G.R. No. 172457 December 24, 2008 Proclamation No.

420, without the invalidated portion, remains

valid and effective.9
CJH DEVELOPMENT CORPORATION, petitioner,
vs. The decision attained finality when the Court en banc denied the motion for
BUREAU OF INTERNAL REVENUE, BUREAU OF CUSTOMS, and reconsideration through a resolution dated 29 March 2005. 10
DISTRICT COLLECTOR OF CUSTOMS EDWARD O.
BALTAZAR, respondents. While the motion for reconsideration was pending with the Court, on 16
January 2004 the Office of the City Treasurer of Baguio sent a demand
DECISION letter11 which stated that:

TINGA, J.: In view of the Supreme Court decision dated October 24, 2003 on
G.R. No. 119775, declaring null and void Section 3 of Proclamation
Before us is a petition for review on certiorari 1 seeking the reversal of the 420 on applicable incentives of Special Economic Zones, we are
orders dated 14 October 20052 and 04 April 20063 of the Regional Trial Court sending you updated statements of real property taxes due on real
(RTC) of Baguio City, Branch 5. The RTC dismissed the petition for estate properties declared under the names of the Bases Conversion
declaratory relief filed by petitioner CJH Development Corporation (CJH). and Development Authority and Camp John Hay Development
This petition was brought directly to this Court since it involves a pure Corporation totaling P101,935,634.17 inclusive of penalties, as of
question of law in accordance with Rule 50 of the 1997 Revised Rules of January 10, 2004.
Court.
May we request for the immediate settlement of the above
Proclamation No. 420 (the Proclamation) was issued by then President Fidel indebtedness, otherwise this office shall be constrained to hold the
V. Ramos to create a Special Economic Zone (SEZ) in a portion of Camp processing of your business permit pursuant to Section 2 C c.1 of
John Hay in Baguio City. Section 34 of the Proclamation granted to the newly Tax Ordinance 2000-001 of Baguio City.
created SEZ the same incentives then already enjoyed by the Subic SEZ.
Among these incentives are the exemption from the payment of taxes, both Five months later, on 26 May 2005, the BOC followed suit and
local and national, for businesses located inside the SEZ, and the operation demanded12 of CJH the payment of P71,983,753.00 representing the duties
of the SEZ as a special customs territory providing for tax and duty free and taxes due on all the importations made by CJH from 1998 to 2004. For
importations of raw materials, capital and equipment.5 its part, the BIR sent a letter dated 23 May 2005 to CJH wherein it treated
CJH as an ordinary corporation subject to the regular corporate income tax
In line with the Proclamation, the Bureau of Internal Revenue (BIR) issued as well as to the Value Added Tax of 1997.13
Revenue Regulations No. 12-976 while the Bureau of Customs (BOC) issued
Customs Administrative Order No. 2-98.7 The two issuances provided the CJH questioned the retroactive application by the BOC of the decision of this
rules and regulations to be implemented within the Camp John Hay SEZ. Court in G.R. No. 119775. It claimed that the assessment was null and void
Subsequently, however, Section 3 of because it violated the non-retroactive principle under the Tariff and Customs
Code.14
the Proclamation was declared unconstitutional in part by the Court en
banc in John Hay Peoples Alternative Coalition v. Lim, 8 when it ruled that: The Office of the Solicitor General (OSG) filed a motion to dismiss. 15 The
OSG claimed that the remedy of declaratory relief is inapplicable because an
WHEREORE, the second sentence of Section 3 of Proclamation No. assessment is not a proper subject of such petition. It further alleged that there
420 is hereby declared NULL and VOID and is accordingly declared are administrative remedies which were available to CJH.
of no legal force and effect. Public respondents are hereby enjoined
from implementing the aforesaid void provision.

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In an Order16 dated 28 June 2005, the RTC dropped the City of Baguio as a the adoption of said proviso, our law-making body has asserted its
party to the case. The remaining parties were required to submit their policy on the matter, which is to prohibit a taxpayer to question his
respective memoranda. On 14 October 2005, the RTC rendered its assailed liability for the payment of any tax that may be collected by the
order.17 It held that the decision in G.R. No. 119775 applies retroactively Bureau of Internal Revenue. As this Court well said, quoting from
because the tax exemption granted by Proclamation No. 420 is null and void several American cases, "The Government may fix the conditions
from the beginning. The RTC also ruled that the petition for declaratory relief upon which it will consent to litigate the validity of its original
is not the appropriate remedy. A judgment of the court cannot be the proper taxes..." "The power of taxation being legislative, all incidents are
subject of a petition for declaratory relief; the enumeration in Rule 64 is within the control of the Legislature." In other words, it is our
exclusive. Moreover, the RTC held that Commonwealth Act No. 55 (CA No. considered opinion that the proviso contained in Commonwealth
55) which proscribes the use of declaratory relief in cases where a taxpayer Act No. 55 is still in full force and effect and bars the plaintiff from
questions his tax liability is still in force and effect. filing the present action.22(Emphasis supplied) (Citations omitted.)

CJH filed a motion for reconsideration but the RTC denied it.18 Hence this As a substantive law that has not been repealed by another statute, CA No.
petition, which, as earlier stated, was filed directly to this Court, raising as it 55 is still in effect and holds sway. Precisely, it has removed from the courts’
does only pure questions of law. jurisdiction over petitions for declaratory relief involving tax assessments.
The Court cannot repeal, modify or alter an act of the Legislature.
There are two issues raised in this petition, one procedural and the other
substantive. First, is the remedy of declaratory relief proper in this case? Moreover, the proper subject matter of a declaratory relief is a deed, will,
Second, can the decision in G.R. No. 119775 be applied retroactively? contract, or other written instrument, or the construction or validity of statute
or ordinance.23 CJH hinges its petition on the demand letter or assessment
The requisites for a petition for declaratory relief to prosper are: (1) there sent to it by the BOC. However, it is really not the demand letter which is the
must be a justiciable controversy; (2) the controversy must be between subject matter of the petition. Ultimately, this Court is asked to determine
persons whose interests are adverse; (3) the party seeking declaratory relief whether the decision of the Court en banc in G.R. No. 119775 has a
must have a legal interest in the controversy; and (4) the issue involved must retroactive effect. This approach cannot be countenanced. A petition for
be ripe for judicial determination.19 declaratory relief cannot properly have a court decision as its subject matter.
In Tanda v. Aldaya,24 we ruled that:
CJH alleges that CA No. 5520 has already been repealed by the Rules of
Court; thus, the remedy of declaratory relief against the assessment made by x x x [A] court decision cannot be interpreted as included within the
the BOC is proper. It cited the commentaries of Moran allegedly to the effect purview of the words "other written instrument," as contended by
that declaratory relief lies against assessments made by the BIR and BOC. appellant, for the simple reason that the Rules of Court already
Yet in National Dental Supply Co. v. Meer,21 this Court held that: provide[s] for the ways by which an ambiguous or doubtful decision
may be corrected or clarified without need of resorting to the
expedient prescribed by Rule 66 [now Rule 64].25
From the opinion of the former Chief Justice Moran may be deduced
that the failure to incorporate the above proviso [CA No. 55] in
section 1, rule 66, [now Rule 64] is not due to an intention to repeal There are other remedies available to a party who is not agreeable to a
it but rather to the desire to leave its application to the sound decision whether it be a question of law or fact. If it involves a decision of an
discretion of the court, which is the sole arbiter to determine whether appellate court, the party may file a motion for reconsideration or new trial
a case is meritorious or not. And even if it be desired to incorporate in order that the defect may be corrected.26 In case of ambiguity of the
it in rule 66, it is doubted if it could be done under the rule-making decision, a party may file a motion for a clarificatory judgment.27 One of the
power of the Supreme Court considering that the nature of said requisites of a declaratory relief is that the issue must be ripe for judicial
proviso is substantive and not adjective, its purpose being to lay determination. This means that litigation is inevitable28 or there is no
down a policy as to the right of a taxpayer to contest the collection adequate relief available in any other form or proceeding. 29
of taxes on the part of a revenue officer or of the Government. With

Declaratory Relief
However, CJH is not left without recourse. The Tariff and Customs Code
(TCC) provides for the administrative and judicial remedies available to a
taxpayer who is minded to contest an assessment, subject of course to certain
reglementary periods. The TCC provides that a protest can be raised provided
that payment first be made of the amount due.30 The decision of the Collector
can be reviewed by the Commissioner of Customs who can approve, modify
or reverse the

decision or action of the Collector.31 If the party is not satisfied with the ruling
of the Commissioner, he may file the necessary appeal to the Court of Tax
Appeals.32 Afterwards, the decision of the Court of Tax Appeals can be
appealed to this Court.

With the foregoing disquisition on the first issue, there is no need to delve
into the second issue at this juncture. It should be noted though, as admitted
by CJH in its Certificate of Non-Forum Shopping,33 that even before the
filing of this petition, it already had a pending petition for review with this
Court, docketed as G.R. No. 16923434 and entitled, Camp John Hay
Development Corporation v. Central Board of Assessment Appeals, et
al. That case emanated from assessments made in 2002 for real estate taxes
on CJH by the City of Baguio. Said assessments were duly challenged before
the Local Board of Assessment Appeals, the Central Board of Assessment
Appeals and the Court of Tax Appeals. The petition in G.R. No. 169234 was
filed with this Court in September 2005, or after our 2003 Decision in John
Hay Peoples Alternative Coalition had attained finality. CJH therein raised
the same question of law, as in this case, whether the doctrine of operative
fact applies to G.R. No. 119775. Clearly, the Court in G.R. No. 169234 is
better positioned to resolve that question of law, there being no antecedent
jurisdictional defects that would preclude the Court from squarely deciding
that particular issue. CJH is free to reiterate this current point of clarification
as it litigates the petition in G.R. No. 169234.

WHEREFORE, the Petition is DENIED.

SO ORDERED.

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