G.R. No. 180235 January 20, 2016
Alta Vista Golf and Country Club, Petitioner, vs. The City of Cebu, Hon. Mayor Tomas R. Osmeña, in his capacity as Mayor of Cebu, and Teresita C. Camarillo, in her capacity as the City Treasurer, Respondents.

FACTS

Petitioner Alta Vista Golf and Country Club is a non-stock, non-profit corporation operating a golf course in Cebu City. The Sangguniang Panlungsod of Cebu City enacted City Tax Ordinance No. LXIX (Revised Omnibus Tax Ordinance), with Section 42, as amended by Ordinances LXXXII and LXXXIV, imposing a 20% amusement tax on the gross receipts from entrance, playing green, and/or admission fees of golf courses. On August 6, 1998, petitioner was assessed deficiency business taxes, including amusement tax on its golf course amounting to P2,612,961.24 based on gross receipts. Petitioner refused to pay the amusement tax, arguing it was illegal, contending that under the Local Government Code, amusement tax can only be imposed on operators of theaters, cinemas, concert halls, or similar places of entertainment, not golf courses, citing the Philippine Basketball Association (PBA) v. Court of Appeals case. Despite repeated demands, petitioner persisted in its refusal. On October 11, 2005, respondent City Treasurer Teresita Camarillo sought to collect deficiency taxes for 1998, including amusement tax of P1,373,761.24 plus surcharges and interest. Petitioner’s protest was denied by the City Treasurer on December 5, 2005. Subsequently, on January 12, 2006, petitioner was served a Closure Order dated December 28, 2005, issued by Mayor Tomas Osmeña, for operating without a business permit and nonpayment of deficiency taxes, including amusement tax. Petitioner then filed a Petition for Injunction, Prohibition, Mandamus, Declaration of Nullity of Closure Order, Declaration of Nullity of Assessment, and Declaration of Nullity of Section 42 of the Tax Ordinance with the Regional Trial Court (RTC). The RTC dismissed the petition, ruling that petitioner failed to exhaust administrative remedies by not appealing the tax assessment to the Local Board of Assessment Appeals (LBAA) and the Central Board of Assessment Appeals (CBAA). The RTC also held that the Closure Order was validly issued due to petitioner’s operation without a business permit. Petitioner elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether the Regional Trial Court erred in dismissing petitioner’s action on the grounds of failure to exhaust administrative remedies and in upholding the validity of the Closure Order.

RULING

Yes, the Supreme Court ruled that the RTC erred. The doctrine of exhaustion of administrative remedies was not applicable because the case involved a pure question of law—the legality of imposing amusement tax on golf courses under Section 42 of the City Tax Ordinance. The issue required the interpretation of Section 140 of the Local Government Code, which is a judicial function. Furthermore, the assessment was void on its face as it imposed a tax not authorized by law. On the substantive issue, the Supreme Court declared Section 42 of the Cebu City Tax Ordinance, as amended, void and unconstitutional insofar as it imposed a 20% amusement tax on golf courses. Applying the ruling in PBA v. Court of Appeals, the Court held that the power of a city to levy amusement taxes under Section 140 of the Local Government Code is limited to “theaters, cinemas, concert halls, circuses and other places of amusement.” The term “other places of amusement” should be construed under the principle of ejusdem generis, meaning it refers only to places of amusement of the same kind or class as theaters, cinemas, concert halls, and circuses, which are venues for viewing entertainment performances or shows. A golf course is not of the same class; it is a sports and recreational facility where one goes to play, not to watch a show or performance. Therefore, the City of Cebu had no authority to impose an amusement tax on petitioner’s golf course. Consequently, the tax assessment for amusement tax and the Closure Order (which was based partly on nonpayment of this invalid amusement tax) were also declared null and void. The Court ordered the City of Cebu to refund the amusement tax, penalties, surcharge, and interest paid under protest by petitioner.