Hacking and the Law

Introduction 

On August 21, 2000, Philippine authorities dropped all criminal charges filed against Onel De Guzman and Reomel Ramones, persons accused of unleashing the ILOVEYOU worm which infected computers worldwide in May 2000 and caused an estimated damage of $10B. The government released the two since there were no laws punishing authors of malicious software in the country at the time. However, three months after the spread of the worm, the Philippine Congress passed the Electronic Commerce Act of 2000 (Republic Act No. 8792), which in part provides for the punishment of the act of hacking. However, the government must yet learn from its oversight for the Congress has yet to pass an Anti-Cyber Crime Law that will properly address inimical cyber crimes.

"Hacking", or more appropriately cracking as discussed in this paper, is just one of the acts which endangers cyberspace. However, as technology evolves, the techniques or tools used by crackers and the purpose of their acts have also evolved. While cracking has been penalized in Section 33 of the Electronic Commerce Act of 2000 (Republic Act No. 8792) and has been a catch-all law or a general law punishing almost all kinds of cracking and malicious activities carried out against computer systems, the increasing number and nature of threats has made it important for our laws to address said phenomenon. This paper will first look at what is hacking and will discuss the difference between ethical and unethical hacking. Second, it will show the various tools used by unethical hackers and the effects they produce. Third, it will show the insufficiency of present laws to address the threats brought about by hackers, and proposes the enactment of an Anti-Cyber Crime Law which will address these threats including the creation of a government agency whose principal task will be securing the country's cyberspace.

Hacking and Cracking: Distinguishing the Ethical from the Unethical

There has always been a negative connotation of hackers or hacking per se to the general public. In the information technology (IT) community however, being called a hacker is considered a compliment. Such is the case because a hacker is defined as a person who enjoys learning the details of computer systems and then stretching their capabilities. Meanwhile, hacking describes the rapid development of new programs or reverse engineering of already existing software to make the code better and more efficient. These terms are general in a way that such persons who do the act of hacking or hackers may do so with a positive or negative purpose in mind. Those individuals who use their hacker skills for a positive or defensive purpose are called ethical hackers or what the IT community calls as "white hats". On the other hand, those hackers who use their hacker skills for offensive purposes and who often resort to malicious or destructive activities in cyberspace are called crackers or "black hats". It is unfortunate that the term hackers is used as an equivalent of crackers which is mostly propagated by the mass media who didn't make any distinction to these terms. Even the Electronic Commerce Act of 2000 refers to both terms of hacking or cracking as the same, giving them the same definition. Dones (2009) even proposes that the use of both the terms of hackers and crackers may result to prosecution of ethical hackers, based on the rule of statutory construction that the use of words in its ordinary industrial context carries a great weight; thus, criminal hacking or cracking should be distinguished from hacking.

Ethical hacking is a very important activity in order to secure information systems which nowadays mostly operate through computer networks including the use of the internet. Information security involves the preservation of the confidentiality, integrity and availability of information to an individual, business, enterprise or agency. The last element is usually the subject of "black hat" attacks in what are called denial of service attacks which obstructs persons or networks from availing of certain information which may render some computer systems unusable. The threats against information security are real and pervasive since attacks perpetrated by crackers against information systems are increasing and becoming more sophisticated. This is the reason why the use of technical skills to defend an information system through ethical hacking, which includes the legitimate use of hacking tools, is important. An ethical hacker employs his or her hacking skills or hacking tools to protect an information system by, first looking into the system to find the problems and vulnerabilities that may penetrate it and then putting in place measures to protect it. For further legitimation, an ethical hacker must ask permission when hacking someone else's system and must not do anything he cannot reverse.

Unethical hacking or cracking is carried out by black hat hackers or crackers who specialize in unauthorized penetration to attack systems for profit, for political motivations, for a social cause or even for mere fun. Such penetration is done without authorization and hence they should not be confused with ethical hackers. Their attacks may vary such as distributing computer viruses, internet worms, and spam through the use of botnets. This is substantially how the E-commerce Law has defined crackers, however, as technology advances, the number and nature of attacks and malicious acts that a cracker may carry out has magnified and our laws must adapt to address such threats and attacks.

Threats to Cyberspace and IT Systems

The information technology revolution changed the way business and government operate. At the opportunity of less cost of doing business and increasing productivity, individuals and businesses all over the world jumped on the bandwagon of networked computers to do their business. Countries soon shifted the control of essential processes in manufacturing, utilities, banking and communications to networked computers systems and is a trend that continues to this day. For example, in a certain country, a network of networks directly supports the operation of all sectors of our economy such as: energy, transportation, finance and banking, information and telecommunications, etc. Computer systems may also control physical objects such as electrical transformers, trains, pipeline pumps, chemical vats and radars.

The above discussion shows how vital securing information technology systems is to national security. Countries which have used computer technology for their whole country to operate effectively have to observe massive efforts to secure their cyberspace or their networks so that their countries will not come to a standstill. And with man's present dependence on information technology and the cyberspace, every country must indeed give importance to this. To show that the threats of unethical hackers are real and increasing, the following are some of the tools or "weapons" they utilize: 

• Trojan horse – a program that appears to be valid and useful but contains hidden instructions that can cause damage to the system. 
• Virus – a special type of Trojan horse that can replicate itself and spread, just like a biological virus, and cause damage to the computer system or networks. It is composed of a mission component (deletion, modification, and/or insertion of data), trigger component (based on event and time), and a self-propagating component (attaching itself to files and programs). Back Door/Trap Door – a set of instructions that permits a user to bypass the system's security measures. These are program codes placed by developers and vendors to make easier for them to modify or repair. Worm – a program that replicates itself via a permanent or dial-up network connection. Unlike a virus, which seeds itself within the computer's hard disk or file system, a worm is self-supporting program. It can also be used to spread time bombs, virus, Trojan horses, etc 
• Address Resolution Protocol (ARP) Poisoning - is a technique used to attack an Ethernet wired or wireless network and may allow an attacker to sniff data frames on a local area network (LAN), modify the traffic, or stop the traffic altogether. The aim is to associate the attacker's MAC address with the IP address of another node and any traffic meant for that IP address would be mistakenly sent to the attacker instead.  
• Phishing - process of fraudulently attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication. Communications purporting to be from popular social web sites, auction sites, online payment processors or IT administrators are commonly used to lure the unsuspecting public through emails. It often directs users to enter details at a fake website whose look and feel are almost identical to the legitimate one. 
• Pharming - is a scamming practice in which malicious code is installed on a personal computer or server, misdirecting users to fraudulent Web sites without their knowledge or consent. Pharming has been called "phishing without a lure."  
• Packet Sniffing – program utilities that easily permits unauthorized persons to capture packet data and examine such.
• Packet Storming - a form of attack that involves the flooding of ports with large numbers of packets with the intent to deny service to the network. It can be repeated in rapid fire intervals generating enough traffic to shut down major networks.

These are just some of the tools unethical hackers may utilize. Some of these tools are familiar such as virus or worms, while others such as ARP Poisoning and pharming are more sophisticated tools developed by hackers. As would be garnered from the above description of these tools, unethical hackers can carry out denial of service (DoS) attacks, identity theft, fraud, defacement attacks to websites, or other malicious acts which involves unauthorized access to computer systems that wreak havoc to a certain individual, enterprise or government. Important to note also is that unethical hackers have different motives or purpose for their attacks which include: economic gain, revenge, political objectives and advocacies, extortion, competitive advantage, invasion of privacy, and to meet a challenge. They may also target different levels in our society: the home user, small enterprises, large enterprises, critical sectors/infrastructures, the government and even the global cyberspace. Thereby, there are threats from persons coined as hactivists, cyberterrorists, and cybercriminals, which include malicious attackers, computer fraud perpetrators, network penetrators who steal important data and network intruders. Computer experts or information security experts have strongly enunciated that attacks to computer systems are becoming more sophisticated and are increasing in number, a difficulty they are experiencing especially since a lot of enterprises and services are becoming dependent on computer networks for their operations.

 

Enactment of an Anti-Cyber Crime Law

 

The threats brought about by black hats must be addressed by every power of the government. Also, their attacks must responded to immediately for the effects they bring may have expensive and irreparable consequences. One of the powers of government is legislation. The Congress passed the Electronic Commerce Act of 2000 (E-Commerce Act) which punishes the act of Hacking or Cracking as follows:

Section 33.
Penalties. - The following Acts, shall be penalized by fine and/or imprisonment, as follows:

(a) Hacking or cracking which refers to unauthorized access into or interference in a computer system/server or information and communication system; or any access in order to corrupt, alter, steal, or destroy using a computer or other similar information and communication devices, without the knowledge and consent of the owner of the computer or information and communications system, including the introduction of computer viruses and the like, resulting in the corruption, destruction, alteration, theft or loss of electronic data messages or electronic documents shall be punished by a minimum fine of One Hundred Thousand pesos (P 100,000.00) and a maximum commensurate to the damage incurred and a mandatory imprisonment of six (6) months to three (3) years;

But as argued earlier, said law is so general that it does not take into account the evolved kinds of unethical hacking being carried out especially as to the intent of these crackers. To illustrate, when a black hat phishes for usernames and passwords to carry out identity theft, the cracker only is punished for the unauthorized access into the computer system under the present law but not for the identity theft or other fraudulent act which the hacker may thereafter undertake. Also a stronger and more specific anti-cyber crime law is expected to deter computer users from indulging in criminal or malicious acts. Present law also does not address if a massive attack is undertaken against the Philippines that will gravely affect our national security like what happened in Estonia. It must be noted that we are susceptible to cyber attacks with political motivations with the presence of the New People's Army insurgents and the terrorist group Abu Sayaff. Finally, the E-Commerce Act is a law substantially pertaining to electronic documents or electronic data messages and does not really address the all the threats that unethical hackers may carry out. In fact, worth to mention is that the said provision was only a last minute insertion into the E-Commerce Act during the Bicameral Conference Committee of the Congress as a reaction to the ILOVEYOU virus. This is why Congress must pass present bills addressing cyber crimes. In the Senate, Senate Bill 2347 entitled "Anti-Cyber Crime Act" proposed by Senator Manny Villar, provides more specific cyber crimes are expressly prohibited. The following acts are prohibited: computer fraud, computer forgery, computer sabotage, unauthorized access, unauthorized interception, and different kinds of data theft. The passage of this bill or any law which will address cyber crimes is due and very pressing since the Philippines is quickly becoming dependent on computer and information technologies.

     Another proposal in said bill is the creation of a Cyber Crime Prevention and Investigation Center which will principally combat cyber-related fraudulent activities and including the coordination of investigation into cyber-related cases with all law enforcement agencies. The creation of this body is very important as the government's cyber security efforts, which are contained in a National Cyber Security Plan are implemented only through the National Cyber Security Coordinator. Under the umbrella of the Coordinator are different government agencies with specific functions. Government agencies such as the Philippine National Police and National Bureau of Investigation are tasked with cyber forensics, the Department of Justice deals with the law, the Bangko Sentral ng Pilipinas are tasked with banking, et al. If such body will be created, its focus will be on securing Philippine Cyberspace which is very big task already considering that more and more Filipinos are using computer technology. Furthermore, securing the cyberspace involves many aspects, which are: cyber crime prevention whether through ethical hacking or otherwise, spreading information and building awareness to the people, responding to the incidents of cyber attacks, implementing the Anti-Cyber Crime Law and fostering international cooperation. Indeed the new body will have huge tasks ahead of it. As discussed above, ethical hacking is a vital undertaking to secure computer and information systems. In the US, the Pentagon has been training their own ethical hackers to secure their cyberspace which has been a subject of lots of attacks from all over the world. This has further legitimated the act of hacking if done in an ethical way and defensive purpose. I believe that such program must also be adopted here in the country so that we may secure our own cyberspace, for indeed the Filipinos have talent in such activities, just ask Mr. Onel de Guzman.

Conclusion

 

The country has convicted one JJ Giner in 2005 for hacking due to his act of defacing government websites, particularly that of the National Economic Development Authority. His reason was that he was trying to gain employment from the said office. Ever since, defacement of government websites have recently been perpetrated by hackers. However, these may be just small attacks which are a foreshadowing of a big one. Whatever happens, we must do what we can to be ready for anything, deter whatever attacks and respond if ever cyber incidents occur. And to help us achieve these goals, we must have the law on our side. This paper strongly proposes the enactment of an Anti-Cyber Crime Law, the creation of an Anti-Cyber Crime Office, and strengthening cooperation with other countries who share the world of cyberspace with us. It is important to note that the law may be instrumental in creating awareness to the people about the countries cyber security and existing threats that every person should know. The government with the help of the private sector and its citizens can achieve the goal of a secure world even if it is dependent on information technology and the cyberspace. As long as it punishes the unethical and give due credence to the ethical.

References: 

• Pantola, Alexis. “Introduction to Information Security and Ethical Hacking”. Presentation at the AFP Summit on Enhancing Cybersecurity, 10 March 2010.

• Dones, Jenny Anne. “Ethical Hacking”, 2009, in http://techlaw.berneguerrero.com (Accessed 7 April 2010).

• The National Strategy to Secure Cyberspace. US Deparment of Defense, February 2003.

• Purugganan, Abraham A. “Protecting the Philippine Cyberspace: Design Elements for a National Security Plan”, MNSA Thesis, May 2001.

• Senate Bill No. 2347, 14^th Congress, “Anti-Cyber Crime Act”.

• Wikipedia.org

Limbona vs. Mangelin

GR No. 80391 28 February 1989

Facts: Petitioner, Sultan Alimbusar Limbona, was elected Speaker of the Regional Legislative Assembly or Batasang Pampook of Central Mindanao (Assembly). On October 21, 1987 Congressman Datu Guimid Matalam, Chairman of the Committee on Muslim Affairs of the House of Representatives, invited petitioner in his capacity as Speaker of the Assembly of Region XII in a consultation/dialogue with local government officials. Petitioner accepted the invitation and informed the Assembly members through the Assembly Secretary that there shall be no session in November as his presence was needed in the house committee hearing of Congress. However, on November 2, 1987, the Assembly held a session in defiance of the Limbona's advice, where he was unseated from his position. Petitioner prays that the session's proceedings be declared null and void and be it declared that he was still the Speaker of the Assembly. Pending further proceedings of the case, the SC received a resolution from the Assembly expressly expelling petitioner's membership therefrom. Respondents argue that petitioner had "filed a case before the Supreme Court against some members of the Assembly on a question which should have been resolved within the confines of the Assembly," for which the respondents now submit that the petition had become "moot and academic" because its resolution.

Issue: Whether or not the courts of law have jurisdiction over the autonomous governments or regions. What is the extent of self-government given to the autonomous governments of Region XII?

Held: Autonomy is either decentralization of administration or decentralization of power. There is decentralization of administration when the central government delegates administrative powers to political subdivisions in order to broaden the base of government power and in the process to make local governments "more responsive and accountable". At the same time, it relieves the central government of the burden of managing local affairs and enables it to concentrate on national concerns. The President exercises "general supervision" over them, but only to "ensure that local affairs are administered according to law." He has no control over their acts in the sense that he can substitute their judgments with his own. Decentralization of power, on the other hand, involves an abdication of political power in the favor of local governments units declared to be autonomous. In that case, the autonomous government is free to chart its own destiny and shape its future with minimum intervention from central authorities.

An autonomous government that enjoys autonomy of the latter category [CONST. (1987), Art. X, Sec. 15.] is subject alone to the decree of the organic act creating it and accepted principles on the effects and limits of "autonomy." On the other hand, an autonomous government of the former class is, as we noted, under the supervision of the national government acting through the President (and the Department of Local Government). If the Sangguniang Pampook (of Region XII), then, is autonomous in the latter sense, its acts are, debatably beyond the domain of this Court in perhaps the same way that the internal acts, say, of the Congress of the Philippines are beyond our jurisdiction. But if it is autonomous in the former category only, it comes unarguably under our jurisdiction. An examination of the very Presidential Decree creating the autonomous governments of Mindanao persuades us that they were never meant to exercise autonomy in the second sense (decentralization of power). PD No. 1618, in the first place, mandates that "[t]he President shall have the power of general supervision and control over Autonomous Regions." Hence, we assume jurisdiction. And if we can make an inquiry in the validity of the expulsion in question, with more reason can we review the petitioner's removal as Speaker.

This case involves the application of a most

important constitutional policy and principle, that of local autonomy. We have to obey the clear mandate on local autonomy.

Where a law is capable of two interpretations, one in favor of centralized power in Malacañang and the other beneficial to local autonomy, the scales must be weighed in favor of autonomy.

Upon the facts presented, we hold that the November 2 and 5, 1987 sessions were invalid. It is true that under Section 31 of the Region XII Sanggunian Rules, "[s]essions shall not be suspended or adjourned except by direction of the Sangguniang Pampook". But while this opinion is in accord with the respondents' own, we still invalidate the twin sessions in question, since at the time the petitioner called the "recess," it was not a settled matter whether or not he could do so. In the second place, the invitation tendered by the Committee on Muslim Affairs of the House of Representatives provided a plausible reason for the intermission sought. Also, assuming that a valid recess could not be called, it does not appear that the respondents called his attention to this mistake. What appears is that instead, they opened the sessions themselves behind his back in an apparent act of mutiny. Under the circumstances, we find equity on his side. For this reason, we uphold the "recess" called on the ground of good faith.

San Juan vs. Civil Service Commisssion

GR No. 92299, 19 April 1991

Facts: The Provincial Budget Officer of Rizal (PBO) was left vacant; thereafter Rizal Governor San Juan, peititioner, nominated Dalisay Santos for the position and the latter quickly assumed position. However, Director Abella of Region IV Department of Budget and Management (DBM) did not endorse the nominee, and recommended private respondent Cecilia Almajose as PBO on the ground that she was the most qualified. This appointment was subsequently approved by the DBM. Petitioner protested the appointment of Almajose before the DBM and the Civil Service Commission who both dismissed his complaints. His arguments rest on his contention that he has the sole right and privilege to recommend the nominees to the position of PBO and that the appointee should come only from his nominees. In support thereof, he invokes Section 1 of Executive Order No. 112.

Issue: Whether or not DBM is empowered to appoint a PBO who was not expressly nominated by the provincial governor.

Held: Under the cited Sec 1 of EO 112, the petitioner's power to recommend is subject to the qualifications prescribed by existing laws for the position of PBO. Consequently, in the event that the recommendations made by the petitioner fall short of the required standards, the appointing authority, public respondent DBM is expected to reject the same. In the event that the Governor recommends an unqualified person, is the Department Head free to appoint anyone he fancies?

Petitioner states that the phrase of said law: "upon recommendation of the local chief executive concerned" must be given mandatory application in consonance with the state policy of local autonomy as guaranteed by the 1987 Constitution under Art. II, Sec. 25 and Art. X, Sec. 2 thereof. He further argues that his power to recommend cannot validly be defeated by a mere administrative issuance of public respondent DBM reserving to itself the right to fill-up any existing vacancy in case the petitioner's nominees do not meet the qualification requirements as embodied in public respondent DBM's Local Budget Circular No. 31 dated February 9, 1988.

This case involves the application of a most important constitutional policy and principle, that of local autonomy. We have to obey the clear mandate on local autonomy. Where a law is capable of two interpretations, one in favor of centralized power in Malacañang and the other beneficial to local autonomy, the scales must be weighed in favor of autonomy.

The 1935 Constitution clearly limited the executive power over local governments to "general supervision . . . as may be provided by law." The President controls the executive departments. He has no such power over local governments. He has only supervision and that supervision is both general and circumscribed by statute. The exercise of greater local autonomy is even more marked in the present Constitution. Article II, Section 25 provides: "The State shall ensure the autonomy of local governments"

Thereby, DBM Circular is ultra vires and is, accordingly, set aside. The DBM may appoint only from the list of qualified recommendees nominated by the Governor. If none is qualified, he must return the list of nominees to the Governor explaining why no one meets the legal requirements and ask for new recommendees who have the necessary eligibilities and qualifications.

Aznar vs. Court of Tax Appeals

GR No. 20569, 23 August 1974

Facts: Petitioner, as administrator of the estate of the deceased, Matias H. Aznar, seeks a review and nullification of the decision of the Court of Tax Appeals ordering the petitioner to pay the government the sum of P227,691.77 representing deficiency income taxes for the years 1946 to 1951. An investigation by the Commissioner of Internal Revenue (CIR) ascertained the assets and liabilities of the taxpayer and it was discovered that from 1946 to 1951, his net worth had increased every year, which increases in net worth was very much more than the income reported during said years. The findings clearly indicated that the taxpayer did not declare correctly the income reported in his income tax returns for the aforesaid years. Petitioner avers that according to the NIRC, the right of the CIR to assess deficiency income taxes of the late Aznar for the years 1946, 1947, and 1948 had already prescribed at the time the assessment was made on November 28, 1952; there being a five year limitation upon assessment and collection from the filing of the returns. Meanwhile, respondents believe that the prescription period in the case at bar that is applicable is under Sec. 332 of the NIRC which provides that: "(a) In the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud or omission". Petitioner argues said provision does not apply because the taxpayer did not file false and fraudulent returns with intent to evade tax.

Issue: Whether or not the deceased Aznar filed false or fraudulent income tax returns and subsequently, whether the action has not prescribed.


Held: The petition is without merit.
The respondent CTA concluded that the very "substantial under declarations of income for six consecutive years eloquently demonstrate the falsity or fraudulence of the income tax returns with an intent to evade the payment of tax." The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec. 331 of the NIRC should be applicable to normal circumstances, but whenever the government is placed at a disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to false returns, fraudulent return intended to evade payment of tax, or failure to file returns, the period of ten years from the time of the discovery of the falsity, fraud or omission even seems to be inadequate. There being undoubtedly false tax returns in this case, We affirm the conclusion of the respondent Court of Tax Appeals that Sec. 332 (a) of the NIRC should apply and that the period of ten years within which to assess petitioner's tax liability had not expired at the time said assessment was made.

Sison vs Ancheta

GR No. L-59431, 25 July 1984

Facts: Section 1 of BP Blg 135 amended the Tax Code and petitioner Antero M. Sison, as taxpayer, alleges that "he would be unduly discriminated against by the imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon fixed income or salaried individual taxpayers. He characterizes said provision as arbitrary amounting to class legislation, oppressive and capricious in character. It therefore violates both the equal protection and due process clauses of the Constitution as well asof the rule requiring uniformity in taxation.

Issue: Whether or not the assailed provision violates the equal protection and due process clauses of the Constitution while also violating the rule that taxes must be uniform and equitable.

Held: The petition is without merit.
On due process - it is undoubted that it may be invoked where a taxing statute is so arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to amount to the confiscation of property from abuse of power. Petitioner alleges arbitrariness but his mere allegation does not suffice and there must be a factual foundation of such unconsitutional taint.
On equal protection - it suffices that the laws operate equally and uniformly on all persons under similar circumstances, both in the privileges conferred and the liabilities imposed.
On the matter that the rule of taxation shall be uniform and equitable - this requirement is met when the tax operates with the same force and effect in every place where the subject may be found." Also, :the rule of uniformity does not call for perfect uniformity or perfect equality, because this is hardly unattainable." When the problem of classification became of issue, the Court said: "Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation..." As provided by this Court, where "the differentation" complained of "conforms to the practical dictates of justice and equity" it "is not discriminatory within the meaning of this clause and is therefore uniform."

Municipality of Makati vs. Court of Appeals

G.R. Nos. 89898-99 October 1, 1990

Facts: Petitioner Municipality of Makati expropriated a portion of land owned by private respondents, Admiral Finance Creditors Consortium, Inc. After proceedings, the RTC of Makati determined the cost of the said land which the petitioner must pay to the private respondents amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It issued the corresponding writ of execution accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB. However, such order was opposed by petitioner through a motion for reconsideration, contending that its funds at the PNB could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio.The RTC dismissed such motion, which was appealed to the Court of Appeals; the latter affirmed said dismissal and petitioner now filed this petition for review.

Issue: Whether or not funds of the Municipality of Makati are exempt from garnishment and levy upon execution.

Held: It is petitioner's main contention that the orders of respondent RTC judge involved the net amount of P4,965,506.45, wherein the funds garnished by respondent sheriff are in excess of P99,743.94, which are public fund and thereby are exempted from execution without the proper appropriation required under the law. There is merit in this contention. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution. Absent a showing that the municipal council of Makati has passed an ordinance appropriating the said amount from its public funds deposited in their PNB account, no levy under execution may be validly effected. However, this court orders petitioner to pay for the said land which has been in their use already. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation of land they are already enjoying. The State's power of eminent domain should be exercised within the bounds of fair play and justice.
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Commissioner of Internal Revenue vs. Cebu Portland Cement Co.

G.R. No. L-29059, 15 December 1987

Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement Company, respondent, P 359,408.98 representing overpayments of ad valorem taxes on cement sold by it.  Execution of judgement was opposed by the petitioner citing that private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, there was still a P4 M plus balance they owed. The Court of Tax Appeals, in holding that the alleged sales tax liability of the private respondent was still being questioned and therefore could not be set-off against the refund, granted private respondent's motion. The private respondent questioned the assessed tax based on Article 186 of the Tax Code, contending that cement was adjudged a mineral and not a manufactured product; and thusly they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for review.

Issue: Whether or not assessment of taxes can be enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. That is the reason why, save for the exception in RA 1125 , the Tax Code provides that injunction is not available to restrain collection of tax. Thereby, we hold that the respondent Court of Tax Appeals erred in its order.