposes
than those of that one, because if they have been collected, it was not for tax or tax purposes, but
precisely to compensate the Commission for the work that this call to undertake by mandate of the
law, supervising and regulating the referred businesses or services and activities of the appellant. The
general practice so that both taxes and fees that are charged by one or the other concept will all be
part of the general funds of the Government. This fact does not justify the inference that taxes and
duties are the same. What matters in cases of this kind, is to know the end so that the duties and taxes
are collected. Those who are charged to raise funds for government purposes, to sustain it, or to meet
their needs as such, are properly considered taxes; and those that are charged by virtue of the exercise
of the power of supervision and regulation that is police, are properly rights. This is the generally
accepted criterion, and so it follows and declares, more or less clearly, in the quotations brought by
the Attorney General's allegation, which say:

Fees of Public Officers Not Taxes. - Fees prescribed to be paid by individuals to public officers,
whether in the judicial or executive department of government, for services rendered, are not ordinarily
taxes, unless the object of the requirement is to provide general revenue rather than compensation
for those officer, as in the case of graduated fees in probate proceedings based upon the valuation of
the estate and having no relation to the services rendered or compensation received therefor by the
officer. On similar principles, where statutes provide for the inspection of given commodities with a
view to determine their quality and fitness for uses, the fees to be paid to the inspectors are nor
properly classed as taxes. (61 CJ, 73.)
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Inspection fees are not taxes, but are imposed under the principle that they are compensation for
services rendered in and about making such inspection, which is presumably beneficial to those on
whom the fees are imposed, and they do not fall within a constitutional limitation concerning the
imposition of a local burden by way of taxation. (14 RCL, 694.)

Inspection fees are not taxes, but are imposed under the principle that they are compensation for
services rendered in and about making such inspection, which is presumably beneficial to the person
upon whom the fees are imposed, under and by virtue of the general police powers of the state.
(Charleston v. Rogers, 2 McCord, L. 495; Cooley, Taxn. 413.) It was held in People v. Harper, 91 III.,
357, that the legislature had full power to pass a law committing the inspection of grain to a board
created for that purpose; that the expenses occasioned by such inspection may be required to be
borne by those presumably benefited by it; that the fixing of fees for such services, and prescribing
the manner of their collection and upon whom they shall be imposed do not fall within the constitutional
limitations concerning the imposition of a local burden by way of taxation. (Chicago, Wilmington &
Vermilion Coal Co. v. People, 48 LRA, 554, 556.)

In view of the above considerations, we declare that the Auditor General did not err in deciding that
he was charged by the Complainant by the Public Services Commission, They are maybe rights and
not taxes.

The appellant contends that both Commonwealth Law No. 146 and Law No. 454 that the amendment
are unconstitutional for not making any reference, both in their respective titles, to rights to be charged
for the duties expressed therein. The titles of these laws say this, respectively:
Law that reorganizes the Public Services Commission, prescribes its faculties and duties, defines and
regulates public services, provides and sets the tariff and share of expenses that they must pay and
for other purposes .
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Law that reforms several articles of the Commonwealth Law Number One Hundred and Forty-Six,
known by the Public Services Law.
First of all, it must be said that, being Law No. 454 merely amending Law No. 146, so to speak
expressly the same title, it is unquestionable and clear that if it deals with things included in the title of
the latter, that is to say Law No. 146, although none of it is stated in express terms in its own title, does
not therefore violate the constitutional provision that every law should not embrace more than one
subject and that it be expressed in its title.
Well, it has been demonstrated and declared as it is, that what the Commission charged the appellant
were not taxes but rights, this matter (rights), must necessarily be understood as included in the title
of Law No. 146 which is also virtually that of the Law No. 454. This seems evident because said title
mentions "fee and share of expenses that they must pay", referring to public service companies as is
the appellant; and such phrases naturally include, and mean, the rights of supervision and regulation.
In interpreting the said constitutional provision or prohibition, we must reiterate what we said in the
Philippine Government's case against Hongkong & Shanghai Banking Corporation, et al., XXXVII Gac.
Of., No. 109, pag. 2296:

The requirement that the subject of an act shall be expressed in its title should receive a reasonable
and not a technical construction. Carter County v. Sinton, 120 US 517, 522, 30 Law. ed. 701, 702. It
is sufficient if the title be comprehensive enough reasonably to include the general object which a
statute seeks to effect, without expressing each and every end and means necessary or convenient
for the accomplishment of that object. Mere details need not be set forth.
Therefore, the second error attributed to the Auditor General is unfounded.

The third error pointed out by the appellant is also unfounded. To sustain this error, the appellant
invokes paragraphs 9 and 19 of the franchise that was granted through Ordinance No. 44, which says
the following:

PAR. 9. The grantee shall be reliable to pay the same taxes upon its real estate, buildings, plant (not
including poles, wires, transformers, and insulators), machinery, and personal property as other
persons are or may be hereafter required by law to pay In consideration of Part Two of the franchise
herein granted, to wit, the right to build and maintain in the city of Manila and its subburbs a plant for
the conveying and furnishing of electric current for light, heat, and power, and to charge for the same,
the grantee shall pay to the city of Manila two and one-half per centum of the gross earnings received
from its business under the franchise in the city and its suburbs: Provided, That two and one-half per
centum of the gross earnings received from the business of the line to Malabon shall be paid to the
Province of Rizal. Said percentage shall be due and payable at the times stated in paragraph nineteen
of Part One hereof, and after an audit like that provided in paragraph twenty of Part One hereof, and
shall be in lieu of all taxes and assessment of whatsoever, nature, and by whatsoever authority upon
the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the
grantee, from which taxes and assessments the grantee is hereby expressly exempted.

Xxxxxxxxx

Par. 19. The grantee shall be reliable to pay the same taxes on its real estate, building, plant (not
including roadbed and track, rolling stock, poles and wires), machinery and personal property as other
persons are now, or hereafter by law may be required to pay. The grantee shall further pay to the
municipal government of the city of Manila two and a half per cent of the fares collected and tickets
sold within the limits of the city of Manila, and the same percentage of fares collected and the tickets
sold without the said limits to the proper municipality or municipalities of the Province of Rizal. Said
percentage shall be due and payable by the grantee monthly, and shall be in lieu of all taxes and
assessments of whatsoever nature and by whatsoever authority, upon the privileges, earnings,
income, franchises, roadbed, track, rolling stock, poles, and wires of the grantee, from which taxes
and assessments the grantee is hereby expressly exempted.

But, it should be noted that the only thing that the appellant is exempted in the aforementioned
paragraphs of her franchise, after paying the tax of the percentage of her income, indicated therein,
are not the rights for supervision and regulation, but the "taxes and assessments of whatsoever nature
and by whatsoever authority upon the privileges, earnings, income, franchise and poles, wires
transformers, and insulators", (par. 9); and the "taxes and assessments of whatsoever nature and by
whatsoever authority upon privileges, earnings, income, franchises, roadbed, track, rolling stock,
poles, and wires" (par. 19).

The same reason that has just been given also serves to resolve the fourth error indication against the
appellant.
Article 40 of Law No. 146 does not alter any contractual obligation that can be deducted from its
franchise, because it does not require it to pay taxes or fees of the kind mentioned therein, but
exclusively for supervision and regulation rights.

The contention of the appellant that Article 40, so often mentioned, of Law No. 146 is void because it
makes distinctions and does not provide equal treatment to all, is not sustainable. It is precisely to
avoid this, because it has been inserted in the last clause that says:

The rights collected in accordance with the provisions of this article, will be paid to the Treasury of the
Philippines. This article will not be applicable to the Commonwealth of the Philippines or its
dependencies, nor to companies that have a legislative franchise, for whose enjoyment the law
specifies the payment of a percentage of its profits, instead of all taxes, license fees or others.

With this, the Legislature or the National Assembly wanted to express its willingness to avoid
companies that pay double taxes or double rights. Therefore, the sixth error pointed out by the
appellant is not basic.

The seventh error that the Auditor General made, according to the appellant, is as baseless as the
others that have already been dealt with. The fees that the Public Services Commission charged were
for supervision and regulation during the year 1939, and not 1940. They were charged, not before, but
after having entered into force the aforementioned Law No. 454 that expressly requires that said rights
have been to pay precisely on June 30 of each year, or before that date. Payment was made on June
12, 1939, four days after the law entered into force, and payment was made, under protest, on the
same month and year.

Having reached the conclusions we reached, and not being the fifth and eighth errors but merely a
consequence of the others we have already clarified; and we are of opinion that the decision of the
Auditor General is in accordance with the law;

We hereby confirm the aforementioned decision ordering that the costs be assessed against the
appellant. That's how it is ordered.

Avanceña, Pres., Laurel, Moran, and Horrilleno, MM., Are satisfied.