Coconut Oil Refiners Association vs Torres
G.R. No. 132527. July 29, 2005
Facts: This is a Petition for Prohibition and Injunction seeking to enjoin and prohibit the Executive Branch, through the public respondents Ruben Torres in his capacity as Executive Secretary, the Bases Conversion Development Authority (BCDA), the Clark Development Corporation (CDC) and the Subic Bay Metropolitan Authority (SBMA), from allowing, and the private respondents from continuing with, the operation of tax and duty-free shops located at the Subic Special Economic Zone (SSEZ) and the Clark Special Economic Zone (CSEZ), and to declare the following issuances as unconstitutional, illegal, and void:
1. Section 5 of Executive Order No. 80,[1] dated April 3, 1993, regarding the CSEZ.
2. Executive Order No. 97-A, dated June 19, 1993, pertaining to the SSEZ.
3. Section 4 of BCDA Board Resolution No. 93-05-034,[2] dated May 18, 1993, pertaining to the CSEZ.
Petitioners contend that the aforecited issuances are unconstitutional and void as they constitute executive lawmaking, and that they are contrary to Republic Act No. 7227[3] and in violation of the Constitution, particularly Section 1, Article III (equal protection clause), Section 19, Article XII (prohibition of unfair competition and combinations in restraint of trade), and Section 12, Article XII (preferential use of Filipino labor, domestic materials and locally produced goods).
Issue: Whether the issuances are unconstitutional for supposedly violating the equal protection clause
Held: No.
It is an established principle of constitutional law that the guaranty of the equal protection of the laws is not violated by a legislation based on a reasonable classification. Classification, to be valid, must (1) rest on substantial distinction, (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.
Applying the foregoing test to the present case, this Court finds no violation of the right to equal protection of the laws. First, contrary to petitioners’ claim, substantial distinctions lie between the establishments inside and outside the zone, justifying the difference in their treatment. In Tiu v. Court of Appeals, the constitutionality of Executive Order No. 97-A was challenged for being violative of the equal protection clause. In that case, petitioners claimed that Executive Order No. 97-A was discriminatory in confining the application of Republic Act No. 7227 within a secured area of the SSEZ, to the exclusion of those outside but are, nevertheless, still within the economic zone.
Upholding the constitutionality of Executive Order No. 97-A, this Court therein found substantial differences between the retailers inside and outside the secured area, thereby justifying a valid and reasonable classification:
Certainly, there are substantial differences between the big investors who are being lured to establish and operate their industries in the so-called “secured area” and the present business operators outside the area. On the one hand, we are talking of billion-peso investments and thousands of new jobs. On the other hand, definitely none of such magnitude. In the first, the economic impact will be national; in the second, only local. Even more important, at this time the business activities outside the “secured area” are not likely to have any impact in achieving the purpose of the law, which is to turn the former military base to productive use for the benefit of the Philippine economy. There is, then, hardly any reasonable basis to extend to them the benefits and incentives accorded in R.A. 7227. Additionally, as the Court of Appeals pointed out, it will be easier to manage and monitor the activities within the “secured area,” which is already fenced off, to prevent “fraudulent importation of merchandise” or smuggling.
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. And of course, anyone, including the petitioners, possessing the requisite investment capital can always avail of the same benefits by channeling his or her resources or business operations into the fenced-off free port zone.
The Court in Tiu found real and substantial distinctions between residents within the secured area and those living within the economic zone but outside the fenced-off area. Similarly, real and substantial differences exist between the establishments herein involved. A significant distinction between the two groups is that enterprises outside the zones maintain their businesses within Philippine customs territory, while private respondents and the other duly-registered zone enterprises operate within the so-called “separate customs territory.” To grant the same tax incentives given to enterprises within the zones to businesses operating outside the zones, as petitioners insist, would clearly defeat the statute’s intent to carve a territory out of the military reservations in Subic Bay where free flow of goods and capital is maintained.
The classification is germane to the purpose of Republic Act No. 7227. As held in Tiu, the real concern of Republic Act No. 7227 is to convert the lands formerly occupied by the US military bases into economic or industrial areas. In furtherance of such objective, Congress deemed it necessary to extend economic incentives to the establishments within the zone to attract and encourage foreign and local investors. This is the very rationale behind Republic Act No. 7227 and other similar special economic zone laws which grant a complete package of tax incentives and other benefits.
The classification, moreover, is not limited to the existing conditions when the law was promulgated, but to future conditions as well, inasmuch as the law envisioned the former military reservation to ultimately develop into a self-sustaining investment center.
And, lastly, the classification applies equally to all retailers found within the “secured area.” As ruled in Tiu, the individuals and businesses within the “secured area,” being in like circumstances or contributing directly to the achievement of the end purpose of the law, are not categorized further. They are all similarly treated, both in privileges granted and in obligations required.
With all the four requisites for a reasonable classification present, there is no ground to invalidate Executive Order No. 97-A for being violative of the equal protection clause.
WHEREFORE, the petition is PARTLY GRANTED. Section 5 of Executive Order No. 80 and Section 4 of BCDA Board Resolution No. 93-05-034 are hereby declared NULL and VOID and are accordingly declared of no legal force and effect. Respondents are hereby enjoined from implementing the aforesaid void provisions. All portions of Executive Order No. 97-A are valid and effective, except the second sentences in paragraphs 1.2 and 1.3 of said Executive Order, which are hereby declared INVALID.