Vera vs. Cuevas

Section 169 of the National Internal Revenue Code, which required milk from which fat has been removed to bear a warning that it is unsuitable for infants, was impliedly repealed by the express repeal of the taxing and penal provisions on which it depended; it does not apply to filled milk, a product in which the removed fat is replaced with vegetable oil, and its enforcement against filled milk manufacturers alone violates constitutional guarantees of due process and equal protection. The investigation of misbranding and mislabeling of food products falls within the exclusive jurisdiction of the Food and Drug Administration under Republic Act No. 3720, not with the Fair Trade Board.

In 1939, the Tax Code imposed a specific tax on skimmed milk (Section 141), penalized its sale without payment of the tax and without the required legend (Section 177), and mandated that condensed skimmed milk and all milk from which fatty part had been removed be marked with the words: “This milk is not suitable for nourishment for infants less than one year of age” (Section 169). Subsequently, Republic Act No. 344 expressly repealed Section 141, and Republic Act No. 463 expressly repealed Section 177. After these repeals, the Commissioner of Internal Revenue ordered private respondents — manufacturers of filled milk products (milk whose removed butterfat is replaced with refined coconut oil or corn oil) — to withdraw from the market all filled milk products not bearing the Section 169 inscription. Private respondents challenged the order and also sought to halt a proceeding before the Fair Trade Board concerning the same alleged mislabeling and misbranding. The two actions were consolidated and tried jointly, resulting in a decision permanently enjoining both the Commissioner and the Fair Trade Board.

• Parties and Nature of Actions: Private respondents Institute of Evaporated Filled Milk Manufacturers of the Philippines, Inc., Consolidated Milk Company (Phil.) Inc. (brand “Darigold”), General Milk Company (Phil.) Inc. (brand “Liberty”), and Milk Industries, Inc. (brand “Dutch Baby”) are engaged in the manufacture, sale, and distribution of filled milk products nationwide. Civil Case No. 52276 was an action for declaratory relief seeking an adjudication of their rights and obligations regarding the enforcement of Section 169 of the Tax Code. Special Civil Action No. 52383 was an action for prohibition and injunction to stop the Fair Trade Board from proceeding with FTB I.S. No. 1 (later referred to as No. 2), a complaint for misleading advertisement, mislabeling, and misbranding filed by Antonio R. de Joya and Sufronio Carrasco.
• The Commissioner’s Order: On 28 September 1961, the Commissioner of Internal Revenue ordered private respondents to withdraw from the market all filled milk products not bearing the inscription “This milk is not suitable for nourishment for infants less than one year of age” within fifteen days, warning that failure would result in legal action. The order was affirmed by the Secretary of Finance on 12 November 1962.
• The Fair Trade Board Proceeding: On 7 December 1962, a complaint was lodged with the Fair Trade Board charging private respondents with, among other things, omitting to state on their labels that their filled milk products were “imitation milk” and failing to mark containers with the warning required by Section 169. The Board began hearing the complaint until it was restrained by the trial court on 19 March 1963.
• Definition of Filled Milk: Under the regulations of the Board of Food Inspection, “skimmed milk” is milk from which the fatty part has been removed, while “filled milk” is any milk to which any fat or oil other than milk fat has been added, resulting in an imitation or semblance of milk, cream, or skimmed milk. In filled milk, the removed butterfat is replaced with refined coconut oil or corn oil, and vitamins A and D are added as fortifying substances.
• Admitted Suitability of Filled Milk for Infants: Petitioners admitted in their pleadings that the filled milk products of private respondents are safe, nutritious, wholesome, and suitable for feeding infants of all ages, and that no Filipino infant fed with filled milk since birth had suffered any attributable defect, illness, or disease.
• Administrative Opinion: In 1961, the Board of Food Inspection rendered an opinion that filled milk is not within the purview of Section 169 because it is a product distinct from those specified in the section, the removed fat having been replaced with coconut oil and vitamins. After the repeal of Sections 141 and 177, the Bureau of Internal Revenue itself issued General Circular No. V-85 stating that the enforcement of the legend requirement was no longer within the Bureau’s jurisdiction, the penal provision having been repealed.
• Trial Court’s Decision: The Court of First Instance declared the Commissioner’s order and the Secretary of Finance’s ruling null and void, perpetually restrained the Commissioner from enforcing Section 169 against private respondents, and perpetually restrained the Fair Trade Board from continuing its investigation, nullifying the proceedings undertaken thus far.

• Implied Repeal: Petitioners contended that Section 169 was not repealed by implication by the repeal of Sections 141 and 177, and remained a valid regulatory provision of the Tax Code enforceable on its own terms.
• Jurisdiction of the Commissioner: They argued that the Commissioner retained authority to enforce Section 169 by virtue of Section 3 of the Tax Code, which grants the Bureau of Internal Revenue supervisory and police powers, and that the health-related purpose of the inscription did not divest the Commissioner of that authority.
• Jurisdiction of the Fair Trade Board: Petitioners maintained that the Fair Trade Board had jurisdiction to investigate and prosecute cases of misbranding, mislabeling, and misleading advertisements concerning filled milk products.

• Implied Repeal and Inapplicability: Respondents argued that the express repeal of Sections 141 and 177 left Section 169 without a tax purpose or penal sanction, effectively repealing it by implication; furthermore, Section 169 did not apply to filled milk because its language specifically referred to “skimmed milk” and the rule of ejusdem generis limited its scope.
• Constitutional Violations: They maintained that requiring a false and disparaging label on a product proven to be safe and suitable for infants constituted deprivation of property without due process of law, and that enforcing the requirement only against filled milk manufacturers while exempting other similarly formulated milk products denied equal protection.
• Lack of Jurisdiction: Respondents asserted that, with the loss of its tax purpose, the Commissioner no longer had jurisdiction to enforce a purely health-related labeling requirement, and that the Fair Trade Board equally lacked jurisdiction because Republic Act No. 3720 vested exclusive authority over food misbranding and labeling in the Food and Drug Administration.

• Repeal by Implication: Whether Section 169 of the Tax Code was impliedly repealed by the express repeal of Sections 141 and 177.
• Applicability to Filled Milk: Whether the inscription requirement of Section 169 applies to filled milk products.
• Due Process and Equal Protection: Whether the enforcement of Section 169 against manufacturers of filled milk violates the constitutional guarantees of due process and equal protection.
• Commissioner’s Jurisdiction: Whether the Commissioner of Internal Revenue retained authority to enforce Section 169 after the related taxing and penal provisions had been repealed.
• Fair Trade Board’s Jurisdiction: Whether the Fair Trade Board had jurisdiction to investigate and prosecute alleged misbranding, mislabeling, and misleading advertisements of filled milk, or whether such jurisdiction was exclusively vested in the Food and Drug Administration under Republic Act No. 3720.

• Repeal by Implication: Section 169 was impliedly repealed. The express repeal of Section 141 (the specific tax on skimmed milk) and Section 177 (the penal sanction) left Section 169 as a merely declaratory provision, devoid of any tax purpose or penal consequence, and thereby stripped it of operative effect.
• Applicability to Filled Milk: Section 169 did not apply to filled milk. Under the rule of ejusdem generis, the general phrase “all milk, in whatever form, from which the fatty part has been removed totally or in part” is restricted by the specific terms “skimmed milk” and “condensed skimmed milk.” Filled milk is a distinct product — the removed fat is substituted with coconut oil or corn oil — and thus falls outside the scope of the provision. The Board of Food Inspection’s 1961 opinion that filled milk was not covered carried persuasive weight.
• Due Process and Equal Protection: Enforcement of the inscription requirement against filled milk would violate both due process and equal protection. Because it was admitted that filled milk is safe, nutritious, and suitable for infants of all ages, requiring a label declaring it unsuitable would compel manufacturers to make a false and disparaging statement, depriving them of property without due process. Moreover, the Commissioner enforced Section 169 solely against filled milk manufacturers while exempting other milk products — such as Similac, SMA, Bremil, Enfamil, and Olac — in which the fatty part had likewise been removed and substituted with vegetable or corn oil. This selective enforcement denied private respondents the equal protection of the laws.
• Commissioner’s Jurisdiction: The Commissioner lacked authority to enforce Section 169. Once the provision lost its tax purpose, the Commissioner’s police power under Section 3 of the Tax Code, which is merely ancillary to the principal function of tax collection, could no longer support its enforcement. The Commissioner’s own predecessor had acknowledged this in General Circular No. V-85, stating that after the repeal of Section 177 the legend requirement no longer fell within the Bureau’s jurisdiction. The proper authority to protect infant health through food regulation was the Food and Drug Administration.
• Fair Trade Board’s Jurisdiction: The Fair Trade Board was without jurisdiction to investigate misbranding, mislabeling, or misleading advertisements of filled milk. Republic Act No. 3720, particularly Sections 9 and 26, vested the power to hold hearings, conduct investigations, and recommend standards and prosecutions concerning food products exclusively in the Board of Food and Drug Inspection and the Food and Drug Administrator, with the Secretary of Health and the Secretary of Justice intervening when criminal prosecution is warranted. To recognize concurrent jurisdiction in the Fair Trade Board would create overlapping functions and lead to confusion and conflict in official action.

• Implied Repeal — A statute may be repealed by implication when a later enactment is irreconcilably inconsistent with it, or when the reason for the earlier law ceases. Here, the express repeal of the specific tax and penal provisions deprived Section 169 of its underlying purpose, rendering it impliedly repealed.
• Ejusdem Generis — Where general words follow an enumeration of specific terms in a statute, the general words are construed to embrace only objects similar in nature to those enumerated. Applied here to limit the phrase “all milk, in whatever form, from which the fatty part has been removed” to skimmed milk and not to filled milk, which is a different product.
• Due Process — Deprivation of Property by False Labeling — A regulation that compels a manufacturer to place a false and disparaging statement on its product constitutes a taking of property without due process of law. Because filled milk was proven safe for infants, the required warning was false and impaired the product’s marketability.
• Equal Protection — Selective Enforcement — A law enforced only against one class of persons while others similarly situated are not subjected to it denies equal protection. The selective application of Section 169 to filled milk manufacturers, while exempting other milk products with similar fat substitution, was unconstitutional.
• Primary and Exclusive Administrative Jurisdiction — Where a statute confers exclusive jurisdiction over a subject matter on a specific administrative agency, other agencies are ousted of jurisdiction. Republic Act No. 3720 conferred exclusive authority over food misbranding and labeling on the Food and Drug Administration, precluding the Fair Trade Board and the Commissioner of Internal Revenue from exercising concurrent power.

• “Section 169 became a merely declaratory provision, without a tax purpose, or a penal sanction.” — This encapsulates the Court’s primary basis for finding the provision impliedly repealed.
• “The use of the specific and qualifying terms ‘skimmed milk’ in the headnote and ‘condensed skimmed milk’ in the text of the cited section, would restrict the scope of the general clause … under the familiar rule of ejusdem generis.” — The application of the doctrine to exclude filled milk from the coverage of Section 169.
• “The declaration required by Section 169 … that filled milk is not suitable for nourishment for infants less than one year of age would, in effect, constitute a deprivation of property without due process of law.” — The due process violation arising from compelling a false label on a safe product.
• “The enforcement of Section 169 against the private respondents only but not against other persons similarly situated … amounts to an unconstitutional denial of the equal protection of the laws.” — The equal protection reasoning founded on selective enforcement.
• “To hold that the petitioners have also jurisdiction … would only cause overlapping of powers and functions likely to produce confusion and conflict of official action which is neither practical nor desirable.” — The pragmatic justification for recognizing the exclusive jurisdiction of the Food and Drug Administration.

• Yick Wo v. Hopkins, 118 U.S. 356 (1886) — United States Supreme Court decision invoked for the principle that a law enforced only against a particular class, while others similarly situated are exempted, violates equal protection. Applied to the selective enforcement of Section 169 against filled milk manufacturers.
• Asturias Sugar Central, Inc. v. Commissioner of Customs, G.R. No. L-19337, 30 September 1969 — Philippine authority for the rule that opinions and rulings of administrative officials charged with implementing a law command great respect and weight; cited to support the persuasive value of the Board of Food Inspection’s opinion that filled milk is not covered by Section 169.
• Tan v. Municipality of Pagbilao, G.R. No. L-14264, 30 April 1963 — Similarly cited for the principle of deference to contemporaneous administrative construction.
• Grapilon v. Municipal Council of Carigara, G.R. No. L-12347, 30 May 1961 — Cited for the same proposition as the preceding two cases.

• Section 169, National Internal Revenue Code (1939) — Required condensed skimmed milk and all milk from which fat had been removed to bear the inscription “This milk is not suitable for nourishment for infants less than one year of age.” Rendered inoperative as to filled milk and impliedly repealed in the context of the case.
• Sections 141 and 177, National Internal Revenue Code — Section 141 imposed a specific tax on skimmed milk; Section 177 penalized the sale of skimmed milk without payment of the tax and without the required legend. Both were expressly repealed by Republic Act No. 344 and Republic Act No. 463, respectively.
• Section 3, National Internal Revenue Code — Generally vested the Bureau of Internal Revenue with supervisory and police powers. Held not to sustain the Commissioner’s authority to enforce Section 169 after its tax purpose was lost, as those powers are merely ancillary to revenue collection.
• Republic Act No. 3720 (Food, Drug, and Cosmetic Act) — Particularly Sections 9 and 26, which established the Board of Food and Drug Inspection and the Food and Drug Administrator as the exclusive authorities to investigate and prosecute violations involving misbranded or mislabeled food products. These provisions ousted the Fair Trade Board of jurisdiction.

Teehankee (Chairman), Fernandez, and Melencio-Herrera, JJ., concurred.