FACTS:    Petitioner PPI and respondent Fertiphil are private corporations incorporated under Philippinelaws, both engaged in the importation and distribution of fertilizers, pesticides and agriculturalchemicals.Marcos issued Letter of Instruction (LOI) 1465, imposing a capital recovery component of Php10.00 perbag of fertilizer.

The levy was to continue until adequate capital was raised to make PPI financiallyviable. Fertiphil remitted to the Fertilizer and Pesticide Authority (FPA), which was then remitted thedepository bank of PPI. Fertiphil paid P6,689,144 to FPA from 1985 to 1986.

After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted, however PPI refused.

Fertiphil filed a complaint for collection and damages, questioning the constitutionality of LOI 1465, claiming that it was unjust,unreasonable, oppressive, invalid and an unlawful imposition that amounted to a denial of due process.

PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465 because it does not have a “personal and substantial interest in the case or will sustain direct injury as a result of its enforcement.”

It asserts that Fertiphil did not suffer any damage from the imposition because“incidence of the levy fell on the ultimate consumer or the farmers themselves, not on the seller fertilizer company.  

ISSUE:   

Whether or not Fertiphil has locus standi to question the constitutionality of LOI No. 1465.What is the power of taxation?  

RULING:   

Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere procedural technicality which may be waived.The imposition of the levy was an exercise of the taxation power of the state. 

While it is true that the power to tax can be used as an implement of police power, the primary purpose of the levy was revenue generation. If the purpose is primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the exaction is properly called a tax.  

Police power and the power of taxation are inherent powers of the State. These powers are distinct and have different tests for validity. Police power is the power of the State to enact legislation that may interfere with personal liberty or property in order to promote the general welfare, while the power of taxation is the power to levy taxes to be used for public purpose.

The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The “lawful subjects” and“lawful means” tests are used to determine the validity of a law enacted under the police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations.